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Administrative Cost Efficiency Metric (ACE) Richard E. Thorp MEDCOM PAE 4 March 2010. UNCLASSIFIED. Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil. Objectives. Purpose of ACE Methodological Overview From Ratio to Score Analysis & Examples. UNCLASSIFIED.

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  1. Administrative Cost Efficiency Metric (ACE) Richard E. Thorp MEDCOM PAE 4 March 2010 UNCLASSIFIED Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  2. Objectives • Purpose of ACE • Methodological Overview • From Ratio to Score • Analysis & Examples UNCLASSIFIED Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  3. Purpose of ACE • Focus managerial and leadership on Administrative Efficiency • Why? • Healthcare requires substantial administrative support • MEDCOM spends more than 38 cents per dollar of healthcare value supported* • Some MTF’s spend more than one dollar in admin per dollar of healthcare value • It is one of the main reasons that the Direct Care system is not competitive with Purchased Care Alternatives • Efficiency enables Effectiveness and Outcomes UNCLASSIFIED Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  4. Metric Hierarchy

  5. Analyzing Administrative Ops Administration Efficiency Effectiveness MAPR ADMIN EFFICIENCY ANALYSIS (AEA) ace aFe aFe aFe Admin Efficiency Model ADMIN MANAGEMENT MODEL Overhead by Service ASAM

  6. Methodology UNCLASSIFIED Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  7. Methodological Overview • The ACE Metric is the proportion of Administrative Costs (MEPRS E Accounts with some exclusions) applicable to the value of healthcare created by Inpatient and Outpatient operations (MEPRS A & B Accounts) • In the future it will include the expenses and healthcare value from Ancillary Services & Dental • Exclusions: Depreciation, Free Receipts, Med-Dental-Rx Supplies and Equipment, Utilities, Construction (EDC/EDD) • For each MTF the metric will be expressed as • A Ratio e.g. 0.42 • An Academic Numeric Score ( 0-100) • Based on a non-linear regression model where achieving the expected value earns a score of 70 • Score will be a component of the MAPR (MTF Admin Progress) Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  8. Admin Cost Efficiency in Relation to Revenue OutputADMIN Cost Efficiency(Planned Evolution) • ή$ER= (XEA + XEB) / (RA + RB) • ή$ER= (XEA + XEB+ XED +) / (RA + RB + RD) • ή$ER= (XEA + XEB+ XEC+ XED ) / (RA + RB + Rc+ RD) • ή $ER= (XEA + XEB+ XEC+ XED + XEF + XEG) / (RA + RB + Rc+ RD + RF + RG) • ή$ER : Efficiency of E Account Costs with respect to the supported revenue • XEA , XEB , XEC , XED , XEF, XEG : Expenses (-) Allocated from the E Account to the FCC1 • RA , RB ,Rc, RD , RF , RG : Revenue from the FCC1

  9. Revenue Efficiency in Relation to the FTE Input from E Accounts • ήRφE= (RA + RB + Rc+ RD + RF + RG) / (FEA + FEB+ FEC+ FED + FEF + FEG) • ήR φ E : Revenue Efficiency with respect to FTEs from the E Account • FEA , FEB , FEC , FED , FEF, FEG : Proportional FTEs based on Expenses from the E Account to the FCC1 • RA , RB ,Rc, RD , RF , RG : Revenue from the FCC1

  10. Typical Component Breakdown

  11. From Ratio to Score UNCLASSIFIED Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  12. Focus Area 5-C : The MAPR ACE Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  13. ACE Ratio to Revenue Less Efficient  More Efficient  Y Axis : ACE Ratio, X Axis: Revenue FY2008 Data at PDMIS Below the line is desirable This graph is from early data and the regression formula continues to be refined Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  14. Analysis and Examples UNCLASSIFIED Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  15. Example • Would your goal be to sustain or improve? • If so, by how much each year during the BP time horizon? • How? Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  16. Improving Ace • Make the numerator smaller • Make the denominator larger • ή$ER= (XEA + XEB) / (RA + RB)

  17. Adjusting the Numerator • WARNING: The goal is ACCURACY not accounting tricks! • Change Actual Expenses • Improve Accounting Accuracy

  18. What Impact • MTF is improperly accounting for RN time into E Accounts? • Crazy 8’s for Personnel Assigned to E Account Work Centers • Other Examples?

  19. The Math • How can expenses be reduced? • How can revenues be increased? Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  20. More Math • Considering a Coding Improvement Project • $1,000,000 of Admin Expense all of which will step down to B Accounts • $ 4,000,000 of additional revenue • What will happen to ACE Ratio? Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  21. Interconnections • Considering an Admin Project that has no impact on healthcare production or revenue. • $1,000,000 of Admin Expense all of which will step down to B Accounts • $ - 0 - of additional revenue • What will happen to ACE Ratio? Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

  22. Digging into a downward trend…

  23. Digging Down - Expense Trend

  24. Deeper Analysis • Trend Analysis in Expenses • FCC3 • SEEC • Peer Analysis Expenses • FCC3 • SEEC

  25. Deeper Analysis - Revenue • Revenue • PMRM • Data Accuracy

  26. Your Business Plan • How are you performing relative to your goal? • What is your strategy: • Maintain, Improve, Ignore • How and How Much • Revenue • Expenses • Detail and Drilling Down UNCLASSIFIED Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil 19Jan10@1400

  27. Another Example

  28. Expense Trend

  29. Digging Deeper

  30. Even Deeper

  31. Even Deeper

  32. Even Deeper

  33. However

  34. Questions? Richard E Thorp 210)221-6777 (DSN 471) / richard.thorp@us.army.mil

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