Optimising Pathology - North Devon · PDF fileOptimising Pathology ... a move to open book...

Optimising Pathology

This Business Case proposes both a new approach to the commissioning of Pathology services in North Devon, combined with the development of an optimisation team which drive improved performance and quality, as well as reduced expenditure, through the delivery of optimised patient pathways.

Pathology Directorate and Commercial Division 22 July 2015

Optimising Pathology Business Case Final 22.07.15

Commercial and Operations Divisions Page 2 of 22

1. EXECUTIVE SUMMARY

This business case sets out the case for:

Placing pathology services in the Northern Locality of NEW Devon CCG at the heart of the patient pathway, rather than at the periphery;

Is a joint business case shared between CCG and NDHCT

The proposal of the creation of a pathology optimisation team which builds on existing resource requiring an overall additional investment of £97k per annum. The CCG to pay the additional primary care element (£48.5k) and NDHCT the secondary care element of the service (£48.5k)

Past work by the team has delivered recurrent cost avoidance benefits of £610k per annum. £225k from reducing urinary testing activity and £385k from reducing biochemistry testing activity, whilst also delivering significantly improved patient outcomes.

The optimisation team will work enable a clear focus on an agreed work-plan with the identified benefits being reviewed and financial savings shared between CCG and NDHCT in a formal 50:50 benefits sharing agreement. The benefits delivery from the programme to be reviewed after 12 months.

Benefits in the first year are expected to be in excess of £250k. Therefore giving both the CCG and NDHCT a strong return on the initial investment and a clear joint focus on the greatest areas of benefit.

It is expected that this approach fundamentally changes the relationship between provider and commissioner to maximise the chances of system success, with success defined as delivery of the purpose through the understanding of ‘leading’ as opposed to a concentration on ‘ lagging’ measures;

As part of this, a move to open book accounting with an agreed direct access test price based upon actual costs.



2. THE CASE FOR CHANGE

2.1. The Rationale

It is well-recognised1 that there is very high variation in pathology testing, both across the country, and within the NEW Devon CCG area. It is reasonable to assume that this represents ‘failure demand’ – (i.e. either unnecessary demand, or unmet demand). The aim of any forward-thinking pathology service should be to identify the optimal level of demand. Too often, by its concentration on ‘lagging’ measures (number of tests performed), Pathology services can find themselves inadvertently ensuring higher levels of failure demand, by either actively or passively encouraging ever-increasing numbers of tests, many of which may add little or no value to the clinical decision-making. Indeed, too many tests can actually result in iatrogenic harm.

The trick therefore is to find, both for individual pathways and the pathology service as a whole, the ‘Goldilocks’ point – that level and type of testing that is the optimal level: not too little as to miss essential signs; not too many as to be inefficient, ineffective and potentially harmful.

Error! Reference source not found. below shows this argument diagrammatically.

Figure 1: The Goldilocks Point

It is a given that, for any patient, in any given situation in which a management decision is to be made, there must be a way of formulating a decision that is optimal. This decision will require consideration of benefits and risks associated with:

treating;

1 http://www.rightcare.nhs.uk/index.php/atlas/diagnostics-the-nhs-atlas-of-variation-in-

diagnostics-services

Number of pathology tests

Harm £

Cost of service (left axis)

Value added

(function of both)

Level of harm (right axis)

The ‘Goldilocks’

Point



testing;

referring;

waiting.

It follows that there should be processes in place that aim to optimise the contribution of each of these options towards this decision point. This appears to state the obvious, and it would be reasonable to assume that all those involved in both the planning, commissioning and delivery of services would naturally strive for this outcome. But it does not occur – the evidence being both in the variability of levels of testing, and in the wealth of evidence showing that many people receive sub-optimal care (demonstrated by unnecessary hospital admissions or early mortality) because optimal decisions are not made.

Why is this?

There are three main reasons:

The natural tendency of humans to seek the seemingly ‘easiest’ route, even if his is not the best route in the long-term;

A lack of knowledge by those making decisions, be they patients or clinicians;

“Every system is perfectly designed to get the results it gets” (Professor Don Berwick, CEO, Institute for Healthcare Improvement, 1984).

It is the third which is the most important. Deal with the third and the other two will no longer be an issue.

The main ‘results’ produced by the current system, or at least to those with responsibility for the design of the system (senior clinicians, commissioners and hospital managers) are the number of tests produced, and their price. This tends towards to a system designed by hospitals to produce more and more tests, by commissioners to reduce the number of tests, and by both, to reduce the price per test. Defining the optimal level of testing is left alone by these individuals in the naïve hope that someone else will either know, or will pick up the issue. But these individuals, if they currently exist, cannot change the system, so are doomed to fail.

When we look at systems which have applied the logic of chasing unit costs of testing rigorously we see the opposite has occurred. In Germany, price driven targets have resulted in test prices dropping to 40% of UK test prices. However, counter-intuitively, total testing costs have risen to 200% of UK test costs.

