Increases in national health care expenditures have for the past 3 decades outpaced inflation and overall price gains based on Commerce Department Data.1,2 The financial crisis of 2008 led to a decrease in inflation in all sectors. As the economy improved in the recent years, medical inflation stayed lower than prices for all consumer products for the first time in years.2 However, total expenditures in health care in 2014 still accounts for approximately 17% of our national economy and there are projections that the health care spending may rise to 20 plus percent of economic spending by 2021 as the Office of Actuary projects an average 6% increase in medical expenditures in the next 5 years.1 In 2014, health care expenditures were at around $3 trillion dollars. Rising health care expenditures could compromise both our country’s economic stability and potentially jeopardize the availability of treatment of all the sick and injured.
In addition, attempted regional and national health care reform has placed increased responsibility on health care providers and hospitals in terms of the quality and safety of care provided. There is increasing pressure from national, state, and private payers to provide better care at lower costs. Hence the agenda for improving the value of health care. In this climate of change, physicians and systems that educate themselves about the epidemiological, political, ethical, and economic forces that influence the evolving health care delivery system and economy are likely to be advantaged. Engaged providers can inform and ideally improve the process by their perspectives, meaningful comments, and potentially ultimately achieve the ideal goal of true valuable care improvements as reform progresses.
On the basis of the seminal work of Harvard Business School Professors Michael Porter and Robert Kaplan in value-based health care delivery,3–6 and the extensive preliminary work on systematic clinical assessment and management plans pioneered by the Cardiology Department at the Boston Children’s Hospital (BCH), the BCH Department of Orthopaedic Surgery initiated a series of projects aimed at improving value in health care delivery; investigations specifically focused on reducing costs while maintaining or improving health outcomes. The methods of time-driven activity-based accounting (TDABC) and Systemic Clinical Assessment and Management Plans (SCAMPs) were used.7–9
VALUE IN HEALTH CARE DELIVERY
Value is a measurement of the quality relative to the cost of a service or product. In health care, Porter and colleagues3–6 defined and measured value in terms of patient health outcomes achieved per dollar spent to achieve those outcomes.
Health outcomes, as defined by Porter,6 include patient satisfaction. Through value improvement, patients, payers, providers, and suppliers can all benefit while strengthening the economic stability and sustainability of the US health care system. Kaplan and Porter advocate that cost reduction without regard to outcomes can be “dangerous and self-defeating, leading to false ‘savings’ and potentially limiting effective care.”5,6 In contrast, by giving due consideration to health outcomes, value improvement respects the integrity of patient care while hopefully achieving lasting, meaningful reductions in cost.
EXPLANATION OF TDABC
TDABC follows the fundamental cost accounting equation that:
In TDABC, the resource quantity is time. In health care clinical activities, the price is often the salary plus benefits of the employee(s) performing the task being studied. TDABC is a refinement of Kaplan’s Activity-based Costing and Balanced Scorecards and is most often used in industry to assess capacity utilization. It is now being applied at several academic medical centers to define its usefulness in health care costing and savings. To carry out a TDABC analysis, the hourly cost rate of each resource [usually employee(s) as ∼70% health care cost are human resources] that contributes to a specific patient’s care is multiplied by the amount of time each resource [again usually employee(s) but includes does all consumable supplies] spends contributing to that patient’s care. The total cost of all contributing resources can then be summed to calculate the cost of treating a specific patient for a complete cycle of that patient’s care:
To calculate medical costs using TDABC, several basic steps are required:
- Define the medical condition of interest. For acute conditions, investigate all costs related to that condition from the beginning to the end of an episode of care. For chronic conditions, define the cycle of care as a period of time, such as a year.
- Chart the principal activities involved in a patient’s care for the medical condition, along with the locations of those activities. Develop process maps of each activity in patient care delivery, documenting the various providers that directly interact with the patient.
- Obtain time estimates for all interactions between health care providers and patients at each step of the process map.
- Estimate the cost of supplying patient care resources by estimating the direct costs of each resource involved in caring for patients. The direct costs include compensation for employees, depreciation or leasing of equipment, supplies, or other operating expenses. Also identify and attribute all the support (indirect) resources necessary to supply the primary resources providing patient care. These data are gathered from the general ledger, the budgeting system, and other IT systems.
- Determine the practical capacity for each employee or resource (hours available for patient care).
- Calculate the capacity cost rate for each employee or resource using data gathered in steps 4 and 5.
- Calculate the total costs of providing care for a medical condition over the entire cycle of care. Begin by simply multiplying the capacity cost rates (including associated support costs) for each resource used in each patient process by the amounts of time the patient spent with the resource. Then, sum up all the costs across all the processes used during the patient’s complete cycle of care to produce the total cost of care for the patient.
