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Embracing the Cost-Quality-Outcomes MovementThe Future of Healthcare Supply Chain

April 18, 2013

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Healthcare Landscape 2012: Changing Times

Under reform, fully phased-in hospital cuts (2019):

– At BEST, baseline payment MINUS 14% (across-the-board cuts only)

– At WORST, baseline payment MINUS 20% (across-the-board PLUS quality cuts)

Hospitals need a comprehensive strategy to minimize costs while maximizing quality patient outcomes

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Supply Chain Can Drive that Strategy

Supply Chain

Clinical

Revenue

Operations

Costs

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Economic Downturn

Healthcare Reform

Supply Chain Role

Transformation

Source: HHN Magazine, 11/29/10

Transformational Events

The economic downturn (cost driver) and healthcare reform (quality driver) are events with far-reaching implications for supply chain executives and serve as the driving force in the transformation of the supply chain executive role

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The Evolution of Healthcare Supply Chain

Cost-Quality-Outcomes

Utilization & Standardizatio

n

Price Controls

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What is the CQO Movement?

The CQO Movement looks at the intersection ofCQO meaning the relationships between:

• Cost (how it relates to the cost of services, products,

supplies) • Quality (how it relates to the quality of patient care,

the services provided) and • Outcomes (how it relates to patient outcomes,

patient care, patient experience, reimbursement)

It is important to consider these relationships together rather than in separate silos.

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How AHRMM is Reinventing Itself Around CQO• Education Initiative with three areas of

focus: (A) Quality & Cost(B) Reimbursement & Outcomes(C) Continuum of Care

• Webinars and FAQs

• Committees

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When Supply Chain Owns the CQO Intersection: Case Study Examples

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CQO Movement Asks:

What is unique about its clinical performance to justify

its cost?

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Challenging Hernia Patient

• Ability to rapidly revascularize

• Ability to integrate into host tissues

• Resistant to infection

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Abdominal Wall Reconstruction

Hernia patients with major complications & comorbidities account for about 7% of all hernia repairs

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Potential Economic Impact to Hospital

Potential cost of post-op complications related

to ventral/incisional hernia repairHernia Post-op Complication Potential average cost 1

Infected mesh explant $30,721

Infection $11,739

Small bowel obstruction/ other GI complication $16,069

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Sample Case Costs

SYNTHETIC MESHCost of product $2000

100% Reimbursement -$2000Cost of treating infection $11, 739

Total = $11,739

BIOLOGIC MESHCost of product $13,000

$32.25/sqcm Reimbursement -$10,240Cost avoidance $0

Total = $2760

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Cost Justification

• Consistent outcomes• Single stage• Decreased complication rates• Avoidance of further surgery

• >800,000/yr in US• Risk of blood borne pathogens• Education only means of addressing

CQO Asks: How Do We Reduce Needlestick Injuries in Healthcare?

• New syringes with improved safety mechanisms

CQO Asks: How Do We Reduce Needlestick Injuries in Healthcare?

CQO Asks:What is Unique About its Clinical Performance to Justify its Cost?

Safety Syringes

• 1 Needlestick injury/6000 injections

• Average cost of testing/treatment after injury equals $3000

• Additional costs of treatment can add up to hundreds of thousands

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Case Costs: Conventional Safety Syringes

Note: * Negotiate minimum reduction of $3,500 mesh per unit cost

Actual Historical Spend Needlestick Injury BenchmarkTotal Cost of

Needlesticks/Needles

Average purchase price $ 0 .2207 Needlestick Injuries 37

Units 158,700 Per Needlestick Cost $ 3000.00

Purchase Cost $ 35, 027.00 Total Needlestick Cost $111,000.00Total Cost of

Needlesticks/Needles $146,027.00

Average purchase price $ 0.1876 Needlestick Injuries 37

Units 158,700 Per Needlestick Cost $ 3,000.00

Purchase Cost $ 29,772.95 Total Needlestick Cost $ 111,000.00 Total Cost of

Needlesticks/Needles $140,772.95

Total Savings -15% 0% -3.60%

SUPPLY CHAIN INTERVENTION: DECREASE SAFETY SYRINGE PRICE BY 15%

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Case Costs: New vs. Conventional Safety Syringes

Note: * Negotiate minimum reduction of $3,500 mesh per unit cost

Actual Historical Spend Needlestick Injury BenchmarkTotal Cost of

Needlesticks/Needles

Average purchase price $ 0 .2207 Needlestick Injuries 37

Units 158,700 Per Needlestick Cost $ 3000.00

Purchase Cost $ 35, 027.00 Total Needlestick Cost $111.000.00Total Cost of

Needlesticks/Needles $146,027.00

Average purchase price $ 0.3112 Needlestick Injuries 27

Units 158,700 Per Needlestick Cost $ 3,000.00

Purchase Cost $ 49,387.44 Total Needlestick Cost $ 81,000.00 Total Cost of

Needlesticks/Needles $130,387.44

Total Savings 41% -27% -10.71%

SUPPLY CHAIN INTERVENTION: CONVERT TO IMPROVED SAFETY SYRINGES

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Case Costs: Conventional vs. New Safety Syringes

Note: * Negotiate minimum reduction of $3,500 mesh per unit cost

Actual Historical Spend Needlestick Injury BenchmarkTotal Cost of

Needlesticks/Needles

Average purchase price $ 0 .2207 Needlestick Injuries 37

Units 158,700 Per Needlestick Cost $ 3000.00

Purchase Cost $ 35, 027.00 Total Needlestick Cost $111.000.00Total Cost of

Needlesticks/Needles $146,027.00

Average purchase price $ 0.3112 Needlestick Injuries 18

Units 158,700 Per Needlestick Cost $ 3,000.00

Purchase Cost $ 49,387.44 Total Needlestick Cost $ 54,000.00 Total Cost of

Needlesticks/Needles $130,387.44

Total Savings 41% -51% -29.2%

SUPPLY CHAIN INTERVENTION: OBTAIN PERFORMANCE GUARANTEE

Substantiating Evidence

Tuma SJ, Sepkowitz KA. Efficacy of safety-engineered device implementation in the prevention of percutaneous injuries: a review of published studies. Clin Infect Dis 2006;42:1159–1170.

Elder A, Paterson C. Sharps injuries in UK health care: a review of injury rates, viral transmission and potential efficacy of safety devices. Occup Med (Lond) 2006;56:566–574.

Adams D, Elliott TSJ. Impact of safety needle devices on occupationally acquired needlestick injuries a four-year prospective study. J Hosp Infect 2006;64:50–55.

Whitby M, McLaws ML, Slater K. Needlestick injuries in amajor teaching hospital: the worthwhile effect of hospital-wide replacement of conventional hollow-bore needles. Am J Infect Control 2008;36:180–186.

Jagger J, Perry J, Gomaa A, Kornblatt Phillips E. The impact of US policies to protect healthcare workers from bloodborne pathogens: the critical role of safety-engineered devices. J Infect Public Health 2008;1:62–67.

Lamontagne F, Abiteboul D, Lolom I, et al. Role of safety-engineered devices in preventing needlestick injuries in 32 French hospitals. Infect Control Hosp Epidemiol 2007;28:18:23.

Cost Justification

• Consistent outcomes• Improved quality of hospital experience• Best practice medicine

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Supply chain is perfectly positioned at the intersection of cost, quality, and outcomes to take the lead on responding to the demands of health reform.

AHRMM is leading the way.