session 5 upmc’s systemwide change to service lines...

Session 5

UPMC’s Systemwide Change to Service LinesSupported by Activity-Based Costing:

The Blueprint to Healthcare Improvement Efforts

Paula LounderDirector, Payer Provider Programs UPMC

Robert Edwards, MD Professor & Chair, OB/GYN/RSMagee-Womens Hospital of UPMC

Learning Objectives

• Define what service line means and the implications of organizing around them.

• Explain how service line activities integrate finance and operations and how the leadership structure needs to have expertise in both.

• Recognize how service line costing, reporting, and analytics can benefit an organization.

• Relate examples of service line initiatives through Women’s Health case study.

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We believe that organizing by service lines, supported by activity-based costing, offers a pathway to deliver life-changing medicine to our patients.

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4

$9,400 per person

Physicians Don’t Know

One in Three

Poll Question #1

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The physicians in my organization are well aware of the cost of the care they provide and how it compares to their peers.

a) Trueb) Falsec) Unsure or not applicable

INSURANCE SERVICESHEALTH SERVICES ENTERPRISE SERVICES INTERNATIONAL SERVICES

Highly integrated system with an academic medical center hub closely affiliated with University of Pittsburgh.

• More than 20 hospitals with 5,100 beds and 284,000 admissions/observations.• 60% inpatient market share in Allegheny County.

• Over 500 outpatient locations.• More than 40 cancer centers.• 4 million outpatient visits annually.

• More than 3,500 employed physicians.• $457 million in NIH funding at the University of

Pittsburgh and UPMC.• 2.9 million lives enrolled in a portfolio of insurance

products.

Magee–Womens HospitalOur VisionMagee, as an integral part of UPMC, will be a regional and national leader in women’s and infants’ health, recognized for medical excellence, outstanding patient care, education, research, standards development, and advocacy.

We, at Magee-WomensHospital, enhance the

health and wellbeing of women, infants, and their families. We build on our

heritage of community service through:

Excellence Education Leadership Integration Maintenance

An Era of Change

That was then…

Increase Volume / Maximize Revenue.

Hospital / Department-Focused Efforts.

Costs Using RCC Methodology.

Costs Unknown to Physicians.

This is now…

Eliminate Unnecessary Care / Highest Quality at Lowest Cost.

Service Line / Regionalization / Payer-Provider Integration.

Activity Based Costing.

Transparency / Standardized Practice Variation.

Systemwide service line and activity-based costing was the solution…

It Worked!

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• Formalized the Women's Health Service Line and supported it with activity-based costing. • Provided leaders with visibility and oversight, leading to efficiencies

and improvements. • During this time, the clinical service saw a 25% improvement in its

contribution margin and achieved key clinical improvements including:

20%reduction in inpatient LOS for hysterectomies.

34%reduction in open hysterectomies.

28.3% reduction in 30-day readmissions for hysterectomies.

200%increase in same-day hysterectomies, as a result of a pilot program, which led to an estimated cost savings of $250,000.

What is a Service Line?

A Service Line represents an aggregation of services provided to patients with similar medical conditions, and has both revenue and expense components.

Considerations

Example: Traditional View of Reporting

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Hospitals

Hospital 1 Hospital 2 Hospital 3 TotalRevenue (Net of Bad Debt) $1,400 $300 $350 $2,050

Operating Expenses

Salaries, Supplies, & Purchased Services 750 150 200 1,100

Physician Investment 250 40 60 350

Admin & Other Expenses 110 40 40 190

Total Operating Expenses 1,110 230 300 1,640Operating Income before Centrally Managed Expenses

$290 $70 $50 $410

Centrally Managed Expenses 380

Operating Income $30

Hospital Component

Natural Classification of Expenses

($ in millions)

Sample data for illustrative purposes.

(a) Direct expenses include clinical supplies, drugs and blood(b) Service centers represent functional clinical areas including nursing, surgical, interventional and diagnostic services(c) Support expenses represent clinical support areas including physician costs, facility costs, depreciation, administration

Example: Service Line Reporting

Women’sHealth Ortho Cardiac Cancer Neuro

Sub-Total

Other Medical

Other Surgical Total

Revenues $100 $150 $200 $250 $150 $850 $900 $300 $2,050

Operating Expenses

Direct (a) 10 40 40 100 30 220 90 40 350Service Center (b) 50 40 50 80 40 260 300 80 640Total Variable Expenses 60 80 90 180 70 480 390 120 990Operating Income before

Supportand Indirect Expenses $40 $70 $110 $70 $80 $370 $510 $180 $1,060 Support Expenses (c) 30 40 70 50 40 230 400 100 730