The situation in the US is worse – a focus on test price has driven total costs of testing to 400% of UK costs. This does not begin to consider the effect of sub-optimal testing on downstream costs. We know that there is considerable iatrogenic harm in these health economies driven by sub-optimal over-testing. One must presume that downstream costs are substantial, and will dwarf the costs of testing2.

The system needs to be designed to deliver the results we all want: optimised pathology. To deliver this, the definition of what we think of as ‘results’ needs to change. The ‘results’ of the system need to be aligned to its purpose. To support this, there needs to be a move towards looking at ‘leading’ measures as opposed to ‘lagging’ measures. (It is recognised, however, that the nature of existing Standing Orders, for a business case to be approved, the case has to be made primarily on the basis of lagging measures.

2

http://webarchive.nationalarchives.gov.uk/20130107105354/http:/www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/@dh/@en/documents/digitalasset/dh_091984.pdf



If the system can be re-designed to focus on its purpose, then that same system will ensure that the ‘easiest’ route is also the best route. It will also ensure that all decision-makers have the right level of knowledge to be able to make the correct decision.

2.2. 'Purposeful pathology' and the new NHS

We believe that the proposed approach to diagnostics will place the Northern Locality at the leading edge of a new type of commissioning relationship in the NHS.

2.3. Care closer to home

The boundaries between primary and secondary care are, from a patient's perspective, often blurred. With a move towards care closer to home, we will have to rethink what constitutes 'acute' pathology, and how this is provided. It will not be good enough to have urgent results available within 24 hours, when decisions need to be supported in much shorter time frames. New technologies are emerging that will facilitate this transition, but many of the barriers to implementation are historical, and created by narrow framing of problems in terms of traditional boundaries. The current system, which acts (and charges) based on where a test was performed, rather than why it was performed, will have to change. We believe that our proposed model, of optimisation according to need, with transparent open book accounting, will be a key part of this process.

2.4. Five Year Forward View

Our proposed model of collaborative and transparent working across the health system, with a focus on purposeful activity, fits well with the Five Year Forward View. Notably, this work will promote vertical integration; development of emergency care networks; and development of improved care for patients in care homes.

2.5. Examples of past success

Over the past four years we have seen innovation in North Devon in the way that GPs, pathologists and managers have worked together to attempt to optimise testing. This has been recognised at a national level, and the results of the work has been presented at a number of conferences. Most recently, clinical leads in Pathology and Commissioning have been invited onto a Department of Health funded initiative to improve the use of pathology services.

It should be noted that this work has been up to this point ‘against the rules of the system’ which rewards providers for increasing low cost activity. However, managers both within NDHT and the commissioning body sanctioned the work as it was recognised that the current system did not work, and that this work must be ‘the right thing to do’, even if there were some seemingly negative short-term consequences.

Most of the work described below has followed a paradigm (as described retrospectively by Vanguard consultancy) of aiming for clean in (right test, right time), clean through (test performed according to user requirements) and clean out (results given in a way that facilitates the correct action).

There are 3 examples of past success which have yielded significant improvements in patient care while at the same time releasing real benefits in the form of cost savings, cost avoidance and time spent;



Urine testing – Saving the health economy £225k of testing activity

Wound care – showing significant patient benefits with financial benefits tbc

Biochemistry testing – Saving the health economy £385k of avoided testing activity

It has been shown that a focus on optimisation of testing can deliver large wins, both in terms of quality and cost. This has been achieved through integrated working across the health system

Optimisation of urinary tract infection management. Submission of urine for microbiological analysis is important in patients with infection. In patients with likely infection, it is important that clinicians act quickly, before the results of tests are available, and then use results to refine care. However, when they do not have infection, this test can still be positive, and in this case positive results drive harm. This may be direct to the patient when a prescriber gives an antibiotic they didn’t need (leading to resistance and other less well defined side effects; as well as increased prescribing costs), or indirect, through opportunity cost as someone will need to make an active decision to ignore the result.

Our work showed that management of urinary tract infection was sub-optimal. Many patients with infection were receiving delayed treatment as doctors waited for the results of tests. On the flip side, many patients without infection were receiving treatment for positive results – and this number had increased substantially over recent years due to a change in the way QOF required primary care to analyse urine in patients with some long term conditions.

By studying the demand (why urine specimens were, or were not, submitted) we were able to act at a number of points (from the way receptionists gave out bottles in primary care; to the way specimens were processed in the laboratory) to move towards a more optimal use of testing in management of urine infection.

It is noteworthy that we were essentially focussing on a leading measure, as defined by a patient: "I want the symptoms of my infection to be treated as quickly as possible, and I want to avoid side effects of over-treatment". This focus on delivery of purpose through leading measures, as defined by a patient, is distinct from traditional management approaches which tend to focus on lagging measures (cost, admission rates, etc) or inward looking measures, such as specimen turn-around time (which at best can only be proxy measures for patient-relevant measures).

However, this is a good example on how, by concentrating on the purpose, and through that, leading measures, there can be a positive effect on lagging measures, as shown below in Error! Reference source not found. below.

