Calculating Financial Outcomes for Hospital Palliative Care

1. Calculating Financial Outcomes for Hospital Palliative Care Kathleen Kerr Senior Analyst Faculty, UCSF PCLC University of California, San Francisco kkerr@medicine.ucsf.edu Steven Pantilat, MD Associate Professor of Clinical Medicine Director, Palliative Care Program and Palliative Care Leadership Center (PCLC) University of California, San Francisco stevep@medicine.ucsf.edu

2. Palliative Care “…comprehensive, interdisciplinary care, focusing primarily on promoting quality of life for patients living with a [serious, chronic, or] terminal illness and for their families… assuring physical comfort [and] psychosocial support. [It is provided simultaneously with all other appropriate medical treatments]” Billings, J Pall Med, 1999;1:73-81 www.CAPC.org

3. What Palliative Care Teams Do • Symptom management • Communication • clarify or change goals of care • conduct family meetings • Discharge planning • Advance care planning • Spiritual support • Psychosocial support www.CAPC.org

4. What Kinds of Patients do PC Teams See? • CHF, 3rd admission in a year • Breast cancer and malignant pleural effusion • Brain metastases • Dementia and aspiration pneumonia • New diagnosis of idiopathic pulmonary fibrosis • Cirrhosis and 3rd admission for altered mental status www.CAPC.org

5. A Distinct Population • Severe, chronic often terminal illnesses • Deaths and live discharges • Resource utilization • High costs per case • Longer lengths of stay • More admissions • Payer mix • More Medicare (case rate payments) www.CAPC.org

6. Evident at State Level Payer Mix for Adults Discharged from California Acute Care Facilities in 2004 “Target population” = patients discharged alive who were assigned to one of the 25 most common DRGs for patients who died in the hospital. www.CAPC.org

7. … And at Individual Hospitals 200-bed California community hospital www.CAPC.org

8. Medicare Profitability and LOS High costs and high proportion of Medicare cases mean many mortality cases and many target population cases result in financial losses UCSF Medicare deaths FY 2006 www.CAPC.org

9. How Palliative Care Can Help • Reduced ICU utilization • Shorter LOS in ICUs • More transfers out of, fewer into, ICUs • More admissions directly to PC (vs. to ICU) • Lower inpatient daily costs • Reduced utilization of labs, radiology, pharmacy, blood • Better care coordination, more hospice • Reduced readmissions www.CAPC.org

10. Analysis Process • Identify changes/differences in resource utilization that can be attributed to PC • Assign value to those changes/differences • Calculate net benefits www.CAPC.org

11. Calculation Challenges • Savings from cost avoidance, not revenue generation • Need to define “what would have happened” had PC team not become involved • Most complex, sickest patients, and a relatively small proportion of hospital population, so comparisons can be difficult • Extensive costs in the period before PC involvement often means good result is smaller loss, not loss to profit www.CAPC.org

12. Measuring Changes in Costs • By days • Before and after PC • PC vs non-PC • Costs & LOS • By admission • Typically only used if PC service responsible for entirety/majority of hospital stay • Generally NOT appropriate for consultations or late transfers to a PC unit • By patient • Resource utilization over a defined period of time (i.e., the last six months of life) www.CAPC.org

13. Total Costs FIXED COSTS Those costs that do not vary directly with the volume of patient services provided. Over a specified period these costs would be incurred regardless of volume. As shown below, fixed costs have two components. VARIABLE COSTS Costs that vary directly and proportionately with the volume of patient services provided. These expenses may fluctuate day to day and would not be incurred if no services were used. As shown below, variable costs have two components. FIXED DIRECT Costs that can be traced to or identified with a specific product or service but that do not vary with volume. Examples: supervisory personnel, equipment. FIXED INDIRECT Costs that cannot be specifically traced to an individual department and do not vary with volume. These costs are allocated to all departments. Examples: utilities, hospital administration. VARIABLE DIRECT Costs that can be traced to a specific product or service. These costs increase or decrease according to the volume of services provided. Examples: nursing care, supplies. VARIABLE INDIRECT The costs or expenses that cannot be specifically traced to an individual patient but that do vary with volume. Examples: social services, medical records. Which Costs to Measure? www.CAPC.org

14. Which Cases to Use? Do you want to include: • Patient discharged or dies on day of consult (PC LOS = 0) • Patient seen intermittently thru discharge • Patient signs off service www.CAPC.org

15. Tallying the “Before” Costs • Need date of PC consult/transfer • Data on costs (or charges) per day by category (room and care, pharmacy etc.) • Decide which “before” days to count • All? • Exclude first two (high-cost surgeries), or back out peri-operative costs? • Only use day immediately prior to consult/transfer? www.CAPC.org

