Blending hospital economics with quality of care: a case study: regulatory and market forces are combining to drive U.S. health care toward integration of clinical quality and healthcare finance—and creating new challenges for healthcare CFOs

Healthcare Financial Management, Dec, 2004 by Martin Kleckner, III

Looming on the healthcare horizon is pay-for-performance, an emerging payment model that bases reimbursement on clinical outcomes as well as resource utilization. CMS and employer coalitions such as The Leapfrog Group have initiated programs to reward hospitals and physicians for attaining targeted quality and cost goals. Also, in December 2002. CMS launched the National Hospital Quality Initiative ("Project Public Trust") to collect and publish clinical performance data related to three disease areas: acute myocardial infarction, heart failure, and pneumonia.

Unfortunately, the impact of cost and productivity initiatives on quality of care and clinical outcomes is not clear. Although the relationships between quality and cost are generally accepted as inherently logical, specifics are tougher to come by; there are few published findings on the impact of cost control programs on changes in quality of care and clinical outcomes.

To that end, this article presents a model to measure the clinical outcomes and economic impact of a technology as it is used within a hospital's patient management protocol. Two new tests for diagnosing heart failure are used as a case study. By looking at the patient management "cash burn rate" (i.e., costs incurred relative to reimbursement as the patient progresses through diagnosis and treatment), healthcare providers are able to evaluate a technology's economic value to the hospital integrated with quality of care metrics.

We applied the model to two recently launched tests brain natriuretic peptide (BNP) and N-terminal prohormone BNP (NT-proBNP). We selected heart failure to tie in with the national quality initiative: also, DRG 127 (heart failure and shock) accounts for the highest portion (5 percent) of the Medicare national reimbursement budget.

For their medical economics to be deemed "acceptable," the tests would have to provide a return on investment relative to the hospital's current standard of care and competing technologies in concert with clinical outcomes targeted by the hospital. Economic value would be based on the technology's effect on patient management outcomes.

Our findings reveal technology economic value and cost-effectiveness per patient, which in turn can be extended to value in total to the hospital. Economic value and cost effectiveness calculations include an activity based accounting of a technology's effect on the mean cost of care at various stages of a patient's course of management based on avoided steps or procedures, patient complications, mortality, readmissions, use of ancillary technology, and length of stay. Other indications of clinical quality may be added depending on the intervention being considered.

Assessing New Technology

Approximately 5 million people in this country are living with heart failure. An additional 500,000 cases are diagnosed annually. According to the American Heart Association, case volumes are rising at about 2 percent per year. CMS spends approximately $6.5 billion per year on heart failure--about 5 percent of its total DRG budget. In 2004, total costs for heart failure patient management are expected to exceed $38 billion. The mean per case charge for heart failure in 2002 was $14,470 versus $9,270 in 1993 (a 56 percent aggregate growth in cost, or about 6 percent per year).

Two diagnostic tests, one measuring BNP concentration in the bloodstream and the other measuring NT-proBNP, were cleared by the FDA over the past few years. NT-proBNP and BNP, both of the natriuretic peptide family of hormones, are generated and released into blood circulation as a reaction to heart failure symptoms. The tests work effectively as part of a diagnostic triage in patients presenting with symptoms suggesting heart failure and for ruling out diagnostic tests for populations deemed to be at high risk. They also perform as precursor measurements to help physicians decide between further diagnosis and a course of therapy.

Both tests are reported to help lower both diagnosis costs and patient management costs because of their diagnostic accuracy and by ruling out the need for echocardiography. Although echocardiography has been considered the gold standard for determining systolic dysfunction, it is expensive, is not always readily available, and may not reflect acute conditions.

A review of 169 published clinical studies conducted throughout the European Union, the Americas, Australia, and Asia addressed the efficacy of each test's abilities within emergency department (ED) and primary care environments to differentiate heart failure from other causes of heart failure symptoms and its prospective capacity to serve as a guide for complex drug therapy. Of these studies, 23 reported comparative clinical results of the tests, while only four addressed cost effectiveness. The four cost-effectiveness studies evaluated the tests as a means to precede and guide the use of echocardiography. Of the 23 studies comparing the efficacies of the tests for various patient populations, 16 reported NT-proBNP as being a superior diagnostic test, one reported BNP as superior, and six declared the tests clinically equivalent.