Efficiency and Quality in Health Care

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Efficiency and Quality in Health Care

• Harvey V. Fineberg, M.D., Ph.D.
• University of Wisconsin
• 20 November 2006

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Efficiency and Quality

• Meaning and measurement of efficiency
• Relationship between efficiency and quality
• Examples and reasons for inefficiency in health
  care
• Strategies and examples to improve efficiency and
  quality

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Meanings of Efficiency

• Technical
• Production
• Allocative
• Market
• Health

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Technical Efficiency

• When no greater output can be achieved for a
  given level of resource input. Production occurs
  on the technical production possibility
  frontier.

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Technical Efficiency

• When no greater output can be achieved for a
  given level of resource input. Production occurs
  on the technical production possibility
  frontier.

Input A
Input B
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Technical Efficiency

• When no greater output can be achieved for a
  given level of resource input. Production occurs
  on the technical production possibility
  frontier.

Input A
Input B
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Technical Efficiency

• When no greater output can be achieved for a
  given level of resource input. Production occurs
  on the technical production possibility
  frontier.

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Production Efficiency

• Optimal combination of resource inputs (labor,
  equipment, supplies, etc.) to achieve a given
  output. Production is efficient if a given level
  of output is achieved at the lowest resource
  cost.

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Production Efficiency

• Optimal combination of resource inputs (labor,
  equipment, supplies, etc.) to achieve a given
  output. Production is efficient if a given level
  of output is achieved at the lowest resource
  cost.

Input A
Input B
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Production Efficiency

• Optimal combination of resource inputs (labor,
  equipment, supplies, etc.) to achieve a given
  output. Production is efficient if a given level
  of output is achieved at the lowest resource
  cost.

Ratio of Input Costs
Input A
Input B
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Allocative Efficiency

• Resources are allocated so as to optimize
  benefit to a population
• Market Efficiency
• Distribution of goods according to individual
  preferences
• Competitive market marginal cost marginal
  price
• Health Efficiency
• Distribution of health resources to maximize the
  level of health in the population

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Allocative Efficiency

• When would market efficiency equal health
  efficiency? Among the assumptions
• Complete and accurate information
• No barriers to market access and exchange
• Personal preferences (utilities) for health
  expenditures coincide with health improvements
• Equivalent purchasing power across purchasers

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Measuring Efficiency

• Identifying all inputs
• Pricing (resource cost) of each input
• Identifying relevant outputs
• Valuing the outputs (outcomes)

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Outputs of Interest in Health

• Element of service
• Episode of illness or health condition
• Overall health of an individual
• Health of a community or society

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Efficiency is not about

• Just cutting costs
• Enhancing revenues
• Making the doctors life easier (rather than the
  patients life better)
• Achieving justice

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Quality and Efficiency

• Efficiency, in terms of eliminating waste, is one
  dimension of quality in health care.
• Quality, in terms of net benefits to health, is
  half of the equation for health efficiency.

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Efficiency in Health

• Efficiency is a relationship of value how much
  output of value (health benefit) per input of
  value (resource cost)
• Focus on efficiency forces consideration of both
  sides of the value proposition benefits and
  costs
• EFFICIENCY

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An estimated thirty to forty cents of every
dollar spent on health care a half trillion
dollars a year is spent on costs associated
with overuse, underuse, misuse, duplication,
system failures and inefficiency.
2005
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Expected Quality and Costs
Quality
Cost
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Expected Quality and Costs
Quality
Cost
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Why is Health Care Inefficient?

• Payment for wrong outputs (units of service
  rather than care of illness or health outcome)
• Financial incentives reward inefficiency
  (complications or re-admission)
• Lack of price incentives to patients
• Providers indifferent to induced costs

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Why is Health Care Inefficient?

• Insufficient attention to prevention and
  long-term results
• Fragmented and uncoordinated delivery system
• Lack of information on performance and quality
• Dysfunctional competition rather than value-based
  competition

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Making Anesthesia Better

• Deaths from anesthesia decline
• Early 1980s 1 per 10,000
• Today 1 per 200,000
• Malpractice claims, judgments, and fees decline
• Proportion of malpractice claims targeting
  anesthesiologists 19727.9 20013.8
• Proportion of malpractice claims closed with
  payment 1970s64 1990s45

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Making Anesthesia Better

• 1985 Anesthesia Patient Safety Foundation
• Forum for health professionals, device
  manufacturers, regulatory bodies, and others
• Patient safety newsletter
• Seed grants in safety research
• New technology
• Pulse oximeter and capnometer
• Redesigned machines, standardized practice
  guidelines, improved training programs, hospital
  safety committees

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St. Johns Hospital

• 866-bed, not-for-profit hospital and trauma
  center in Springfield, Missouri
• 32 operating rooms and 45-room trauma center
• 29,000 surgical procedures in 2005
• 74,000 emergency department visits in 2005, 22
  of whom are admitted and comprise 20 of the
  surgical load

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St. Johns Hospital

• Problems (2002 analysis by E. Litvak)
• Lack of flexibility in scheduling elective
  surgeries that produced unpredictable and
  excessive use of overtime
• Mid-week peaks in surgery and resulting backup in
  admissions that often made it impossible for
  patients to have a bed on the appropriate floor
  and receive optimal post-surgical care

