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Why Clinical QualityShould Be Your Core Business Strategy

Health CatalystHealthcare Analytics Summit 2018

Grand America Hotel, Salt Lake City, UtahWednesday, 12 September 2018, 9:00a – 9:45a

Brent C. James, M.D., M.Stat.Quality Science

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Disclosures

I receive a monthly retainer as a part time(3 days / month) senior advisor for Health Catalyst.

Other than that, neither I nor any family members have any relevant financial

relationships to be directly or indirectly discussed, referred to or illustrated within the

presentation, with or without recognition.

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A value proposition

The basis for variation research:

Investigators began to apply rigorousclinical research measurement methods

to

routine care delivery performance(that is, to quality of care)

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Quality, Utilization, and Efficiency (QUE)wSix clinical areas studied over 2 years:- transurethral prostatectomy (TURP)- open cholecystectomy- total hip arthroplasty- coronary artery bypass graft surgery (CABG)- permanent pacemaker implantation- community-acquired pneumoniawpulled all patients treated over a defined time period

across all Intermountain inpatient facilities - typically 1 year

widentified and staged (relative to changes in expected utilization)- severity of presenting primary condition- all comorbidities on admission- every complication- measures of long term outcomeswcompared physicians with meaningful # of cases

(low volume physicians included in parallel analysis, as a group)

James, B.C. What is a TURP? controlling variation in the performance of clinical processes.Improving Clinical Practice: Total Quality Management & the Physician (ed: D.B. Blumenthaland A.C. Scheck). San Francisco, CA: Jossey-Bass Publishers, 1995 (Chapter 7).

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Intermountain TURP QUE StudyMedian Surgery Minutes vs Median Grams Tissue

M L K J P B C O N A I D H E G F0

20

40

60

80

100

0

20

40

60

80

100

Attending PhysicianMedian surgical time Median grams tissue removed

Gra

ms

tissu

e / S

urge

ry m

inut

es

James, B.C. What is a TURP? controlling variation in the performance of clinical processes.Improving Clinical Practice: Total Quality Management & the Physician (ed: D.B. Blumenthaland A.C. Scheck). San Francisco, CA: Jossey-Bass Publishers, 1995 (Chapter 7).

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Intermountain TURP QUE Study

James, B.C. What is a TURP? controlling variation in the performance of clinical processes.Improving Clinical Practice: Total Quality Management & the Physician (ed: D.B. Blumenthaland A.C. Scheck). San Francisco, CA: Jossey-Bass Publishers, 1995 (Chapter 7).

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The opportunity (care falls short of its theoretic potential)

1. Massive variation in clinical practices (beyond even the remote possibility that all patients receive good care)

2. High rates of inappropriate care (where the risk of harm inherent in the treatment outweighs any potential benefit)

3. Unacceptable rates of preventable care-associated patient injury and death

4. Striking inability to "do what we know works"

5. Huge amounts of waste, leading to spiraling prices that limit access to care

James, B.C. Testimony to the U.S. Senate Finance Committee, February 2009

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The waste opportunity is HUGE

30-50+% of all health care resource expenditures are

quality-associated waste:• recovering from preventable foul-ups• building unusable products• providing unnecessary treatments• simple inefficiency

Institute of Medicine Roundtable on Value and Science-Driven Healthcare. The Healthcare Imperative:Lowering Costs and Improving Outcomes. Yong, Pierre L., Saunders, Robert S., and Olsen, LeighAnne, editors. Washington, DC: National Academy Press, 2010.

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MUCH higher financial leverage from waste elimination than revenue growth

NetOperating

Margin(and return on investment)

Revenue growth:5 to 9% contribution

for each case added

Waste elimination:50 to >100% contribution

for each case avoided

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Case-rate utilization(# cases per population)

Within-case utilization(# and type of units per case)

Efficiency(cost per unit of care)

1.

2.

3.

% of allwaste

45%

50%

5%

Examples of removing waste

Waste class

a) Inappropriate cases (risk outweighs benefit)(e.g., many cath lab procedures; CTPA)

b) Preference-sensitive cases(when given a fair choice, many patients opt out)(e.g., elective hips, knees; end-of-life care)

c) Avoidable cases(hot spotting; move upstream)(e.g., team-based care)

Waste subclasses

a) Supply chain

a) Clinical variation(e.g., QUE studies; surgical equipment)

b) Avoidable patient injuries(e.g., serious safety event systems; CLABSI)

c) Administrative inefficiencies- regulatory burden - billing thrash- TPS Lean observation - current EMR function

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Financial incentive alignment under

different payment mechanisms

Note: For green arrows, savings from waste elimination accrue to the care

delivery organization; for red arrows, savings go to payer organizations.

Case-rate utilization(# cases per population)

Within-case utilization

(# and type of units per case)

Efficiency(cost per unit of care)

FFS

Per

case

Provider

at risk

WASTE REMOVALLEVEL

PAYMENT METHOD

1.

