How to Renovate Your Decision Support System for the ... - Oracle

HOW TO RENOVATE YOUR DECISION SUPPORT SYSTEM This ar ticle examines s ome key elements to cons ider when renovating your decis ion s uppor t s ys tem to facilitate health-care refor m and pres ents a method for crafting an ef fective action plan.

FOR THE HEALTH CARE REFORM ERA PRASHANTH KINI AND WILLIAM BERCIK

nolog y-enabled deliver y model across the cont inuum of care, including preoperative, intra-operative, and post-operative services, to manage cost and achieve the best financial and clinical outcomes across cases and episodes of care and attributed populations. Follow ing are seven key elements to consider when renovating your decision suppor t system to suppor t health-care reform and our method for an effective action plan.

Seven key elements Today’s health-care CFO is focused on de velopi ng a nd m a na g i ng i n nov at ive reimbursement models and identif y ing new business mo dels to generate new revenue grow th amidst shrinking revenues from traditional revenue and reimbursement models. Today’s CFO needs a new generat ion of decision suppor t

P R A S H A N T H K I N I is senior director of health-care product strateg y at Oracle w ith over 20 years of strateg ic technolog y and business leadership experience across multiple verticals. He was previously senior scientist at Procter & Gamble. Prashanth earned a Ph.D. in electrical and computer eng ineering from the University of Cincinnati w ith a focus in medical imag ing. W I L L I A M B E RC I K is director of health care at Oracle. With over 25 years of experience in the health-care industr y, he has specialized in enter prise applications and technolog y solutions since 1992. He prov ides specialist product expertise and develops and executes solutions for the health-care market. Formerly, William was the CFO of a 350-bed acute care hospital.

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his is proving to be a watershed year in the transformat ion of the U.S. health-care s y s te m f rom volu me - to v a lue - b a s e d c a re . T he U. S . Department of Health and Human Services (HHS) has firmly planted a stake in the ground by pledging that 50 percent of Medicare payments must move to a lte r n at ive p ay me nt a g re e me nt s by 2018. 1 Accept ing the throw n gauntlet, le ad i ng he a lt h s y s te ms a nd p aye rs formed the Health Care Transformation Task Force (HCTTF) and pledged that 75 percent of their businesses will move to value-based payments by 2020. 2 With payment reform comes an increasing shift of care deliver y from higher revenue and higher margin acute ser vices to lower revenue and lower margin outpatient care, with a focus on a good patient experience tied to good clinical outcomes. Health systems will need to adopt a tech-

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Cost Management, Volume 29, Number 5. Copyright 2015. Thomson Reuters/Tax & Accounting. Reprinted with permission.

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EXHIBIT 1 Stakeholder Value and Shared Accountability

tools, working in concer t w ith the clinical and operational systems, to prov ide point-of-decision insights to deliver the most clinically cost-effective care paths. T he h a rd que s t ions t he C F O mu s t answer require insights across the continuum of care, bringing together clinical, operational, and financial perspectives to drive care-deliver y decisions. The CFO, thinking also as the CMO, COO, and CEO, must answer “hard” questions such as: • What are your biggest cost management strategies? • What data insights and analy tics are you using to drive dow n cost of care across your system? • How are you using cost-of-care insights in your population health strategies? • What cost and revenue management capabilities do you need for sharedrisk contract negotiations? • What methods are you employ ing to influence cost management beyond inpatient/acute care ser v ices (i.e., linking costs across episode of care, ambulator y care sites, and continuum of care)? • How are you using workforce analy tics to respond to flex volume demands? O n c e t h e s e q u e s t i o n s h ave b e e n answered, seven key elements of a deci-

An effective cost management and valuebased care delivery strategy requires coordinated buy-in and engagement f rom stakeholders across the enterprise. This strategy should be driven by specific, actionable insights derived from a single source of truth: an enterprise-wide data repositor y across the various functions. Relevant performance indicators and forecasted trends must be delivered at the right time, in each manager’s specific decision-making workflow. Key performance indicators (KPIs) must be accompanied by the necessar y “drill-down” transparency and

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sion suppor t system must also be considered. These elements include: 1. shared cost and qualit y accountabilit y ; 2. closed-loop strategic decision suppor t; 3. cost accounting allocation methods; 4. value-based, labor productiv it y capabilities; 5. budgeting and flex variance analysis; 6. financial modeling and what-if analysis; and 7. cost insights in population health management. Let’s examine each of these elements in more detail.