When all processes have been mapped and measured in this way, they can be evaluated retrospectively, currently, and prospectively for respective inefficiencies and advantages. Costs that are higher than expected can be identified, and detailed data can easily be examined to understand cost drivers. In the end, Feeley et al10 advocates that the advantages of TDABC over other cost accounting systems, especially when paired with outcome measurements, are to: (1) improve efficiency by benchmarking and bringing visibility to ineffective variations; (2) provide the opportunity for less expensive resource substitution (ie, NP instead of MD, satellite site rather than urban core hospital) for tasks that do not require the most expensive resource; (3) enhancing resource utilization by defining unused capacity and improving efficiency of use without compromising outcome; and (4) planning, budgeting, and potentially even pricing in a value-based health care system. At Boston Children’s Department of Orthopedic Surgery, similar to other academic medical centers,11,12 we have applied TDABC methods to (1) assess the accuracy our present cost accounting systems9; and (2) reduce variation in care delivery with reduction in costs without loss of quality of outcome.13–15
THE FUNDAMENTALS OF SCAMPs
SCAMP is an iterative change and significant potential improvement from clinical practice guidelines16,17 in that variations from the guidelines are anticipated, expected, and in some respects, even encouraged.18 The innovators of SCAMPs at Boston Children’s Hospital Department of Cardiology recognized that very few medical decisions are informed by conclusive data and such data are hard to acquire and at times inaccurate.19 Recognizing that treatment decisions must be informed by useful data, SCAMPs is a systematic method of treatment plans and assessments based on plausible outcomes informed by existing publications and care expertise.20,21 The initial organizational work of a SCAMP is to review all the known and unknown information about a specific health condition and its treatment; and then, define plausible outcomes and treatment plans. Diversions from the algorithmic management plans are permitted but must be recorded and analyzed regularly and systematically to assess their positive or negative value. A primary goal of any SCAMPs is to continuously improve outcome, decrease ineffective variation, while promoting positive innovative changes to the clinical care of each condition studied. In a SCAMP, the clinician is empowered. First to design the best treatment plan; then to analyze the outcomes of treatment including the effects of variations of care provided; and finally, to make timely improvements in care based on the data systematically collected and analyzed.18,20
SCAMP started in 2008-2009 within the Cardiology Department at Boston Children’s Hospital and has resulted in many improvements in clinical decision making and care delivery.22–24 By 2010-2012, SCAMP had expanded to other subspecialty services and multiple other academic medical centers. The Institute for Relevant Data Analytics was formed to manage multi-institutional SCAMPs. At present, there are 53 SCAMPs ongoing across 8 hospitals/academic medical centers/health care systems and 2 professional associations/societies. As examples in orthopaedics, the Brigham and Women’s Hospital Department of Orthopedic Surgery SCAMP on adult distal radius fracture care has been able to decrease practice variation, reduce operative rate by 11%, and cost by 14.4% based on resource utilization. At Boston Children’s’ Department of Orthopedic Surgery, we have noted the wide practice variation on treatment of distal radius torus fractures14 and the lack of utility of a 4-week x-ray for conscious reduction distal radius fracture follow-up at TDABC cost savings of 14% based on our SCAMPs on Pediatric Distal Radius Fracture care.15 The provider satisfaction with participation in a SCAMP is quite high, based on consecutive year surveys in 2010-2102 and again in 2014 at our institutions indicating 70% to 80% satisfied to highly satisfied participation in SCAMPs compared with 10% to 25% satisfaction with clinical practice guidelines.25,26 The SCAMP data have led to revisions in care that has been mutually beneficial to payers, hospitals, providers, and patients.
IMPROVING VALUE DELIVERY IN PEDIATRIC DISTAL RADIUS FRACTURE CARE
POSNA has awarded the Directed Research grant to our SCAMPs-TDABC team led by principal investigators Drs Donald Bae and Apurva Shah including Susan Mahan, MD/MPH; Leslie Kalish, ScD; and myself to study Improving Value Delivery in Pediatric Distal Radius Fracture care. Already we have used TDABC methods to compare resource utilization and costing in our casting room9 and our treatment costs for distal radius fracture care around follow-up clinical and radiographic visits.15 In our study of internal practice variation for distal radius buckle fractures, we discovered significant cost savings without jeopardizing patient outcomes.14 Our pediatric distal radius fracture SCAMPs applied these preliminary study findings to our algorithms and since implementation in 2012, we have noted major reduction in cost of care by reduction in practice variation. The present grant will apply these TDABC and SCAMPs methods across institutions to broaden the value delivery model.
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. Accessed September 7, 2014.
2. Eric Morath and Louise Radnofsky Medical Price Inflation is at Slowest Pace in 50 years. Available at: http://online.wsj.com/news/articles/SB10001424127887323342404579081312680485476
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