Yes.
Can you make money from Medicare?
Yes.
Can you get doctors to change their expensive habits?
Yes.
Can a high-quality institution, even a major teaching hospital, compete on price?
Yes.
How? There is no cookbook answer, but we can tell you how hospitals in central Florida have accomplished these feats of seeming magic - and get into the details with two outstanding examples, the Orlando Regional Medical Center (ORMC) and Florida Hospital.
Since the early '80s, employers across the country have banded together in local groups to try to force hospitals to charge less. The results have been mixed. In some cases, the results have been disastrous for all concerned. More recently, employers have banded together in buying cooperatives with the same goal. The results have been more positive, but still mixed. Yet the root of the idea seems sound: employers should be involved in price feedback for healthcare, since in our society, directly or indirectly, it is employers who dig into their pockets to pay for it.
Yet these two elements - large buying groups dickering with healthcare providers, and the control of cost and quality through the close analysis of outcomes - are likely to be central to the future of healthcare in America, no matter what bills make their ways through Congress, or through state legislatures.
But things look different in Central Florida. In the home of space flight, monorails, and King Kong, a combination of employer alliances and hospitals has made some dreams come true.
Members of the Employers Purchasing Alliance (EPA), an umbrella group representing 355 employers with some 850,000 employees in 32 Florida counties, enjoy premiums 15 to 40 percent lower than the plans they had used before - and have not had higher premiums for three years now. The Orange County School System has been able to save 20 teachers' jobs due to a 26 percent drop in health premiums. General Mills Restaurants counts its savings throughout its chain at $1 million per month. Due to this and other efforts, health care inflation in Florida as a whole has slowed considerably in the past five years.
The lowered hospital charges that have made this possible do not come at the expense of profitability or quality, nor are they simple cost shifts. Florida Hospital eliminated its $1100-$1500 loss per Medicare patient in 18 months. At Orlando Regional Medical Center, "We were losing $12 million per year on Medicare cases only three years ago," says C. Gordon Wolfram, MD, a former chief of staff. "During those three years our volume has stayed the same, and the severity of cases has risen - we are getting only the sickest patients. Yet today we are making $3 million per year." In fact, most of this improvement, from cash drain to breaking even, came in the first year. At the same time, ORMC knocked the average pre-procedure length of stay from a day and a half to below one day - at a savings of $400 per admission. According to Tom Wallace, assistant director of Florida's Agency for Health Care Administration, "Our interest in [Orlando Regional's] program is: How do we get this done throughout the whole state?"
The differences that made a difference in the Florida story came from all sides: from the state, from the employers alliances, and from the hospitals.
The state has also debated who should write and enforce practice parameters describing what is acceptable medicine for all the state's doctors.
But what may have made the greatest difference was a tiny bureaucratic detail. For years the state had collected gross data on the hospitals: admissions, morbidity, mortality, cost, and so forth. In 1990 the state announced it would begin gathering the identities of the attending physician for each case.
The state does not itself publish this data. It sells it, each quarter, raw, on a floppy disk, to anyone who wants to pay $75. Suddenly companies began springing up to offer, for instance, a guide to the state's obstetricians, complete with cost index and C-section rate.
This caught the doctors' attention in a big way. They could always defend the way they practiced medicine. But no one wanted to be known as that dreaded pariah of modern healthcare, an "outlier." No one wanted to be the most expensive gastroenterologist in the area, or the thoracic surgeon with the worst outcomes.
The second big player was the Employers Purchasing Alliance. One of the founding constituents of EPA, the Central Florida Health Care Coalition, represents some 250,000 covered employees. An alliance of major purchasers such as Disney, General Mills Restaurants, Martin Marrietta, and the Orange County Public School System, it began with an attitude at once cooperative and demanding. The coalition told the hospitals that it wanted to work with them to improve both their quality and their cost. It looked on its work with the hospitals not as a one-shot thrash at costs, but as a long-term, continuing relationship.
From 1985 to 1989, together with the Florida Gulf Coast Health Coalition, it used the state-gathered data, as well as data from the cases of their own employees, to compare institutions by charges (adjusted by case mix) and length of stay. The hospitals were receptive to the data, and worked to improve their efficiency. But doctors were not identified in this data. And doctors who were known to be high-cost could (and usually did) claim either that their patients were sicker than most, or that their measures of quality - their outcomes - were better.
