PART IIValue Added Care:

Costs and Charges – Where to Begin?

Dmitry Dukhovny, MD MPHInstructor in Pediatrics, Harvard Medical School

Neonatologist, Beth Israel Deaconess Medical Center QI/Teaching Value Curriculum

February 12, 2013

Acknowledgment

Carl J. Shapiro Institute for Education and Research at BIDMC

John Zupancic DeWayne Purlsey Jane Smallcomb EPIC – Economics in Perinatalogy

Investigators’ Collaborative

Conflicts of Interest

I have no conflicts of interest

Agenda

PART I November 27th, 2012– Basics and Definitions of Cost-Effectiveness

Analysis– Choosing Wisely Approach

PART II February 12th, 2013– Costs and Charges: Where to Begin?– Case discussions/costing excercise

Objectives

1. To understand the key components of costs in an economic evaluation

2. To review local and national sources for costs

Game of Numbers

$2.8 trillion

20%

$360 billion

$800 billion

$24.3 billion

Annual US Health Expenditure

% of GDP by 2021

Annual administrative costs

Annual waste/inefficient care

Cost of the Big Dig

http://www.wbur.org/2012/07/12/7-things-that-cost-less-than-the-big-dig

How can we can Neonatology more efficient?

1. Decrease cost

2. Improve or not change quality

3. Don’t push anything off to someone else (e.g. PICU, primary care, family)

-will avoid the issue of causing problems later in life by not doing anything about it now (i.e. delayed diagnosis)

David Cutler, BIDMC Epi confernece 2/7/2013

What can you do to reduce the demand for

Neonatologists?

David Cutler, BIDMC Epi confernece 2/7/2013

International Health Care Spending: 1980-2007

Note: $US PPP = purchasing power parity.Source: Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009) (from the Commonwealth Fund: “Mirror Mirror on the Wall” June 2010 Report).

Commonwealth Fund 2010 Report

Ideas from Choosing Wisely Discussion

Cardiac Evaluations

24 hour electrolytes

Hypoglycemia Management

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

CONSEQUENCCONSEQUENCEE

COSCOSTT

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Cost-Effectiveness Study

Cost-Effectiveness = Costs of Treatment A – Costs of Treatment B

Effects of Treatment A – Effects of Treatment B

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Framing: Perspective

Whom do the decision makers care about?– Society– Government– Third party payer– Hospital/Accountable Care Organization– Patient/Parent

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Framing: Time Horizon

Over what period are costs and effects measured?

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Time Sequence

Time

Costs

00

Start-up costs

Include if investment required

Initial Intervention Costs

Future Costs

Include intervention related costs, induced costs, averted costs

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Types of Resource CostsHealth Care Related Costs

– Direct Medical Costs Variable: Drugs, personnel, tests Fixed: Land, equipment

Non-Health Care Related Costs– Direct Non-Medical Costs

Child care, parking, meals, gym membership

Productivity Costs – “Absenteesim”

Work absence of family or patient due to illness

– “Presenteeism” Decreased productivity of family or patient due to illness

– Employment choices due to condition (eg CP)© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Behavior of the Various Cost Layers in the Health Care System.

Rauh SS et al. N Engl J Med 2011. DOI: 10.1056/NEJMp1111662

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Which Costs Should Be Included?

FramingPerspectiveTime Horizon

Include all goods and services that may change because of the intervention

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Perspective

Health Care

Related

Non-Health Care

Related

Productivity

Society + + +

Government + - +/-Third party payer + - -

Hospital + - -Patient - + +

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Valuing Resources

Opportunity Cost Functioning Market

– Simple: the cost is whatever is paid BUT, market assumptions often violated

Pricing of drugs while under patent Prices set administratively Charges ≠ costs

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Measuring Costs

Bottom Up Micro-Costing

– Sum of labor and non-labor inputs

– Potentially more precise

– Burdensome– Sensitive to site

specific details

Top Down Gross-Costing

– Diagnosis Group– Per diem – Less accurate– Simple– More generalizable

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

SPR Workshop: Dollars and SPR Workshop: Dollars and Sense Sense

Perspective

Whom do the decision makers care about?– Society– Government– Third party payer– Hospital/Accountable Care Organization– Patient/Parent

© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic© 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Costing Pitfalls

Costs ≠ Charges– Charges are inflated 50-300+ % of true costs– Costs ≠ Payment (perspective)

Validity of Sources Numbers from different years

– Convert costs to 1 yr/1 currency

Sources for Costs

Local Administrative Data– Patient Billing Forms (UBO4)

Regional/National Administrative Data– Kids’ Inpatient Database (KID)– Pediatric Health Information System (PHIS)– MA (http://hcqcc.hcf.state.ma.us/)

PHIS EXAMPLE

Berry et al, JAMA 305 (7), 2011

Readmissions within 365 days

Berry et al, JAMA 305 (7), 2011

KID EXAMPLE

Patrick et al, JAMA 307 (18), 2012

Increased NAS Admissions:2000 to 2009

Patrick et al, JAMA 307 (18), 2012

Increased NAS Admissions:2000 to 2009

Patrick et al, JAMA 307 (18), 2012

NAS LOS and Charges:2000 to 2009

Patrick et al, JAMA 307 (18), 2012

NAS Payers:2000 to 2009

Patrick et al, JAMA 307 (18), 2012

Task for the Day

10-15 minutes in small groups Share with the group (5 minutes each)