Cost Reduction

Palliative Care Results in $1.7M Savings While Improving Outcomes

April 6, 2017 8:56 am

When the CEO, CFO, and CNO looked at the cost savings, their first question was, “Is this real?”

Today, more than two-thirds of hospitals with 50 beds or more have palliative care programs (Dumanovsky, T., Rachel, A., Rogers, M., et al., “The Growth of Palliative Care in U.S. Hospitals: A Status Report,” Journal of Palliative Medicine, Dec. 24, 2015.) In this interview, Vincent M. Obi, CPA, director, decision support, Virginia Hospital Center, Arlington, Va., offers strategies for hospitals to measure the value of their palliative care programs.

On the impetus for finding value. In 2005, a recently hired physician and a nurse clinical coordinator began to offer palliative care at Virginia Hospital Center, a 334-bed, not-for-profit teaching hospital. Their goal was to provide better end-of-life care to patients with cancer, chronic obstructive pulmonary disease (COPD), and other conditions. The physician asked Obi and his team if they could help him prove that palliative care reduced costs and improved care to justify the investment in FTEs.

“As an acute care hospital, we get paid either a DRG case rate or a per diem, so there is no additional reimbursement for adding the staff,” says Obi. “So we truly had to show that the new service would improve cost savings and the quality of care.”

Obi leads the hospital’s decision support team, which includes two analysts. He also shares a business intelligence data warehouse architect who reports to IT. Obi’s team is responsible for cost accounting, contract modeling, and assessing profitability by service lines. The team also assists with some clinical reporting.

On providing palliative services via consult. Some hospitals maintain a separate palliative care unit, which charges a room-and-board charge. This makes it easier to track and associate the cost of palliative care to a case, Obi says. But other organizations like Virginia Hospital Center do not have a separate palliative care unit and instead provide palliative services via consult. In such a model, palliative care cases can be located on any floor, and the palliative care team travels to the patient. A member of the care team may call the palliative care nurse or social worker to assess whether the patient is a candidate for palliative care services. Patients and family members also can request a consult with a member of the palliative care team.

Without a room-and-board charge, the decision support team has a more difficult time tracking the cost of these cases. “We depend on medical records to code those cases properly,” Obi says. In addition, overhead costs are allocated to the floors.

On determining the cost savings.  Obi and his team set out to measure days and costs saved using their decision support system. To do this, they selected palliative care cases by DRG. Then, they created a patient population with these DRGs and selected non-palliative cases with the same DRGs. When they created a report comparing the average length of stay (ALOS) for these two populations, they found that the overall palliative care ALOS was consistently lower for the palliative care cases. Specifically, palliative care saved more than nine days in LOS per case. In 2016, palliative care saved a total 5,099 days.

Using the difference between the ALOS, Obi and his team could calculate total days saved based on cases that did receive palliative care. In 2016, their total variable cost savings, including labor, amounted to $3.7 million. Then, they calculated the variable cost savings without labor. “Our theory was that we would not lay off staff, but move them to another service.” By focusing mainly on supplies and pharmaceuticals, they could arrive at a more conservative cost savings, nearly $1.7 million in 2016.

The DRG associated with the greatest cost savings was 871 for septicemia or severe sepsis. Palliative care for these patients saved 356 days in 2016, leading to more than $117,000 in cost savings.

Obi and his team also wanted to measure cost savings achieved by using less interventional care and more palliative care. To do this, they developed a consult date field in their decision support system, which is based on the first consult date in their electronic health record. Then, they measured the average variable cost savings per day before and after the consult. From there, they compared the average cost savings by department summary so they could understand where the cost savings originated.

Areas associated with significant costs savings included room and board, ICU, pharmacy, and supplies. “When the CEO, CFO, and CNO looked at the cost savings, their first question was, “Is this real?’” Obi says. “So we added more detail, looked at specific ICU patients, and analyzed detailed charges. Once we showed them this data, they were comfortable with the results.”

On demonstrating patient and family satisfaction.  In 2016, 68.1 percent of patient and family members surveyed were very satisfied and 19.7 percent were satisfied with the hospital’s palliative care services, for a total satisfaction rate of 87.8 percent. “Families are often relieved when they find out we offer these services,” Obi says.

On advice to other organizations.  “Many decision support systems cannot track costs, and there are a lot of manual processes involved in tracking these cases,” Obi says. One of the challenges was determining the first consult date. “We depend on the coders and system to make sure it is reported properly, which is an evolving process.”

Today, Virginia Hospital Center’s palliative care team has grown to include two employed physicians, a coordinator, a nurse, a social worker, a chaplain, and bereavement staff. They also have a palliative care team from Kaiser Permanente that treats members at the hospital.

As the U.S. population ages, the need for palliative care will grow. Virginia Hospital Center’s analysis has helped it meet the needs of its population, Obi says. “Palliative care can improve quality of care at the end of life,” he says. “In finance, it’s possible to make the case to upper management to allocate resources to these programs.”

This article is based in part on a presentation at the October 2016 Strata Decision Summit in Chicago.

Interviewed for this article:

Vincent M. Obi, CPA, is director, decision support, Virginia Hospital Center, Arlington, Va., and is a member of HFMA’s Virginia-Washington D.C. Chapter.


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