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St. Johns Hospital

• Solution (peak-flow management techniques
  operations research)
• Set aside a single OR for overflowboth elective
  and unplannedsurgeries
• Smooth the scheduling of elective surgeries
  across the five weekdays

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St. Johns Hospital

• Results
• After smoothing elective surgery, the capacity
  for ED admissions rose from 647 (October 2004) to
  1100 (October 2005)
• Excluding ICU, a 59 increase in inpatient
  capacity was realized without adding additional
  inpatient nursing beds
• The number of OR rooms needed after 3 p.m.
  dropped by 45, and OR overtime declined to a
  record low level of 2.9

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St. Johns Hospital

• Results (continued)
• Since 2003, surgical volume has increased by 33,
  and trauma surgeons experienced a 4.6 increase
  in revenue
• Waiting time for emergent and urgent surgical
  cases after 3 p.m. was reduced by 45
• Prior to smoothing, the rate of patient placement
  into the appropriate bed for orthopedic patients
  was 83 after smoothing, the rate of appropriate
  placement rose to 96

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Strategies to Increase Efficiency

• Improve outcomes (health benefits) without
  raising costs (i.e., without consuming more
  resources) or while saving resources

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Strategies to Increase Efficiency

• Improve outcomes (health benefits) without
  raising costs (i.e., without consuming more
  resources) or while saving resources
• OR
• Reduce costs without reducing benefits (health
  outcomes) or while improving health outcomes

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Strategies to Increase Efficiency

• Improve outcomes (health benefits) without
  raising costs (i.e., without consuming more
  resources) or while saving resources
• OR
• Reduce costs without reducing benefits (health
  outcomes) or while improving health outcomes
• Get more value from every health care dollar

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Strategies to Increase Efficiency
InnovationEvaluationDiffusionPerformance
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Strategies to Increase Efficiency

• Discover, design and invent technologies that
  provide more efficient solutions (direct savings
  and induced savings improved results)
• Incentives for research and development of
  efficient technology and program design
• Institutional innovation to bridge academic
  centers and technology creators and speed
  transition from research through prototype
  development and product availability
• Payment for efficient solutions

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Strategies to Increase Efficiency

• Evaluate health outcomes and costs of
  technologies, care strategies, and providers
• Assess resource costs and health outcomes as a
  routine part of care
• Design information systems that serve patient
  records and can be used to evaluate patient
  outcomes and performance
• Devise, test, and deploy evaluation alternatives
  to RCTs that are cheaper, faster and more
  directly relevant to different patient
  populations

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Strategies to Increase Efficiency

• Use evidence more effectively in decisions by
  care givers and patients (increase appropriate
  use decrease misuse and overuse)
• Make information technology and decision-support
  systems more widely available
• Develop uniform standards for health IT, provide
  financial resources to introduce and support IT
  systems, and mandate their use
• Measure and make available to the public
  information on results and cost by physicians,
  hospitals, nursing homes, and health plans

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Strategies to Increase Efficiency

• Redesign care processes to reduce avoidable
  errors in care
• Follow recommendations in series of IOM reports,
  from To Err is Human (1999) and Crossing the
  Quality Chasm (2001) to Preventing Medication
  Errors (2006)
• Systems approach, with many interacting parts
• Safer design, bar coding and labeling

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Strategies to Increase Efficiency

• Train health professionals to improve quality and
  practice efficiently
• Educate jointly across the several health
  professions to provide comprehensive care to
  patients
• Regard as core professional competencies the
  ability to evaluate evidence and develop and use
  practice guidelines
• Increase use of simulation training

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Strategies to Increase Efficiency

• Enhance value-based competition for health care
  dollars
• Reduce barriers to inter-state health insurance
  competition among health insurers
• Pay for episodes of illness or periods of
  managing patients rather than for procedures
• Provide feedback on performance to providers and
  to patients

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Strategies to Increase Efficiency

• Give providers financial incentives to increase
  value
• Pay for performance and reward high-value
  providers
• Pay for prevention
• Pay for management of chronic conditions and
  coordination across hospital, nursing home, and
  community-based care
• Couple payment to evaluation
• Stop paying for hospital-acquired infection

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Strategies to Increase Efficiency

• Give patients financial incentives to increase
  value
• Income-related co-payment and deductible
• Reduce insurance premiums for healthy lifestyle
  choices
• No deductible for preventive services
• Lower co-payment and deductible for use of
  high-value providers

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Strategies to Increase Efficiency

• Use systems engineering methods to improve
  performance
• Reduce variability
• Optimize workflow
• Enhance use of resources

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Strategies to Increase Efficiency

• Streamline administrative systems
• Uniform insurance forms and procedures
• Bulk purchasing cooperatives and competitive
  bidding
• Reliance on information technology

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The Culture of Medicine

• Professionalism Quality and Efficiency
• From Autonomy to Responsibility
• From Institution-centered to Patient-centered
  care
• From My patients to All patients

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Toward Improved Health Care
Efficiency Outcome per Cost Value
Quality and Safety Performance
Use and Non-Use Practice
Standards Guidelines
Evidence Clinical Research
Opinion Personal experience