• Periop Proceedings

    This blog is intended to encourage open dialogue and learning amongst members and interested parties of the perioperative and periprocedural communities for the purpose of envisioning and encouraging higher performing systems.

  • About Our Bloggers

    Dan Krupka

    Dennis Fowler

    Warren Sandberg

  • Print this page

You are here: Twin Peaks Group > Articles by: Dan Krupka

Author Archives: Dan Krupka

The Apparently Dismal Economics of Reducing Hospital-Acquired Infections

Posted at 1:47 pm on May 09, 2012 by

Several months ago I wrote about the cost of an OR minute.

Hospital-aquired infectionsThis time I’m taking on the cost of a hospital-acquired infection (HAI). More specifically, I’ll be discussing the financial impact of eliminating an HAI on a hospital’s profitability. “What’s the cost of an OR minute got to do with the financial impact of eliminating an HAI?” you might ask. Plenty! It’s all about understanding the real financial consequences of improvement projects.

Let’s say your hospital’s accountants have determined the full cost of a particular HAI to be $20,000 over and above the cost of a normal stay for that condition or surgery. In arriving at the figure, they’ve taken into account the (average) cost of medications and supplies, the time of the nurses and their supervisors, the time of support staff, the utilities, the depreciation on the buildings and equipment, an allowance for the hospital administration, etc. So, if the HAI rate is reduced through the hard work of a group of clinicians, how much will the hospital save per HAI eliminated?

Sadly, the answer is not $20,000. It’s only about 10% to 15% of that figure. Why? Because that’s an estimate of the variable portion of the cost – primarily for the medications and supplies. So let’s assume that the hospital saves 15% or $3,000.

Now let’s look at what the hospital had to give up to reduce the HAI rate. Well, there were all those clinicians I mentioned. Their time is expensive. And they probably purchased some equipment for their project, and created a protocol that increases the hospital’s expenses.

The good news is that the correct way to analyze the situation is to ignore the clinicians’ time unless they were hired specifically to work on the project. However, we do have to take into account any additional expenses resulting from the new protocol. But we don’t expect them to be too big. Let’s say they average out to $200 per HAI averted.

At this point, then, the net savings appears to be $2,800 ($3,000 – $200) per HAI. This is far less than the $20,000 that would result from an incorrect analysis.

But wait! There’s more!

The Impact on Revenue

Suppose the hospital was receiving reimbursement for the excess length of stay associated with the HAI. Let’s assume that it was $5,000 or only 25% of the $20,000 cost. In that case, the hospital would lose $2,200 ($2,800 – $5,000) for each HAI it succeeds in eliminating. And so, the hospital could lose money by doing the right thing. It all depends on the magnitude of the average reimbursement associated with the HAI. In this example, if it’s greater than $2,800 the hospital loses money. Or, more correctly expressed, in the example, the hospital’s cash flow is negative if the average reimbursement associated with the excess length of stay exceeds $2,800.

The example is not a fantasy. It is based on a situation that Dr. Warren Sandberg and I recently addressed in a letter to the editor (PDF) of the American Journal of Medical Quality entitled “The Correct Business Case for the Michigan Keystone Patient Safety Program in ICUs.” In our letter, we consider an analysis that erred in using the full cost of an infection and the full expense associated with the clinicians’ time. However, as we state at the conclusion of our letter:

“[o]ur purpose is to help hospital leaders understand that, in the short term, the benefits of programs such as the one reported in the article, should be measured in terms of lives saved and improved rather than dollars.”

I’ll have more to say about the hospitals’ apparent dilemma associated with projects to improve clinical quality in a future post. Hint: It’s not as grim as it sounds, but it does require thinking out of the box.

IF you need help eliminating your HAIs, please contact us.

