Measure Outcomes & Cost for Every Patient - Institute For Strategy And Competitiveness - Harvard Business School

2/5/22, 09:42

Measure Outcomes & Cost

for Every Patient
Measurement of outcomes and cost for every patient are essential elements
of the value-based health care agenda. Health care invests billions of dollars
in quality measurement programs and complex cost accounting systems yet
these systems currently fail to collect outcomes that matter to patients and
the costs to acheive them.

OUTCOME MEASUREMENT THE INTERNATIONAL

CONSORTIUM FOR HEALTH
Standardized outcomes, transparently reported by condition, are essential for both care improvement and for making
informed choices by patients, payers, and other provider organizations. Outcomes represent the ultimate measure of OUTCOMES MEASUREMENT
quality. (ICHOM)
Launched in 2012 by founders
Michael Porter, HBS, Stefan
The outcomes of care are important information for patients so that they can make informed decisions about where to
Larsson, BCG, and Martin
receive care and who should be providing it. They also should define the success of physicians and provider
Ingbar,Karolinska Institute.
organizations.

Has created 26 standard measure

When there is effective multidisciplinary care, outcomes provide data for improving performance. They are also
sets using a global consensus
essential for value enhancing efforts at cost reduction since when costs are reduced one must be sure that outcomes
process including leading
are not made worse. Outcomes are also essential parts of value based payment plans like bundled payment. In
clinicians and patients.
regional and national expansion of delivery organizations, they are important in determining how to provide the right
service in the right location. They also inform choices about service line growth and areas for affiliation.
Overseeing implementation in
numerous provider organizations
In today’s health care delivery systems many things are measured and reported yet most are surrogates for patient
worldwide.
centered outcomes. Process measures are often used in health care quality assessment, yet these, while often easy to
measure, do not always correlate with clinical outcomes. Similarly, structural measures, patient experience, and other
indicators are often substituted for outcomes. Beginning an international
benchmarking program.

There are several basic principles of outcome measurement. The first is that they must be measured for the medical
condition or segment of a primary care population. Outcomes for a condition are always multidimensional and include Measures being used by the OECD
what matters to clinicians and patients – patient reported outcomes form an essential component. The outcomes and the World Economic Forum’s
cover the full cycle of care for the condition and include risk adjustments for the severity of the disease and the programs of value in health care.
underlying condition of the patient.
READ MORE ON ICHOM WEBSITE

The multidimensional aspect of outcome measurement is captured in the outcome measurement hierarchy where
clinician and patient reported outcomes are captured in three tiers. Tier one represents survival and the degree of PRINCIPLES OF MEASURING
functional status achieved. Tier two represents the process of recovery including complications problems encountered THE COST OF CARE
in the treatment process. Tier three represents the long-term sustainability of health achieved including clinical and 1. Cost is the actual expense of
functional status. patient care, not the charges
billed or collected
2. Cost should be measured
THE OUTCOME MEASURES HIERARCHY around the patient
3. Cost should be aggregated over
the full cycle of care for the
patient’s medical condition, not
for departments, services, or
line items
4. Cost depends on the actual use
of resources involved in a
patient’s care process

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Measure Outcomes & Cost for Every Patient - Institute For Strategy And Competitiveness - Harvard Business School 2/5/22, 09:42

(personnel, facilities, supplies):

The time devoted to each
patient by these resources
The capacity cost of each
resource
The support costs required
for each patient-facing
resource
HOW TO START A TDABC
PROJECT
TDABC PROJECT STARTER KIT
(PDF)

The first step in developing outcome measures is to define what to measure, who the stakeholders are including
patients, and to set up a multidisciplinary team with an influential leader. Measures, risk adjustments, and validated
survey tools for PROMs need to be identified. Until recently, having full sets of outcome measures for clinical
conditions a was major limitation to implementing this part of the value-based health care agenda. That was changed
in 2012 when leaders at Harvard Business Sschool, Boston Consulting Group, and the Karolinska Institute came
together to form the International Consortium for Health Outcomes Measurement (ICHOM). ICHOM brought together
clinical leaders and patients in over 25 conditions worldwide to develop and lead the implementation of outcome
measure sets. ICHOM’s pioneering work has captured the attention of clinicians, provider organizations, governments,
and other payers.

