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PART II Value Added Care: Costs and Charges – Where to Begin? Dmitry Dukhovny, PART II Value Added Care: Costs and Charges – Where to Begin? Dmitry Dukhovny, MD MPH Instructor in Pediatrics, Harvard Medical School Neonatologist, Beth Israel Deaconess Medical Center QI/Teaching Value Curriculum February 12, 2013

Acknowledgment n Carl J. Shapiro Institute for Education and Research at BIDMC n John Acknowledgment n Carl J. Shapiro Institute for Education and Research at BIDMC n John Zupancic n De. Wayne Purlsey n Jane Smallcomb n EPIC – Economics in Perinatalogy Investigators’ Collaborative

Conflicts of Interest n. I have no conflicts of interest Conflicts of Interest n. I have no conflicts of interest

Agenda n PART I November 27 th, 2012 – Basics and Definitions of Cost-Effectiveness Agenda n PART I November 27 th, 2012 – Basics and Definitions of Cost-Effectiveness Analysis – Choosing Wisely Approach n PART II February 12 th, 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. 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 n $2. 8 trillion n Annual US Health Expenditure n 20% Game of Numbers n $2. 8 trillion n Annual US Health Expenditure n 20% n % of GDP by 2021 n $360 billion n Annual administrative costs n $800 billion n Annual waste/inefficient care n $24. 3 billion n Cost of the Big Dig

http: //www. wbur. org/2012/07/12/7 -things-that-cost-less-than-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 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 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: 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 on the Wall” June 2010 Report).

Commonwealth Fund 2010 Report Commonwealth Fund 2010 Report

Ideas from Choosing Wisely Discussion n Cardiac n 24 Evaluations hour electrolytes n Hypoglycemia Ideas from Choosing Wisely Discussion n Cardiac n 24 Evaluations hour electrolytes n Hypoglycemia Management

COST CONSEQUENCE SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic COST CONSEQUENCE SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Cost-Effectiveness Study Costs of Treatment A – Costs of Treatment B Cost-Effectiveness = SPR Cost-Effectiveness Study Costs of Treatment A – Costs of Treatment B Cost-Effectiveness = SPR Workshop: Dollars and Sense Effects of Treatment A – Effects of Treatment B © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Framing: Perspective n Whom do the decision makers care about? – Society – Government Framing: Perspective n Whom do the decision makers care about? – Society – Government – Third party payer – Hospital/Accountable Care Organization – Patient/Parent SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Framing: Time Horizon n Over what period are costs and effects measured? SPR Workshop: Framing: Time Horizon n Over what period are costs and effects measured? SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Time Sequence Initial Intervention Costs Future Costs Include intervention related costs, induced costs, averted Time Sequence Initial Intervention Costs Future Costs Include intervention related costs, induced costs, averted costs Start-up costs Include if investment required 0 SPR Workshop: Dollars and Sense Time © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Types of Resource Costs Health Care Related Costs – Direct Medical Costs § § Types of Resource Costs Health Care Related Costs – Direct Medical Costs § § Variable: Fixed: Drugs, personnel, tests 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) SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Behavior of the Various Cost Layers in the Health Care System. Rauh SS et Behavior of the Various Cost Layers in the Health Care System. Rauh SS et al. N Engl J Med 2011. DOI: 10. 1056/NEJMp 1111662

Which Costs Should Be Included? Framing Perspective Time Horizon Include all goods and services Which Costs Should Be Included? Framing Perspective Time Horizon Include all goods and services that may change because of the intervention SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Perspective Health Care Non-Health Productivity Related Care Related Society + + + Government + Perspective Health Care Non-Health Productivity Related Care Related Society + + + Government + - +/- Third party payer + - - Hospital + - - Patient - + + SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Valuing Resources n Opportunity Cost n Functioning Market – Simple: the cost is whatever Valuing Resources n Opportunity Cost n Functioning Market – Simple: the cost is whatever is paid n BUT, market assumptions often violated § Pricing of drugs while under patent § Prices set administratively § Charges ≠ costs SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Measuring Costs Bottom Up n Micro-Costing – Sum of labor and nonlabor inputs – Measuring Costs Bottom Up n Micro-Costing – Sum of labor and nonlabor inputs – Potentially more precise – Burdensome – Sensitive to site specific details SPR Workshop: Dollars and Sense Top Down n Gross-Costing – – – Diagnosis Group Per diem Less accurate Simple More generalizable © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Perspective n Whom do the decision makers care about? – Society – Government – Perspective n Whom do the decision makers care about? – Society – Government – Third party payer – Hospital/Accountable Care Organization – Patient/Parent SPR Workshop: Dollars and Sense © 2012 Dukhovny, Lorch, Profit, Kamholz, Zupancic

Costing Pitfalls n Costs ≠ Charges – Charges are inflated 50 -300+ % of Costing Pitfalls n Costs ≠ Charges – Charges are inflated 50 -300+ % of true costs – Costs ≠ Payment (perspective) n Validity of Sources n Numbers from different years – Convert costs to 1 yr/1 currency

Sources for Costs n Local Administrative Data – Patient Billing Forms (UBO 4) n Sources for Costs n Local Administrative Data – Patient Billing Forms (UBO 4) n 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 PHIS EXAMPLE Berry et al, JAMA 305 (7), 2011

Readmissions within 365 days 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 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

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 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 NAS Payers: 2000 to 2009 Patrick et al, JAMA 307 (18), 2012

Task for the Day n 10 -15 minutes in small groups n Share with Task for the Day n 10 -15 minutes in small groups n Share with the group (5 minutes each)