REDUCING COSTS IMPROVING QUALITY & SAFETY MANAGING RISK 1.800.805.4608 WWW.PREMIERINC.COM

Premier announces groundbreaking evidence that better patient care reduces costs and saves lives

“Can high-quality healthcare actually

cost less?”Stephanie Alexander, Sr. Vice President

Healthcare Informatics, Premier, Inc.

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Yes.The connection between cost and quality in healthcare has been debated but never formally proven using empirical data. Until now.

The Centers for Medicare and Medicaid Services (CMS) and Premier Inc. joined forces in 2003 to launch the Hospital Quality Incentive Demonstration Project (HQID), the first national Pay-for-Performance demonstration of its kind. Building on early findings from the HQID project, which showed dramatic quality improvements across the board, Premier undertook an additional, extensive analysis to examine the relationship between quality and cost. The analysis used detailed cost and clinical data from Premier’s PerspectiveTM database, the largest clinical and operational comparative database in the nation.

Five clinical conditions were studied: heart bypass (coronary artery bypass graft (CABG)), heart attack (acute myocardial infarction (AMI)), pneumonia, hip and knee replacement, and heart failure. This paper outlines the key findings of Premier’s groundbreaking study that demonstrates how better patient care benefits patients as well as the healthcare system. The findings indicate that better patient care costs hospitals less and improves patient outcomes. The implications of these research findings for healthcare consumers and the nation’s healthcare system are dramatic.

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“Premier’s analysis provides evidence that reliably delivering a set of basic care measures saves lives. These results are important not only for hospitals but for patients to understand.

“The care measures tracked in Premier’s analysis are not difficult to understand; patients and families can use this information to become more informed consumers of healthcare.”

Donald M. Berwick, MD, MPP, FRCPPresident and CEO Institute for Healthcare Improvement

“This is important early evidence regarding a question that is central to the sustainability of both public and private health benefits plans, whether efforts to improve quality actually improve or worsen the affordability of care.

“The predominant answer emerging from these results could not be more encouraging. Better care can indeed improve affordability.”

Arnold Milstein MD, MPHMedical Director Pacific Business Group on Health and MedPAC Commissioner

“This analysis is extremely valuable because it provides empirical evidence supporting the concept of the business case for quality. Not only is it possible for hospitals to provide high quality care efficiently, but in fact those institutions that achieve outstanding quality performance appear to benefit from reduced costs and improved outcomes.”

Dr. Peter K. Lindenauer M.D. M.Sc.Medical Director, Clinical and Quality Informatics for Baystate Health Springfield, Mass.

“Our nation’s current healthcare payment system pays all hospitals the same way regardless of the quality of care delivered. These new findings point the way toward a payment system that rewards hospitals for delivering higher quality care. A common sense, outcomes-based system will hopefully be a better one for both patients and hospitals.”

Rep. Sue MyrickU.S. Representative, 9th District, North Carolina

National Industry Response

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MethodologyBetter patient care in this research means patients receive the relevant evidence-based components of care for which they are eligible.

In this study, better patient care is measured by the patient process measure (PPM) — the percentage of recommended evidence-based care processes received by the patient. Patients from the CMS/Premier P4P demonstration were grouped according to their PPM, regardless of where they were treated.

Evidence-based care processes used in the study are nationally accepted quality indicators.

For example, evidence-based care shows that every eligible heart bypass surgery patient should receive care including timely administration of prophylactic antibiotics to prevent infections, and receipt of a prescription for aspirin when discharged from the hospital.

For pneumonia patients, evidence-based care processes include assessment of oxygen levels, receiving a pneumococcal vaccination, if eligible, having a blood culture prior to the first antibiotic dose, smoking cessation counseling, and receiving the appropriate antibiotic within four hours of hospital arrival.

For a complete listing of the measures studied in the project, please visit www.premierinc.com/p4p to download the whitepaper, “Exploring the Nexus of Quality and Cost.”

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Confirming the Connection.Following are the key findings from the Premier Performance Pays study.

FINDING 1 — HOSPITAL COSTS Patients receiving better patient care cost less to treat.

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FINDING � — MORTALITY Patients are more likely to survive when they receive better patient care.

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FINDING � — COMPLICATIONS Patients who receive better patient care have better outcomes – fewer complications.

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FINDING � — READMISSIONS Patients who receive better patient care have better outcomes - fewer readmissions.

