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Leveraging Lab Information
in New Ways to Benefit Healthcare
in a Non-Fee-for-Service Environment
Brad Brimhall, MD, MPH
Professor, Pathology and Medicine
& Medical Director, Clinical Laboratories
University of Mississippi Health Care
Curt Johnson
Chief Operating Officer
Orchard Software
Opportunities for
Laboratories to Provide Value
in a Non-FFS Environment
Current State of Healthcare
• Transition away from FFS towards value-based
payment models
– Bundled Payments
– Capitation
– ACO Environments
Page 3
The Laboratory’s New Role
• Laboratories become more important, not less.
• Adapt to changes in order to thrive.
• Think of the laboratory’s overall impact on the
organization, not as a silo within.
• Business Analytics
Page 4
Time of Transition = “Choppy Water”
• Shore up the lab’s foundation.
• Make sure your lab is prepared for the current &
future environment.
• Look for opportunities to improve patient
outcomes.
• Make the changes necessary to get there.
Page 5
Target Area 1
1. “Right-size” Testing
– Reduce waste (duplicate tests).
– Reduce unnecessary testing/Recommend
testing cascades.
– Seek opportunities to improve (new
equipment justification).
Page 6
Target Area 2
2. Integrate & Collaborate
– Radiology
– Adult ICU
– Pharmacy
– Finance/Administration
Page 7
Target Area 3
3. Identify areas where the lab can save
healthcare dollars across the entire patient
care episode.
– Integrated Medical Analytics
• Enterprise Data Warehouse
Page 8
Target Area 4
4. Where does the reference laboratory fit in
the new healthcare model?
Page 9
“RIGHT-SIZE” TESTING
Reduce Duplicate Testing
Reduce Unnecessary Testing
Quantify When Possible: Duplicate Testing
• Launched an new enterprise HIS almost 2 years ago
• Worked with the CMIO to implement alerts (aka
best practice advisories) for duplicate laboratory
testing
• Need to follow financial impact as we implement
new alerts (>8 mo)
Executive War College April 30, 2014
Page 11
Started with BMP & CBC Using 4
Hr Duplicate Window
Duplicate Testing Alerts
Annualized Totals
Test
BMP
CBC
CBC W/ AUTO
DIFF
TOTAL
Pct
Total Canceled Canceled Vbl Cost
9,391
3,855
41.0%
$45,255
4,461
1,669
37.4%
$6,960
Total
$94,635
$25,686
4,113
17,965
$26,354
$146,675
1,712
7,236
41.6%
40.3%
$7,141
$59,356
Information updated periodically and provided to CMIO to
use in meetings with CIO and executive leadership
More Data Sources: Unnecessary Testing
• “Money is tight” in healthcare these days
• How can the laboratory can help with these
challenges?
• Potentially a great deal of unnecessary testing
done in delivery networks.
Page 14
Unnecessary Testing Groups
Thyroid testing
Example: FT4 ordered with TSH (should reflex FT4 from
abnormal TSH)
Liver Function
Example: GGT ordered with ALKP (should reflex GGT from
abnormal ALKP)
Pancreatitis
Example: AMY ordered with LIPA (LIPA has greater dx
accuracy)
Vitamin D testing
Example: 1,25D ordered with 25D (should reflex 1,25 or
order only in pts with renal failure)
Unnecessary Testing Groups
2
Iron Status
Example: FESAT ordered with FERR (should order one or the
other; FESAT for iron overload or FERR for iron deficiency)
General Inflammation
Example: ESR ordered with CRP (CRP has greater dx accuracy)
Myocardial Injury/Infarction
Example: CKMB ordered with TROPI (TROPI has greater dx
accuracy)
Other
