Every clinical quality improvement initiative across the Bon Secours Health System, Inc. has two target goals: a quality target and a financial target, says Jill Kennedy, RN, vice president of patient care services and CNO at Bon Secours' Memorial Regional Medical Center. "We have to meet both of these targets for it to 'count' toward our Clinical Transformation goal."
Clinical Transformation is the systemwide initiative launched in 2006 to improve clinical outcomes, reduce variation, and reduce costs.
These dual quality-finance targets are supported by a unique oversight structure-a triad of clinical, physician, and finance leaders-at both the system and hospital levels. "You need all three of these expertises to truly identify and address the issues," says Kennedy, who serves as the systemwide clinical leader.
Success to date is admirable. Take the impact of just one hospital in the health system: In FY09, Memorial Regional Medical Center, in Mechanicsville, Va., saved $1,247,000. More than $85,000 of the savings came from slashing hospital-acquired infection (HAI) rates. For example, hospital-acquired sepsis rates declined 1.58 percent (from 3.55 percent to 1.97 percent). Other major savings were achieved by decreasing falls and decubitus ulcers.
Drilling to Find Orthopedic Opportunities
Memorial Regional staff are now working toward their FY10 Clinical Transformation goal of $1 million saved. A review of cost data related to all-patient-refined diagnosis related groups (APR-DRGs) helped leaders identify orthopedics as one key area to focus on in FY10.
"We have now drilled down into our lumbar fusion, joint replacement, and other orthopedic DRGs," says Misty Freeman, RN, administrative director of cardiovascular inpatient services. "We know how each physician practices, including how many labs and X-rays each of them orders. We have looked at how long patients are on IV antibiotics as a potential cost opportunity. And we have compared ourselves with national benchmarks."
Studying the data has helped the hospital create a roadmap for improving quality and reducing costs in orthopedics. Four months into the hospital's FY10, two offshoot teams have started to study specific opportunities around the procurement of implants and the use of pharmaceuticals.
The organization's comprehensive cost accounting system has helped assuage the teams' hunger for detailed and comparative data, says Michael McNeely, CPA/CHFP, director of finance. "Our reporting capabilities help us slice and dice the variable cost of a particular APR-DRG into different buckets," says McNeely. "How much of that cost is perioperative? How much of it is coming from a nursing unit, and what type of nursing unit? How much is coming from lab, imaging, and so forth."
Vendor partnerships also provide ready access to national benchmark data, which allows the hospital to compare itself to similar facilities.
Calculating the Cost Savings
Asked how they calculate the cost savings related to clinical improvements, McNeely and his clinical colleagues describe two different-but related-processes.
Tracking cost avoidance.Cost savings related to decreases in HAIs, falls, decubitus ulcers, and other harmful events are estimated and reported in a dashboard report, says Monique Lowe, performance improvement manager. The hospital determines HAI savings in the following way:
- Creating an internal benchmark: "We figured out the average number of ventilated associated pneumonias (VAPs) and other types of infections that occurred per month in FY08," says Lowe.
- Determining the average cost of each type of HAI: "We figured out our average VAP cost by pulling and reviewing different charts to determine an approximate average cost of treating a VAP."
- Tracking the number of infections prevented: "In FY08, we had one VAP a month; then, in September 2008 (which is the start of our FY09), we had zero, meaning we saved one infection compared to the FY08 average," she says.
- Calculating the savings: "We multiplied the average cost of a VAP by the one infection we prevented-and that was our September 2008 savings for VAPs," says Lowe.
The savings on the bottom line. "One of the acid tests that we have is the average variable cost of an APR-DRG at a point in time, and then we compare that variable cost over time to see if we have improved it," says McNeely.
This acid test goes hand-in-hand with detailed charge code work, he explains. "We have costing down to the charge code level detail. So if our clinicians omit a particular charge code or substitute it for another type of charge code, then we can identify very quickly how much the variable cost for that charge code is and the related savings."
"If a code goes away because a patient needed fewer services, there may be savings that gets calculated," continues McNeely. "Or there may be a change in the mixture of the charge codes for a particular APR-DRG-for example, a shorter length of stay replaces a more expensive pharmaceutical regimen or vice versa. In that case, one code may cost more than the other. But we typically see that producing overall savings, or not, at the end, when we perform the acid test of the change in the variable costs of the particular APR-DRG under evaluation."
Advice from the Dugout
Asked for lessons learned, McNeely stresses: "Don't get lost in the data. There's no cost accounting system that is going to get this exactly on the nail right," he says. "You need to learn to live with plus or minus 5 percent, or you will spend all of your time challenging the data and getting everything reconciled to the penny-instead of spending that time addressing the opportunities for improvement."
Interviewed for this case study: Misty Freeman, RN, is administrative director of cardiovascular inpatient services at Memorial Regional Medical Center in Mechanicsville, Va. (misty_freeman@bshsi.org). Jill Kennedy, RN, is vice president of patient care services and CNO at Memorial Regional (Jill_Kennedy@bshsi.org). Monique Lowe is performance improvement manager at Memorial Regional. Michael McNeely, is director of finance at Memorial Regional, and a member of HFMA's Virginia chapter (michael_mcneely@bshsi.org).
Publication Date: Wednesday, January 06, 2010