Florida group benefits from quality data - Coalition Report - Central Florida Health Care Coalition

Is director of benefits for General Mills' Restaurant Division, John Reiker can point to the fact that health care bills for the 3,000 employees in his division's Orlando, Fla., headquarters are running as much as 25% lower than last year.

At the Orlando Regional Medical Center, Steve Harr is smiling, too. He's the director of finance for managed care, and his institution has reduced its length of stay by one day, to 5.4 days, over the last 18 months. Previously, the medical center was losing $12 million a year on Medicare. "Now, we're making ends meet," he says. By operating more efficiently, the hospital has reduced its cost shifting to private payers.

The Central Florida Health Care Coalition is partly responsible. The coalition is studying billing information from the region's hospitals to identify costs that are higher than normal. In addition, by comparing area hospitals' outcomes to national norms, the employer group is putting the onus on the hospitals to provide quality care. The coalition members and hospitals share data so that employers can make purchasing decisions based on outcomes.

Squeezing out waste

"We're not focusing on prices. We're focusing on expenses," explains Reiker, who is president of the coalition. "We're trying to squeeze out the waste."

The quality initiative is directed by Marilyn Bell, the executive director of the coalition, which has 38 member employers that represent 120,000 employees in the three counties around Orlando. The area has 12 hospitals and 3,600 beds.

At the time the coalition was considering the need for better data, the hospitals and physicians were contemplating change. Harr realized that while Medicare reimbursements were declining, costs at the Orlando Regional Medical Center were increasing 9% to 12% a year. "Realistically, our options were limited," he says. To stay in business, Orlando Regional had to cut costs.

The coalition began talking with hospitals, trying to win their cooperation and to prepare them for what was ahead. "We laid the foundation for trust," Bell said. "We did not want to make things more difficult, but we did want to hold them accountable."

So in the fall of 1989, the coalition and the hospitals met for their first major discussion of controlling costs. The coalition's message was simple: It was going to study the Medicare billing information the hospitals had been supplying to the state. The hospitals agreed to cooperate in the study and to work with the coalition to use the information to help cut costs.

The two sides met again in the spring to learn the grim news. Compared with other hospitals in the state, Orlando's hospitals were charging about the average. But when compared with the nation, Orlando's hospitals were charging about 33% more. The employers and hospital executives also learned that cost shifting was a problem. What hospitals were losing in Medicare reimbursements they were making up by billing employers' private plans.

Accurate data needed

In addition, Bell found that there were no incentives for hospitals to code properly all types of cases in which Medicare was not involved. But improper coding made it difficult to pinpoint the source of the highest costs. So Bell and the coalition's board of directors insisted that all hospitals use a uniform software system.

The coalition selected Medis-Groups, a system from MediQual Systems Inc., a software company for hospital quality improvement, in Westborough, Mass. Essentially, MedisGroups uses the patient's chart--not billing information--as the source of data, collecting information on vital signs, physical findings, laboratory findings, X-ray findings, and pathology findings. From that data, the MedisGroups system computes an admission severity score and provides information on the severity of clinical findings both before and after treatment, says Spencer Borden, medical director, MediQual Systems. The system also contains national averages on mortality and morbidity data for hospitals.

By the summer of 1990, the hospitals and the coalition agreed on the new system of information gathering. Two years later, 83% of licensed beds in the three-county area use the system--all of the 12 hospitals except the three smallest ones, which found the cost an obstacle. MedisGroups costs about $50,000 to $100,000 to install in a hospital.

With the systems in place, hospitals started to share data with the coalition in February. Practitioners had to explain why death rates and complication rates were higher in certain cases than national averages. "It was like giving us the ammunition so we could shoot them," Bell said.

"But the goal here is continual improvement, not to cut the bad guys out of the plan," Reiker says. For example, once the information exchange started, it was apparent that neither employers nor hospital executives had ever looked at pre-procedural length of stay--the time spent in the hospital between admission and the procedure for which the patient was admitted. In some cases, a patient might have been admitted on Friday when instead he or she should have been admitted on Sunday for a procedure to take place on Monday. Before the quality initiative, the pre-procedural length of stay averaged about 1.5 days in the Orlando area. Now, it is less than a day, Bell said. A hospital day costs $850 to $1,000 in Orlando.

Ending second opinions?

And employers satisfied with the effort are considering eliminating second opinion. "This [initiative] takes employers out of the business of running their plans through utilization review programs and puts the medical care back in the doctors' hands," Reiker says. "We as employers don't want to be micro managing an employee's health care. We've thrown out these hurdles that doctors have to get over. They have to call this number and explain to a nurse why they want to do this procedure. It's just added additional expense on both sides."

Within another year, it may be possible to eliminate the second surgical opinion that has been imposed on the medical community in recent years, says Reiker. "There's no need to second guess someone who shows demonstrated good outcomes with low resource utilization," he says.

Other tangible benefits to employers are beginning to show. At the Orange County Board of Education in Orlando, the average employee hospital bill has dropped 11% as a result of the quality program, says John B. Hanson, director of insurance benefits.

Hanson says that the hospital became more efficient in the area of internal medicine and obstetrics, for example. The Orange County Board of Education worked with obstetricians at Orlando Regional Medical Center to cut Cesarean section rates. "As the obstetricians looked at cost, they pointed out that their charges were too high. The hospital had been doing considerable cost shifting into obstetrics. But through reducing ancillary services--X-rays, laboratory tests, and the like--the hospital no longer had to make up for its Medicare losses at the expense of private payers," says Hanson.

"As a result of working with the MedisGroups information and because physicians have been so diligent in looking at opportunities to practice more effectively, we are breaking even with Medicare," says Harr of the Orlando Regional Medical Center. In fact, the hospital reduced a number of its obstetrics charges last spring and has limited its rate of increases. "Last year, our rate increase was 5%, and this year it's comparable," Harr says. He was reluctant to attribute all of the hospital's success to the MediQual system, however. The hospital has been working with two other software systems, besides the Medis-Group software system, over the last three years.

Already, the program has spread to other areas of Florida. The Central Florida Health Care Coalition is a member of the Employers Purchasing Alliance, a group of five health care coalitions representing 275,000 employees in central and western Florida. In March, the alliance implemented the quality program in Tampa, Clearwater, and Sarasota.

The alliance expects to save $50 million a year once the quality system is in place throughout its area, says Frank Brocato, president of the alliance and executive director of its Tampa member coalition, the Florida Gulf Coast Health Coalition.

Coalition members believe their undertaking has changed the way hospitals do business. "If the coalition and alliance fold tomorrow, the hospitals are going to leave this in place because it is teaching them how to do business better," Reiker says.

COPYRIGHT 1992 A Thomson Healthcare Company
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