Examples: VMA ordered in pt >20 year old (used primarily to dx
tumor of children); MMA ordered with B12 (should reflex from
abnormal B12)
Systems Evaluated
(Min 2 year period, 2008-2013)
Hospital System:
4 hospitals (including rural)
>500 providers
Hospital System 2:
>12 hospitals (including rural)
>4,000 providers
>10 small to medium hospital clients
4 Regional payers:
US: 2 Northeastern, 1 Southeastern, 1 Western
>6,000,000 covered lives
Summary: Cost to Hospital
System
1
Testing Group
Volume
Vbl Cost
Total
14,668
$169,834
$302,769
Liver function
1,154
$9,947
$18,072
Pancreatitis
2,801
$24,341
$42,967
884
$43,732
$60,298
2,364
$31,536
$55,767
13,450
$83,794
$156,020
Myocardial injury/infarction
332
$7,944
$10,953
Other
454
$25,721
$34,491
36,107
$396,847
$681,336
Thyroid
Vitamin D
Iron status
General inflammation
Total (Annual)
Summary: Cost to Hospital
System
2
Stratified Cost
Testing Group
Volume
Vbl
Thyroid
94,841 $202,359
Liver function
16,388
Pancreatitis
20,378
Vitamin D
Iron status
General
inflammation
Myocardial
injury/infarction
Other
Total (Annual)
+ Labor
All Lab
Total
Cost
$351,569
$475,555
$611,089
$23,763
$49,574
$71,042
$91,289
$35,662
$67,757
$94,452
$121,371
3,726 $128,547
$131,286
$131,286
$168,702
19,428
$68,581
$88,980
$114,231
$147,044
17,658
$13,773
$87,937
$111,069
$142,723
62,745 $274,823
$373,646
$455,842
$585,758
$50,887
$50,887
$65,390
3,338
$48,434
238,502 $750,940 $1,201,636 $1,504,564 $1,933,365
Summary: Paid-Out Payer
Claims
Annual Volume
Total Paid Claims
536,097
$12,252,830
30,963
$458,420
172,798
$3,606,089
Vitamin D
33,864
$2,166,743
Iron status
145,186
$4,503,433
General inflammation
196,372
$1,868,772
Myocardial injury/infarction
146,537
$5,640,741
Other
53,643
$1,694,711
Total
1,315,460
$32,191,739
Testing Group
Thyroid
Liver function
Pancreatitis
Savings would amount to $0.39 PMPM for health plan members
Policy Coverage
Determinations
New Equipment Justification
The Broader View: New Equipment Proposal
• Conference presentations: MALDI-TOF
bacterial identification can save money for
hospitals.
• But….administrators are not convinced given
the cost of the equipment.
Page 23
Current Approach
Fast, inexpensive, limited
Slow, expensive, accurate
A Tale of Two Projects I
MALDI-TOF / Vitek profitability analysis
Year
Item
Cost of Instrument
Service contract
Investment
1
2
3
4
5
Total
($312,387)
$0
$0
$0
$0
($19,178)
$0
($19,178)
$0
($19,178)
$0
($19,178)
($312,387)
($76,710)
$0
$33,408
$33,408
$33,408
$33,408
$33,408
$167,040
Sum of cash flows
($312,387)
$33,408
$14,230
$14,230
$14,230
$14,230
($222,058)
PV Cash Flows
($312,387)
$33,408
$13,553
$12,907
$12,293
$11,707
($228,519)
$36,162
$14,382
$13,429
$12,539
$11,707
$88,219
Cost savings from reagents
FV Reinvested +ve Cash Flows
Payback period
Payback period (years)
Payback period (months)
Payback period (weeks)
Net present value
Discount rate
Project NPV
20.60
247.25
1,071.43
5%
($228,519)
Modified internal rate of return
Discount rate
5%
Reinvestment rate
2%
MIRR
-22.34%
Improved Diagnostic
Efficiency
Reduced Time to Bacterial Identification:
Mean reduction = “34.3 hours”
Lagace-Wiens PRS, Adam HJ, Karlowski JA, et al. J Clin Microbiol 2012;50:3324-3328 [University of Manitoba,
Winnipeg, MB]
Mean reduction = “1.45 days” (34.8 hours)
Tan KE, Ellis B, Lee R, et al. J Clin Microbiol 2012;50:3301-3308 [Johns Hopkins University, Baltimore, MD]
Mean reduction = “28.8 hours”