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FINDING � — LENGTH OF STAY Patients receiving better patient care spend less time in the hospital.

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Heart FailureOne population, heart failure (HF), is unique in the first order results from the study. While patients receiving more of the evidence-based care processes were less likely to be readmitted, their cost, length of stay, and readmission rates appeared higher. Mortality rate is not applicable for heart failure in this study, as the operational definition of the HF population included in the analysis excluded patients with a discharge status of “died .”

There are several reasons why the results for heart failure may look different from the other clinical areas. Heart failure is the only chronic, progressive disease in the project. Heart failure patients were more likely to have extensive diagnostic procedures and surgical interventions, both of which would increase costs of care and increase the risk of complications. We believe there are other contributing factors, including the stage of disease for populations showing higher or lower costs, or receiving more or fewer of the interventions. The heart failure findings demonstrate the need for continued study of the relationship among quality, cost and outcomes.

Premier believes there will be a similar cost/quality relationship when further analysis is completed, and additional contributing factors to cost and quality are uncovered.

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Research ImplicationsThese findings provide a model for the business case for quality performance – lives saved, lives improved, and costs saved as a result of improvements in patient care. To understand the potential impact of improving care, the model was applied to Agency for Healthcare Research and Quality (AHRQ) Healthcare Cost and Utilization Project (HCUP) data from 2003 for pneumonia and heart bypass surgery, heart attack and hip and knee replacement.

Using the actual population size from HCUP discharge data, the impact of improving care was determined based on the Performance Pays model. The cost, mortalities, and outcomes for patients in 2003 were calculated, assuming the population received care at the same level of quality shown in the study (e.g., the same percentage of the population fell into the low, medium and high quality care categories). The improvement opportunity is the potential savings, in lives and money, if reliable patient care could be delivered across the board.

IMPLICATION 1 — OVER $1.� BILLION SAVED

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IMPLICATION � — OVER �,�00 AVOIDABLE DEATHS

IMPLICATION � — OVER �,000 COMPLICATIONS AVOIDED

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IMPLICATION � — NEARLY 10,000 READMISSIONS AVOIDED

IMPLICATION � — NEARLY ONE MILLION HOSPITAL DAYS AVOIDED

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Premier Pay-for-Performance Readiness ProgramHundreds of hospital leaders have already joined Premier’s Pay-for-Performance (P4P) Readiness Program to prepare for the coming changes in the reimbursement environment and understand the impact of quality on patient outcomes and the hospital’s bottom line.

Hospital executives are relying on the resources provided by the program, including:

Performance Pays Study ResultsWeb Seminars and Lessons on Quality and Cost TransparencyP4P Readiness Weekly e-NewsletterP4P Executive ForumsP4P Readiness Program Online Calculator

Premier is the thought leader in Pay-for-Performance and is committed to improving the health of communities by providing programs, resources and solutions to optimize and promote quality and cost performance. Enrollment is free and open to all.

Join Premier in this mission by enrolling in the P4P Readiness Program at www.premierinc.com/P4P

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The Premier Performance Pays study presents powerful evidence that better patient care results in better patient outcomes and lower costs. To that end, the Premier Pay-for-Performance (P4P) Readiness Program was developed to prepare hospitals for the developing performance-based reimbursement environment. The P4P Readiness Program not only considers current changes in legislation that will impact Medicare payments based on severity of illness and complications, but takes an even more forward-looking position to consider payments linked to quality of care. The P4P Readiness Program uses a model based on the findings of the Performance Pays study to give hospitals insight into their current cost savings potential associated with improvements in patient care and prepares them for the inevitable rollout of reimbursement based on the quality and efficiency of care delivered (Pay-for-Performance).

For more than 30 years, Premier programs, services, and tools have assisted thousands of hospitals in identifying opportunities for improving quality of care and resources utilized.

Premier Pay-for-Performance Readiness ProgramThe Premier P4P Readiness Online Calculator – The P4P Calculator is available at no charge by registering at www.premierinc.com/p4p.

Use the calculator to:

Measure differences between current DRG payments and anticipated 2007 and 2008 Medicare reimbursements.

Identify performance gaps that could put the hospital at risk in a Pay-for-Performance environment.

Review three unique Premier patient process measure (PPM), the percentage of recommended evidence-based care processes received for acute myocardial infarction (AMI), heart failure, and pneumonia patients.

