Richard Siegrist SVP General Manager HealthShare Technology, Inc., a WebMD company Adjunct

2. The Focus Choose the “right” hospital Employers Health Plans Consumers Be the “right” hospital Proactive, not reactive Competitive opportunity, not threat Effective use of available information key Commitment to consumer transparency

3. Consumers Care about Quality 82% of consumers feel that the quality of hospital care varies greatly (Forrester) 42% of consumers had been affected by a medical error, either personally or through friend or relative (National Patient Safety Foundation) 16% of consumers considered changing hospitals based on quality, 12% actually did change hospitals (Forrester)

4. Quality Goal – Six Sigma Six Sigma = 3.4 defects per million Achieved in other industries Three Sigma = 67,000 defects per million Best for most healthcare processes Difference between Three to Four Sigma and Six Sigma is 10-15% of revenue (GE estimate) Clearly a long way to go in healthcare

5. How would you choose? Situation Your father has a leaky heart value and needs to undergo a heart valve replacement Father lives in a suburb of Philadelphia Questions Where should you suggest he go for care? Local community hospital vs. downtown teaching hospital? What factors would you consider to be most important? Any different approach if had congestive heart failure?

6. Historical Hospital Selection Consumers currently select hospitals by: Proximity/ Convenience Physician recommendation Familiarity

7. How evaluate hospital quality? Objective Metrics Structural Process Outcomes Subjective Metrics Patient Satisfaction Reputation Recommendations Convenience

8. Subjective Metrics Reputation US News & World Report Recommendations Primary care physician or specialist*** Family and friends Convenience How far willing and able to travel Family and work realities Patient Satisfaction***

9. Satisfaction Measures PEP-C Patients’ Evaluation of Performance in Calif. Overall, maternity, surgical, medical Six areas such as respect for patients prefs, care coordination, physical comfort 1 to 3 stars HCAPS Will measure patients experiences with their hospital care Builds upon CMS CAPS survey which measures consumer experiences with health plans

10. Structural Measures JCAHO Accreditation Scope of Services offered Technology available Hospital Type Teaching vs. Community For-profit vs. Non-profit Religious affiliation Staffing Physician specialty accreditation Nurse staffing levels***

11. Process Measures CMS Heart failure Heart attack Pneumonia Leapfrog Leaps CPOE ICU staffing Evidence based hospital referral (EHR) 4th Leap – NQF Safe Practices JCAHO Core Measures

12. Outcomes Measures - Effectiveness Volume Absolute volume Volume minimum Volume threshold Mortality Procedure specific in hospital mortality Failure to rescue Complications Procedure specific complications Agency for Healthcare Research and Quality (AHRQ)

13. How evaluate hospital cost? Cost to the hospital Length of stay Hospital charges Hospital full or direct cost Cost to the health plan Based on claims experience Cost to the consumer Out-of-pocket cost

14. What Consumers Want to Know

15. Volume Does Matter Halm, Lee and Chassin Literature Review in Annals of Internal Medicine (2002) 77% of 88 studies examined showed statistically significant relationship between higher volume and better outcomes, none showed significant relationship in opposite direction Dr. Arnold Epstein, HSPH, Editorial in NEJM (April 2002) “After two decades of research, it is time to move ahead. Few doctors would routinely send their own family members to undergo a high-risk, elective operation at a hospital where such operations were rarely performed (or to a physician who rarely performed them) if good alternatives were nearby.”

16. Mortality, of Course Severity Adjusted Mortality Severity adjustment essential for credibility APR-DRGs from 3M or RDRGs from Yale Significantly different from area average as focus May be controversial, but is of highest interest to consumers and employers Failure to rescue as useful complement Interest in mortality at procedure level

17. Leapfrog Indicators - EHR Kane and Siegrist Study Findings (2002) Achieving mortality rates equivalent to those of hospitals meeting the Leapfrog criteria could substantially reduce patient deaths by an estimated 2,340 deaths per year Compliance with the TLG volume criteria varied widely by state, both in terms of number of hospitals meeting the criteria and % of patients treated in hospitals that meet the criteria. Most hospitals providing the TLG-identified procedures did not meet the volume criteria. Massachusetts Findings Highlights Esophageal Cancer 15% hospitals met, 66% of cases 3.5% mortality vs. 9.1% AAA 16% hospitals met, 59% of cases 8.5% mortality vs. 15.3% 

18. Complications HCUP Original Quality Indicators Adverse effects, wound infection, pneumonia after major surgery, pulmonary compromise, UTI, etc. AHRQ Patient Safety Indicators Accepted Indicators (20) and Experimental Indicators (17) Examples: infection due to medical care, post op complications, OB trauma, technical difficulty, decubitus ulcer, failure to rescue

19. Adverse Effects – Variation

20. Adverse Effects – Cost Impact

21. Cost of Quality Issues Analysis for MA, NY and FL comparing patients with quality issue vs. patients at risk but without the quality issue (severity adjusted) Wound infection 100+% more expensive Pneumonia 80+% more expensive Pulmonary compromise 80+% more expensive Adverse effects 50+% more expensive OB complications 30+% more expensive Quite consistent results across states

22. The Impact on Behavior Forrester Survey – November 2004 Online quality information being accessed 23% that needed hospital care used a hospital comparison tool 20% via health plan site, 4% via employer site Online quality information influencing decisions 52% reassured about the hospital they intended to use 16% considered changing hospitals 12% actually changed based on quality information