So in 1990 the two coalitions formed EPA to begin group purchasing efforts. They told the hospitals that they could not award contracts without data that was valid, reliable, adjusted for severity in a detailed and meaningful way, and comparable from one institution to another. The coalition would not attempt to tell the hospitals how to use this information, nor would it "punish" a hospital for having high costs. Instead, the coalition was looking for improvements. So the coalition agreed not to publicize the results of the any studies at first, and to screen the identities of the hospitals through the use of codes.
First, the coalition contracted with MediQual Systems of Westborough, Massachusetts, to conduct an "MQ Pinpoint" study of all 12 hospitals in the area, using the state data. The coalition shared the general data with the hospitals as a group, then showed each institution how it stacked up to other institutions. The data showed who was more expensive, and it also documented price shifting from Medicare cases to other cases, and from the more serious ones to the less serious.
The study made it obvious both to the coalition and the hospitals that they needed more detailed data - and this turned out to be one of its most powerful results. The coalition strongly suggested that all the hospitals buy one software system: MediQual's MedisGroups II. By tracking such statisitics as mortality, morbidity, severity, number and type of invasive procedures case-by-case, MedisGroups attempts to measure healthcare organizations on three dimensions: appropriateness of admission and invasive procedures, effectiveness, and efficiency.
Although MedisGroups is pricey - up to $400,000 in the first year - 10 of the healthcare organizations, controlling 85 percent of the beds in the area, accepted the challenge.
Both institutions took their data-gathering seriously. Many institutions around the country have signed up for database programs, or have organized teams to look at best practices. But the efforts can be half-hearted and confused, lack support by management, and fail to change the behavior of the people who can truly make a difference. In contrast, both Florida Hospital and Orlando Regional committed themselves fully to the task.
Both systems began a long-term education of their staffs, both the operational and administrative people and the clinical professionals, about the changing nature of the industry, the need to cut costs, and the possibility that you can maintain high quality at lower cost. According to ORMC's Beth Rudloff, "A lot of people really didn't know about the trends in the industry, about managed care, about why it is important to look good on comparative data bases, why it is important to lower our charges."
Finally, both systems saw the need to directly and intimately involve the people whose decisions form the largest single vector for costs: the doctors. But they went about it in two rather different ways. Both sought large amounts of credible data with which they could parse out just what costs how much, who orders what, how much is necessary and how much is just old habit. The difference lay both in how they arrived at conclusions and in how they delivered those conclusions to their medical staffs.
For each specific area of practice (such as
respiratory diseases) or specific area of the hospital (such as the ER or the
Family Health Center), the hospital forms a task force of 10 to 15 physicians
to lead the study, plus other hospital personnel, co-chaired by a physician and
a hospital vice president. They divide the work among specific focus groups,
each chaired by a physician, and pull into each focus group anyone whose
consensus is necessary to cause change in that area. They gather data
internally. As the effort has matured, they have added two databases for
comparisons: first SunHealth, which amalgamates information from some 250
hospitals in the Southeast and, in 1990, MedisGroups II.
Together, the focus groups and the task force running them come up with recommendations for change. The task forces disseminate their papers within the hospital and give presentations at department meetings.
In clinical matters, the result of this detailed analysis can be protocols
running to three dozen steps or more. The changes can be seemingly minute. For
instance, according to standing orders, new mothers would be given a chemical
cold pack that cost $5.50 to ease perineal pain just after giving birth. It
turned out a surgical glove filled with ice chips and wrapped in a towel woud
do just as well. Other savings are more substantial: $386,000 per year from
substituting a metered dose inhaler for an aerosol in certain respiratory
cases, $100,000 per year by re-designing the standard pack (sponges and drapes
and such) used in the cardiac cath lab, $97,000 per year from using saline
solution instead of blood-thinning heparin to flush intravenous lines, $993,000
per year by standardizing the formulary to encourage use of generic and less
expensive drugs. A little bit of reprogramming blocked a computer from allowing
physicians to run both a "Chem 7" and a "Chem 20" blood screen (since the seven
are included in the 20) - as some physicians habitually did. Minute or
substantial, the hospital claims that audited savings of over $8 million per
year can be credited to the accumulation of such changes.