Vlek ALM, Bonten MJM, Boel CHE. PLoS ONE 2012;7:e32589 [Univ. Medical Center, Utrecht, NL]
Implications for Patient Care:
Reduced time to appropriate therapy: 28.8% of patients (treating physician), 44.6% of
patients (stewardship team)
Tamma PD, Tan K, Nussenblatt VR, et al. Infect Control Hosp Epidemiol 2013;34:990-995 [Johns Hopkins University,
Baltimore, MD]
Increase in proportion of patients receiving appropriate treatment at 24 hours: 11.3%
Vlek ALM, Bonten MJM, Boel CHE. PLoS ONE 2012;7:e32589 [Univ. Medical Center, Utrecht, NL]
Percent with modification of empirical therapy: 35.1%
Clerc O, Prod’hom G, Vogne C, et al. Clin Infect Dis 2013;56:1101-1107 [Univ. of Lausanne, Lausanne, CH]
Finance/Accounting Data
A Tale of Two Projects II
MALDI-TOF / Vitek profitability analysis
Year
Item
Investment
Cost of Instrument
Service contract
1
2
3
4
5
Total
($312,387)
$0
$0
$0
$0
($19,178)
$0
($19,178)
$0
($19,178)
$0
($19,178)
($312,387)
($76,710)
Cost savings from reagents
$0
$33,408
$33,408
$33,408
$33,408
$33,408
$167,040
*Cost savings from early d/c
$0
$1,253,967
$1,253,967
$1,253,967
$1,253,967
$1,253,967
$6,269,836
Sum of cash flows
($312,387)
$1,287,375
$1,268,198
$1,268,198
$1,268,198
$1,268,198
$6,047,778
PV Cash Flows
($312,387)
$1,287,375
$1,207,807
$1,150,293
$1,095,517
$1,043,349
$5,471,954
$1,393,496
$1,281,735
$1,196,764
$1,117,427
$1,043,349
$6,032,772
FV Reinvested +ve Cash Flows
Payback period
Payback period (years)
Payback period (months)
Payback period (weeks)
Net present value
Discount rate
Project NPV
0.24
2.91
12.62
5%
$5,471,954
Modified internal rate of return
Discount rate
5%
Reinvestment rate
2%
MIRR
80.79%
Project Payback Period (y)
MALDI-TOF Sensitivity Analysis
3.59 hours to get payback of 2 years
Decrease in Mean LOS (h)
Collaborative Projects
with Clinical Colleagues
Integrate & Collaborate
RADIOLOGY
Integrate & Collaborate: Radiology
• Patients requiring contrast studies
• “We will continue to lose patients as this type of
poor service is happening in every area currently
performing CT and MRI.” Director, Dx
Radiology
• Project reluctantly approved by administrators at
the time
• Evaluate actual impact of project
Page 33
Outpatient Contrast Studies
Data from Multiple Sources
Combined
Data
Before/After Comparison
POCT Launch
6/17/13
Before:
12/1/12-5/31/13
After:
7/1/13-12/31/13
Outpatient Contrast Studies
HCPCS
71260
71270
71275
Description
CT THORAX W/DYE
CT THORAX W/O W/DYE
CT ANGIOGRAPHY, CHEST
Pre Vol
1852
15
506
Post
Revenue
Vol
Pre Rev
Post Rev Vol Diff Diff
1898 $554,324 $567,885
46
$13,561
29
$3,403
$8,388
14
$4,985
465 $143,580 $133,743
-41
($9,837)
•••••••••••••••••••••••••
72156
72157
72158
MRI NECK SPINE W/O W/DYE
MRI CHEST SPINE W/O
W/DYE
MRI LUMBAR SPINE W/O
W/DYE
TUMOR IMAGE PET/CT FULL
BODY
78816
Total
Annualized
Annualized
net revenue:
Less cost of contrast, etc.:
Less cost of POCT reagents:
Net contribution to fixed costs:
Profitability
Cost of instruments:
Payback (days):
186
223
$117,406
$140,761
37
$23,355
139
160
$93,904
$108,091
21
$14,187
232
295
$129,419
$164,563
63
$35,144
44
64
$23,104
$35,702
7968
8421 $3,443,293 $3,690,955
$495,323
15936 16842 $6,886,587 $7,381,910
20
453
906
$12,598
$247,662
$495,323
$32,767
$85,547
$377,100
$23,970
22.1 d
Outpatient Contrast Studies
Bottom Line:
We started in June, 2013, and paid for
all the instruments by the middle of
July, 2013.
