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Using Variation Analysis to Lower
Costs While Improving OutcomesCaleb Stowell, MD
Kevin Fleming, MBA
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Welcome and Introductions
Venkat BhamidipatiExecutive Vice President, CFO
Caleb Stowell, MDVP, Value Analytics
Providence St. Joseph Health
Caleb Stowell is VP, Value Analytics at Providence St. Joseph Health. He brings cost
and outcomes data together to engage physicians in optimizing the value of their care.
Prior to Providence, he helped found and lead the International Consortium for Health
Outcomes Measurement (ICHOM), focusing on outcome standard development and
stakeholder engagement. He received his medical degree at Harvard Medical School
and was Senior Researcher at Harvard Business School for 6 years.
Kevin Fleming serves within Providence St. Joseph Health (PSJH) as the Chief
Operating Officer for Clinical Program Services. In this role, he works collaboratively
with clinicians, caregivers, and administrative leaders across all service lines on
strategic projects that impact clinical quality, cost, value, and growth across the health
system. These projects include initiatives designed to increase the value of care
provided to patients and communities, the development of bundled payment
strategies, implementation of care pathways and protocols, negotiation of physician
preference items, and the development and execution of alignment strategies with
independent clinicians. He has presented the collaborative work of PSJH at
conferences held by AAOS, ICHOM, Becker’s Healthcare, HFMA, and others. Kevin
has worked in integrated healthcare delivery systems in both system-level and local
operational roles, and he has also held leadership roles in independent physician
practice settings as well as in the post-acute environment.
Kevin Fleming, MBAChief Operating Officer, Clinical Program Services
Providence St. Joseph Health
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Agenda for today
❑ Context for our discussion today
• Broad healthcare environment
• Within Providence St. Joseph Health (PSJH)
❑ The Value Improvement Journey at PSJH
• Bridging the Data Divide
• Developing Credibility and Transparency
• Supporting Change
❑ Discussion/Q&A
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Learning objectives
❑ Attendees will learn strategies utilized in a large health system to develop data
tools that visualize financial and clinical information
❑ Attendees will discuss clinician engagement methods that can be leveraged to
gain clinician participation and ownership of an organizational strategy to
improve the value of care
❑ Attendees will review data highlighting typical practice variations and will practice
developing improvement plans that capture the opportunity
❑ Attendees will learn the value of ongoing performance monitoring during
transformative projects and will be able to identify leading indicators of
resistance to change efforts
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An introduction to
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As expressions of God’s healing love,
witnessed through the ministry of Jesus,
we are steadfast in serving all,
especially those who are poor and vulnerable.
Mission
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The organization
builds on a deep
history and legacy,
tracing its roots to
the mid-1800s.
Both Catholic and
non-faith-based
traditions are
included in the
enterprise.
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We care for patients in a variety of settings across communities
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CONTEXT FOR TODAY’S DISCUSSION
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Source: Harvard Business Review; https://hbr.org/2017/10/how-u-s-hospitals-and-health-systems-can-reverse-their-sliding-financial-
performance
“On the Pacific Coast,
Providence St.
Joseph Health, the
nation’s second
largest Catholic
health system,
suffered a $512
million drop in
operating income and
a $252 million
operating loss in FY
2016.”
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PSJH collaborates across geography in key clinical areas
Clinicians within PSJH,
aligned around common
groups of clinical conditions,
work together with
administrative, financial,
nursing, rehab, and data-
driven stakeholders within
Clinical Institutes. These
groups are charged with
delivering better care at a
lower cost, with an eye for
future opportunities for
responsible growth.
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PSJH Clinical Program Services 2018 Accomplishments
Only 1
maternal death
experienced during
over 71,000
deliveries
Over 15,000
high risk patients
screened for lung
cancer
88% increase
in patients receiving
tPA for stroke
10% lower
mortality than
expected in CABG
procedures
220 fewer readmissions
than expected for the
elective Total Joint
population
Over 6,000
patients enrolled in
cancer clinical trials
Over 40,000
patients treated for
malnutrition
Over 770
fewer deaths
from Sepsis
than expected
>$84M savings
in supply chain
>$13M cost per case
savings (VOA)
7 states
Participating in
APM’s with CPS
2 commercial
contracts
for value-based
payment arrangements
$4M
Received from CMS
for Bundle
performance
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Despite the early successes for these teams,
the most pressing work is still ahead…
Value = Outcomes
Cost
x Appropriateness
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2
3
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Drive down unit cost in areas
without outcome impact
Measure and demonstrate excellent
outcomes (at competitive prices)
Broaden measurement scheme to
capture and optimize appropriateness of
care
Win commercial contracts while still
operating profitably at government rates
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A. Lack of executive sponsorship
B. Lack of clinician engagement in improvement efforts
C. Lack of data/tools to review, select, and monitor improvement
opportunities
D. Other
Audience question:
Within your organization, what is your biggest challenge
related to value improvement?