Shared cost and quality accountability

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traceability to engender credibility and stakeholder buy-in. Exhibit 1 outlines a segmentation of key stakeholders and influencers and the relevant insights necessar y w ithin each realm of the care deliver y process.

Closed-loop strategic decision support Health systems, transforming to meet the demands of value-based accountable care reimbursement models, must employ a por tfolio of next-generat ion st rateg ic decision support tools that enable their workers to continuously, accurately, and transparently engage stakeholders in the common mission to profitably evolve care deliver y models. Next-generation tools will allow health systems to pragmatically and progressively adopt methodologies that effectively represent value-based constructs, like total cost of care across acute and ambulator y episodes of care, bundled ser vice definitions, and population health performance measures, while leveraging today’s practices. “Traditional” decision support functions of cost accounting, budgeting, planning, forecasting, and workforce analytics must now be delivered as a single, integrated suite. This is necessar y in order to harmonize data from clinical and operational systems and provide multiple, seamDECISION SUPPORT SYSTEMS

less, real-time lenses on the health system’s short- and long-term performance against t he dr iv ing p er for m ance me asures of value-based care. Stakeholders should also be equipped with short- and long-term predic t ive mo deling ins i g hts into t he impact of changing patient volume on costs and profitability. Such insights will support decisions on service-line grow th and potential financial risk of multiple, simultaneously modeled contractual agreements across various payers.

Cost accounting allocation methods Adv a nce d co s t a ccou nt i ng s olut ions , w ithout being prescr ipt ive or rest r ictive, give institutions the capabilit y to deploy and simultaneously compare a variety of costing methods ranging from fundamental methods such as ratio of cost to charge (RCC) through institution-specific or standard relative value units (RVUs) (see Exhibit 2). Inst itutions can use multiple methods to alloc at e d e p a r t m e nt a l c o s t p o o l s t o t h e charge-master items (a chargeable procedure) as an accurate proxy of activ it y and ser v ice consumption. Often, the charge master is extended to include non-chargeable activ ities to keep the integrit y of the same costing methodolog y. SEPTEMBER/OCTOBER 2015

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EXHIBIT 2 Advanced Cost Accounting Capabilities

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EXHIBIT 3 Labor Productivity Measurement Drives Staffing Optimization

Advanced decision support systems will provide a rich set of pre-built and ad hoc reporting capabilities to examine costs and revenues across clinical and operational dimensions. Stakeholders would be able to examine cost and profitability by service line, diagnosis-related group code (DRG), and costs from the physician level down to the patient level. They would also be able to quickly look at variability across each dimension. Plotting profitability on a “whale” cur ve chart quickly enables the examination of top- and bottom-tier performers in each categor y. Cost reports must provide traceability to address any skepticism about accuracy of the numbers (this is critical) and to gain stakeholder buy-in. Such traceability maps will provide drill-down visibility into the step-down allocation and cost drivers used in cost allocation at the most g r a nu lar le vel . Adv a nce d t r ace abi l it y reports will also provide automatic visibility into unallocated costs and general ledger reconciliation. Traceability maps provide transparency into revenue and cost allocations. From any point in the model you can trace backward or forward, easily visualizing the defined allocation flow for validation and knowledge transfer.

Value-based, labor productivity capabilities

tives are now focused on managing labor costs through other init iat ives. 3 These include effective application of the right acuit ybased staffing and scheduling to eliminate unnecessar y pay roll “leakage” from lost product iv it y and potent ially unnecessar y over t ime pay from subopt i m a l s h i f t t r a ns it ions a n d h a n dof f s . Such labor product iv it y diligence must be par t of an integrated decision suppor t strateg y infor med by established over r iding perfor mance targets, as well as cost and outcome r isk management insights. Nursing managers have little or no insight into timekeeping data until it appears in pay roll, and by then it is too late to affect any staff allocat ion or over t ime decisions. Kerri-Lynn Primmer Morris, executive director of finance operations and strategic projects at the Oakland-based Kaiser Pe r m a n e nt e , e mp h a s i z e s K a i s e r ’s approach to “give managers insight to make decisions in the moment by implementing a new timekeeping ecosystem that prov ides real time, actionable analy tics and aler ts w ith consumer grade experience with dashboards on mobile devices.” Value-based capabilities, such as those show n in Exhibit 3, would provide some of the much-needed support for managers to make better decisions.