16. “After” Costs Can compare: • All “before” to all “after” • Or subset of “before” to all “after” • Or can limit number of “after” days • Difficulty of forecasting what would have happened beyond a certain point, say 5 days • May exclude day of consult or transfer (transitional day) www.CAPC.org

17. Simple Before and After Comparison Average Variable Cost per Day Before and After UCSF PCS Consult www.CAPC.org

18. PC vs. non-PC Comparison Possible variables to use in defining a comparison group: • DRG or APR-DRG (APRs include severity-of-illness and risk-of-mortality indices) • Major illness type (e.g., metastatic cancer) • Number of co-morbidities and/or complications • Number of organ systems involved • Age (perhaps 10-year cohorts) • Attending or clinical service • Disposition (e.g., death) www.CAPC.org

19. PC vs. non-PC Cost Comparison Decide on Comparison Period • Entire stay • Entire “after” period • A portion of the stay, i.e. last 3-5 days • Common to align with average LOS on PC service www.CAPC.org

20. VCU Case Control Study 60% cost reduction for patients in PCU Smith TJ, Coyne P, Cassel B, Penberthy L, Hopson A, Hager MA. A high-volume specialist palliative care unit and team may reduce in-hospital end-of-life care costs. J Palliat Med. 2003 Oct;6(5):699-705. www.CAPC.org

21. UCSF Subsequent Day Control Group Average daily variable costs , pts who died who were referred to PCS within 1 day of admission compared to control group of low-utilization patients who also died www.CAPC.org

22. UCSF Last 3 Days of Stay PCS Deaths vs. Others Average Daily Variable Costs www.CAPC.org

23. How UCSF uses PC vs. non-PC Calculations Savings for first day on service: Difference between average “before” daily cost and average “after” daily cost Savings for subsequent days: Difference between control group average daily cost and PC “after” daily cost www.CAPC.org

24. A Different Approach for Deaths Savings for first day on service: Difference between actual cost of day prior to consultation or transfer and actual cost of day after consultation Savings for subsequent days: Difference between average daily cost of final three days of stay for non-PC patients who died and average daily cost for final three “after” PC days www.CAPC.org

25. LOS Savings • More difficult than per-day savings estimates • Most patients have a substantial pre- PC stay • Analysis begins at time of referral to PC • If avg. pre-PC LOS is 14 days, your question is “Once we reach the 2-week mark, what is the difference in LOS for the two groups from that point until discharge?” • Matching to comparable pts critical • Consider variation in referral patterns by service or clinical condition www.CAPC.org

26. Time to PC Referral Varies by Specialty www.CAPC.org

27. The Value of Saved Days • Consider limiting to case rate payers • Program could be credited with: • Avg. variable costs for “after” PC day x number of saved days, or • Avg. total costs for “after” PC day x number of saved days, or • Total up saved days; divide by hospital ALOS; multiply by avg. profit per case www.CAPC.org

28. Profit/Loss for PC Unit Admissions www.CAPC.org

29. Savings per Patient Will PC intervention change resource utilization down the road? • Avoid admissions entirely • Change goals and costs of subsequent admissions (i.e. direct admit to PC vs. ICU) www.CAPC.org

30. Kaiser Permanente RCT Inpatient PC • 512 pts followed for 6 months • No differences in survival between cases and controls • PC pts had: • Significantly fewer ICU stays (p = 0.04) • Significantly longer hospice LOS’s (p = 0.01) • Significantly lower costs for hospital readmissions (p =0.001) Conner D, McGrady K, Richardson R, Beane J, Venohr I, Gade G. 2005. “Outcomes from a randomized control trial of an inpatient palliative care service.” The Permanente Journal 9 (4); 7 (http://xnet.kp.org/permanentejournal/fall05/HMOabs.html). www.CAPC.org

31. Summary of PCLCs’ Cost Avoidance Analyses www.CAPC.org

32. Variables that Influence Financial Performance • Baseline resource utilization • Capture rate • Service case mix • Influence on care • Quality of service • Level of institutional support www.CAPC.org

33. PC Financial Analysis Do’s and Don’t Do’s • Create clinical team-administration partnership • Present financial outcomes in context of operational, clinical, & satisfaction outcome data Don’ts • Analyze and present data prematurely • Quibble www.CAPC.org

34. Conclusions and Questions • Most PC services can show adequate if not excellent financial outcomes • This is not why you have a palliative care service, but how you get, grow and sustain one www.CAPC.org