Operating Income before IndirectExpenses $10 $30 $40 $20 $40 $140 $110 $80 $330

Indirect Expenses 300

Operating Income $30

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($ in millions) - Discharged Patients only

Patient Service Line Components

Service Center Costs

Variable Costing at Service Line Basis

Full Costing at Service Line Basis


Poll Question #2

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Is your organization structured along service lines with service line financial reports?

a) No service lines b) Fewer than 4 service lines c) 5 to 9 service linesd) All clinical specialty areas are service linese) Unsure or not applicable

Service Line: A Finance or Operational Led Initiative? Formal Structure

Executive team consisting of a physician leader along with the Executive Administrator and the hospital CNO (at the Center of Excellence).

Operational Leaders

Serves as the primary point of contact for all financial matters for the assigned area, and collaborates with other finance areas such as supply chain.

Finance Team Lead

A collaborative group of UPMC clinicians and administrators from across the system serving as “champions” within the Service Line.

Service Line Team

What Are the Goals of the Women’s Health Service Line?

Enhance the quality of care.

Utilize a systemwide approach.

Provide competitive,

patient-centered, value-based

care.

Establish Service Line financial

reporting, metrics, and measurable

goals.

• MD/Provider coverage.

• Staffing optimization.

• Market share expansion.

• Identify new revenue stream opportunities.

• Integration & navigation resources.

• Regionalize care.

• Enhance telemedicine.

• Expand APP model.

• Develop medical home model.

Optimal Structure for Maximum Efficiency

Transforming Volume to Value within Women’s Health Involved the Integration of Three Strategic Targets

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Resource Utilization/Capacity

Management

• New models of care.

• Reduction in variation of care and cost.

• Enhance patient safety & satisfaction.

• Leverage technology.

Enhance Quality & Cost for Appropriate

Care

What Is a Service Line Finance Lead?

A Service Line/Service Center Lead is the primary point of contact for all financial matters related to the assigned area.

Role of ServiceLine Lead

Improvement Initiative Process Flow

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Data assessment and opportunity identification

Clinician created protocols and pathways

Pilot design and implementation Pilot assessment

Process improvements selection and launch

Metrics & reporting, ongoing evaluation

Key Report #1: Service Line P&LSub-Service Lines

Current efforts to improve quality &

reduce costs

Case Study Example

Continuum of care costs & stand-alone visits

Non-Cancerous Other Other OP Other OPMother Baby Hysterectomy Inpatient Procedures Services Total

Volume 1,730 2,500 7,500 285,000 308,830 Revenue 62,900$ 64,650$ 11,690$ 21,000$ 20,000$ 77,000$ 257,240$ Expenses

Direct 2,760$ 895$ 2,590$ 2,540$ 4,500$ 6,300$ 19,585$ Supplies 590 20 2,170 1,400 3,900 170 8,250 Pharmacy 1,530 825 350 820 500 5,720 9,745 Blood 640 50 70 320 100 410 1,590

Service 23,050$ 25,950$ 3,630$ 7,440$ 5,095$ 23,885$ 89,050$ Med Surg 16,580 6,500 830 2,550 260 1,420 28,140 ICU CCU NICU 160 11,600 40 440 5 5 12,250 Laboratory 580 480 200 570 450 6,940 9,220 Outpatient Clinic 650 - - 30 20 6,430 7,130 Imaging 120 220 10 190 80 6,210 6,830 Premium Tax 1,650 3,200 130 700 - - 5,680 Operating Room 20 - 1,400 1,020 1,750 10 4,200 Other Services 3,290 3,950 1,020 1,940 2,530 2,870 15,600

Subtotal, Variable Expenses 25,810$ 26,845$ 6,220$ 9,980$ 9,595$ 30,185$ 108,635$ Unit Supporting 14,670 14,600 4,030 5,590 5,050 13,200 57,140

Subtotal, Total Expenses less Indirect 40,480 41,445 10,250 15,570 14,645 43,385 165,775 Hospital Contribution Margin 22,420$ 23,205$ 1,440$ 5,430$ 5,355$ 33,615$ 91,465$

Women's Health Contribution MarginHospital Deliveries

12,100


Identification of significant variable expenses

($ in 000’s)

Key Report #2: Sub-Service Line P&L

($ in 000’s)

Sub-Service Line Report: Average Cost per Case


LAPAROSCOPIC VAGINAL ROBOTIC OPEN TOTAL HYSTERECTOMIES

CASES 870 250 330 280 1,730

PER

CASE

REVENUE $ 6,207 $ 10,480 $ 5,152 $ 7,036 $ 6,757VARIABLE & SUPPORITNG EXPENSE $ 5,397 $ 4,400 $ 6,803 $ 7,893 $ 5,925

CONTRIBUTION MARGIN $ 810 $ 6,080 $ (1,651) $ (857) $ 832

2.7%

10.1

%

0.3% 4.