Figure 2: Reduction in tests requested for UTI over time

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Cost to commissioners, as determined by number of specimens processed, has fallen by over £200,000 per year. The reduced workload in the laboratory has meant we have been able to absorb the loss of one staff member (at an approximate saving of £35,000). Hospital admission rates with UTI have stabilised with a slightly downwards trend over the last 5 years that were previously rising at approximately 5% per annum in the previous decade. This reduction equates to 30 cases less per year which would be a saving of approximately 60 acute bed days (£18k) and reduced expenditure for the CCG of approximately £25k. Combined, this represents a significant saving to the system, for just one condition.

It should be noted that, when looked at from the perspective of the laboratory or the Trust, there was no incentive to carry out this work, as income has fallen, both in terms of pathology income, but also through patient admissions. The costs avoided will not have offset this loss of income. We know that, when a similar focus on quality of work was attempted by other laboratories, it wasn’t supported by management who were focussing on the loss of income.

Optimisation of wound care The team applied a similar logic to the management of patients with chronic ulcers. Wound swabs have no role to play in the management of this condition, and yet the laboratory receives a substantial number of these tests each day (at a cost to the user of over £20 per test). We spent time with users and patients understanding this demand, and as a result redesigned the pathway for management of this condition. This removed the need for any pathology tests (again, as with the urine example, acting against the activity focussed contract, from a laboratory perspective).

The result has been a significant improvement in patient outcomes - average heal times have dropped from over 1 year to under 4 months. This has been achieved and has also delivered on the lagging measures (reduced testing costs, antibiotic costs reduction in nursing appointments).

The top 3 GP practices rated - 28%, 25%, 35% success rates at 12 weeks and then 43%, 42%, 41% at 24 weeks. These results are comparable to the NDDH “leg club” and better than national heal rates. There is still considerable variability in primary care as heal rates in other practices at 12 weeks vary from 1-14% success rates, The implementation of wound care pathway for these practices would be improved with primary care 'link' GP's and optimisation team to improve 'flow'.

To establish benefits, it would be possible to measure appointment data to prove that commencing with a longer initial appointment and appropriate diagnostic would reduce time in the pathway overall and significantly improve the patients outcome

We cannot yet know whether we will have had an impact on more distant lagging measures, such as amputation rates, but it seems likely that improved early care will impact on this.

It should be noted that North Devon has been identified as a national outlier as having high amputation rates.



Tackling variation in use of Biochemistry tests Over the past 4 years, the team have visited all primary care practices in North Devon on a number of occasions to present data on variation in requesting of common tests. This has led to a great deal of discussion with users, and we know that all practices are now much more aware of the cost (financial, opportunity and harm) caused by over testing. As a result of this, requesting of common blood tests has remained stable in North Devon as shown in Error! Reference source not found. below. This is against a secular trend of a 5%+ year n year increase; which continued nationally and in neighbouring localities. This is a reduction of 500,000 tests of which 275,000 would have been primary care given the current percentage split.

The 275,000 tests would have attracted at today’s tariff of approximately £1.40 each and therefore cost avoidance to the commissioner of £385,000. However, the cost avoidance to the Trust was negligible due to the marginal reduction in automation and reagent costs (again, resulting in a net loss of income to the Trust)

Figure 3: Trend in biochemistry workload over time

Perhaps more interestingly, we have also had the ability to understand the demand that leads to this variation, from the user’s perspective. We have been able to start designing test ordering profiles (requested through electronic ordering) that meet these user requirements. Our approach to this method of syndromic ordering, with rigorous evaluation of evidence, and robust debate with users, is ahead of all other services we have evaluated, and has been recognised at a national level for its potential to drive improvements in quality whilst reducing costs.

2.6. Future Projects

There are similar success stories to develop with other clinical pathways. Three are described below but there are many others to develop. While there are now teams who aim to improve treatment and referral pathways, there has been little attention to how we optimise the use of tests to help decision processes. Studying demand and variation is a powerful way to begin to tackle this. We can do this at many levels.



Renal Function Testing opportunity For instance, we know that the level of renal function tests requested between doctors within a single general practice varies by a factor of more than two. This not only leads to increased direct testing costs, we know this leads to increased downstream costs. For instance, we have seen patients referred for colonoscopy for incidental blood findings (in tests that were not indicated) at the borderline of a ‘normal range’. From national data, we know that Devon is the second highest requestor of Full Blood Counts. We know that Devon has a high rate of referral of patients for haematology opinion, and this is likely to be driven by high rates of requesting of full blood counts. This is clear harm plus expense that results from deviation of testing away from the optimal.

Brain Natriurietic Peptide (BNP) testing opportunity It is important to understand that under-testing also adds costs to the system. Under-testing may lead to poor diagnosis, and sub-optimal treatment or referral decisions. This is expensive. For instance, if Devon performed at the level of East Sussex in the way it used Brain Natriurietic Peptide (BNP) testing as a screening test for heart failure, instead of performing more expensive echocardiography, there could be a saving of c.£3.5 million to the local health economy. This would need to be developed further for North Devon but the benefits both to the Trust in reduced demand for a finite and expensive resource and for the CCG in test costs. Currently there are approximately 5,000 echocardiography tests performed annually.