Posted in * View all Blog Posts, Other topics in health care, Quality and safety | Tagged Leave a comment

Getting to Know Your (Time-Driven) ABCs

Posted at 9:10 am on Nov 09, 2011 by

In my previous posting I praised Robert Kaplan and Michael Porter for applying Time-Driven Activity-Based Costing (TDABC) to uncover differences in the costs for total-knee procedures in U.S. hospitals and two hospitals in Germany and Sweden.

Their sample was admittedly very small, but the findings suggest that the leading culprit is lower productivity in the U.S.

However, the major point of their article in the September issues of the Harvard Business Review was to advance the benefits of TDABC to health care.

Activity-Based Costing

So, does their prescription to use TDABC make sense? Read more about this article »

Posted in * View all Blog Posts, Other topics in health care, Perioperative Systems-related | Leave a comment

How to Solve the Cost Crisis in Health Care

Posted at 10:44 am on Nov 04, 2011 by

When two of the best-known thinkers from the Harvard Business School offer their prescription on how to solve the cost crisis in health care, it’s time to listen.

In the September 2011 issue of the Harvard Business Review, Robert Kaplan and Michael Porter put it bluntly: “there is an almost complete lack of understanding of how much it costs to deliver patient care, much less how those costs compare with outcomes achieved.” Read more about this article »

Posted in * View all Blog Posts, Other topics in health care, Quality and safety | Leave a comment

CABG quality: the latest results from Consumer Reports

Posted at 8:16 am on Aug 26, 2011 by

The September 2011 issue of Consumer Reports carries report cards on the quality of CABG procedures performed by 324 groups/hospitals.

Ratings of one, two or three stars,  corresponding to performance below, at and above average, are based on performance in 11 categories (e.g. risk-adjusted mortality after CABG, antiplatelet medication at discharge and percentage of procedures performed using an internal thoracic artery).  A 2010 article in the New England Journal of Medicine (NEJM) describes the program (http://www.nejm.org/doi/full/10.1056/NEJMp1009423).

The rating system was developed by the Society of Thoracic Surgeons (STS) whose web site includes more details on individual ratings (http://www.sts.org/quality-research-patient-safety/sts-public-reporting-online).  The methodology, endorsed by the National Quality Forum, is based on a registry of about 90% of approximately 1100 U.S. cardiac surgery programs.

When Consumer Reports published the first set of ratings in October 2010, the NEJM article, cited above, called the public disclosure “a watershed event in health care accountability.”

I believe that this year’s report, based on data running from July 1, 2009 to July 30, 2010, is particularly significant because the number of groups/hospitals that have chosen to go public has increased by more than 100, and because five groups/hospitals with below-average performance had the courage to disclose their report cards.

My disappointment lies in the absence of reports from many famous institutions – Massachusetts excepted – and the lack of analogous report cards for other specialties, such as orthopedics and vascular surgery.  I had hoped that their respective societies would have followed the lead of the STS.

As a consultancy devoted to helping our clients create high-performing perioperative systems, Twin Peaks Group applauds the initiative of the STS and the two-year trend in public disclosure.  We believe that hospitals should measure and publish risk-adjusted outcomes.

With that in mind, how gratifying would it be if next year’s announcement in Consumer Reports listed report cards for 500 groups/hospitals, and revealed that this year’s one-star performers had added one or more stars?

Posted in * View all Blog Posts, Perioperative Systems-related, Quality and safety | Leave a comment

The Cost of an OR Minute: Use and Abuse

Posted at 3:11 pm on Jul 07, 2011 by

During a recent discussion on operational improvements I was asked for “my” number for the cost of an OR minute.  “What’s your point?” I asked.  “It tells us how much we can save by reducing time in the OR,” he responded.  Unfortunately, this is a fallacy.  It’s even more unfortunate that there are many others who share this misunderstanding.

Before explaining the source of this fallacy, let’s consider why the number is important, how it’s calculated and who should be interested in the number.

