William P. Pierskalla, Ph.D. Distinguished Professor and Dean Emeritus

1. “Improving Our Health Care Delivery: New Appeals and New Ideas”Innovations in Health Care Delivery 2006 ConferenceSponsored by: College of Business, University of CincinnatiCincinnati Children’s Hospital Medical Center William P. Pierskalla, Ph.D. Distinguished Professor and Dean Emeritus UCLA Anderson Graduate School Management Ronald A. Rosenfeld Professor Emeritus The Wharton School, University of Pennsylvania email: william.pierskalla@anderson.ucla.edu

2. Outline of Lecture • A brief review of the current state of our health care system? • Second: What the NAE/IOM Report is asking us to do • Third: What is our job?

3. The current state of our health care system

4. We will continue to move to new crises in Health Care Delivery in the United States (as well as in most or all other developed countries) • they will begin to surface strongly in the years 2007-2010 (probably in 2007 or 2008) and then they will continue to gain momentum unless war, terrorism or other major events continue to dominate the news.

5. 2006

6. Why do I believe this?Because they will again become a major political agenda item • Costs • Quality • Technology • Access • Aging of Baby Boomers - 2011 • Social Security/Medicare Financial Crises DRIVEN BY:

7. Should we be Optimistic or Pessimistic about this? • More Optimistic:Because OR/MS has answers to many of these problems and the research capabilities to resolve many others. THIS CONFERENCE IS A PRIME EXAMPLE ! A Second Example Is the Recent NAE/IOM REPORT ! • But Somewhat Pessimistic:Because OR/MS might not be at the national table when the crises demand solution and the crises will be attempted to be resolved only politically and/or pseudo-economically. And because there are no present forces evaluating the fantastic growth in medical research and technology. • HOWEVER, OR/MS will be in the thick of the hands-on work at the institutional level of care delivery

8. Where are we? First: the crises areas: • Costs • Quality • Technology • Access • Aging of Baby Boomers • Social Security/Medicare Financial Crises

9. COSTS

10. Each of them is named after one of my medications

11. YEAR 2004 • Health Care spending per person in USA increased by 8.2% (total $1.9 trillion or 16% of GDP) • Who paid: Employees and the Elderly! (Employers?- essentially no) • Disposable wages • Co-payments and deductibles • Insurance premiums • Medicare premiums and deductibles

12. Expenditures Polynomial where x = 1,…,45 corresponding to 1960,…,2004

13. Average = 10.2% for 1961-2002 ? 8.2% ? ? 2004 1960 1985 2002 2010 Average = 7.98% for 1985-2002 Introduction and implement. of ProsPaySys. Hey-Day years of Managed Care Source: OECD Health Data 2004, 2nd Edition

14. The Causes of Health CostIncreases • Demographics • Income Level Increases • Insurance • Price Inflation / non Wages • Administrative Expenses • Factor Rents • Technologies

15. Table 2: Accounting for the Increase in Health Costs 1940-1990 Share of Total Factor Increase Due To Demographics 14 2 Income 37 5 Spread of Insurance 100 13 Relative Price Change 147 19 Administrative Expense 101 13 Factor Rents 0 0 Total Static Factors 399% 51% Technology 391% 49% Total Increase 790% 100% Source: David M. Cutler, “Technology, Health Costs and NIH,” Harvard University and NBER paper presented at the NIH Economics Roundtable on Biomedical Research, October, 1995.

16. Quality

17. Five of IOM/NAE Quality Reports • November 1999 (IOM): “To Err Is Human” • Found that 44,000 to 98,000 Americans die each year as a result of medical errors. • March 2001 (IOM): “Crossing the Quality Chasm: A New Health System for the 21st Century” • Found that the healthcare system is “plagued by a serious quality gap” and called for eliminating handwritten clinical information by 2010 and refocusing the healthcare system on treating chronic illnesses. • October 2002 (IOM): “Leadership by Example: Coordinating Government Roles in Improving Health Care Quality” • Argued that the federal government should lead the development of clinical standards for measuring care and proposed financial incentives for organizations that improve quality. • November 2003 (IOM): “Keeping Patients Safe: Transforming the Work Environment of Nurses” • Identifies solutions to problems in hospital, nursing home, and other health care organization work environments that threaten patient safety through their effect on nursing care. • In 2005 (NAE and IOM): “Building a Better Delivery System: A New Engineering/Health Care Partnership” • “Purpose is to forge a new partnership between Systems Engineering, Operations Research, Management Science and Medicine” to manage quality, costs and access challenges.