There is a common view that the decision to perform a test, and the actions that result from a test, are the responsibility of the requesting practitioner alone. The role of the laboratory in this situation is simply to perform tests as efficiently as possible, while hitting targets for accuracy and timeliness. The principle measure used with this model is unit cost. It is almost obvious that a reduced unit price will result in reduced total test costs.

Our conclusion is that this focus on price has taken attention away from where it should be directed - namely optimisation of testing.

Ultrasound / Liver Function Tests. There has been a study on the demand and efficacy of liver function tests. It has been shown that 90% of tests have no clinical value. This is not benign.

Clinical findings

A recent example highlighted a patient who had routine testing, with mildly abnormal values which was an incidental finding of no clinical relevance. The consequences of this were;

Multiple follow up appointments (14 GP visits in a year);

Secondary care referrals and ultrasound scanning.

This episode expended a considerable use of expensive resource (testing, scanning, clinician input) which was unnecessary and may indeed cause harm.

Studying the system shows several points for intervention. Some of these are at a high level (such as appointment times) but others are more tractable to an instant test of change. For instance, the use of order communications based on syndromic requesting (i.e. linking exact tests to exact clinical need) and improving the ways that results are relayed to clinicians and patients so that appropriate actions are encouraged.



Reviewing a number of patient history’s and feedback, these stories are common. Another instance reviewed a patient who had an incidental finding of a raised plasma viscosity. She had seen two consultants, had multiple investigations (including an MRI) and yet no one had been able to inform her at the end of this very expensive and time consuming process of any diagnosis of what was actually wrong with her (i.e. in this case, nothing).

In short, wherever optimisation resources are used to study demand, reflecting on;

why there is deviation between 'what matters' and what we actually deliver,

thinking about how we can redesign systems to improve,

It never fails to deliver substantial quality improvement. Cost then follows quality.

From the initial understanding of demand created from Primary care, it is likely that there are a significant number USS abdomen requests driven by liver function test (LFT) requesting and the out of reference range results obtained. We know this is sub-optimal. Direct access U/S activity has been rising by 7 to 8% per annum.

A very modest 10% saving on Ultrasound demand by optimising the referral pathways (currently around 6,000 examinations per annum) would provide substantial savings on direct access costs for the CCG (approximately £30k) as well as approximately 250 - 300 hours of U/S appointments per annum in the Trust that could be better utilised for in-patient diagnostics to improve patient flow and reduce patient length of stay.

The estimate for reducing demand and increasing benefits is modest and this could well be higher than 10%

Measures An annual Liver function test (LFT) does not meet the purpose of a test for patients at annual review and does not contribute to what matters to patients. It only contributes to failure demand.

For a lagging measure (LFT +Chronic disease) the LFT test in GP annual review chronic disease order sets has been removed (>50% of all primary care bloods).

This lagging measure will be a reduction in overall biochemistry requesting across 22 practices.

Approximately 5 practices have implemented the sets - showing an average 16% reduction in biochemistry volume as per the CCG pathology monthly stats. The majority of practices have yet to implement these rational order sets for chronic disease. The optimisation team will use this as a lagging marker of practice uptake of the chronic disease order sets - reducing LFT use in chronic disease monitoring.

GP uptake is reliant on the pathology capability work to continue to engage with practices and clinicians to support to optimise flow/ processes around the use of chronic disease order sets in practice.

The service will be assessed by its performance against leading measures. These are measures that can be used to assess how well the service is performing against things that matter to patients. For instance, "I know why I am having this test done, and what I will do with the result." It is important to note that these measures can only be designed from first studying the problem - they cannot be defined without first talking to patients and users.



When optimisation projects are being reviewed, they will be assessed collaboratively and with the benefits broadly aligned to each organisation

2.7. New approach to Contracting/Finance

From the increased quality of patient care derived from optimisation, there are many benefits and cost savings that can be driven out in both primary care and secondary care. The potential savings in pathology services themselves should be dwarfed by savings to the system as a whole, through:

A reduction in unnecessary testing;

A reduction in iatrogenic harm;

Optimising pathways for patients with common conditions (often long-term) to enable them to understand and manage their condition better and for practitioners to identify what is the care required, when;

To maximise the benefits wherever they fall, it is essential that there are no boundaries from a contracting and finance point of view with an agreed transparent sharing of the identified benefits between the CCG and NDHCT.

To create an environment of trust, an open book accounting model is strongly recommended in conjunction with a combined approach with both parties working closely together.

The current contracting model will also need to be re-defined and in line with the agreed changes to ensure transparency and the application of ‘actual cost’ costing.

As a product of the optimisation process, key leading measures will need to be developed.

2.8. Learning points

While there have had notable successes over the past few years, some projects have been less successful.

When we look at the reasons behind this we see a lack of:

dedicated time for optimisation;

resources for analysing and accessing data;

formal links with users;

a formal governance structure for support and challenge;

and, at times, insufficient management attention.