The number is essential to assessing a hospital’s profitability by comparing the hospital’s costs to the reimbursements it receives.  In addition to the cost of materials and supplies used in a case, the hospital also needs to calculate the cost of everything else that should be allocated to, say, a lap chole procedure. Read more about this article »

Posted in * View all Blog Posts, Perioperative Systems-related | 2 Comments

Inside a High-Performing Perioperative System (2)

Posted at 10:02 am on May 03, 2011 by

Several months ago, I described what it’s like inside one hospital’s high-performing perioperative system.  Since then, I’ve been privileged to learn more.

The hospital is successfully applying analytic capabilities rarely found in healthcare settings, and continues on its quest to reduce post-surgical complications, sharing its results more openly than any institution that I know of.Stethoscope and healthcare data (transparency)

The hospital is now supported by an Operations Research Group that originated in a strategic planning exercise launched by the hospital several years ago.  The group has used a variety of mathematical methods to assist in the design of a new building that houses an ambulatory surgery center, a family clinic and imaging facilities, and has built models that optimize the weekly schedules of individual surgeons who divide their responsibilities among multiple facilities. Read more about this article »

Posted in * View all Blog Posts, Perioperative Systems-related | Leave a comment

Anesthesiologists’ Answer to the American College of Surgeon’s National Surgical Quality Improvement Program (NSQIP)?

Posted at 6:22 pm on Mar 21, 2011 by

At the recent meeting of the American Association of Clinical Directors (AACD), I learned that the American Association of Anesthesiologists (ASA) had set up the Anesthesia Quality Institute (AQI) (www.aqihq.org).  The Institute’s vision is to become “the primary source for quality improvement in the clinical practice of anesthesiology,” while its mission is to establish and maintain the National Anesthesia Clinical Outcomes Registry. (I could put in all the acronyms but it would make your eyes glaze over).

If this sounds to you like a cousin of the National Surgical Quality Program (NSQIP), you’d be almost right: Having observed NSQIP, Rick Dutton, MD, AQI’s Executive Director, has taken a different approach to membership and to the collection and analysis of data.

Because storage capacity is infinite and because bandwidth will continue to increase, he decided that the system should collect all reasonably useful data on all cases of participating institutions; moreover, that membership should be almost free.  (It’s subsidized by the ASA).

After you sign up, “pipes” are set up to channel your data – de-identified – into a massive data base.  The choices made by Rick allow for flexible, but potentially complex, analyses.  By contrast – and probably for good reasons – NSQIP collects carefully defined data on selected cases (only), and requires that data be checked by a full-time assessor, who is trained and periodically re-qualified by NSQIP.

It’s gratifying that the ASA has set up the Anesthesia Quality Institute.

When it comes to surgery, anesthesiologists feel particularly responsible for post operative nausea/vomiting, and for pain.  In recognition of this, the data collected and adjusted by the Institute will permit benchmarking on those two quality dimensions.

Now, all that we need is a joint program – one that combines NSQIP and a subset of the data from the Anesthesia Quality Institute.

After all, anesthesiologists’ complications are indistinguishable from those of surgeons from the perspective that matters most: the patient’s.

Posted in * View all Blog Posts, Perioperative Systems-related, Quality and safety | Leave a comment

A Valentine for Dr. Brent James

Posted at 10:56 am on Feb 14, 2011 by

There is no doubt that Brent James, MD, MStat, Chief Quality Officer and Executive Director of the Institute for Health Care Delivery Research at Intermountain Healthcare, is one of a handful of this Country’s leaders in healthcare quality.

According to the introduction of an interview conducted by Bob Wachter, arguably our leader in patient safety, Dr. James “has probably educated more leaders in health care quality and systems change than anyone else in the United States.”

