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Boston Children’s Hospital: Measuring Patient Costs

Boston Children’s Hospital: Measuring Patient Costs. George McMillan Fleming Center for Healthcare Management 2 nd Annual Case Competition. Ratio-of-Cost-to-Charges (RCC) Method. CONS. Not consistently accurate Does not support cost reduction Determines costs based on reimbursement. PROS.

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Boston Children’s Hospital: Measuring Patient Costs

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  1. Boston Children’s Hospital: Measuring Patient Costs George McMillan Fleming Center for Healthcare Management 2nd Annual Case Competition

  2. Ratio-of-Cost-to-Charges (RCC) Method CONS Not consistently accurate Does not support cost reduction Determines costs based on reimbursement PROS • Easy to implement • Simple to maintain

  3. Relative Value Unit (RVU) Method CONS Encourages focus on quantity of procedures and interventions, not quality The assumption that each RVU consumes the same amount of resources PROS • Simple, standardized calculations • Most prevalent bundle payment system in healthcare • Uses clinical operations to determine costs

  4. Our Proposal:Time-Driven Activity Based Costing

  5. Why TDABC Works • Provides true and highly accurate data; essential for effective bundle payments • Directs providers towards quality of care • Physicians understand costs associated with delivery of care

  6. Where do we go from here? • “How can you offer a bundled all-in price if you don’t know what your procedures truly cost and what drives those costs? -Dr. Meara

  7. How it Works

  8. Why TDABC Is Financially Valuable

  9. Capacity Cost Rate

  10. Financial Implications at Boston Children’s Hospital • The value of accurate costs calculated by TDABC: • Insight for operational and strategic planning. • Application of accurate Bundle Payments. • Value-based Physician Incentives.

  11. Physician Bonus Payment Model

  12. Impact On Quality and Value

  13. Outcome Measures

  14. Value Value Health Outcomes Cost

  15. Creating Value for Our Patients

  16. Impact on Quality and Value

  17. Thank You For Your Time.

  18. References • Cauchi, R., King, M., Yondorf B. Global Payments to Health Providers. Health Cost Containment and Efficiencies: NCSL Briefs for State Legislators. no. 2(May 2010). National Conference of State Legislatures. • De Brantes, F., M.S., MBA, Rosenthal, M. B., Ph.D., & Painter, M., J.D., M.D. (2009). The New England Journal of Medicine. Building a Bridge from Fragmentation to Accountability — The Prometheus Payment Model, 361(11), 1033-1036. Retrieved March 17, 2013, from http://www.nejm.org/doi/full/10.1056/NEJMc0909480 • West, Timothy D, Balas, Andrew. West, David A. Contrasting RCC, RVU, and ABC for managed care decisions; Healthcare Financial Management, 50. 8 (Aug 1996): 54. • Healthcare Incentives Improvement Institute. Bundled Payment Contracting Strategies and Guidelines for Health Plans. n/d. Retrieved from http://www.phprwi.com/Partner_Resource_Docs/Bundled_Payment_Contracting_Strategies_and_Guidelines_for_Health_Plans.pdf • Hussey, P., Ridgley, S., Rosenthal, M. The PROMETHEUS Bundled Payment Experiment: Slow Start Shows Problems In Implementing New Payment Models. Health Affairs, 30, no.11 (2011):2116-2124.doi: 10.1377/hlthaff.2011.0784. Retrieved from http://content.healthaffairs.org/content/30/11/2116.full.html • Kaplan, R. S., Witkowski, M. L., & Hohman, J. A. (2013). Boston Children's Hospital: Measuring Patient Costs. Harvard Business Review, 9(112), 086th ser., 1-28. • Lee, T., Both, A., Steele, G. How Geisinger Structures Its Physicians' Compensation To Support Improvements In Quality, Efficiency, And Volume. Health Affairs, 31, no.9 (2012):2068-2073. doi: 10.1377/hlthaff.2011.0940. Retrieved from http://content.healthaffairs.org/content/31/9/2068.full.html • Mechanic, R. E., & Altman, S. H., 
Payment Reform Options: Episode Payment Is A Good Place To Start Health Affairs, 28, no.2 (2009):w262-w271
(published online January 27, 2009; 10.1377/hlthaff.28.2.w262) • Mechanic, R. E., Santos, P., Landon, B. E., & Chernew, M. E. (2011). Medical Group Responses To Global Payment: Early Lessons From The ‘Alternative Quality Contract’ In Massachusetts. Health Affairs, 30(9), 1734-1742. doi: 10.1377/hlthaff.2011.0264 • Porter, M., Telsbert, E. (2006, May). Value-Based Health Care Delivery IPUs, Outcomes and Cost Measurement, and Bundled Pricing. Retrieved from http://www.isc.hbs.edu/pdf/2011.06.20_CJS_Final_UK_Lecture%202_%20IPUs%20Outcomes%20%20Costs.pdf • Porter, M. E. (2009). A Strategy for Health Care Reform — Toward a Value-Based System. New England Journal of Medicine, 361(2), 109-112. doi: 10.1056/NEJMp0904131 • Porter, M. E. (2011, January). Creating Shared Value: How to reinvent capitalism- and unleash a wave of innovation and growth. Harvard Business Review, 1-17. Retrieved March 18, 2013, from http://hbr.org/2011/01/the-big-idea-creating-shared-value

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