The Pursuit of Cost Efficient Quality A Fresh Approach Squaring the Circle The Pursuit of Cost Efficient Quality A Fresh Approach Barry Childs Health Professional Actuary Discovery Health The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City Agenda Squaring the Circle Brief discussion of current models A fresh approach A case study The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City Current Models Squaring the Circle 1. Managed Care Requires continuous effort Use evidence based protocols, with main focus on cost effectiveness Friction increases administrative burden for doctors and administrators 2. Vertical Integration SA doesn’t have right regulatory framework Risk inappropriate incentives Risk poor quality and Member backlash The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City Current Models Squaring the Circle 3. Consumerism Information on quality for decision making - Hospital Rating Index Medical Savings Accounts Members are more prudent with their own money Incentivise preventative healthcare - Vitality Wellness program The BHF Southern African Conference 22-25 July’07 Sun City

A Fresh Approach Squaring the Circle 4. Collaborative Risk Management “ Collaboration is the new frontier in human creativity” - Michael O. Leavitt, Secretary of Health and Human Services, U.S. Department of Health and Human Services June 5, 2005, HIMSS Summit: Achieving National Healthcare Transformation The BHF Southern African Conference 22-25 July’07 Sun City

Collaborative Risk Management Squaring the Circle Definitions and models Collaboration can be defined as: “working together to achieve a common goal” Collaborative Risk Management can then be defined as: cost efficient quality” The BHF Southern African Conference 22-25 July’07 Sun City

Collaborative Risk Management Squaring the Circle Definitions and models And Cost Efficient Quality can be defined as: “Delivering the highest quality care within the budget constraints of the healthcare system” The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City A New Approach Squaring the Circle Definitions and models Work together with Service Providers to achieve cost efficient quality Various permutations are possible All involve measurements and reporting Some involve incentives and alternative reimbursement Rewarding improved clinical outcomes and ‘value based reimbursement’ are current thrusts The BHF Southern African Conference 22-25 July’07 Sun City

Collaborative Risk Management Squaring the Circle Advantages Less friction means less effort to maintain and achieve objectives making it more cost efficient Working with Doctors gains their trust and support improving traction and impact More support from patients The BHF Southern African Conference 22-25 July’07 Sun City

Collaborative Risk Management Squaring the Circle Economics and Incentives Price Gain to the Dr = Cost to the system = A - B But system also saves generated cost = K x B P1 A P0 Efficient where K > (A / B) -1 B Q1 Q0 Quantity The BHF Southern African Conference 22-25 July’07 Sun City

Collaborative Risk Management Squaring the Circle Practice Type Paid to the discipline Generated IH Cost Gearing: K Surgeon 835,274,744 4,558,444,521 5.46 Orthopaedic Surgeon 995,454,568 4,461,049,986 4.48 Physician 707,326,721 3,778,899,332 5.34 Gynaecologist 1,284,070,702 3,515,241,955 2.74 Paediatrician 656,876,223 2,224,326,314 3.39 Cardiologist 483,332,279 2,008,769,885 4.16 Neuro Surgeon 338,923,228 1,668,311,709 4.92 Thoracic Surgeon 212,563,533 1,586,979,058 7.47 Urologist 338,199,153 1,286,402,204 3.80 Otorhinolaryngologist 418,797,223 1,016,873,750 2.43 Neurologist 154,996,862 423,058,758 2.73 Gastroenterologist 82,892,630 240,869,790 2.91 The BHF Southern African Conference 22-25 July’07 Sun City Estimated 2006 Industry Expenditure

Collaborative Risk Management Squaring the Circle Some Key Ingredients Willingness to engage Trust and transparency Agreed strategy and objectives Agreed principles Organisation and infrastructure Leadership Persistence The right technical tools The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City A Case Study Squaring the Circle The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City A Case Study Squaring the Circle Background Jointly initiated to address Paediatric tariff concerns and unexplained rising admission rates Voluntary participation yields higher fees on 0111 in return for willingness to be peer reviewed by SAPA / PMG based on Discovery data Higher fees on 0019 introduced in response to further requirement from Paediatricians and funded by successes achieved “The application of profiling science in medical risk management” The BHF Southern African Conference 22-25 July’07 Sun City

Risk adjusted Actual versus Expected Admission Rates A Case Study Squaring Profiling on demographics the Circle The BHF Southern African Conference 22-25 July’07 Sun City Risk adjusted Actual versus Expected Admission Rates

25% of Drs outliers with 80% confidence A Case Study Squaring the Circle Profiling on Clinical Episodes The BHF Southern African Conference 22-25 July’07 Sun City 25% of Drs outliers with 80% confidence

The BHF Southern African Conference 22-25 July’07 Sun City A Case Study Squaring the Circle Holistic Profiling Neonates only Sub specialist The BHF Southern African Conference 22-25 July’07 Sun City 18% of Drs in the overlap

A Case Study Dynamics Drs Outlier Not Outlier On Project 22 154 Squaring the Circle Dynamics Drs Outlier Not Outlier On Project 22 154 Not on Project 13 172 Actual / Expected Admit Rate Outlier Not Outlier On Project 125% 90% Not on Project 128% 88% 2005 data The BHF Southern African Conference 22-25 July’07 Sun City 22 Drs targeted with Communication and Peer visits

The BHF Southern African Conference 22-25 July’07 Sun City A Case Study Squaring the Circle Individual Reports Dr X, Sandton, Actual Versus Expected Admission Rate 140% 120% 100% Your admission rate was 37% above predicted, resulting in 64 more admissions than expected 80% 60% 40% 20% 0% Pneumonia: Bacterial Gastroenteritis Asthma The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City A Case Study Squaring the Circle Individual Reports Dr Y, Pretoria, Actual Versus Expected Admission Rate 400% 350% 300% Your admission rate was 51% above predicted, resulting in 180 more admissions than expected 250% 200% 150% 100% 50% 0% Pneumonia: Bacterial Gastroenteritis Asthma The BHF Southern African Conference 22-25 July’07 Sun City

8% drop in Target groups admit rate, other groups unchanged A Case Study Squaring the Circle Results: 2006/2005 Admission Rates The BHF Southern African Conference 22-25 July’07 Sun City 8% drop in Target groups admit rate, other groups unchanged

The BHF Southern African Conference 22-25 July’07 Sun City A Case Study Squaring the Circle Some Lessons Long development cycle Need the right data and interpretation layers to draw the right conclusions Need time to build trust The BHF Southern African Conference 22-25 July’07 Sun City

The BHF Southern African Conference 22-25 July’07 Sun City Conclusion Squaring the Circle Collaborative Risk Management can make significant savings Leave quality in the Drs hands with no perverse incentives CRM represents an efficient, sustainable solution for all stakeholders Compliments existing risk management tools and interventions The BHF Southern African Conference 22-25 July’07 Sun City