Financial Aspects of Patient Safety

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Financial Aspects of Patient Safety

• Michael S. Wilson
• VP Business Realization
• McKesson

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Financial Aspects of Patient Safety

• What Keeps A CFO Up At Night
• Fortunately, There Are Financial Benefits To
  Patient Safety Initiatives
• Review Benefit Toolkit

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What Keeps A CFO Up At Night (one example)
Hospital with 200 million Net Revenue
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What Keeps A CFO Up At Night (one example)
14 million Total Capital Budget
IT Capital Budget Must Fund
2.8 million IT Capital Budget

• Prior year commitments
• Hardware replacements
• New projects
• Software
• Hardware
• Implementation Services

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What Keeps A CFO Up At Night (one example)
Sample Operating Budget Impact ( 000)
100 97 3
Total Net Revenue Total Operating
Expense Operating Margin
200,000 194,000 6,000
IT Capital Proposal (typically spend 5m)
15,000
CFO Concern Most of the hospitals annual profit
is consumed by this one purchase.
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Financial Aspects of Patient Safety

• What Keeps A CFO Up At Night
• Fortunately, There Are Financial Benefits To
  Patient Safety Initiatives
• Review Benefit Toolkit

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Financial Benefits Of Patient Safety Initiatives

• CFOs focus on 3 things when considering the
  financial impact of an investment
• Increasing revenue
• Reducing expenses
• Reducing cash tied-up in A/R inventory

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Financial Benefits Of Patient Safety Initiatives

• CFOs Focus Primarily on 3 Statements
• Income statement
• Measures revenue, expenses, and profitability
  over a period of time
• Balance sheet
• Reflects financial condition (assets,
  liabilities, equity) at a point in time
• Cash flow statement
• Shows sources and uses of cash over period of time

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Financial Benefits Of Patient Safety Initiatives

• The Key to Getting the CFOs Attention
• Demonstrate a favorable impact on
• Revenue
• Expenses
• A/R inventory
• Thereby
• Improving income statement
• Improving balance sheet
• Increasing cash flow

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Financial Benefits Of Patient Safety Initiatives

• Sources of Patient Safety Financial Benefits
• Tier 1 Directly Related to Patient Safety
• Reduce adverse drug events (ADEs)
• Reduce cost of care delivery
• Tier 2 Indirectly Related to Patient Safety
• Increase patient admissions
• Reduce clinical labor hours/patient
• Reduce supplies expenses

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Financial Benefits Of Patient Safety Initiatives

• Directly Related to Improved Patient Safety
• Reduce ADEs
• 0.5 of inpatient days suffer an ADE
• Ordering - 39 (CPOE, PIS)
• Transcription - 12 (CPOE, PIS)
• Dispensing - 11 (Pharmacy robotics, cabinets)
• Administration - 38 (Bedside bar-code admin.)
• 8,750 per ADE - IOM
• Cost of treatment Meds, tests, labor
• Also reduces ALOS, increasing bed capacity

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Financial Benefits Of Patient Safety Initiatives

• Directly Related to Improved Patient Safety
• Reduce cost of care delivery
• Use physician order-sets based on evidence
  based-practices (CPOE)
• Electronically presented to physician during
  order-entry process
• Reduce DRG costs about 10
• Cost of treatment Meds, tests
• Also reduces ALOS, increasing bed capacity

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Financial Benefits Of Patient Safety Initiatives

• Indirectly Related to Improved Patient Safety
• Increase patient admissions
• Increased physician referrals (physician sat.)
• 3,200 contribution margin per additional
  admission
• Reduce supplies expenses
• Clinical documentation forms (electronic
  document)
• Medication inventory shrinkage (bar-coding,
  cabinets)
• Reduce medication inventory levels
• Turn inventory more frequently (robotics/cabinets)
  

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Financial Benefits Of Patient Safety Initiatives

• Indirectly Related to Improved Patient Safety
• Reduce clinical labor hours/patient
• Pharmacist order entry, interventions (CPOE, PIS)
• Pharmacy med dispensing and distribution
  (robotics)
• Nursing overtime (electronic documentation)

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Financial Aspects of Patient Safety

• What Keeps A CFO Up At Night
• Fortunately, There Are Financial Benefits To
  Patient Safety Initiatives
• Review Benefit Toolkit
• See Excel File on CD