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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
88
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 repair
Hernia 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
20
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.