Data collection is a key next step and ideally should be captured in the course of the care delivery workflow. Once the
data is captured, it needs to be risk adjusted for co-morbidities and severity of disease for comparison to registry and
other benchmarks. The data needs to be periodically openly reviewed and, through a frank discussion of results,
identify ways for improving the outcomes and leverage best practices. When combined with care cycle cost data,
opportunities for value improvement become clear and achievable. Reporting outcomes begins locally with involved
providers in a non-judgmental manner. Over time, reporting can be expanded to other providers and payers. Public
reporting can lead to informed patient and payer choice in the selection of providers.

Current barriers to outcome measurement lie in the tremendous resources already committed to other quality
measurement activities. The longstanding focus on process measures has slowed the development of clearly defined
standardized outcomes at the medical condition level. Additional barriers include IT systems that do not support
outcome measurement and limited incentives to use outcome measures.

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Measure Outcomes & Cost for Every Patient - Institute For Strategy And Competitiveness - Harvard Business School 2/5/22, 09:42

Overcoming those barriers involves implementing the standardized ICHOM measure set and developing the IT systems
to collect and manage the data. Ideally, this should occur in the patient care workflow and not require additional
effort on the part of already busy clinicians and other front line providers. Use of these measures in a payment system
will also accelerate their implementation.

READ MORE IN PUBLICATIONS ON OUTCOMES MEASUREMENT

READ MORE ABOUT ICHOM

COST MEASUREMENT
Accurate cost measurement is essential to optimize value in health care. Currently health care accounting systems do
not measure the costs of treating patients over their cycle of care. Most cost accounting in health care rely on charges
yet, in today’s health care marketplace, cost shifting have rendered these methods inaccurate. In 2010, Harvard
Business School Professor Robert Kaplan introduced Time-Driven Activity-Based Costing (TDABC) to health care. In
this unique approach, costing is approached from the bottom up looking at exactly what happens to a patient in the
course of their treatment and develops accurate assessments of the true costs of all the processes of care a patient
experiences in the course of their care. Since its introduction, TDABC has been tested in many delivery settings
worldwide resulting in cost savings and efficiencies in many organizations and resulting increasing numbers of peer
reviewed publications.

The cost of care needs to be measured by patient and condition, not for departments or support functions. The cost of
care includes all the personnel, resources, supplies and supporting services involved across the full cycle of a patient’s
care for a condition. Numerous pilots have revealed that measuring the true costs of care delivery for the patient’s
condition in this way unlocks major opportunities to improve efficiency and guide reimbursement. For example, cost
rates for individuals performing front line tasks can have as much as a ten-fold difference – a phenomenon unique to
the health care industry. Having individuals work to the top of their license and training can substantially reduce the
costs of care without adversely impacting outcomes.

Cost measurement begins by mapping all the processes involved in patient care for a condition, (or primary care
patient segment) including all the personnel, equipment, space, and the time required for each process. Overhead
functions such as billing, information technology, and human resource management should be attributed to the
condition based on resource use resulting from the needs of patient facing resources. Time-driven activity-based
costing (TDABC), using time and capacity cost rates to allocate resource costs, has become the gold standard in
measuring the true costs of health care delivery and well described in a growing literature.

Currently, process mapping in health care is sporadic, covering mostly procedures or discrete visits. Costs are attached
to care using arbitrary allocations rather than actual cost data. Most current IT costing systems do not identify which
provider(s) is providing each service, the time taken to perform the service, and the other key inputs involved in the
care. The electronic health record should identify who is performing the service, not simply charting the fact that the
service was performed. Emerging technology will allow routine and efficient collection of such data.

LONG LEG VS. PETRIE CAST: BOSTON CHILDREN'S

HOSPITAL EXAMPLE

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Measure Outcomes & Cost for Every Patient - Institute For Strategy And Competitiveness - Harvard Business School 2/5/22, 09:42

Example of a process map developed as part of the Time-Driven Activity-Based Costing project at Boston Children's
Hospital examining the costs of services in the orthopedic cast room. This process map follows patients through cast
application.
This map shows that the cast technician's labor cost of a long leg is roughly half that of a Petrie long leg cast (46
minutes versus 77 minutes) ultimately resulting in a cost difference in the two procedures yet the reimbursement is
the same.

Accurate cost measurement, when tied with outcomes that matter to patients form the basis of the value relationship
in health care.

READ MORE IN PUBLICATIONS ON COST MEASUREMENT

LEARN ABOUT COST MEASUREMENT RESEARCH

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