Operations Management in Healthcare Organizations

HCM-401 Week III Group Project Progress So Far – Budget – Organizational Structure Pre-test III John Donnelly Shared Saving Plan (SSP) Kyle Bain Tort Reform Week III presentation by Kemal Erkan CCHS 2010 Annual Financial Report Case Studies – Break Even Analysis – Pay for Performance – Physician Extender Analysis Changing the Behavior

Changing The Behavior of Responsible Parties Changing the Behavior Cost Profit Medicare Medicaid Fee For Service Length of Stay No Copay No Deductible Patients Physicians And Hospitals Insurance Companies Government

Medicare Shared Savings Program Presented by John Donnelly For Kemal Erkan HCM-401 Course

Healthcare Reform & the Transformation of Reimbursements Payments will be increasingly linked to performance “Performance risk” will be increasingly transitioned to providers Payers and consumers will become accountable; and a greater value will be placed on maintaining individual health

Accountable Care Organizations ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the patients they serve When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will have the opportunity to share in the savings it achieves

Shared Savings Program The Affordable Care Act, signed by President Obama in March of 2010, requires CMS to establish a shared savings program in order to: Facilitate coordination and cooperation among providers Improve quality of care Reduce unnecessary costs

Medicare Shared Savings Program The Shared Savings Program is designed to improve outcomes & increase value of care by: Promoting accountability for the care of Medicare FFS beneficiaries Requiring coordinated care for all services provided under Medicare FFS Encouraging investment in infrastructure and redesigned care processes

Requirements Form a legal structure to receive and distribute shared savings to participating providers 3-year agreement Have a minimum of 5,000 Medicare beneficiaries Report Quality Measures

Timeline CMS will begin accepting applications for the Shared Savings Program on January 1 st, 2012 First ACO agreements start on April 1 st, 2012 and July 1 st, 2012 – First performance year will be 18 or 21 months

Quality Measures Quality Assessments will be calculated based on 33 measures from the following 4 domains; 1.Patient Experience 2.Care Coordination and Patient Safety 3.Preventive Health 4.Caring for at-risk populations

Payment Models One-Sided Model – Share up to 50% of any savings they achieve compared to target spending Two-Sided Model – Share up to 60% of the savings, but will also be accountable for losses

Issues Upfront Expenses – Final rule did create the “Advanced Payment Model” that provides upfront funds. This money would be recovered from any future shared savings achieved by the team of providers Legal Issues – Stark & Anti-Kickback HHS estimates that ACOs could save Medicare up to $940 million in the first 4 years – Far less than 1% of Medicare spending during that time period

Shared Savings Program Questions?

Tort - Reform Presented by Kyle Bain For Kemal Erkan HCM-401 Course

 Definition  Famous McDonalds Case  Reasoning  Pros and Cons Changing the Behavior

 Tort : A “Civil Crime” – One that is illegal but not criminal  Most Common example, Car Accidents or Medical Malpractice  Not intended to Reward victims but to Punish wrongdoers  Tort-Reform : Effort to “reform” lawsuits to prevent verdicts that range in the millions of dollars  Total Healthcare spending was $2.3 Trillion in 2008  Expected $4.7 Trillion by 2020  $714 Billion 1990  $253 Billion in 1980 Changing the Behavior

STELLA LIEBECK  Stella Liebeck, 63 year old woman spilled coffee at a McDonalds drive through.  3 rd degree burns to groin, thighs, & privates.  Skin graphs, years of treatments  Originally $20,000 – McDonalds refused  $2.7 Million equal to 2 days profit from coffee sales MCDONALD'S NEGLIGENCE  700 people complained about burns.  Admitted impossible to consume directly after purchase  140 v. 190 degrees.  2 Reasons  Refills  Construction Workers Changing the Behavior

 The cost of Healthcare is rising at an alarming rate.  Reduce the amount of wasted money physicians spend only to avoid lawsuits  Save the Patients Time and Money.  Reduce the amount of excessive Jury awards Changing the Behavior

 Reduction in amount of unnecessary tests.  “80% of Physicians admitted ordering more tests than necessary”  “18-28% Tests, Procedures, Referrals, and Consults were to avoid Lawsuits  “13% Hospitalizations were to avoid Lawsuits” ▪ “Roughly $625 -$850 Billion Annually” – *Avoidable Expenses ▪ (~$250 Billion Defensive medicine) ▪ 1990 – Total Healthcare Spending was $714 Billion  Patients waste less Time and Money on tests, procedures, etc resulting in faster and more efficient recoveries. Changing the Behavior

 Alternative Solutions may have greater impact  Electronic Medical Records  Improving Quality and Efficiency  Adjust Provider Reimbursement  Government Regulation  Prevention  Consumer Involvement  Tax preferences  It may be less expensive to get sued a few times than change the practice/product.  Ex. Firestone Defective Tires- Maximum fine of $900,000. Would have cost over $250Million for recall. Changing the Behavior

 Justice.org  htm htm  ProCon.org  php?questionID= php?questionID=  Kaiseredu.org  Health-Care-Costs/Background-Brief.aspx Health-Care-Costs/Background-Brief.aspx  (Hickson et al. 1994) Changing the Behavior

Break Even Analysis Changing the Behavior

Pay for Performance Changing the Behavior

Pay for Performance Changing the Behavior

PHYSICIAN EXTENDER ANALYSIS Changing the Behavior