2.9. So how would Pathology Optimisation look in North Devon?

We believe that the work described to date provides a compelling reason to attempt to formalise optimisation, while tackling some of the issues that have detracted from its potential impact. The aim to create a team that is focussed purely on optimisation of testing (clean in / clean through / clean out). This will be done by understanding demand where it occurs, and then acting with users to move towards an optimum state (as defined by the patient). We will derive new measures of performance that encourage improvement. In particular, we will measure:

whether requests for testing are necessary or optimal

whether the results produced are on time for the key clinical decisions to be made

whether results are understood



whether results are leading to informed decisions.

Creating an optimisation team to sustain and Increase this work The significant successes achieved thus far have been realised, to an extent, by keen individuals being given licence to work ‘off radar’. This has been in an environment in which there has been ever-increasing pressure, both nationally, and locally at times, to create testing ‘super-hubs’ either through merging or outsourcing. It has also been undertaken during a period when, at times, relationships between provider and commissioner were strained.

It is now time for Pathology Optimisation to move centre stage, with a clear commitment from both the senior management teams of both the CCG and NDHT and a more formal approach both to deliver optimisation and a new commissioning relationship.

We need to formalise the approach to optimisation if it is to be sustained and more importantly increased. (as with the success in Pharmacy)

From the work with Vanguard, we now have a robust structure within which to embed this work

The proposed initial team will mirror that of the prescribing team in primary care, and consist of:

A GP (4 PA’s/2 days a week)

A consultant pathologist (4 PA’s/2 days a week)

2 biomedical scientists (2 x 21 hours per week)

External coaching support (Vanguard – fixed setup cost £5k)

Other laboratory administration and clinical input as required

Link GP practitioners in primary care (1 PA per week)

Link practitioner in the acute hospital

Public Health specialist registrar to develop health needs assessment and initial ‘measures for success’ (as part of already-funded training package)

Project management costs

The estimated cost of this team is detailed in the finance section. This includes set up costs (for example, training in use of practice computer systems; an initially more intensive period of user engagement that may require additional locum / backfill time).

It should be recognised that a number of the elements identified above relate to costs already incurred, so would not all be new investment. Much can be achieved simply through re-profiling job plans. They are included here because their input would be formalised as part of the Optimisation team, and, as such, their costs should be recognised.

The costs of the team will be a part of a transparent open book accounting system, and as such will be held to account for its actions. The portfolio of leading measures that will arise from this work will be the most rigorous and transparent way of assessing quality and accountability to have been developed by any pathology service we are aware of.

2.10. OPEN BOOK ACCOUNTING

The current system is focussed on activity and sets up transactional relationships between commissioners and providers

There is a need to change the system to focus on capability, and promote cooperative working



It is apparent that many of the problems in negotiation of a pathology contract have arisen from an 'illusion of control' driven by a focus on unit cost.

All recognise that the existing contractual system is not fit-for-purpose. There is no obvious reason why continuation of this model will not see an ever-reducing unit cost, yet an increased cost of the service overall. This will increase the pressure on the CCG to tender competitively its direct access services. If this course of action were taken:

Following the logic of focusing on the wrong measures, whilst there may be a benefit of reduced unit price leading to overall service cost reduction, the benefit may well be short-term with the tendency towards ever-increasing service cost returning, potentially at a greater rate than previously;

The knock-on impact to NDHT could be a significant level of stranded costs, leading either to increase the difficulties of sustainability and/or increased need for tariff modification. NDHT could either tender its own services, or jointly tender with the CCG in a bid to offset this risk.

Whether or not the decision to competitively tender was taken, it would remain the case that the true potential for adding value by a Pathology service would not be properly recognised. Improvements, as have already been seen, would be less likely to be achieved, and if achieved, would tend to be despite the system, rather than because of it.

However, it is a known model, it has known, and seemingly well-understood, measures (although their impact might not be so well understood). It is easy to count. It is easily benchmarked, and thus can be compared (although, not as safely as many might currently think). In the short-term, it might be seen as safe.

To change requires a degree of courage, and, being honest, a bit of a step into the unknown. However, the evidence of success already achieved shows the potential for the optimisation approach – a little funding now could reap significant benefits both to the health of the local population and the financial health of the local health system.

As opposed to continuing as is, which virtually ignores it, the proposed change explicitly recognises the added value that a dedicated team involving pathologists/GP’s and healthcare professionals can add to the health system.

The approach enables the parties to “design a system that delivers the purpose we want”.

It does not discount the possibility of outsourcing through tender the testing element of pathology. However, if this approach were chosen it would be essential for the selection criteria to include the ability for any third party provider to work within the new model, and share the purpose. In addition, the model would require the CCG and the Trust to tender their current pathology requirements jointly, which in all likelihood, given the increased volume, lead to improved offers from the market.

The proposed contracting approach ties the Trust and the CCG together and ensures they have a common interest in the success of a local pathology service. This new approach, based on mutual trust and with a common purpose, could provide evidence for adopting this approach in other services – much in line with the Five Year Forward View.

