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Identifying, Categorizing, and Evaluating Healthcare Efficiency Measures
Elizabeth A. McGlynn, Ph.D.Associate Director, RAND Health
September 28, 2007
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The Work Was Done by A Multidisciplinary Team
• Peter Hussey• John Romley• Han de Vries• Margaret Wang• Paul Shekelle• Dana Goldman• Martha Timmer• Susan Chen• Jason Carter• Carlo Tringale
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Overview of Talk
• Highlight motivation for current work
• Present RAND’s typology
• Review existing measures
• Examples
• Concluding thoughts
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Many Fortune 50 Companies Are Demanding Cost and Quality Metrics on Physicians
High/Low High/High
Low/Low Low/High
Efficient
Effective
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Purchasers Are Using Efficiency Metrics In Several Ways
• Public reporting – information to help consumers make more cost-conscious decisions
• Pay-for-performance – financial rewards to providers with better performance
• Tiering – differential co-payments to encourage patients to choose higher performing providers
• Selective contracting – contracts limited to providers who perform at a certain level
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But…• Little is known about what various stakeholders
mean by “efficiency”– Considerable lack of common language,
conceptual clarity– Link between content of metrics and proposed
applications not always thought through
• Little is known about the consequences (intended and unintended) of applying available metrics at different levels in the system
– Can measures developed for one level (health plan) be applied at a different level (physician)?
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Overview of Talk
• Highlight motivation for current work
• Present RAND’s typology
• Review existing measures
• Examples
• Concluding thoughts
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Definition of Efficiency Measure
The relationship between a specific product of the health care system (output) and the resources used to create that product (inputs)
• Maximize output produced for a given input• Minimize inputs used for a given output
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Efficiency Measures Typology Overview
1. Perspective
2. Output(s)
3. Inputs
Who is asking what about whom, and why?
What is being produced?
What resources are used to produce the output?
Typology is organized in three tiers
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Perspective
• We identify several potential points of view:– Health care “firms”
• Physicians• Hospitals• Nursing homes
– “Agents”• Health plans• Employers
– Individuals– Society
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Context Matters in Efficiency Measurement
Stakeholder
Who Are TheyResponsible For?
Over What Time Period?
Physician Active patients in a panelAs long as responsible
for patient
Hospital Patients who are admitted
During hospital stay
Health Plan Enrollees Renewed annually
Employer Employees and covered dependents
Length of employment
Society All residents Unlimited
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Use of Information Varies With Perspective
• Health care firms can change the way the outputs are produced
– Amount and/or mix of inputs
– Service amenities associated with a product
• Agents can principally change how much is paid, the conditions under which the product is purchased, or how the product is bundled
• Individuals can principally change what they buy and from whom
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Output: What’s Being Produced?• We define two major categories of outputs:
– Health services
– Health outcomes
• Being explicit about the output is critical (and often not done)
• Producers tend to define outputs
– Financial flows (how the product is purchased) influence definitions, for example:
• Hospital day vs. a discharge
• Quality adjusted life year vs. a covered life
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Examples of Outputs by Type
Entity Service Output Examples
Health Outcome Output Examples
Physician
• Visits• Procedures• Diagnoses• Prescriptions
• Preventable deaths• Quality adjusted life
years
Hospital• Discharges• Procedures• Inpatient days
• Functional status• Preventable deaths• Preventable
complications
Health Plan • Covered lives• Quality adjusted life
years
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Inputs
• We identify two main ways of measuring inputs:– Physical– Financial
• These map to the economic definitions of technical (physical) and productive (financial) efficiency
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Technical and Productive Efficiency MeasuresPoint to Different Root Causes of (In)Efficiency
Technical Efficiency
Inputs are put to good use
Productive Efficiency
Inputs are put to good use
Best mix of inputs chosen
Lowest prices are paid
+
+
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Social Efficiency
• Social efficiency is achieved when no member of society can be made better off without making another member worse off
– Giving more resources to one person implies that those resources have been taken away from someone else
– Appeal of “waste” is the notion that those resources do not benefit anyone currently
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RAND’s Efficiency Typology
Society
Providers PurchasersHealth Plans
Health Care Firms
Individuals
Health Services Health Outcomes
Physical Financial
Per
spec
tive
Out
put
Inpu
t
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Overview of Talk
• Highlight motivation for current work
• Present RAND’s typology
• Review existing measures
• Examples