2.

3.

% of allwaste

45%

50%

5%

James Brent C and Poulsen Gregory P. The case for capitation: It’s the only way to cut wastewhile improving quality. Harv Bus Rev 2016; 94(7-8):102-11, 134 (Jul-Aug).

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To be “business viable,” waste elimination requires financial alignment

Ø Waste elimination always requires investmentØ The group that makes the investment

must harvest sufficient waste savings to insurefinancial survival (plus, hopefully, a contribution to operating margins)

Ø Key questions:- Who makes the investment?- Who gets the savings?

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-11%-22% -21%

+4%+13%

-11%

1

Emergency Room Visits

Hospital Admits

PCP Visits

Urgent Care Visits

Radiology Tests

Other Avoidable Visits and

Admissions

Team-Based Care(3rd generation coordinated medical home)

An investment of $22 per-member-per year (PMPY) decreased medical

expenses by $115 PMPY

Reiss-Brennan B, Brunisholz KD, Dredge C, Briot P, Grazier K, Wilcox A, Savitz L, and James B. Association of integrated team-based care with health care quality, utilization, and cost. JAMA 2016; 316(8):826-34 (Aug 23/30).

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0

2

4

6

8

10

12

14

1988 1989 1990

0

2

4

6

8

10

12

141 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3

1988 1989 1990

Month/Year

Aver

age

cost

per

cas

e ($

1,00

0s)

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3

Total Hip Arthroplasty - Cost

James, B.C. Quality Management for Health Care Delivery (monograph). Chicago, IL:Hospital Research and Educational Trust (American Hospital Association), 1989.

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Financial impact of clinical qualityimprovement at Intermountain

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

2011 2012 2013 2014 2015 2016

Net

Rev

enue

(in M

illio

ns)

Status Quo Net Rev 2011 5-Yr Plan Net Rev

$728MM(~13%)

$688MM(~13%)

James Brent C and Poulsen Gregory P. The case for capitation: It’s the only way to cut wastewhile improving quality. Harv Bus Rev 2016; 94(7-8):102-11, 134 (Jul-Aug).

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Within the healing professions,

We count our successes in lives

Lesson 1

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Nearly always with proper clinical management

better care is cheaper carethrough waste elimination

The path to financial success leads through clinical management

Lesson 2

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None of our successes came fromcomparing ourselves to others

Ø In every instance, we were already at or near top of class when we startedØ Instead, we tracked the gap arising from “best possible” careØ This principle is especially true with regard to nationally-mandated reporting

It came through solid analyticsbased on good internal data

Lesson 3

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Lesson 4

The long-term organizational viability ofclinical quality improvement strategies

requires aligned financial incentives

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What does the future hold?

Walter Gretzky (Wayne Gretzky’s father):Skate to where the puck is going to be, not where it has been.

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“Pay for value” continues to growForward looking indicators:

ØKaiser Permanente (continued rapid growth within existing geographic markets, mostly)

ØMedicare Advantage (continued rapid growth)

ØACOs (Leavitt Group; mostly commercial)

ØERISA direct to provider contracting(11% of large employers, according to Modern Healthcare)

ØProvider-payer consolidationby ownership or partnership (e.g., United Healthcare)

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Implications – we will see:Ø Increasing focus on waste elimination through

“move upstream” strategies: primary care-based population health; clinical variation control using clinical decision support tools (a.k.a. clinical knowledge management = “learning healthcare systems”)

Ø Care delivery organizations will increasingly seek capitated risk through ownership or partnership (a.k.a. “pay for value); watch for payer/care provider consolidation

Ø Stand-alone specialty care practices and hospitals will increasingly become “price takers” – intense competition mainly around payment rates

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Health IT will matureØ EMR’s primary purpose will shift to clinical decision

support – away from their current focus on maximizing fee for service billing

Ø The resulting systems will be much more clinically natural and adaptable – massively improving productivity and eliminating the primary source of burnout in clinical practice today

Ø Analytics, including AI and machine learning, will explode – quality reporting will be a direct extension of internal operational data, just as happens today in financial systems (i.e., SEC, GAAP, GAAS, annual independent financial audits)

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The past:1. "Top-line" revenue enhancement

- Systems designed around documentation to support FFS payment, clinical decision support as a secondary "bolt-on"

2. Quality defined as regulatory compliance- e.g. CMS Core Measures, Pay for Value, Meaningful Use

The future:1. Quality becomes the core business

- Demonstrated performance for key clinical processes- Systems designed around clinical decision support (process management),

producing documentation as an integrated by-product 2. "Bottom-line" cost control and waste elimination

in a "provider at risk" financial environment

A fundamental shift in focus (disruption?)

Used with permission from Intermountain Healthcare. ©1998 Intermountain Healthcare. All rights reserved.

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Better has no limit ...an old Yiddish proverb