The successes achieved so far have already attracted national attention. Wrapping up this approach in a single model is likely to reinforce and accelerate this success.



From previous examples, this does nothing to tackle the real causes of cost in the system. For this work to progress (moving from a focus on activity to a focus on purpose) it is felt that it is essential to move to a transparent accounting model. Costs will described where they fall, and not as allocations of a proportion from a wider budget. Commissioners (and this includes the hospital as a commissioner of pathology for its users) needs to buy a capability, rather than an activity.

Currently we have at least three commissioners for the North Devon Pathology Service. Namely, Northern locality NEW Devon CCG for all 'direct access' work; Northern Devon Healthcare Trust (for all secondary care work) and Cornwall CCG (for 'direct access' work from Stratton and Bude medical centres).

It is proposed that NEW Devon CCG direct access pathology charges are based upon proportion of fixed actual 14/15 pay costs (adding back any tariff deflator applied to the 15/16 contract) with variable volume based charge for non-pay costs. The surplus has been removed from pathology during the contract discussions. This will remove the Trust/ CCG focus on the surplus and also address the issues of a focus on unit costs within the system as described in section 2 of this document.

For the CCG, this will ensure that volumes are no longer a driver of future increased costs to the healthcare system and also that volumes are no longer a driver of increased surplus to the Trust.

The trust proposes to routinely share the future direct costs of the pathology service (as already provided).

In its service line reporting model, the trust “allocates” central overheads to services on a high level basis. These allocations will then be allocated as a percentage onto the direct costs within the financial analysis and subject to review annually.

In order to fund the virtual optimisation team, it is proposed that the Trust and CCG invests 50% of the overall net cost of the proposed optimisation team (approximately £48k each with NDHT investing in the secondary care element and the CCG investing in the primary care element) from funding released though early efficiency actions (e.g. reduction of admissions/bed days/activity) to enable the release of the NDHCT team detailed below in combination with elements of service currently funded through the CCG

Implications for the next contracting round The next contracting round will have to deal with how all parties deal with overhead costs that have been placed within the pathology budget, the overall budget envelope and the sharing of financial benefits and risks collectively.

It should also be noted that, with this approach, it will not make sense to consider the cost of an individual test, and on this basis, the commissioners will have to resist the urge to benchmark costs against other services. The interest will lie solely in ensuring the total pathology service cost represents maximum value for money. This will require commissioners to be more involved in the day to day governance of the service.

3. OPTIONS APPRAISAL

The options available to the Trust are as follows:-

Option 1: Continue As Is



Option 2: Create Pathology Optimisation Team and work to a Purpose based/value contract model with Open book accounting

3.1. Non-financial assessment

Option 1 – As is All recognise that the existing contractual system is not fit-for-purpose. There is no obvious reason why continuation of this model will not see an ever-reducing unit cost, yet an increased cost of the service overall. This will increase the pressure on the CCG to tender competitively its direct access services. If this course of action were taken:

Following the logic of focusing on the wrong measures, whilst there may be a benefit of reduced unit price leading to overall service cost reduction, the benefit may well be short-term with the tendency towards ever-increasing service cost returning, potentially at a greater rate than previously;

The knock-on impact to NDHT could be a significant level of stranded costs, leading either to increase the difficulties of sustainability and/or increased need for tariff modification. NDHT could either tender its own services, or jointly tender with the CCG in a bid to offset this risk.

Whether or not the decision to competitively tender was taken, it would remain the case that the true potential for adding value by a Pathology service would not be properly recognised. Improvements, as have already been seen, would be less likely to be achieved, and if achieved, would tend to be despite the system, rather than because of it.

However, it is a known model, it has known, and seemingly well-understood, measures (although their impact might not be so well understood). It is easy to count. It is easily benchmarked, and thus can be compared (although, not as safely as many might currently think). In the short-term, it might be seen as safe.

Option 2 – Optimisation team Option 2 requires a degree of courage, and, being honest, a bit of a step into the unknown. However, the evidence of success already achieved shows the potential for the optimisation approach – a little funding now could reap significant benefits both to the health of the local population and the financial health of the local health system.

As opposed to Option 1, which virtually ignores it, Option 2 explicitly recognises the added value that a dedicated team involving pathologists/GP’s and healthcare professionals can add to the health system.

The approach enables the parties to “design a system that delivers the purpose we want”.

It does not discount the possibility of outsourcing through tender the testing element of pathology. However, if this approach were chosen it would be essential for the selection criteria to include the ability for any third party provider to work within the new model, and share the purpose. In addition, the model would require the CCG and the Trust to tender their current pathology requirements jointly, which in all likelihood, given the increased volume, lead to improved offers from the market.

The contracting approach in Option 2 ties the Trust and the CCG together and ensures they have a common interest in the success of a local pathology service. This new approach, based on mutual trust and with a common purpose, could provide evidence for adopting this approach in other services – much in line with the Five Year Forward View.