23. Tiering – at what Level? Major Category Adult Med/Surg Obstetrics Pediatrics Center of Excellence Cardiac Cancer Orthopedics Procedure/Diagnosis CABG Pneumonia Colon Surgery

24. How are tiers determined? Number of Tiers Two if in or out of network Three if tied to benefits (similar to drugs) Four if quartile focus Typical Three Tier Structure Equal distribution 25% 1st, 50% 2nd, 25% 3rd Basis of Tier Determination Local Market State National

25. What weighting for measures? Quality and cost typically equal in weighting Often separate dimensions combined 50/50 at the end Outcomes measures more heavily than process measures for quality Differing weights for volume based on philosophy Morality and complications always high weight Leapfrog and CMS typically lower Health plan cost heavily weighted for cost dimension

26. How set score for a measure? Quartiles typically used Usually based on range of absolute values Sometimes tied to progress or participation (CPOE, IPS) Points for quartile performance 10 for 1st quartile, 7, 4, 1 10, 8, 6, 4 10, 7.5, 5, 2.5 Meeting thresholds sometimes used for volumes or other measures

27. What are criticisms of tiering? Penalizes teaching hospitals Doesn’t capture true severity of illness Penalizes community hospitals Volume too heavily weighted Penalizes hospitals that code completely But may be offset by resulting higher severity Uses imperfect administrative data Creates perverse incentives regarding patient selection

28. How is tiering being used? Hospital performance or value index Presented in provider directory, often with separate quality and cost scores Often at procedure/diagnosis level High performance hospital networks In or out, Comparison of hospital networks for national accounts Centers of excellence Cardiac, cancer, transplants, etc. Consumer benefit tiers Differing co-pays based on tier Pay for performance Hospital negotiations

29. Tiering Examples Tufts Navigator – Tiered Payments Plan offered to Mass State employees Hospitals placed in 3 tiers for employee co-payment based on hospital quality and health plan cost Very well received by employees National Plans – Hospital Value Index Index based on relative performance on health plan cost (claims based) and hospital quality For display in provider directory and for use in hospital contract negotiation Regional Plans – Pay for Performance Severity adjusted quality comparison across multiple measures Being used in pay for performance programs Employers/Coalitions – Quality Report Card High volume procedures, outcomes and process measures Public release of comparisons, internal cost control

30. Historical Perspective - Hospitals Perform well on JCAHO accreditation Intense devotion of resources for a short period of time One time focus until re-accreditation Avoid a major medical mistake that generates significant adverse publicity Overdose of cancer drug given to Boston Globe health reporter at Dana Farber Cancer Institute Heart/lung transplant from incompatible donor for Mexican teenager Jesica at Duke Death of living liver transplant donor at Mount Sinai Talk constantly about providing the highest quality, but know deep down that quality problems occur almost every day

31. Be the “right” hospital Why does it make financial sense? Success under pay for performance and tiered networks Ultimately lower cost (poor quality costs more) Ultimately more business Why does it make strategic sense? Competitive advantage for being a leader in quality improvement More productive relationships with health plans and employers Transparency, transparency, transparency

32. Volume The wrong approach Perform unnecessary procedures to increase volume The right approach Encourage more volume by achieving excellent outcomes and making sure health plans and consumers know about performance Answer the following questions: For what diagnoses and procedures do we have an excellent story to tell? How profitable are those diagnoses and procedures? How well do we fit pay-for-performance programs? Do we have a Center of Excellence?

33. Mortality Rate The wrong approach Send the most severe patients elsewhere Discourage people with certain illnesses from coming to your hospital The right approach Identify diagnoses/procedures where have higher mortality rates than peers after severity adjustment Answer the following questions: Is it just one or two physicians or a hospital-wide problem? Is it consistent across multiple years? Are too many physicians treating too few patients? Any particular patient characteristics of those dying?

34. Complications The wrong approach Send the most severe patients elsewhere Stop coding complications The right approach Identify diagnoses/procedures where have higher complication rates than peers after severity adjustment Answer the following questions: What complications are most prevalent? Are those complications physician or nursing care sensitive? Is it consistent across multiple years? Across physicians? How much more expensive are those patients with complications?

35. Length of Stay The wrong approach Prematurely discharge patients The right approach Identify diagnoses/procedures where have higher length of stay than peers after severity adjustment Answer the following questions: Is it time on the ICU or routine units? Is it consistent across multiple years? Across physicians? How much could be saved by reducing length of stay or reducing time in ICU? What % of patients are short LOS patients (probably shouldn’t have been admitted) vs. long length of stay patients?

36. Cost The wrong approach Save $ by cutting quality of care programs Ignore cost of poor quality The right approach Identify how much more patients with quality problems cost across the hospital Answer the following questions: What complications are costing the hospital the most? What programs are in place to curb those complications? What would be the potential ROI of a new quality program to reduce X complication by 1/3?

37. Where should we be going? “Quality is Not a Department” “Your organization will only make meaningful and sustainable quality improvements when people at every level feel a shared desire to make processes and outcomes better every day, in bold and even imperceptible ways.” Robert Lloyd, Executive Director, Institute for Healthcare Improvement

38. Where should we be going? “Reducing medical error is everybody’s business, including clinicians and the public. Accountability for what we do in in medicine is a cornerstone for the future construction of any delivery system. We need the energy of both the public and the private sectors to tackle this social challenge. How we tackle this matters less than the fact that we must tackle it now.” Dr. David Nash, Jefferson Medical College, in March 2003 Health Policy Newsletter

39. Where are we going?