From August, 2013, onward we are
providing more than $375,000 per
annum, “cash in the door” net of any
additional costs, to the hospital
Quality Improvement from the Project
• Decreased wait times for patients: “…cut down on
our wait time to almost no wait for labs on ER and
outpatients.” [Chief MRI Technologist]
• Fewer canceled studies after patient arrival (Pre =
17.7/month, post = 2.6/month)
Page 39
Integrate & Collaborate
Intensive Care Unit
Integrate & Collaborate: Adult ICU
• The hospital system recently began to assess
physician and service productivity.
• Colleagues who cover the adult ICU are concerned
about how they might “measure up” and wanted
baseline information for ICU-specific LOS and
resource utilization.
Page 41
ICU Productivity Metric
Baseline
Attending
Patients
Total LOS
ICU LOS
ICU Pct
Vbl Cost
Total Cost
DOCTOR A
91
930
615
66.1%
$1,513,787
$2,071,091
DOCTOR B
70
751
475
63.2%
$1,431,864
$1,943,763
DOCTOR C
38
549
406
74.0%
$992,608
$1,358,411
DOCTOR D
75
608
357
58.7%
$809,222
$1,122,227
DOCTOR E
81
852
542
63.6%
$1,147,182
$1,581,568
DOCTOR F
39
341
224
65.7%
$525,479
$722,852
394
4031
2619
65.0%
$6,420,141
$8,799,913
TOTAL
Per Patient Day
Per Patient
Attending
DOCTOR A
DOCTOR B
DOCTOR C
DOCTOR D
DOCTOR E
DOCTOR F
TOTAL
Vbl Cost
Total
$16,635
$20,455
$26,121
$10,790
$14,163
$13,474
$16,295
Cost
$22,759
$27,768
$35,748
$14,963
$19,526
$18,535
$22,335
Attending
DOCTOR A
DOCTOR B
DOCTOR C
DOCTOR D
DOCTOR E
DOCTOR F
TOTAL
Vbl Cost
Total Cost
$2,461
$3,368
$3,014
$4,092
$2,445
$3,346
$2,267
$3,143
$2,117
$2,918
$2,346
$3,227
$2,451
$3,360
Mean Lab Tests/ICU Patient Day
ICU Productivity Lab
Tests/ICU Day
Physician
Mean APR-DRG SI Weight
Mean APDRG Weight
Adjusts for case mix & severity of disease
Physician
Email from Director of ICU Medicine
“This is really exciting. Is ICU LOS defined by service,
provider, location, or per diem charge? If it is by per diem, then we
also need to get it by service. This could get us the cost of staying
in the ICU extra days without needing critical care services.
The next step is to add it by a diagnosis. DKA is pretty clean and a
good one to start with. Then if we can find a way to link ICU cost
with severity of illness scores we may blow the roof off—very
publishable and groundwork for really big things.
This is really exciting. Lets discuss as soon as we get back.
Thanks so much. This is getting me fired up again.
Andy” [3/8/14]
Page 45
Email from Medical Chief of Staff
“Just now thinning down my pile of “to do” stuff; sorry it has
taken a few days to get back with you. Needless to say, I was very
impressed with what [the lab] has been able to accomplish as
it relates to data analytics, especially since the message I’ve been
receiving is that we can’t do anything like this because the data is a
mess.
…Let me continue to work on some questions/ICD-9/DRG stuff
so we can start looking at something in addition to what you’re
already doing. The CAG members will be helpful in this regard as
well. This is incredibly exciting, especially if it works!!