0%

18.8

%

43.3

%

1.4% 7.

2%

6.2% 12

.5%

0.0% 4.

9%8.1%

2.3%

0.0% 4.

8%6.1%

20.2

%

0.4% 4.

7%Complications Transfusions (IP

Only)Surgical Site

Infections30 Day Returns

Hysterectomy Quality Outcomes

Laparoscopic Open Robotic Vaginal Total

1.38

3.51

1.631.18

2.10

IP ALOS

IP Average LOS

Laparoscopic Open Robotic Vaginal Total

Key Report #3: Physician Variability

By physician detail

Non-Cancerous Hysterectomies

Laparoscopic Open Robotic Laparoscopic Open Robotic Laparoscopic Open Robotic Laparoscopic Open RoboticPhysician Group 1 4.50 1.00 232 132 180 1,300$ 2,167$ 1,600$ 3,000$ 4,450$ 2,900$ Physician 1 5.00 128 2,500$ 5,300$ Physician 2 4.50 1.00 232 142 180 1,300$ 2,000$ 1,600$ 3,000$ 4,500$ 2,900$ Physician 3 3.00 130 2,000$ 3,600$ Physician Group 2 1.09 2.50 1.00 157 133 197 1,650$ 750$ 1,900$ 2,300$ 3,100$ 2,700$ Physician 4 1.25 2.67 115 178 1,200$ 550$ 2,100$ 3,300$ Physician 5 1.00 132 1,120$ 2,200$ Physician 6 1.00 2.75 224 106 1,700$ 425$ 3,000$ 3,000$ Physician 7 1.00 1.00 162 240 2,400$ 1,800$ 2,500$ 3,000$ Physician 8 1.00 175 2,000$ 2,600$ Physician 9 3.00 127 600$ 3,300$ Physician 10 1.00 1.00 244 175 1,400$ 1,900$ 1,800$ 2,500$ Physician 11 1.00 2.00 130 216 2,100$ 1,700$ 2,100$ 3,800$ Physician 12 2.00 98 450$ 2,100$ Physician Group 3 1.00 3.00 188 226 1,130$ 510$ 2,100$ 3,380$ Physician 13 1.00 188 1,130$ 2,100$ Physician 14 3.00 226 510$ 3,380$ Physician Group 4 2.00 247 1,300$ 3,200$ Physician 15 2.00 247 1,300$ 3,200$ Total 1.36 3.33 1.00 206 164 189 1,345$ 1,150$ 1,750$ 2,650$ 3,600$ 2,800$

Attending PhysicianAverage LOS Average OR Minutes per Case Average Direct Cost per Case Average Unit Operating per Case

Metrics and costs physicians can impact


Opportunities within the Women’s Health Service Line

Obstetrics• Reduce Length of Stay. • Reduce Cesarean Sections.• Reduce NICU costs.• Physician Variability in Prenatal Care.• Enhanced Education.

Solutions:

1. Clinical Pathways.

2. Awareness and Monitoring of Cost and Quality.

3. Engaging Physicians.

Gynecology • Reduce Open Hysterectomies.• Increase Same Day Hysterectomies.• Decrease Hysterectomy Utilization.• Physician Variability in Supply Usage.


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Evidence-based clinical decision pathway

Solution #1: The Hysterectomy Clinical Pathway

Series of clinical questions that lead to a recommendation for the type of hysterectomy to be performed.

Able to palpate uterus and judge size?

What is the size of the uterus?6-8cm 8-10cm 10-12cm 12-14cm <14cm

Yes No

Suspicion of extrauterine disease?Yes No

Decision support is driven by flow sheet data and evidence-based literature published by the American Congress of Obstetricians and Gynecologists (ACOG).