These efforts rapidly spread beyond the purely clinical. From 1989 to 1991,
Florida Hospital took part in a series of operational benchmarking efforts with
four other institutions in the southeast and midwest. In 1990, Florida Hospital
expanded the CCM process into a hospital-wide Total Quality Management program.
The more than 300 Quality Improvement Teams have produced savings worth over $3
million per year so far. And every year since 1991 the hospital administration
has produced an annual Process Improvement/Resource Management Plan, setting
out goals and areas for improvement across the system's operations. In one
12-month effort, a careful evaluation of hospital departments allowed a drop in
FTEs from 7500 to 7200, mostly through attrition, in a single year and the
number of hours worked per patient continues to decline.
But the executives running Florida Hospital knew that producing voluminous
studies and detailed protocols would not be a sufficient "lever and a place to
stand" to change individual doctor's behavior. Starting in 1990, they began to
put serious energy into crunching the numbers from SunHealth and MedisGroups
into 30-page packets of information, every six months, for each of the 250 top
admitters in the Florida Hospital Health System. 
Every six months, a system
vice president sits down with each of these high-volume physicians and spends
an hour going over this massive collection of charts, graphs, and statistics.
The packet places the particular doctor's costs and outcomes in the context of
his peers locally, in the state and in the nation. It gets into such details as
how the physician uses ancillary services and particular nursing units,
compared to other top admitters in that DRG.
Many physicians change their practice patterns in response to the data. Caeserean sections, for instance, dropped from 24.6 percent to under 20.6 percent between 1989 and 1993. At the same time, quality measures have done well: severity-adjusted morbidity and mortality have consistently been better than the expected norm, and in almost all categories have shown year-to-year improvement.
"If we are going to effect change," says Florida Hospital VP Terry Shaw, "we
have to involve as many practicioners in that change as possible. We have to
spend enough time with them to build relationships of trust. They are an
integral part of breaking the system down and putting it back together. When
you spend significant time with physicians on an issue, it allows you to get
down below the surface to get to some isues that you otherwise wouldn't get.
For instance, when we took a look at surgery, we spent a month watching the
surgeons - what equipment they used, what type of sutures, how they worked.
It's very individual with each surgeon. If we hadn't done that, we might have
been able to talk about some superficial issues, such as getting the patient
down earlier to get them properly prepped so the surgery can start on time, or
which antibiotic to use, but we wouldn't be on firm ground to talk about the
details of the physicians' behavior that might be making a difference in
quality or cost."
Florida Hospital officials feel that this massive infusion of data is both
necessary and effective, but they are now trying to streamline the effort so
that they can produce the reports faster. Now it takes three to four months to
produce the reports for each six-month period. If that time could be shortened
to a few weeks, it would shorten the feedback loop considerably.
Overall, Florida Hospital has achieved remarkably good results in a remarkably short time, with large and rapid drops in length of stay, in ancillary utilization, in the use of supplies, and in overall cost per admission.
Each has its advantages. CFIS looks at costs, the other two focus on charges. Iameter is relatively inexpensive and, says Wolfram, "is quick and easy - it comes off the front sheet of the chart, the diagnosis and the complications." MedisGroups goes into much greater depth, but it calls for a lot more work. It requires that someone sit down with the charts and key in special categories of information.
The three systems are not interfaced in any way. They live on separate workstations, make some different assumptions, and look at somewhat different universes of data. Beth Rudloff, of ORHS' Department of Strategic Value, which manages the systems, says, "When they conflict, we cut the data further, we take a look at the medical charts, and talk to the physicians involved with that DRG to decide which to accept. We switch back and forth a lot, depending on the strengths and weaknesses of the various systems. Severity adjustments, for instance, are really still crude. Sometimes the resolution of the system is just not good enough. For instance, we do a lot of neonatal intensive care with babies of less than 500 grams. The MediQual system, which just goes from zero to four, just didn't have enough levels to adequately express the different levels of severity for such babies."
