Sustainable smaller hospitals: UK and international lessons

1
Sustainable small(er) hospitalsUK and
international lessons
Tim Ward, Associate Principal, McKinsey Company
New Roles for Small Hospitals
8 July 2009
CONFIDENTIAL AND PROPRIETARY Any use of this
material without specific permission of McKinsey
Company is strictly prohibited
2
Scale challenges can be demonstrated in some
services
x
Scale challenge
Activity and cost for Trust A and selected peers,
selected inpatient service, 2006/07
Efficiency challenge
Average cost per FCE,
Brighton and Sussex
James Paget
Devon
Basingstoke
IoW
Harrogate
Northumbria
Morecambe Bay
Hull and East
Average tariff received
Yeovil
Barnsley
Queen Elizabeth
Cumbria Acute
Royal Cornwall
Hereford
Salisbury
The Island premium for this service represents
0.9m per year
FCEs
Source Reference costs 2006/07 (unit costs and
activity data) HES 2006/07 (average tariff)
team analysis
3
Another example for ambulance services
n
Scale challenge
Activity and cost for Trust A and other Ambulance
Trusts, 2006/07
Potential range
Efficiency challenge
Average cost per incident,
IoW
South East
London
South Central
Yorkshire
Per incident efficient cost at scale
East Midlands
Great Western
North West
South Western
North East
East of England
West Midlands
The Island premium for Ambulance represents
2.5m per year
Incidents, 000
Source Reference costs 2006/07 (unit costs and
incidents) team analysis
4
Agenda

• Staring into the abyss?
• The clinical and financial challenge for small
  hospitals

• Glad tidings
• Three reasons for hope

• Squaring the circle
• Approaches for planning a sustainable future

• Getting going
• Experience of launching transformation efforts

5
Agenda
Animation

• Staring into the abyss?
• The clinical and financial challenge for local
  hospitals

• Glad tidings
• Three reasons for hope

• Squaring the circle
• Approaches for planning a sustainable future

• Getting going
• Experience of launching transformation efforts

6
Centralisation and decentralisation are putting
pressure on DGHs
Centralisation is pulling some services out of
DGHs to larger acute providers able to provide
specialist care e.g. primary angioplasty,
hyperacute stroke care
Decentralisation is pulling some services out of
DGHs to primary and community care e.g.
management of long term conditions, urgent care,
routine OP, diagnostics
7
These trends are likely to be exacerbated

• Elements of reform

Impact on smaller sites
Reduced revenues with limited immediate scope to
reduce costs
Increased focus on commissioning for health
shifts resources out of hospitals into
preventative and community services
New models of primary care provide effective
urgent care, reducing AE attendances and
admissions significantly
As above
Financial challenges as costs rise above inflation
Tariff held at constant price (or reduced)

• Need to demonstrate
• Critical mass for quality
• High quality facilities

Commissioners set clear standards for high
quality services
EWTD and new training requirements need more
consultants to provide 24x7
Costs will increase
Harder to invest in smaller hospital
Need to invest in capital developments
8
Agenda
Animation

• Staring into the abyss?
• The clinical and financial challenge for local
  hospitals

• Glad tidings
• Three reasons for hope

• Squaring the circle
• Approaches for planning a sustainable future

• Getting going
• Experience of launching transformation efforts

9
Basic thoughts

• Clinical quality/ sustainability needs to come
  first
• Any proposals require a clinically led case for
  change and clinical leadership during options
  evaluation
• Look outside too, e.g.
• Partnerships with primary and community care
• Wider clinical networks across appropriate
  population base

10
Possible moves smaller hospitals could take (not
mutually exclusive!)

• Stronger alliances (networks) between hospitals

Operational improvement and right-sizing
Vertical integration with primary and community
care
11
Fixed costs dont need to be fixed
Animation
Sites earmarked for disposal
Retained accommodation
Example estates strategy, local hospital trust
Multi-storey car park
Road
Queens Rd Offices
KAC property
Christchurch lodge (KAC)
MRI
lt___gt lt__gt
Public House
47
48
51
47
48
51
48
51
47
48
51
59
61
83
81
75
76
77
79
12
Variable costs dont need to be variable
No change in cost
Typical site cost structure breakdown,
Fully variable cost
Shut site
Shut service
Lose a bit
Gain a bit
Gain a lot
Variable Pay
3
11
Variable Non-Pay
42
Semivar Pay
Semivar Non-Pay
2
2
Fixed Non-Pay
18
Clinical support
8
Corporate support
14
Site cost
13
Agenda
Animation

• Staring into the abyss?
• The clinical and financial challenge for local
  hospitals

• Glad tidings
• Three reasons for hope

• Squaring the circle
• Approaches for planning a sustainable future

• Getting going
• Experience of launching transformation efforts

14
Core services that a smaller hospital could
offer, recognising that some may offer additional
services
Additional services dependent on quality and
sustainability
Minimum/core services for a smaller hospital
Emergency surgery 24hrs
Elective Surgery
Level 3 critical care
Oncology/ chemo
Paediatric inpatients
Primary and Community Care Centre(s)
15
There are examples of the core abroad . . .
Services offered
Local Hospital model
Core service lines
AE (24h)
Paediatric Assessment Unit
Urgent Care
Emergency surgery (12h)
Acute medicine (Inpatients)
Level 2 CC and intubation
Rehab comm. serv. (IP)
Outpatients
Regular attenders
Diagnostics (X-ray, CT)
Pathology
Additional services