18. Building a Better Delivery System: A New Engineering/Health Care Partnership* A National Academy of Engineering/Institute of Medicine Report Supported by grants from: National Science Foundation, Robert Wood Johnson Foundation, and the National Institutes of Health *Wherever it says “engineering”, it also implies “business information and operations management”.

19. W. Dale Compton, PhD, Cochair, Purdue Univ. Jerome Grossman, MD, Cochair, Harvard Rebecca Bergman, Medtronic John Birge, PhD, Univ. of Chicago Denis Cortese, MD, Mayo Clinic Robert Dittus, PhD, Vanderbilt Univ. G. Scott Gazelle, MD, MGH Carol Haraden, PhD, IHI Richard Migliori, MD, United Resource Networks Woodrow Myers, MD, WellPoint William Pierskalla, PhD, UCLA Stephen Shortell, PhD, UC Berkeley Kensall Wise, PhD, Univ. Michigan David Woods, PhD, Ohio State Univ. Study Committee

20. Project Goals • Accelerate introduction of engineering ideas and principles to health care delivery • Identify engineering applications (technologies, tools, and research) that could help significantly improve health care system performance • Identify factors that facilitate or inhibit the use and diffusion of these applications • Identify research and education priorities for a new engineering-medicine partnership

21. Safety failures 1 million injuries; 98,000+ deaths annually in U.S. from process/system failures (progress from IHI's 100,000 Lives Campaign) Knowledge—Practice Gap patients receive “best practice” treatment only half of the time Waste, Inefficiency, Spiraling Costs 30 to 40 cents of every health care dollar covers costs of “overuse, underuse, misuse, duplication, system failures, poor communications and inefficiency” 30% of $1.6 trillion = $480 billion/yr Health care costs rising at or close to double digit rates since late 1990s, 3X rate of inflation Growing uninsured population ~ estimated 45 million in 2006 Revenue squeeze on care providersStaff cuts/workforce shortages impact safety, timeliness, access, patient-centeredness Converging Crises—Safety, Quality, Cost, Access

22. ERRORS

23. OVERUSE REGULAR OR JUMBO PAINS I’M HAVING SLIGHT STOMACH PAINS REGULAR. THAT’LL BE AN UPPER GI AND TWO PEPTO BISMOLS. PULL UP TO THE NEXT WINDOW, PLEASE PERHAPS IT’S TIME TO RE-EVALUATE HEALTH CARE. YOU WANT AN APPENDECTOMY WITH THAT?

24. MISUSE BIZARRO BY DAN PIRARO IT’S A “WIN-WIN” SITUATION! THERE WAS NOTHING WRONG WITH YOUR HUSBAND AFTER ALL SO HE CAN GO HOME IN A WEEK OR SO…..AND I CAN NOW AFFORD TO GO TO EUROPE THIS SUMMER.

25. INEFFICIENCY

26. A Patient-Centered Model of the Health Care System The Broader Political and Economic Environment The IDS The Organization The Care Team PATIENT

27. NOT PATIENT CENTERED

28. Focus for a New Engineering/Health Care Partnership A Systems Approach to Health Care Delivery • Use System design, analysis, and control tools& associated research to advance understanding of processes and system interactions and to improve/optimize dimensions of system performance in face of constraints • Use Information and information/communication technologies and associated research to advance connectivity, information flow, coordination

29. A Systems Engineering Agenda for Health Care Delivery—Selected Findings • Systems-engineering and business tools have improved quality, efficiency, safety, customer-centeredness of processes, products, and services in a wide range of manufacturing, services and high risk industries, including “islands” of health care. • Some tools can or have been adapted for limited tactical/localized application to improve performance of discrete health care processes, units, and departments—e.g. concurrent engineering, SPC, queuing theory, modeling/ simulation, human factors, Failure Mode And Effects Analysis (FMEA), Toyota PS, Six Sigma.