Here are just four of Dr. James’s positions that I admire and endorse:

  1. Speak “the language of the natives” when introducing a quality improvement program; avoid the use of jargon.  By taking this tack, you reduce the barrier to acceptance of the quality methods and the fear that there’s a huge body of knowledge that must be learned before making progress.
  2. Have a clear aim for the project.  This comes from Dr. Deming.  We, at Twin Peaks Group, also preach the importance of clear, concise, objectives so that we can easily determine whether they’ve been attained and so they can be attained before the participants run out of enthusiasm and energy.
  3. Plan for managing change from the very start of an improvement project.  Any significant improvement modifies the way that people perform their work.  But, since we all prefer to do things the same old way, it’s essential to plan for winning support and sustaining the gains before embarking on a project.
  4. Include the financial impact along with the process impact.  In Dr. James’s words “include cost outcomes in parallel with the clinical outcomes.”  As he correctly points out, this is essential to get the organizational resources behind the programs to improve quality.  As consultants, we’re naturally very aware of the importance of this step.

No Valentine is perfect: Dr. James and I probably disagree regarding the financial benefit to a hospital  of many quality improvement projects , such as those which have reduced infections.

The benefit is conventionally estimated as the sum of variable costs (e.g. materials and supplies), which are relatively small, and the loaded cost of the clinicians and others who deliver value to the patient.  The latter costs, as recently pointed out in “The fixed cost dilemma: what counts when counting cost reduction efforts?”, are fixed or vary very slowly with the number of patients. Consequently, the financial benefit to hospitals of many healthcare quality improvement programs is not as large as often thought.

Fortunately, there are payers out there who are willing to support virtuous behavior, sending additional patients the way of well-deserving hospitals; a perfect payer Valentine to a provider.

Posted in * View all Blog Posts, Quality and safety | Leave a comment

Let’s Start Investing in Measuring Value for Patients

Posted at 5:04 pm on Dec 15, 2010 by

As consultants, we rely on metrics to assess the impact of our work.  Thus, when our clients don’t already measure what we might improve, we face an uphill battle.  And the battle becomes particularly frustrating when institutions don’t measure what we consider to be most important: value to the patient.   But what do we mean by “value”?  Very recently, Michael Porter defined it as health outcomes achieved per dollar spent.

We applaud his definition because it’s consistent with our position that perioperative systems should be judged by a double bottom line: quality of outcomes and financials.

Porter is very careful to stress that outcomes must be measured in terms of results achieved for the patient; process measures are not outcomes.  Moreover, he points out that the principal reason for collecting the outcome measures is to enable “innovations in care.” Read more about this article »

Posted in * View all Blog Posts, Other topics in health care, Perioperative Systems-related, Quality and safety | Leave a comment

Building Capabilities for a High-Performing Perioperative System

Posted at 3:16 pm on Nov 29, 2010 by

What would it be like to be inside a high-performing perioperative system? We may hold different opinions; I certainly have mine.

Recently that opinion was reinforced during a visit to a hospital that has been participating in NSQIP for several years, and which has steadily improved its performance on a number of categories.

How did this perioperative system get to where it is today?  I believe that, several years ago, the chief of surgery began to worry that surgical quality was not what it needed to be, but could not prove it. When NSQIP came along, he recognized that it would provide the credible yardstick for comparing his hospital’s complication rates to other hospitals’.  The results confirmed his fears.  Let’s just say they weren’t pretty…

The good news was that the results fired up the surgeons, who, like surgeons everywhere, crave reliable data.  But simply getting the surgeons to commit to an improvement program wasn’t going to be enough: He also needed to win the hearts, the minds and the enthusiastic participation of the nurses.  To accomplish that, he decided to improve the quality of dialogue between the physicians and the nurses through a dose of Team Resource Management delivered by a former airline pilot.

These steps alone would not have been sufficient.  After all, many hospitals – though not enough, in my opinion –are following a similar path.  What’s really different about this perioperative system is its internally generated commitment to grow its capabilities and, in doing so, to further transform its culture and thus to further improve outcomes.  It’s a virtuous cycle.

So, what’s it like inside the perioperative system at this hospital? Here’s what I learned from several people with whom I spoke: Read more about this article »

Posted in * View all Blog Posts, Perioperative Systems-related | Leave a comment
  • © Copyright 2021 Twin Peaks Group, LLC
  • All Rights Reserved.