Peter” [2/3/14]
Page 46
Integrate & Collaborate
PHARMACY
Integrate & Collaborate: Pharmacy
• Colleagues in pharmacy estimate that we spend
$12-15 million annually for unnecessary drugs
• Asked to focus on antibiotic stewardship
projects (and laboratory can help)
• Start with selected expensive antibiotics
(“gorillacillins”)
Page 48
Expensive “Gorillacillin” Use
Linezolid 600 mg PO
Vancomycin 1000 mg IV
Daptomycin 500 mg IV
Expensive “Gorillacillin” Use
Culture Sensitivity Report:
“Sensitive to Vancomycin”
30 days
Administration of Expensive Antibiotic
Expensive “Gorillacillin” Use
Drug
DAPTOMYCIN 500 MG IV
SOLN
LINEZOLID 600 MG PO
TABS
Vanc
Sens
Doses
Total Vbl
Total
Sensitive
1,014
$243,661
$310,076
Sensitive
280
$57,601
$73,302
1,294
$301,262
$383,378
Less Cost of Vanc
$20,454
$26,028
NET COST SAVINGS
$280,808
$357,350
$5,090
$6,477
TOTAL
Plus another interesting finding…
VANCOMYCIN HCL 1000
Resistant
MG IV SOLN
322
Integrated Medical Analytics:
Enterprise Data Warehouse
Get Involved: New Enterprise DW Project
• New Associate Vice-Chancellor for Research
must develop a research data warehouse.
• He needs additional support to design and
launch the warehouse
• We in the laboratory are invited to take a leading
role: “The laboratory produces more ‘minable’
data than any other area in the hospital” Chief of
Medical Staff
Page 53
Data Model: Laboratory &
Finance
Presented internally at Grand Rounds
Presented at national meetings with authors from:
Department of Pathology
Division of Finance Decision Support (Department of Finance)
The Data Flow
“BI/MI”
Dashboard
s
Accounting &
Finance
Big Data
Laboratory,
Operational
& Clinical
ETL
OLAP
RDBMS
Other (ad
hoc)
CDSS
Reports
The “Integrated Analytics
Portfolio”
CU Laboratory Data Warehouse
(1998-Present)
Laboratory
Test
Data
Middleware
HTML
Operational
& Medical
Report
Data
Warehouse
Hospital
Administrative
Data
Direct SQL
Query
Document
Statistical
Analysis
Research &
Trend Analysis
Reports
CU Laboratory Data Warehouse
Financial Measures from Projects Requiring DB
Realized Cost Savings (2005)
Annual savings
Pct of total laboratory costs
$746,200
4.5%
Profitability (actual figures 1998-2005)
Payback period
1.47 y
NPV
$2,968,639
MIRR
59.4%
Still being used today!
Future Outlook:
Where do Reference Labs Fit?
Partner with Customers: Reference Labs
• Reference laboratories will face different
challenges in the new information marketplace
• What is critical for reference labs to succeed in
the new healthcare models?
– Provide analytics as well as results.
Page 60
Customer Perspective
• Visits to prospective and current client
hospitals (35-140 beds)
• Spoke with hospital executives and laboratory
leaders
• Asked about value of laboratory utilization
reports
• Several new clients acquired
• Small point of difference vis-à-vis competitors
61
Hospital Executives
“I see the great potential for
not only rural facilities, but all
of Banner in developing
evidence-based protocols
that could be shared
across the industry.”
Mike Gillen
Former CEO, Sterling Regional Medical Center
Sterling, Colorado
62
Payer Perspective
“Flexibility, partnership and the realization that we are in a
‘brand new’ paradigm shift in medicine. It is not business
as usual.
Reference laboratories need to assist, physicians,
clinics, and hospitals in understanding and embracing
analytics to stay aligned with where the payer market is
moving.
Laboratories need to be pro-active in regard to
analytics. Payers will embrace them as the payer
networks "narrow" in the future.”
Director, Laboratory Contracting
US Western Region, UHC
63
Reference Labs as Consultants
•
•
•
•
Understand your clients’ data.
Be able to use analytics to benefit clients.
Take a consultative role.
Integrate into the administrative level.
Page 64
What’s Next?
Have an Action Plan
• Produce valuable lab analytics
– Get the data and decide how you will need to
augment it.
• Communicate and collaborate
–
–
–
–
with administration
with finance
with pharmacy
with radiology
Page 66
Be Proactive & Be Involved!
• In just a few areas, millions of dollars can be
saved.
There are three types of
baseball players: Those who
make it happen, those who
watch it happen, and those
who wonder what happened.
- Coach Tommy Lasorda
Page 67
Thank You
Questions?
Page 69