The system uses these education physicians in a two-pronged effort. One prong is the equivalent of Florida Hospital's CCM: group efforts focused on particular segments of the hospital's practice. But at Orlando, the groups are smaller and quicker, and have less extensive goals. The top one or two admitting physicians for that particular area meet over a period of time with one or two of the education physicians, plus a staff person to help with the data. "We started off by getting 20 docs in the room," says Wolfram. "We couldn't get anything done. We can get a lot more done with just a couple." Rudloff adds, "The time we spend with them is used very well. They're not just sitting in a bunch of meetings."
Wolfram comments, "A lot of people are spinning their wheels making up very complex practice parameters, with lines going everywhere, and a hundred steps. It's very time consuming. The doctors don't like to look at them, and they are so complex they are almost unusable. Here we've got our own docs doing it, and it's so simple it can be looked at in just a few minutes."
These small task forces report their recommendations at departmental meetings once each quarter, and hand out summaries, which are usually small enough to fit on one page. As one result, Caesarean-section rates dropped from 32 percent to 22.9 percent at ORHS' Arnold Palmer Hospital (which specializes in high-risk pregnancies). Every focused DRG has seen reduced costs (from one percent to 20 percent), charges (from four percent to 25 percent), and length of stay (from four percent to 36 percent), along with an improvement in morbidity, mortality, and appropriateness.
The other prong of Orlando's physician education is similar to the Florida Hospital's one-on-one discussions. But here the discussions happen not between a vice president and a doctor, but between two doctors: one of the three education physicians, and one of the hospital's top admitters. Rather than thirty pages of charts and graphs, the education physician focuses on one or two ways in which the data show that there is room for improvement in the quality or the cost of the doctor's practice.
One cardiac surgeon, for instance, cost his patients hundreds of dollars per case simply by routinely putting them in intensive care for several hours after surgery, rather than moving them to a step-down room as soon as possible.
Another cardiologist always prescribed "clot-buster" TPA for every patient with chest pain. It's a good drug, but it costs $2000 per regimen. Wolfram showed him data that other cardiologists, with outcomes numbers just as high, habitually use streptokinase, which costs $200 per regimen.
A third always ordered a chest X-ray every day for five days after bypass surgery. Others with equal outcomes would only order them when they seemed necessary.
Another doctor always prescribed the highest-cost antibiotic for his pneumonia patients, no matter how serious or mild their case. "My patients are worth it," he argued. Yet outcomes data showed that the doctors in the area that had the best medical outcomes usually used an antibiotic that cost $200 less per day.
Each of these doctors, when shown credible, severity-adjusted, comparable data, voluntarily changed the way they practiced medicine.
As at Florida Hospital, all recommendations are non-binding. The doctors may practice medicine as they see fit, and ORHS refuses to consider economic factors in credentialing doctors. But through constant feedback and education, ORHS doctors are becoming far more aware of the need for the system to compete on price as well as quality -- and more aware of their part on contributing to that price.
| FY 1988-1990 | FY 1990-6/93
| |
|---|---|---|
| Laboratory | +20.4 | -19
|
| Electrocardiograms | +9.3 | -7
|
| Radiology | +26 | -21
|
| Respiratory Therapy | +41.3 | -32
|
| Physical Therapy | +5.2 | -39
|
| Occupational Therapy | +25.3 | -41
|
| Average Length of Stay | +4.9 | -19 |
"As our costs have gone down," says Wolfram, "our quality has actually increased" as measured by the outcomes reports. "I'm amazed. I thought it would stay the same. I'm not sure why that's happening, except maybe that we are decreasing the diversity of patterns, and the patterns the doctors are now following are the best ones."
He describes some physicians, at least at first, as saying, "'This is none of your business.' But most of them are now coming to us, asking about their six-month analysis. It's like a report card - they like to see how they're doing."
Do the statistics declare a winner? Is one way better than another? Not necessarily. Over the past few years, both hospitals have dramatically lowered their inflation rate.
Each chose a technique that better reflected their particular corporate culture, and so far it seems to be working for each of them.
Orlando Regional Medical Center is the flagship of the Orlando Regional Health System. It is a not-for-profit, one of Florida's half-dozen legally-defined major teaching hospitals. Some 1100 physicians have admitting priviliges.