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Solution #2: Monitoring Progress

What gets measured, gets done!Physician incentives and evaluations include criteria for the following:

COST QUALITY

80% Pathway Adherence

Cost and Quality Physician Dashboard

cTotal Hysterectomy Pathway Adherence by Physician

Period 2 Total Adherence

No Yes Total Adherence

% No Yes TotalAdherence

%No Volume 11 1 12 8%

2 2 100% 6 3 9 33%4 4 100% 4 2 6 33%

1 3 4 75% 6 2 8 25%1 2 3 67% 17 5 22 23%1 1 0% 0 1 1 100%2 5 7 71% 1 2 3 67%1 1 2 50% 6 6 12 50%

No Volume 4 3 7 43%2 4 6 67% 8 5 13 38%2 3 5 60% 17 5 22 23%

No Volume 5 1 6 17%3 3 100% 1 3 4 75%

9 16 25 64% 4 20 24 83%9 29 38 76% 4 5 9 56%

33 12 45 27% 42 50 92 54%12 2 14 14% 26 27 53 51%

2 2 100% 30 30 60 50%3 21 24 88% 23 8 31 26%1 6 7 86% 95 17 112 15%

No Volume 5 1 6 17%1 3 4 75% 11 10 21 48%5 1 6 17% 7 1 8 13%2 2 0% 22 1 23 4%

No Volume 0 2 2 100%33 0 33 0 110 0 110 0%

134 320 454 70% 753 771 1524 51%

Period 1

Physician Group No Yes Total AdherencePhysician 1 Group 1 6 6 0%Physician 2 Group 2 4 4 0%Physician 3 Group 2 2 2 0%Physician 4 Group 2 4 4 0%Physician 5 Group 2 11 1 12 8%Physician 6 Group 3 1 1 100%Physician 7 Group 3 1 1 100%Physician 8 Group 3 2 2 4 50%Physician 9 Group 3 3 3 100%Physician 10 Group 3 4 2 6 33%Physician 11 Group 3 8 8 0%Physician 12 Group 3 3 3 0%Physician 13 Group 4 No VolumePhysician 14 Group 5 1 6 7 86%Physician 15 Group 5 1 3 4 75%Physician 16 Group 5 7 19 26 73%Physician 17 Group 5 5 11 16 69%Physician 18 Group 5 6 9 15 60%Physician 19 Group 5 4 6 10 60%Physician 20 Group 5 28 5 33 15%Physician 21 Group 6 No VolumePhysician 22 Group 7 5 3 8 38%Physician 23 Group 7 1 1 0%Physician 24 Group 7 7 7 0%Physician 25 Group 8 No VolumeNo Adherence Physicians 32 0 32 0%Grand Total 182 270 452 60%

Total pathway adherence

Period 2 Total Adherence

No Yes Total Adherence No Yes Total Adherence

No Volume 4 0 4 0%

No Volume 2 0 2 0%

1 1 0% 1 0 1 0%

1 1 0% 1 0 1 0%

No Volume 3 0 3 0%

No Volume 2 0 2 0%

No Volume 1 0 1 0%

No Volume 1 0 1 0%

No Volume 4 0 4 0%

19 19 0% 57 0 57 0%

10 10 0% 27 0 27 0%

No Volume 2 0 2 0%

1 1 0% 1 0 1 0%

No Volume 1 0 1 0%

1 1 0% 2 0 2 0%

No Volume 1 0 1 0%

33 0 33 0 110 0 110 0%

134 320 454 70% 753 771 1524 51%

Period 1

Physician Group No Yes Total Adherence

Physician 1 Group 1 1 1 0%


Physician 3 Group 2 No Volume














No Adherence Physicians 32 0 32 0%

Grand Total 182 270 452 60%


Physician Dashboard: Cost & Quality


Solution #3: Engaging Physicians

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Initial results ~24%.

Feedback from physicians.

Resolution of concerns.

Support by physician leadership.

Focused efforts: Hospital

200% increase in adherence!

Lessons Learned: Critical Success FactorsQuality, safety, and patient satisfaction at a reduced cost leads to increased value.

Engagement of clinical

leadership.

Collaboration with

operational leadership and

other stakeholders.

Clinical pathways.

Setting time expectations appropriately.

User acceptance

testing.

Need for cost and quality

measurement tools.

Future Plans

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Reduce hysterectomy surgeries performed by low-volume surgeons and proceduralists, using quality metrics and group incentives.

Reduce physician variability in OR utilization and supply usage for hysterectomies.

Expand same-day hysterectomy to other providers and hospitals.

Expand focus on the obstetric population to reduce variability in prenatal care, develop protocols for inpatient management, reduce Cesarean sections, reduce NICU costs, and enhance education.

With a winning combination of service line management and activity-based costing, UPMC will continue to improve patient care and set an example

for other healthcare systems to follow.

Future Plans

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Analytic Insights

AQuestions &

Answers

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What You Learned…

Write down the key things you’ve learned related to each of the learning objectives

after attending this session

Thank You

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session 5 upmc’s systemwide change to service lines...

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