Budgeting and flex variance analysis

With labor costs account ing for 60 percent or more of a hospital’s budget and with hospitals already having reduced the workforce dow n to the point of endanger ing qualit y, hospital finance execu-

For most health-care organizations, budget ing and strateg ic planning are disconnected, making it impossible to report ac t u a l resu lt s agains t t he budget a nd

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Cost Management, Volume 29, Number 5. Copyright 2015. Thomson Reuters/Tax & Accounting). Reprinted with permission.

strategic plan. Connecting disparate data in unconnected systems takes time and effort, but this alone does not provide reliable information for decision-making. Instead of isolating each functional area, it is important to connect them and levera ge t h e i n for m at i on f rom a com m on repositor y. There are three key components of an effec t ive financia l p er for mance s olution: 1. strategic planning; 2. ser v ice-line budgeting; and 3. operational/capital budgeting. The goal is to develop a long-range st rateg ic plan; to create a ser v ice-line bu d ge t t h at prov i d e s bu s i n e s s d e t a i l and depicts volumes and revenues accur ately w hi le automat ica l ly gener at ing o p e r a t i o n a l b u d g e t t a r g e t s . Ho w d o rolling forecasts fit in? It is increasingly important to align rolling forecasts w ith mult iyear plans and det ailed budgets. Af te r c re at i n g t h e op e r at i n g bu d ge t , analysis and repor ting (e.g., actual versus budget) cont inue on a go-for ward basis. The net result is a real-t ime v iew of your strategic plan, market investments, variances, and actual performance down to the ser vice-line level to promote mulDECISION SUPPORT SYSTEMS

t i d i re c t i on a l re p or t i n g a n d to re f i n e your projec t ions. Exhibit 4 lists s ome of the value-based capabilit ies that would make this long-range st rateg ic plan a realit y.

Financial modeling and what-if analysis Equipped w ith hig h-qualit y, g r anular, h i s t or i c a l d at a a c ro s s t h e e nt e r pr i s e f u n c t i on s , h e a lt h - c a re or g a n i z at i on s can progress to the most advanced level of ana ly t ics matur it y w it h predic t ive modeling. Organizations need to assess financial models that reflect the impact of value-based pay ment ar rangements, side by side w ith cur rent financial proj e c t i o n s b a s e d o n v o l u m e . Wi t h advanced planning and forecasting tools, finance depar t ments can examine multiple financial scenarios simultaneously. Parameters such as var ious reimbursement r ates by p ayer, aver age leng th of stay (ALOS), and volume of admissions can be adjusted to examine net revenue imp ac t. Adv a nce d mo del i ng to ols enable providers to organize services used across multiple patient encounters into episodes of care or bundled ser vice definitions, SEPTEMBER/OCTOBER 2015

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EXHIBIT 4 Integrated Budgeting, Planning, and Forecasting Capabilities

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EXHIBIT 5 CCHIT 2013 Framework Processes

and they also enable those providers to examine care path and corresponding cost variations. Such modeled service bundles can be informative for contract negotiations and can be exported into contract management systems as a grouping of negotiated contractual ser vice definitions.

Use cost insights in population health management

tification Commission for Health Information Technology’s (CCHIT) 2013 framework for accountable care IT (see Exhibit 5) outlines and describes the key functions an IT infrastructure must deliver to support the triple aim of accountable care: improving population health and delivering the best patient experience, all at an affordable level. 4 A review of the detailed processes outlined in the framework reveals ample and ubiquitous opportunities to propagate cost insights throughout various points of decision across the care deliver y path.

The abilities for health systems to create hierarchies of patient populations based on clinical and financial risk will be pivotal to their abilit ies to manage these pat ients under value-based pay ments. Managing them is, of course, hinging on the savings and outcomes achieved across cohort (like cases) populations. The Cer-