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PSJH Value Aim
Together, we willdeliver nation-leading health outcomes
at Medicare ratesby 2022,
starting with the top 20 diagnoses
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THE VALUE IMPROVEMENT JOURNEY AT PSJH
1. Bridging the data divide
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Bridging the data divide
Patient-reported
Outcomes
Patient Experience
Readmissions
Mortality/Complications
Purchased Services
Labor
Pharmacy
Supplies
Quality Cost
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To optimize value, we had to bring together its two
components
Purchased
Services
Labor
Pharmacy
Supplies
Improve value = lower this while maintaining or improving this
Patient-
reported
Outcomes
Patient
Experience
Readmissions
Mortality/
Complications
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▪ 1. Cost normalization
▪ What is the right way to visualize cost data for clinicians?
Simple in principle but challenging in practice
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Isolated CABG
2017
Each shape is one facility
Each mark is one case
Direct variable cost only
Blue = Non-normalized
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A. Show them direct variable cost straight out of your cost accounting
system
B. Try to normalize cost across facilities for comparisons
C. Don’t show them cost; only show utilization
Audience question:
How would you approach representing cost to clinicians?
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Our approach to normalizing cost
Cost Category Sub-CategoryNormalization
Method
Room and BoardICU, ICU Intermediate, Routine
Room and Board, Observation
Standardized unit cost per bed
day per sub-category
Operating Room OR, PACUStandardized unit cost per
minute per acuity level
Pharmacy and Supply Many Pull through acquisition cost
CPT-basedLabs, Blood Products, Therapy
Visits, ImagingStandardized unit cost per CPT
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Isolated CABG
2017
Each shape is one facility
Each mark is one case
Direct variable cost only
Blue = Non-normalized
Orange = Normalized
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▪ 1. Cost normalization
▪ Normalization has been central for clinicians to understand the “typical”
cost impact of their practice pattern variation
▪ However, it is not without its challenges – more than half of our team’s
time is spent on updating and optimizing the cost normalization logic
▪ Translating between “normalized” savings and “true” savings often not
straightforward
Simple in principle but challenging in practice
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▪ 2. Outcomes that matter
▪ We built standard outcome variables for all patients (mortality,
readmission, and patient experience) but those are crude indicators
▪ We want to build outcomes that truly matter
▪ The “give a darn” test
▪ Current additions include patient-reported functional improvements,
revisions, specialty specific complications
Simple in principle but challenging in practice
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Outcomes included now and in the near future
Total Joints
▪ Complications
▪ Surgical site infections
▪ DVT/PE
▪ CAUTI
▪ Hip dislocation
▪ Peri-prosthetic fracture
▪ Patient experience
▪ Patient reported outcomes
▪ Operative mortality O:E
▪ Any reoperation O:E
▪ Deep sternal wound
infection O:E
▪ Permanent stroke O:E
▪ Post-op length of stay O:E
▪ Prolonged ventilation O:E
▪ Acute renal failure O:E
▪ Hours in ICU
▪ Hours in OR
▪ Hours on ventilation
▪ Patient experience
▪ Patient reported outcomes
▪ In-hospital mortality O:E
▪ Acute kidney injury rate
▪ Non-elective CABG rate
▪ Post-PCI bleed rate
▪ Revascularization rate
▪ Stroke rate
▪ Patient experience
▪ Patient reported outcomes
CABG PCIAll Patients
▪ Readmission O:E*
▪ Mortality O:E
▪ Length of stay O:E
*O:E observed to expected ratio; indicates use of risk model
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▪ 3. Appropriate comparisons
▪ DRGs are not the way clinicians view the world
▪ Desire to stratify in a more clinically intuitive way
▪ We started with administrative data (DRGs, ICD Procedure and
Diagnostic Codes, CPTs) but went deeper as necessary
Simple in principle but challenging in practice
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Sample cohorting enhancements
• Total joint replacements
• Hips, knees separate
• Fracture separate
• Appendectomy
• Peritonitis separate
• CABG, PCI
• Risk of mortality from
clinical registries
• Vaginal Delivery
• Para count
• Spine Fusion
• Number of levels fused
Administrative Data Only Supplementary Data
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▪ 4. Practice pattern drillability
▪ To simplify explorations of total cost per case differences down to
component practice drivers, we developed a multi-layered taxonomy
Simple in principle but challenging in practice
Level 2
Level 1 (Major Activity Group)
Level 3
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Surgeon 1 Surgeon 2 Surgeon 3 Surgeon 4 Surgeon 5 Surgeon 6
Taxonomy exampleProvider’s avg
cost/case for this
item
System avg
cost/case for this
item
Avg cost/case of a
low-cost group of
physicians (“reference
group”) for this item
The greater a surgeon’s cost for an item than
the reference group, the darker the blue
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▪ 5. Volume of data
▪ 1 row per chargeable activity per patient stay = ~100M rows for 2 years
▪ 1 column per quality metric per patient plus additional identifying
information (surgeon, facility, etc.) = ~50 columns
▪ Total data size around 25GB; not something for excel!