• Concluding thoughts
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Identifying Existing Efficiency Measures
• Peer-reviewed literature– Medline and EconLit search: 1990-2005– Titles, abstracts, and articles reviewed by 2
independent reviewers; consensus resolution– Excluded non-U.S. studies
• “Gray” literature review– Purposive, reputational sampling– 8 vendors identified & reviewed
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Overview of Article Flow
Titles (n=4,324)
Rejected (n=3,754)
Articles (n=563)
Excluded (n=145)
Detailed review (n=318)
High priority (n=158)
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Measures in Literature Dominated by Hospital Perspective & Service Outputs
0 20 40 60 80 100 120
Physician
Hospital
Number of measures
Hosp disch/days Procedures MD visits
Other services Episodes Outcomes
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40 Different Physical Inputs Identified in Peer Reviewed Literature
• Physician labor – number of physicians (usually FTEs) or hours worked
• Nursing labor – number of nurses (usually FTEs) or hours worked
• Administrative, technical, or other labor categories – number of personnel (usually FTEs) or hours worked
• Beds – the most common indicator of capital stock
• Depreciation of assets - a measure of capital, calculated in various ways
Financial inputs appear almost as often as physical inputs
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No measures using health services as outputs explicitly incorporated a
measurement of quality
Methods for incorporating or accounting for quality are not well
developed in peer reviewed literature
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Different Worlds of Efficiency Measures
• There is an almost total separation between the published studies of health care efficiency and the use of efficiency measures by providers, payers, and purchasers
– Academic measures focus on multiple input/output models
– Vendor measures focus on specifying outputs
• Purchasers and health plans are generally using measures developed by vendors
– Little independent testing of reliability and validity has been reported on these metrics
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Vendor-Developed Measures
• Episode-based: ETGs, MEGs, CCGs
– Claims aggregated into clinically-defined episodes and attributed to different entities
– Measure is cost per episode (productive efficiency)
– Also can look at resource use per episode (technical efficiency)
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Vendor-Developed Measures
• Population-based: ACGs, DxCGs, CRGs, RRU, PPMS
– Patient populations weighted by morbidity burden
– Measure is cost per risk-adjusted patient per year (productive efficiency)
– Also can look at resource use (technical efficiency)
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Overview of Talk
• Highlight motivation for current work
• Present RAND’s typology
• Review existing measures
• Examples
• Concluding thoughts
Some Examples of Efficiency MeasuresMetric Perspective Outputs Inputs
Cost per episode Health plan Health service bundle (cross entity)
Monetized total cost
Cost per discharge
Health plan Health service bundle (w/in entity)
Monetized total cost
Cost per covered life
Employer # employees with health insurance
Premium price charged by plan
Cost per health improvement
Medicare Change in functional status
Total costs of care
Labor utilization Hospital (internal)
Total number of discharges
Total number of nursing hours
Productivity Physician (internal)
Number of patients seen per year
Total number of MD pt-care hours
Generic prescribing rate
Health plan Number of days rx supplied
Number of days generic rx supplied
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Measures We Wouldn’t Classify as Efficiency
Metric Perspective Output Input Why Not?
Readmissions Medicare Discharges Number of admissions within 30 days of discharge
Missing key events (death, different facility)
Rate of CABG surgery
Employer Total number of enrollees
Number of bypass surgeries
No input specified
Cost-effectiveness
Society Change in outcome
Change in cost (from using new vs. existing intervention)
Result not specific to an entity; may help construct metrics
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We Asked What the Evidence Was Regarding Whether the Measure Was…
• Important• Scientifically sound• Feasible• Actionable
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Summary of Findings
Criterion Peer Reviewed Vendor
Important Low High
Scientifically sound Low Low
Feasible Low High
Actionable Low Low
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Overview of Talk
• Highlight motivation for current work
• Present RAND’s typology
• Review existing measures
• Examples
• Concluding thoughts
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Conclusion
• Disconnect between academic world and vendors on efficiency measurement offers opportunity
• Although steps have been taken to achieve consensus among stakeholders, more work needs to be done
– Typology can assist in structuring more explicit discussions about key issues
• Scientific soundness of both academic and vendor-developed measures is largely unknown
• Ability of potential users to act on the results of these measures is not well understood
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Some Priorities for the Future• Be explicit about the perspective, output, and
inputs used in measure:
– What’s the purpose, approach?
• Develop measures to fill important gaps
– When is it most important to incorporate quality measures?
– Measures that use health outcomes as outputs
– Measures for units of analysis other than hospital
• Evaluate whether efficiency measures are scientifically sound, feasible, actionable