• 24/7 medical AE without ES
• No Obstetrics or Paediatric Additional services
  in Orthopaedics

• 24/7 medical AE without ES
• No Obstetrics or Paediatric
• Additional services in Acute Psychiatry

• Limited ES cover (from Elective surgeon)
• Additional services in Paediatrics, palliative
  care and care for elderly

• ES cover by on-call surgeons

• Additional services dependant on quality and
  sustainability (e.g., Elective Surgery)

Note ES stands for Emergency Surgery Source In
terviews
16
. . . and in the U.K.
Services offered
Site A
Site B
Site D
Site C
Core service lines
AE (24h)
Paediatrics Assessment Unit
Urgent Care Centre
Emergency surgery (12h)
Acute medicine (Inpatients)
HDU/Intubation
Rehab comm. serv. (IP)
Outpatients
Regular attendees
Diagnostics (X-ray, CT)
Pathology
Additional services

• ES 12/7 only, but 24/7 surgical opinion
• Flexible HDU/ITU
• Paediatric Inpatient care
• Elective Surgery

• No ES services
• Obstetrics and Neonatal care for
• low risk pregnancies only

• Spike in Urology and Endovascular Surgery
• ES 24/7 for these 2 specialties only
• Midwife-led birthing unit for low risk
  pregnancies only

• No ES services
• Elective ortho-paedic surgery Obstetrics and
  Neonatal care for low risk pregnancies only

Note ES stands for Emergency
Surgery Source Interviews
17
However, concerns remain about how to provide new
models of care
Can the core provide 24/7 AE without providing
24/7 Emergency Surgery?
1
What level of Critical Care is required at the
core?
2
If a core has maternity care, can neonatal care
be provided without inpatient paediatrics?
3
Can the core have a Paediatric Assessment Unit
without providing paediatric inpatient care?
4
18
Example although most international examples
offer PAU with Paediatric Inpatient units, there
are U.K. examples of stand alone PAUs
4
Common characteristics
Site E

• Paediatric area in AE department (AE staff)
• No Paediatrics Inpatient on-site, all patients
  transferred if necessary to Heartland (7 miles)

• Upfront triage (e.g., centralised emergency
  number, ambulance protocols)
• Ability to stabilise before transferring to
  closest site offering Paediatric Inpatient or
  more specialised care
• Relatively short distances (lt15 min in blue light
  transport)
• Close network arrangements (e.g., receiving site
  has to accept incoming transfer)

Site F

• PAU on-site (plan to reduce service to 12hr),
  with four overnight observation beds
• No Paediatrics Inpatient, all children requiring
  inpatient treatment transferred to Lister (13
  miles)
• St Johns ambulances commissioned to ensure
  timely transfer of children

Site G

• Children AE 24/7
• PAU with 28 beds for up to 48h
• No traditional paediatrics inpatient, all
  inpatient paediatric cases transferred to Royal
  London (3m)

Source Interviews
19
Requirements for a successful network

• Successful routing of patients across and within
  sites
• Clearly defined, effective triage at AE
• Clear criteria for ambulance service
• Senior decision making needed upfront

• Cover across sites
• Must provide on-call cover across sites
• Contracts tied to network (not single site)
• Rotas for exposure to Major Acute to attract
  staff
• Reasonable travelling distance for safe transfers

• Ability to accept patients
• Commissioning is critical
• Patients of lower acuity should be moved to
  accommodate more urgent cases if required
• This must be reflected in commissioning contracts

Network

• Transfer protocols
• Clearly defined protocols
• Accepted by ambulance service and enforced
• Commissioning must ensure patients in hospital
  are not de-prioritised

20
There are six places to look in response to the
financial challenges
1

• Clinical areas redesigning models of care
• Clinical areas operational improvements
• Non-clinical costs
• Fixed costs
• Income (clinical, research/teaching, other)
• Vertical integration

2
3
4
5
6
21
Agenda
Animation

• Staring into the abyss?
• The clinical and financial challenge for local
  hospitals

• Glad tidings
• Three reasons for hope

• Squaring the circle
• Approaches for planning a sustainable future

• Getting going
• Experience of launching transformation efforts

22
Six thoughts on how to start driving changes

• Make a major commitment as a top team
• Develop a compelling change story given clinical,
  research and specialist priorities
• Decide how to harness front line staffs passion
  and intellectual horsepower
• Ensure clear accountability for operational
  performance
• Bring the best of XXXXX to every patient every
  time by identifying and standardising best
  practices
• Monitor and publish information on natural
  teams to manage and improve performance

23
Parting thoughts

• Clinical sustainability needs to come first
• Hospitals can be right-sized
• Fixed costs do not need to be fixed
• Variable costs do not need to be variable
• There are six places to look for financial
  sustainability improvements
• Change needs to be led

24
Sustainable small(er) hospitalsUK and
international lessons
Tim Ward, Associate Principal, McKinsey Company
New Roles for Small Hospitals
8 July 2009
CONFIDENTIAL AND PROPRIETARY Any use of this
material without specific permission of McKinsey
Company is strictly prohibited