Health-care organizations can pursue a pragmatic and progressive approach to

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Action plan



building out their portfolios of decision suppor t solutions, but they first need to star t w ith some fundamental building blo ck s to ensu re v is ibi l it y ac ros s t he enter prise. It is impor tant to be able to embark on phased, cross-organizational initiatives w ith stakeholder engagement on each initiative, namely : 1. Establish an enter prise data warehouse (EDW) as a single source of truth across clinical, financial, and operational systems. • Adopt a unif y ing dat a mo del and dat a gover nance inf r ast r uc ture reflec t ing a health-care enter pr ise w ith inp at ient, out p at ient, physician pr ac t ice, al lied health faci lit ies, and even home-based care sites. Such a dat a mo del w i l l incorpor ate health-care–specific clinical, oper at ional, and financial subjec t areas across the care cont inuum. 2. Progressively integrate sources into the EDW in the follow ing order : • general ledger, patient accounting, and charge master : RCC- and RVUbased costing; DECISION SUPPORT SYSTEMS

• electronic medical records (EMR)/admission discharge and transfer (ADT) for encounter- and patient-level activ it y details (timebased drivers): labor costing v ia activ it y-based costing (ABC); • supply chain: Rx direct costs; and • enter prise resource planning (ERP). 3. Establish a por tfolio of costing methods and standardize w ithin activ it y t y pes (cost pools) across ser v ice lines and continuum of care. 4. Standardize stakeholder-specific dashboards and repor ts in enterprise BI solution: Engage stakeholders in definition, traceabilit y, and validation. 5. Prov ide ad hoc repor ting and rootcause analysis drill-dow n capabilities.

Case study: Providence Health & Services The Seattle-based Prov idence Health & Ser v ices is committed to a system-w ide consolidated decision suppor t system while adopting such a phased approach. SEPTEMBER/OCTOBER 2015

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EXHIBIT 6 Providence Health & Services Costing Journey

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A key first step is driv ing standardized approaches across the continuum of care for defining and prov iding comparable and reliable financial, operational, and clinical data as it relates to the repor ting and analy tics of cost, profitabilit y, and performance of business operations and health-care ser vices. Christine Santos, chief of strategic business analy tics at Prov idence, remarked that “as health systems embrace value-based purchasing , a key first step is to extend their cost-accounting capabilities beyond the acute-care sett ing to include ambulator y/clinics and post-acute settings (home health, long-term care, and hospice) building the cr it ical foundat ion for understanding the cost of delivering care across the cont inuum.” Exhibit 6 illustrates Prov idence’s phased implementation approach toward unified cost accounting across the continuum, beginn i n g w i t h s t a n d a r d i z i n g d at a i np u t s across the organization.

ments presented here and implementing the action plan are excellent steps toward renovat ing your decision suppor t system to suppor t today’s healthcare reform. Health-care organizations like Providence that deploy advanced, businessuser–configurable and non-prescriptive de c is ion supp or t s olut ions c a n avoid big-bang investments and progressively har ness t argeted dat a s ources to gain insight across the care continuum while leveraging current “best practices.” Health care is changing whether we like it or not. Take up the challenge and renovate your decision suppor t system to suppor t it. n

An effective population health strateg y in the era of health-care reform demands a comprehensive, per vasive, and datadriven financial decision suppor t por tfol io op er at i ng f rom a s i ng le u n if ie d source of high quality: reliable data across clinical, financial, and operational funct ions. Consider ing the seven key ele-

NOTES 1 Better care. Smarter spending. Healthier people: Paying providers for value, not volume (press release), Centers for Medicare and Medicaid Ser vices (Jan 26, 2015). Available at: http://www.cms.gov/Newsr o o m / M e d i a R e l e a s e D a t a b a s e / F a c t - s h e e t s / 2 015 Fact-sheets-items/2015-01-26-3.html. 2 Major health care players unite to accelerate transformation of U.S. health care system, Health Care Transformation Task Force (Jan 28, 2015). Available at: http://www.hcttf.org/releases/2015/1/28/majorh e a l t h - c a r e - p l aye r s - u n i t e - t o - a c c e l e r a t e - t r a n s fo r mation-of-us-health-care-system. 3 Herman, B., “10 st atistics on hospit al labor costs as a percent age of operating revenue,” Becker ’s H o s p i t a l R e v i e w ( D e c 10 , 2 013 ) . Av a i l a b l e a t : http://www.beckershospit alreview.com/finance/10st atistics-on-hospit al-labor-costs-as-a-percent ageof-operating-revenue.html. 4 “A Health IT Framework for Account able Care,” Certification Commission for Health Information Techn o l o g y ( C C H I T ) ( J u n e 6 , 2 013 ) . Av a i l a b l e a t : http://www.healthit.gov/FACAS/sites/faca/files/a_health _it_framework_for_account able_care_0.pdf.

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Conclusion