P4P Executive Forums – Senior executive forums showcase exclusive P4P results. The forums also feature hospital CEOs sharing lessons learned from top performers.

P4P Web Seminars – Targeted online seminars given by expert speakers on P4P study results and lessons learned from top performers. Register at www.premierinc.com/p4p

Pay-for-Performance (P�P) ConsultingPremier offers the P4P consulting service solution to help organizations reach top performance in the CMS Hospital Quality Incentive Demonstration (HQID) Project clinical conditions. For organizations not involved in the HQID, this service is directly applicable to many JCAHO core measure set conditions. The hands-on consultative program focuses on

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clinical consulting and facilitation support to clinical teams executing best practices. In addition to the consultative services, clinical condition-specific toolkits include sample standard orders, protocols, clinical evidence, rapid cycle improvement team training modules, and top performer case studies.

Performance Improvement System Assessment Consulting Premier’s Performance Improvement (PI) System Assessment is a Baldridge-based review of the organization’s approach to performance improvement, with an emphasis on clinical improvement activities. The review encompasses the following major areas: leadership and collaboration (between the hospital and medical staff, between departments/services); measurement, analysis and knowledge management; process design and improvement; and organizational results.

Clinical AdvisorClinical Advisor is the leading clinical efficiency and quality Performance measurement and benchmarking application in the healthcare industry. Clinical Advisor allows hospitals to measure an organization’s performance against benchmarks and normative data calculated from top performing hospitals in PerspectiveTM, the industry’s largest clinical comparative database in the industry. Subscribers to Clinical Advisor automatically receive the P4P calculator, plus the details showing how improvements in clinical care could change reimbursement and their resource utilization by clinical area.

Operations AdvisorOperations Advisor is the healthcare industry’s leading labor and supply performance measurement and benchmarking application. Accessing the PerspectiveTM database, hospitals can measure performance against top performers and peer facilities at the corporate, facility, and department levels. The application includes a fully integrated productivity measurement system which allows hospitals to measure performance against peers on a quarterly basis, while also allowing optimal department performance targets to be set and measured on a bi-weekly basis.

Safety AdvisorSafety Advisor, in partnership with Quantros, is an enterprise-wide Web-based system that automates incident collection, review, follow-up, and regulatory reporting for healthcare organizations. It provides a complete work flow system simplifying the entire process of managing adverse events and near-misses.

Premier’s variety of programs, services and tools assist hospitals in identifying opportunities for improvement in quality of care delivered and resources utilized.

Learn more about Premier and the P4P Readiness Program at: www.premierinc.com/P4P

P�P Opportunities from Premier

About Premier Inc. Premier Inc. helps hospitals accelerate performance on both clinical outcomes and supply chain costs. Premier is a healthcare alliance entirely owned by more than 200 of the nation’s leading not-for-profit hospitals and healthcare systems. These organizations operate or are affiliated with more than 1,500 hospitals and more than 42,000 other healthcare sites. Premier Purchasing Partners provides an array of services supporting health services delivery including group purchasing totaling more than $27.4 billion annually in supplies and equipment purchasing, as well as supply chain and clinical performance improvement services. Premier Healthcare Informatics offers performance measurement, benchmarking, and reporting products and advisory services supporting quality improvement. Premier Insurance Management Services helps hospitals manage insurance costs and improve risk management and claims capabilities. Headquartered in San Diego, CA, Premier has offices in Charlotte, NC and Washington, DC.

For more information, visit www.premierinc.com.

Notes on the study’s Research Implications:The Research Implications section in this study was created based on data from the Agency for Healthcare Research and Quality (AHRQ) Healthcare Cost and Utilization Project (HCUP) FY-2003 inpatient discharge volumes (pneumonia discharges = 1,153,378, heart bypass surgery discharges = 291,095, knee surgery discharges = 380,636, hip surgery discharges = 306,828, AMI medical discharges = 471,653, AMI surgical discharges = 234,237) Premier used the study’s findings to determine the potential improvements (“Magnitude of the Improvement Opportunity”) that could be gained if all patients had received the same reliability of care as those in the High Reliability PPM class.

For a complete listing of the measures studied in the project, download the whitepaper, “Exploring the Nexus of Quality and Cost” at www.premierinc.com/p4p.