Simple in principle but challenging in practice
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THE VALUE IMPROVEMENT JOURNEY AT PSJH
2. Developing credibility and transparency
33 Better
Better
What did we find when we put it all together?
Unilateral Total Knee Replacement
2016-2017
Surgeons with >75 cases/yr
Direct variable cost only
Composite Outcome Score includes:
Readmissions
Complications
Patient experience
Patient reported outcomes
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The link to our financial challenges
Unilateral Total Knee Replacement
2016-2017
Surgeons with >75 cases/yr
Direct variable cost only
System average across all surgeons
Estimated Medicare direct cost
coverage
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A. Visible down to the surgeon level across the organization
B. Visible at the surgeon level within a department but not across the
entire organization
C. Visible at the surgeon level only to an individual surgeon
Audience question:
How transparent would you make the value analysis
information just described?
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• Unilateral Total
Knee
Replacement
• 2017-2018
• Surgeons with
>75 cases
• Direct variable
cost only
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THE VALUE IMPROVEMENT JOURNEY AT PSJH
3. Supporting change
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Cumulative impact of practice variation –
Total Knee Replacements
Major Activity
Group
Low Cost Practice Cost/Case High Cost Practice Cost/Case
Implant Vendor A $3,118-3,472 Vendor B $4,300
Supplies 1-2 boxes plain bone
cement
$130-190 Multiple boxes of
antibiotic cement
Up to $900
OR/Anes Average OR time 82
minutes
$1,525 Average OR time 160
minutes
$2,534
Room/board Median LOS 1.3 days $500 Median LOS 3.2 days $1,337
Pharmacy NSAID, TXA, ABX $100 Tisseel + Exparel Up to $800
Therapy 1 session, PT only $150 Mult sessions, PT+OT $450
Imaging No inpatient imaging 0 X-ray and ultrasound $150
Total ~$5,600-5,900 ~$10,700-11,000
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Service
Line Admin
Leader
Practice
Change
Content
Support
(Various)
Project
Support
(PI/OE)
Data
Clinical
Champions
Guidance (i.e.,
pharmacy, supply
chain, finance, etc.)
Design new care
processes for
complex initiatives
Own improvement
work & lead
engagement with
caregivers locally
Champion initiatives,
lead by example &
dialogue with reluctant
adopters
Executive Leadership Develop culture of
improvement,
allocate resources
Clinical Champions
Inform & guide data
definitions, identify
meaningful outcomes,
validate data
From data to change
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Impact Example: Primary Total Knee Replacement
Cost
Outcome:
Readmissions
43 Trends in cost index for ALL VOA cohorts over time by region
PSJH
System
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❑ Collaborate with physicians on meaningful cohorts and metrics
❑ Incorporate shoulder to shoulder chart reviews to supplement data tools
❑ Understand areas of clinical judgment
❑ Socialize the work and approach until it is a part of your organizational vocabulary
❑ Accept feedback
Keys to success in accelerating value improvement
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❑ Data availability, reliability, and action-ability• The hardest questions require deeper dives, which require resources and time
• Changes in financial systems sometimes hinder year-to-year comparisons
❑ Alignment and accountability• How can local medical directors become skilled at value improvement work?
• How can a local hospital get its clinicians to agree that cost of care is also their problem?
❑ Operational support• How to make sure all local teams have visibility to best practice
• Complex interventions require broad teamwork from operations leaders
• Competing priorities for local PM/PI work
Barriers remain that PSJH continues to address
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Questions?