Cost Repositioning – an Institutional C ase S tudy

1. Cost Repositioning – an Institutional Case Study Kandice Kottke-Marchant, MD, PhD Chair, Robert J. Tomsich Pathology & Laboratory Medicine Institute Cleveland Clinic

2. Cleveland Clinic’s Cost Repositioning Approach

3. Cost Repositioning Objectives • Provide value and ensure affordable care for patients • Leading innovation in changing industry • Transformational cost structure changes • Balancing the shift: volume to value

4. Cost Repositioning2014 - 2016 Goals* Implemented Savings (in millions) Clinical Programs & Assets Non-Staff Stewardship 20% Overlap Total Indirect Staff Research Education Value Based Care

5. Org Chart Executive Check In CEO, Chief of Staff, Chief Strategy Officer • Task Force • Physician-Led with Members Representing: • Physician Leadership • Administration • Nursing • Marketing & Human Resources Workstreams Project Management Office Finance Human Resources Marketing / Communications

6. Structure Executive Leadership Full engagement & sponsorship of CEO / Chief of Staff Cross-functional physician, nursing and administrative leadership team Physician-Led Task Force Workstreams Intentionally not aligned with org. structure to encourage transformative change

7. Workstreams • Clinical • Indirect • Non-Staff • Staff • Stewardship • Research • Education • Value Based Care

8. Project Pipeline As of 4/15/14 *Each Indirect team will present numerous ideas

9. Specific Pathology and Laboratory Medicine Drivers for Cost Reduction

10. Transparency and Decreased Reimbursement Pathology & Lab Med Cleveland Clinic 452% of CMS* 406% of CMS 285% of CMS 200% of CMS 100% Medicare 147% of CMS 45-80% of CMS 45-80% of CMS * Reflects new lab pricing; UHC’s current price is 537% of CMS

11. Additional Drivers • Devaluation • Biopsy codes • Cytopathology codes • Revaluation • IHC codes • Other changes • Molecular diagnostic billing codes

12. Robert J. Tomsich Pathology & Laboratory Medicine Institute Approach

13. RT-PLM Cost Repositioning Summary • 2014 • 12%* • 2015 • 10% • 2016 • 8% • Reduce cost per test by 30% • How? • Assess current operations • Develop enterprise-wide transformational strategies: optimize laboratory resources • Implement *2.6% from 2014 budget + 9.4% new in 2014

14. Major Projects • Department Reorganization • Administrative Reorganization • Lab consolidation • Pathology sub specialty consolidation • Allogen: transplant lab reorganization • Preanalytics optimization

15. Big Picture: How We Are Saving

16. Department and Administrative Reorganization

17. Robert J. Tomsich Pathology & Laboratory Medicine Institute 2013 Dr. Marchant, Inst. Chair/ J Seestadt, Admin Cleveland Clinic Laboratories Dr. Bosler, Head Dr. Stagno Vice Chair of Operations D Helmick, Finance Director Departments Molecular Pathology Clinical Pathology Dr. Hsi Molecular Pathology Anatomic Pathology Dr. Goldblum Pathology Dr. Goldblum Regional Pathology Cleveland Clinic Laboratories Florida Dept. of Pathology Regional Pathology Laboratory Medicine Dr. Hsi Preanalytic Services Enterprise Test Utilization/Consultation (NEW) Dr. Procop Family Health Centers Test Development Centers Pathology Informatics Internal Assessment & Compliance Continuous Improvement Biorepository Research Education

18. Administrative Restructuring 1st Tier: Clinical Operations 2nd Tier: Lab Med and Preanalytics Non-Clinical Operations 1 FORMER: 41 FTE REVISED: 23 FTE* REDUCTIONS: 13 FTE FORMER: 25 FTE REVISED: 23 FTE REDUCTIONS: 2 FTE • FORMER: 45 FTE • REVISED: 34 FTE • REDUCTIONS: 12 FTE • Align management • (regional hospitals) • Accountability • Supervisor + team leader/coordinator PreA PreA FHC CP Lab Med • Lab Admin • Quality • Informatics • Finance • Education MP RP AP Path

19. Lab Consolidation

20. Lab Medicine Consolidation – Why? • Increased efficiency and decreased cost/test • Enterprise subspecialty lab oversight • Standardize enterprise quality and compliance • Enterprise-wide oversight of laboratory operations and preanalytics • Consolidated pre-analytics will improve quality and decrease errors

21. Ashtabula CMC Euclid Hospital H H H H H H H H H Hillcrest Hospital ClevelandClinic Lakewood Hospital South PointeHospital Lutheran Hospital Marymount Hospital Fairview Hospital Medina Hospital Following the completion of lab and pathology consolidation, main campus will ultimately see about a 32% increase in billable tests.

22. Lab Consolidation Process Highlights • Enterprise Optimization Committee • Members from across the enterprise – • Hospital presidents/COO • pathology and laboratory medicine (SME) • Nursing • IT, logistics, preanalytics, finance, quality • Defining required service levels between main campus and regional hospitals. • Scope: Daily draw times, standardization, TAT, couriers (q2hr), billing, communication

23. Lab Test Consolidation Plan

24. Pathology Consolidation - Why? • All enterprise pathology specimens with subspecialty signout • Improve histology and cytopathology processing efficiency: decrease cost/test • Pathologist RVUs 80th percentile target • Standardize frozen section & cytology rapid reads - ePathology

25. Pathology Consolidation • Professional Subspecialty Service Model • Frozen Section Coverage • Surgical Pathology & Cytopathology subspecialty plan • Credentialing • Consolidate Technical Operations • Accessioning, specimen tracking, courier deliveries, histology, cytology, billing, etc. • Facility & Equipment Prerequisites • Main campus office space • Biopsy cell • Digital scanners and web cams • Scheduling system

26. AP Consolidation (Regional to Main)2013 Workload by Subspecialty • Subspec.Wt. FTE Need^ • GYN 2.82 • GI 2.06 • Breast 1.06 • SFT 0.92 • Ortho 0.90 • GU 0.77 • HPB 0.66 • ENT 0.44 • Derm 0.30 • PUL 0.27 • 10.20 • Cyto 2.15 • BM/Lymph 1.25 (EH)

27. Pilot Metrics • Lost specimen rate by site of origin • Critical Value Performance for test that are moving • # calls to AP pathologists for coverage (New for AP) • Clients Service performance metrics • % or # of STAT orders for tests that are moving • Length of stay metrics by hospital • TAT for top 10 tests by volume • AP Bx TAT • Logistics Measures • % on time pick ups and % of scheduled pickups complete • Duration of routes and time spent at each site for pickup • % that short notice Pathologists arrive within 60 minutes (New to Pathology) • Revenue • Denial Rate performance • Productivity Impact • Earned FTE vs. Actual FTE at pilot sites (Productivity Report)

28. RT-PLMI Cost Repositioning 2014 Timeline 2nd Tier Reorg Pathology Consoli-dation New Managers Hired Approvals granted September October December August May June July First RT-PLMI Ent. Opt. Meeting Dept + Admin Restructure First Pilot Meetings with Lutheran and Marymount Pilots Begin

29. Percentage of Savings = 9.4% Total 2014: 9.4% new in 2014 + 2.6% from 2014 budget

30. Challenges • Long-term, multi-year transformation • Change throughout organization • Aligning annual planning timeline / process • Organizational engagement • Communication to all stakeholders • Setting service level expectations

31. “….the pathway to improving quality and safety is the same pathway to lowering cost, and that involves relentlessly taking waste and unnecessary variability out of our processes.”

32. Questions?