The successes achieved so far have already attracted national attention. Wrapping up this approach in a single model is likely to reinforce and accelerate this success.

3.2. Financial assessment

The financial impact of proceeding with the new model is difficult to quantify. In undertaking this assessment three perspectives have been used:

The Trust;

The CCG;

The Health Economy.

This approach, which of course should always be used, is particularly relevant at a time when the financial challenge facing the NEW Devon health economy is so huge. Whilst there may be short-term benefit, there is distinct long-term dis-benefit, in playing a ‘beggar thy neighbour’ approach. In the same way that there is little point in the Trust seeking to increase activity to improve the contribution of the service to overheads if the CCG cannot afford this additional activity, there is no advantage to the health system if the CCG reduces its expenditure with the Trust only to leave stranded costs that cannot be lost with the Trust.

Option 1 – As is The Trust

patient flow

Increased urgent care/ED activity (and marginal income) Continued Increased demand Subsequent Increased bed capacity required for longer periods (Winter beds) Negative effects on 4 hour target Increased hospital length of stay/delayed discharges due to other key

resources not being available

effective use of resources

Inappropriate testing – increases activity and income

pressure/demand on key resources

U/S and imaging slots used as a result of inappropriate testing

capacity/demand issues

Diagnostic waiting times meeting the needs of inappropriate testing

The CCG

activity/cost that does not provide any demonstrable benefit to patients

Increase in ED activity costs Increase in admissions/cost

Better health outcomes for patients

Iatrogenic harm for un-necessary interventions/tests/procedures



The Health Economy

Meeting the needs of patients:

Harmful to the population, increased testing, poorer quality of care Increased failure demand

pathway re-design

This option facilitates current practices and the spiralling upwards of demand

Pathway costs

Increased costs as inappropriate testing increases demand for services

Capacity required to meet growing demographic demand

The continuation of current practice will result in the continuing rise in demand for additional capacity

Option 2 – optimisation team

The Trust

patient flow

reduced urgent care/ED activity (and marginal income) reduced or static demand less requirement on sustained bed capacity required for longer periods (Winter

beds) reduced pressure on 4 hour target reduction in average hospital length of stay/delayed discharges due to other

key resources being less pressured

effective use of resources

targeted and evidence based testing reduces the demand/activity on inappropriate testing but reduces income

less pressure/demand on key resources

reduced pressure on diagnostic resources

cost avoidance of increasing capacity to meet results of failure demand

The CCG

Activity/cost that does not provide any demonstrable benefit to patients

reduction in ED activity costs reduction in admissions/cost

Better health outcomes for patients

Reduced harm to patients for un-necessary testing Patients being able to be treated in their homes Care able to be maintained closer to home via community/primary care



The Health Economy

Meeting the needs of patients

Less harm to the population, reduction in inappropriate testing, increased quality of care

Reduction in failure demand

Improved pathway re-design

Reduction of cost in the overall pathway

Capacity to meet growing demographic demand

Reduced capacity required to meet the growing demand and population increase

For option 2, the optimisation team will work across the health system, and in the spirit of partnership working, it is proposed that the costs and benefits are shared equally between the CCG and NDHCT.

The proposal requires the creation of an optimisation team at an overall cost of £263k across the CCG and NDHCT. £166k is within existing structures and therefore an initial investment of £97k is required.

Projects as described in section 2.6 will need to be carefully and strategically identified for both primary and secondary care. Once confirmed, project plans and expected deliverables can be established.

The projected annual recurring benefits from the optimisation team are targeted initially at £250k. It is expected that these will be shared equally between the CCG and NDHCT.

Costs

The estimated cost of this team as per the table below is £263k per year. This includes set up costs (for example, training in use of practice computer systems; an initially more intensive period of user engagement that may require additional locum / backfill time).

A large element of the costs are already within the existing establishment, therefore the net additional investment required to establish the Optimisation team is £97k

Figure 4: Breakdown of Optimisation Team costs

£'k

Assumed

Band

Cost per

WTE

£000's

WTE

Total

Cost

£000's

In

Existing

NDHCT

Structure

In

Existing

CCG

Structure

Net

Incremental

Cost to

Trust/CCG

GP (4 PA’s/2 days a week) @ £80/hr 156 0.4 63 63- -

A consultant pathologist (4 PA’s/2 days a week) 150 0.4 60 60- -

2 biomedical scientists (2 x 21 hours per week) B6 36 1.2 43 43- -

External coaching support (Vanguard – fixed cost £5k) 5 5

Other laboratory administration and clinical input as required B5 31 0.619 19

Other laboratory administration and clinical input as required B3 23 0.614 14

Link practitioners in acute care (1 PA per week) 156 0.11 17 17

Link GP practitioners in primary care (10.15 Hrs pw) 156 0.27 42 42

263 103- 63- 97



Benefits

The three areas of work identified and discussed in section 2.6 are:-

Renal Function Testing

Brain Natriurietic Peptide (BNP)

Ultrasound / Liver Function Tests.

