By Patrick Flaherty and Joe Haduch
The need to radically reduce the collective financial burden that health care creates for all Americans is a short-list item for political policymakers from all parties. The path away from fee-for-service toward value is desperately needed, but the trail has yet to blazed. This is the first in a series of articles that will address the concept of value in health care and how HTM departments can play an influential role in helping to define and operationalize this critical deliverable. Though not technical in nature, these articles will address how we define value-based health care, identify what elements create value, derive objective and scalable value-based metrics and incorporate all of these concepts into contracts which objectively measure suppliers and hold them accountable for delivering value. Each article will be co-authored by Patrick Flaherty, vice president of operations for UPMC BioTronics and Joseph Haduch, MBA, MS, senior director of clinical engineering also with UPMC BioTronics.
Flaherty has served in senior leadership roles of health care supply chain management, including strategic sourcing, systems, policy, process, clinical engineering and value analysis. Haduch has over 30 years of clinical engineering and imaging service experience and extensive experience managing total cost of ownership of medical equipment. BioTronics is the HTM department of UPMC located in Pittsburgh, Pennsylvania. BioTronics consists of over 170 dedicated and highly trained technicians and support staff responsible for nearly 300,000 devices valued at over $1.3 billion. UPMC is a 41-hospital Integrated Deliver and Finance System (IDFS) rapidly approaching $22 billion in annual revenue.
For some time, we’ve heard about health care’s transition from fee-for-service to value-based care or population health management. Progress has been inconsistent and ill-defined as seemingly competing initiatives in personalized medicine have diffused the urgency of this transition. The good news (and the bad news) is that continued reimbursement compression and national employer Procedure Center of Excellence contracting is forcing providers to adapt to, minimally, phased inclusion of value-based practices. As this change continues to evolve, the continuum of care will need to radically change as well. In a fee-for-service world every service provided generates revenue. In a value-based world every service provided is financial overhead and is one component in delivering the value paid for by the patient and payor. New payor metrics will be based on overall outcomes, not individual services. Outcome-based payments and the value, not volume, of care delivered to patients will dramatically affect the financial sustainability of every hospital across the county.
CMS bundled care models and value-based contracts will increasingly define hospital revenue. Bundled care models reimburse hospitals for the cost of a patient’s overall stay or procedure. Instead of paying for each scan, each test, each service, bundled care models pay for each contracted procedure (knee replacements, hip replacements, cardiac catheterizations, etc.). In this model, employers may directly seek out centers of excellence (COE) for orthopedics or cardiology and contract directly with the hospital. Lowe’s, Walmart, Boeing and Amazon are just a few of the large national companies that pre-negotiate hospital services at a limited number of COEs across the country. What is the value in sending employees across the country for routine surgical procedures? Market disparity. The average cost of a knee replacement across the country is just over $30,000 dollars. In New York city that same medical procedure can exceed $65,000. However, in Alabama the cost for a knee replacement with comparable outcomes would cost as little as $11,000. Where is the best value being delivered? For a major national company with thousands of employees the cost savings would be in the millions. Given a variable opportunity cost this high, it is understandable that the employers are searching for all objective means possible to realize this benefit. Walmart has recently partnered with Covera to identify a means of externally assessing the likelihood of a provider to technically deliver the best value in joint-replacements based on the models, accessibility and configurations of the diagnostic imaging equipment. This changes the equation as a third-party now can directly impact how and how often a provider spends its capital budget. Accountable Care Organizations (ACOs) are networks of hospitals and doctors, combining many service lines that collectively work to efficiently manage a patient’s care. Value is created by not duplicating services or delivering unnecessary services while minimizing errors. This model is also applicable for large IDNs and IDFSs as they seek to reduce capital and support costs, limit training and practice variations, and drive cost productivity.
So, how does this impact HTM organizations today and in the future? How can HTM help drive value in this new dynamic? Among the ways HTM can contribute to value in their facilities is by leveraging the data in their CMMS and connecting it to clinical use and outcomes. Your database is more than just a place to archive service reports, it is a gold mine of data that should drive capital decision making, develop and create proactive repair strategies, and evaluate and define PM frequencies. HTM also needs to analyze its data to show which vendors deliver the lowest cost of lifetime ownership for their equipment while continuously maintaining clinical performance. When physicians demand their preferred vendor for a certain modality HTM needs to ask why, and help determine if the added costs of service and training are truly creating proportional value for the patient.
HTM is at the crossroads of value creation and it needs to step up and embrace the need to connect diagnostic and therapeutic care. HTM needs to use data to fight the economic urge to own equipment too long and underserve our patients with a diminished value just as HTM must use data to force suppliers and physicians to perpetually buy and sell contracted “functions” over marketing “features.” The future is calling, it is up to all of us to answer creatively and responsibly.
Patrick Flaherty is the vice president of operations for UPMC BioTronics.
Joseph Haduch, MBA, MS, is the senior director of clinical engineering for UPMC BioTronics.
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