30. A Systems Engineering Agenda for Health Care Delivery—Selected Findings 3. Strategic use of other and more information-intensive tools* in HC has been limited—*i.e., tools from enterprise & supply chain management, financial engineering & risk analysis, and knowledge discovery in databases. 4. Information/communications (IC) systems are critical for taking advantage of the potential of existing and emerging systems-design, -analysis, and -control tools to transform HC; in turn, systems tools will be critical to effective design, deployment and management of IC systems for HC

31. Systems Engineering Agenda—Recommendations Actions to promote development, adaptation, and use of systems engineering tools • 3rd party payers to incentivize tool use • Expand/coordinate outreach & support • Educational materials/NLM website • Increase public/private support for R,D&D

32. Information/Communications Technology Agenda— Recommendations • Design and build NHII/NHIN* for the future—actions to insure an evolving network capable of incorporating WIMS (Wireless Integrated Microsystems) and other next-generation functionality/technologies. • Action to advance standards, interoperability, reduce barriers to implementation *National Health Information Infrastructure/National Health Information Network

33. Information/Communications Technology Agenda— Recommendations 3.Actions to PromoteResearch, Development & Demonstration Priorities • Controlled Medical Vocabulary • Master Patient Index • Electronic Health (Patient) Record • Speech/handwriting/ natural language recognition • Computerized Physician Order Entry • Centralized Patient Scheduling in Care Delivery Networks • Enterprise Decision Support Systems • Connectivity / Networks • Integration of Disparate Legacy and New Systems • HIPAA Improvements

34. Accelerating Change The federal government, in partnership with the private sector, universities, federal laboratories and state governments,should establishmultidisciplinary centers at institutions of higher learning throughout the countryto: • Conduct basic and applied research on systems challenges to healthcare delivery and development/use of: • Systems engineering tools • Information/communications technologies • Knowledge from other fields • Demonstrate and diffuse the use of these tools, technologies and knowledge throughout the healthcare delivery system • Educate and train current/future healthcare, engineering and management professionals and researchers in the science, practices and challenges of systems engineering for healthcare delivery

35. So What Should OR/MS Be Doing? • A great deal but far from what could and will hopefully be done in the future.

36. Better Data Mining in Genomics/Proteinomics/ Drugs development More Powerful Optimum- seeking Nonlinear Algorithms Better Decision Analytic Tools – Stochastic Branching Processes Better Outcomes Measures Integrated Models of the Patient-Centered Supply and Delivery Chains In the Home In the Outpatient Setting In the Hospital In Long-term Care Best Adaptive Processes to Determine Best Practices for Patient-Centered Care? Individual and Organizational Change Much More Research Some Examples

37. Much More Applications

38. DECISION SUPPORT SYSTEM USE & ISSUES

39. Clinical Decision Support System Use & Issues

41. Our Job Is to bring this “heaven” to the health care delivery system in the United States This conference will be exploring how to do this task and provide some exciting answers.

42. Low Hanging Fruit • It's not uncommon that a patient scheduled for surgery accidentally receives dinner the night before from Dietary, resulting in a delay for surgery, and at least an additional day of stay for the encounter. • At about 5:00 PM, the attending MD decided that the patient could be transferred to a telemetry bed outside of the ICU (pressure from the backed-up ED, no doubt), but would require additional nursing supervision not normally available on that unit.  Of course, by this time, it was so late in the day that arrangements could not be made for an additional nurse's aid, so the physician reversed the transfer order - he spent at least 1/2 hour to an hour on phone calls in this entire process and so did many others. • Although CMS provides fairly clear guidance for physician billing for ED visits, the guidelines for facility billing are somewhat ambiguous. Given concerns about OIG audits and penalties for fraud & abuse, you find, almost without exception, that the facility bills for a much lower level of visit than the physicians (indicating a lower acuity level), for the very same patient population, resulting in about $50-$100 in foregone revenues (after adjusting for collections write-offs) per visit.