However, this list is not exclusive and other more deserving projects may be prioritised. It is anticipated that the optimisation team will evidence the clinical and commercial outcomes as part of its deliverables (leading measures) in order that its effectiveness can be assessed after the first year.

4. COMMERCIAL ASPECTS

The challenges to the local health care economy are best dealt within and only full clinical engagement and pathway re-design will provide solutions as to how to best use the resources available sustainably.

There could be a competitive threat from the private sector but reduction of cost per test is only a short lived benefit and does nothing to tackle the long term increasing demand. Working closely with primary care on Optimisation has built a solid understanding and appreciation of the benefits of Optimisation and the collaborative approach required between the respective health care front facing teams

The change in contracting approach allows for this seed change in a different way of working/thinking to be evaluated in a calculated way. There are options to revert to other control mechanisms if this doesn’t provide the benefits expected.

Efficiencies of the laboratory can be improved with internal re-organisation and the potential for future outsourcing of testing (standard MES and MES+)

There is potential to market this approach in regards to consultancy fees potential for Intellectual Property in terms of optimised pathways; contracting approach?

5. AFFORDABILITY

With the examples listed and previous work completed, there is evidence that a very modest increase of investment into Optimisation will yield benefits clinically, operationally and financially.

This is a real scheme driven clinically that will deliver and is arguably the most compelling project on offer to provide the necessary health care changes required in the current financial climate.

6. ACHIEVABILITY

More can be achieved through a dedicated team, with shared governance, than with the current approach ‘off radar’.

Significant effort needs to be put into:

Agreeing open book

Agreeing governance structure

Agreeing success measures, and evaluation approach



Probable governance structure to have representation from:

Primary Care diagnostics lead clinician

Secondary care Diagnostics lead clinician

Other medical and surgical representation from primary and secondary care

CCG contracts manager

Trust manager

In consultation with the primary and acute care clinicians, work will need to be undertaken on specific clinical pathways to target along with timescales for delivery. Agreed leading measures of success will have to be determined and agreed based on previous optimisation work and the complexity of the clinical pathways that are selected.

There will need to be a leap of faith for both provider and commissioner alike in the development of the measures of success but the evidence so far should make this an easier risk to accept.

Communications within the clinical environment can be via GP Forums, GP shutdown days and grand rounds in the acute setting.

Using the “Devon Cares” could be a branding concept to emphasize the primary/acute combined approach.

7. RECOMMENDATIONS

The challenge for senior leadership and management

This work directly challenges the traditional role of senior leadership, management and measures used to assess performance

It is likely that these teams will need support if they are to realise its full potential, and extend it into other areas.

The work described has its foundations in the Vanguard Method – an approach to the design and management of work which has a strong evidence base but which directly challenges conventions about how to achieve control in organisations. We have learned many valuable insights since working with Vanguard. We have learned about the importance of studying demand. We have learned the danger of incentives. We have learned how a focus on purpose defines actions that lead to improvement.

We have learned that any focus on lagging measures has no method for improvement, no logic implying success and is in almost all cases destined to fail. Despite this logical flaw, this is the dominant historical method of well-defined management processes which are very difficult to steer away from, and thus leads to compliance cultures that hit the targets yet miss the point. The result is incredible levels of failure demand - activity that is occurring because the right thing wasn't done in the first place or the right thing was done in the wrong place. Most systems that have been studied in this way show levels of failure demand running at over 50%. In a health system which is struggling to find sufficient resources to sustain current levels of service, there has never been a more compelling time to explore the potential for this new way of working.

The role of management will change and the service will be held to account for acting in accordance with agreed principles. These principles will be determined in a transparent manner, providing a strong basis for governance when taken in tandem with an open book approach to cost and a framework of leading measures.



The principles will relate to;

understanding demand and variation

deriving action to improve from leading measures

determining purpose and value from an end-to-end perspective

This is a radical departure from the normal compliance based ‘lagging’ approach. It assumes that decisions about how to work are best made by those who do the work and provides a framework for ensuring that their action is framed from a system, not ‘own patch’ perspective.

The potential for this to work in pathology has been proven and the recognition, support and buy in from senior managers in both the Trust and CCG team has been highly valued, but to fully realise its potential it is recommended that senior management continue to work to understand and develop this new paradigm.

This alternative approach is not without its challenges but there is enormous potential for extending this work into other clinical areas and could be a significant step in sustaining and being able to manage the health economy in Devon . Other service industries that have used the Vanguard method have seen phenomenal improvements in both customer satisfaction and the financial bottom line; and we have every reason to believe that the potential for synergy by extending this work into other areas of health in North Devon, is enormously exciting.

Option 2 is recommended for approval for:

The formulation of an Optimisation team

The move to a transparent open book accounting model

The adoption of a capability value/purpose based contract

It is further proposed that a small group, containing clinicians and contracting staff from both NDHT and the CCG is established to define, by a deadline (? October 2015), the risk- and gain-sharing arrangements for this new commissioning approach, as well as defining how best to hold the Optimisation Team to account for delivery, whilst maintaining the principles of purposeful commissioning.



APPENDICES

Open Book activities

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