VBHC - week 3 Flashcards
Relevance of cost measurement in VBHC
- Required for completing the value equation and thus for comparing, steering on, and improving overall value
o Improving outcomes cannot come at any cost - Provides insight in the process and cost of care delivery, which in turn helps to:
o Inform focused process improvements and care redesign
o Appropriately target cost reduction efforts
o Meet external expectations and pressure - Informs the design of (value-based) payment strategies
o E.g. estimating the cost of the full care cycle
why tdabc
- Used in other industries since the 1990s as a simple and flexible costing method to replace the resource-demanding ABC-method
- Main differences with traditional ABC are that TDABC (Kaplan & Anderson 2004):
- Uses patients and their conditions as unit of analysis
o Not departments, procedures or services - Acknowledges that resources will not work at full capacity
o Practical vs. theoretical capacity - Focuses on the time it takes to complete a step in a care process
o Not the % of time employees expect to spend on activities
the seven steps of TDABC
- Select the medical condition
- Define the “care delivery value chain” (CDVC)
- Develop process maps for each element in the CDVC
- Obtain time estimates for each step/activity in the process maps
- Estimate the cost of resources involved
- Estimate the capacity of each resource & calculate its capacity cost rate
- Calculate the total cost of care per patient
- Select the medical condition
“An interrelated set of patient circumstances that are best addressed in a coordinated way and should be broadly defined to include complications and comorbidities.” (Kaplan & Porter 2011)
* Define the start and end of the care cycle for the condition
- Define the care delivery value chain (CDVC = care delivery value chain)
- Provides an overall view of care delivery by charting all main activities and their locations occurring over the care cycle
- Ideally disregards boundaries between departments, specialties, organizations, etc. for the patients this doesn’t matter
- Sources: interviews, round-table discussions, literature, observations
- Develop process maps for each CDVC-segment
- Each process map describes a segment (=process) of the care cycle (=CDVC) and the path that patients follow therein
- For each step in a process, list all required capacity-supplying resources, both those directly used by patients (“primary resources”) and those needed to make the primary resources available or to support them
- Process mapping often reveals immediate opportunities for process improvement
- Sources: interviews, round-table discussions, IT systems, observations
- Obtain time estimates for each process step
- Time in minutes each resource spends with a patient at each process step
o Standard times could be used for common, short and inexpensive steps/activities that vary little across patients, like patient check-ins
o Actual times should be measured for complex, long and expensive steps/activities, like a major surgical procedure involving multiple professionals - Sources: interviews, round-table discussions, IT systems, observations, experts
- Estimate the cost of resources involved
- Estimate direct cost per period of all primary resources involved with care delivery
o E.g. compensation for employees, costs of equipment/supplies - Estimate indirect cost of resources required to supply primary resources
o E.g. costs of supervising, space, furnishings
o Estimate overhead/support cost of departments/activities supporting primary resources, and assign these costs based on their demands for these departments/activities
o E.g. central department to sterilize surgical tools - Sources: general ledger, (other) IT-systems, interviews
6a. Estimate the capacity of each resource
Instead of using primary resources’ full or ‘theoretical’ capacity, obtain their practical capacity, i.e. the actual time available for patient-related work over a period (e.g. a month)
* For equipment, estimate the days per month, the hours per day, and then the minutes per month that each piece will be used
* For personnel, obtain the minutes per month by applying the formula below using estimates of:
o total days that each employee actually works each year
o total minutes per day that the employee is available for work
o average minutes per workday for nonpatient-related work
6b. Calculate the capacity cost rate (CCR)
Reflects the cost per unit of time (usually a minute, see step 4) of the relevant resource
- Calculate the total cost of patient care
- Multiply the CCR of each resource (step 6b) by its duration of use in each process step (step 4) to obtain the cost per process step –> leads to
- Sum the cost of all process steps to obtain the cost per process –> leads to
- Sum the cost of all processes to obtain the cost for the full cycle of care for a patient with the medical condition
Goal of xTDABC
- To gain insight in the costs and cost drivers of the provided care
- Examine areas of waste reduction and efficiency
Competition and benchmarking
- Competition requires comparison of providers
o If you don’t have insight in performance, and you can’t compare between providers, competition will not work/ be possible
Benchmarking is method to do so:
Healthcare benchmarking is measuring performance of an organization and comparing it to a standard developed using data from other similar organizations.
The standard can be one specific target or an average
Change pathway
providers will look at their own performance compared to others and then will be motivated to change their practice. Internal improvement
