Identifying, Categorizing, and Evaluating Healthcare Efficiency Measures

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Identifying, Categorizing, and Evaluating
Healthcare Efficiency Measures

• Elizabeth A. McGlynn, Ph.D.
• Associate Director, RAND Health
• September 28, 2007

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The Work Was Done by A Multidisciplinary Team

• Peter Hussey
• John Romley
• Han de Vries
• Margaret Wang
• Paul Shekelle
• Dana Goldman
• Martha Timmer
• Susan Chen
• Jason Carter
• Carlo Tringale

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Overview of Talk

• Highlight motivation for current work
• Present RANDs typology
• Review existing measures
• Examples
• Concluding thoughts

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Many Fortune 50 Companies Are Demanding Cost and
Quality Metrics on Physicians
Efficient
Effective
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Purchasers Are Using Efficiency Metrics In
Several Ways

• Public reporting information to help consumers
  make more cost-conscious decisions
• Pay-for-performance financial rewards to
  providers with better performance
• Tiering differential co-payments to encourage
  patients to choose higher performing providers
• Selective contracting contracts limited to
  providers who perform at a certain level

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But

• Little is known about what various stakeholders
  mean by efficiency
• Considerable lack of common language, conceptual
  clarity
• Link between content of metrics and proposed
  applications not always thought through
• Little is known about the consequences (intended
  and unintended) of applying available metrics at
  different levels in the system
• Can measures developed for one level (health
  plan) be applied at a different level (physician)?

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Overview of Talk

• Highlight motivation for current work
• Present RANDs typology
• Review existing measures
• Examples
• Concluding thoughts

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Definition of Efficiency Measure

• The relationship between a specific product of
  the health care system (output) and the resources
  used to create that product (inputs)
• Maximize output produced for a given input
• Minimize inputs used for a given output

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Efficiency Measures Typology Overview
Typology is organized in three tiers
Who is asking what about whom, and why?
1. Perspective
2. Output(s)
What is being produced?
3. Inputs
What resources are used to produce the output?
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Perspective

• We identify several potential points of view
• Health care firms
• Physicians
• Hospitals
• Nursing homes
• Agents
• Health plans
• Employers
• Individuals
• Society

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Context Matters in Efficiency Measurement
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Use of Information Varies With Perspective

• Health care firms can change the way the outputs
  are produced
• Amount and/or mix of inputs
• Service amenities associated with a product
• Agents can principally change how much is paid,
  the conditions under which the product is
  purchased, or how the product is bundled
• Individuals can principally change what they buy
  and from whom

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Output Whats Being Produced?

• We define two major categories of outputs
• Health services
• Health outcomes
• Being explicit about the output is critical (and
  often not done)
• Producers tend to define outputs
• Financial flows (how the product is purchased)
  influence definitions, for example
• Hospital day vs. a discharge
• Quality adjusted life year vs. a covered life

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Examples of Outputs by Type
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Inputs

• We identify two main ways of measuring inputs
• Physical
• Financial
• These map to the economic definitions of
  technical (physical) and productive (financial)
  efficiency

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Technical and Productive Efficiency
MeasuresPoint to Different Root Causes of
(In)Efficiency

• Technical Efficiency

Productive Efficiency
Inputs are put to good use
Inputs are put to good use

Best mix of inputs chosen

Lowest prices are paid
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Social Efficiency

• Social efficiency is achieved when no member of
  society can be made better off without making
  another member worse off
• Giving more resources to one person implies that
  those resources have been taken away from someone
  else
• Appeal of waste is the notion that those
  resources do not benefit anyone currently

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RANDs Efficiency Typology
Society
Health Care Firms
Perspective
Health Plans
Providers
Purchasers
Individuals
Health Outcomes
Health Services
Output
Input
Physical
Financial
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Overview of Talk

• Highlight motivation for current work
• Present RANDs typology
• Review existing measures
• Examples
• Concluding thoughts

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Identifying Existing Efficiency Measures

• Peer-reviewed literature
• Medline and EconLit search 1990-2005
• Titles, abstracts, and articles reviewed by 2
  independent reviewers consensus resolution
• Excluded non-U.S. studies
• Gray literature review
• Purposive, reputational sampling
• 8 vendors identified reviewed

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Overview of Article Flow
Titles (n4,324)
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Measures in Literature Dominated by Hospital
Perspective Service Outputs
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40 Different Physical Inputs Identified in Peer
Reviewed Literature

• Physician labor number of physicians (usually
  FTEs) or hours worked
• Nursing labor number of nurses (usually FTEs)
  or hours worked
• Administrative, technical, or other labor
  categories number of personnel (usually FTEs)
  or hours worked
• Beds the most common indicator of capital stock
• Depreciation of assets - a measure of capital,
  calculated in various ways

Financial inputs appear almost as often as
physical inputs
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No measures using health services as outputs
explicitly incorporated a measurement of
qualityMethods for incorporating or accounting
for quality are not well developed in peer
reviewed literature
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Different Worlds of Efficiency Measures

• There is an almost total separation between the
  published studies of health care efficiency and
  the use of efficiency measures by providers,
  payers, and purchasers
• Academic measures focus on multiple input/output
  models
• Vendor measures focus on specifying outputs
• Purchasers and health plans are generally using
  measures developed by vendors
• Little independent testing of reliability and
  validity has been reported on these metrics

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Vendor-Developed Measures

• Episode-based ETGs, MEGs, CCGs
• Claims aggregated into clinically-defined
  episodes and attributed to different entities
• Measure is cost per episode (productive
  efficiency)
• Also can look at resource use per episode
  (technical efficiency)

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Vendor-Developed Measures

• Population-based ACGs, DxCGs, CRGs, RRU, PPMS
• Patient populations weighted by morbidity burden
• Measure is cost per risk-adjusted patient per
  year (productive efficiency)
• Also can look at resource use (technical
  efficiency)

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Overview of Talk

• Highlight motivation for current work
• Present RANDs typology
• Review existing measures
• Examples
• Concluding thoughts

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Some Examples of Efficiency Measures
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Measures We Wouldnt Classify as Efficiency
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We Asked What the Evidence Was Regarding Whether
the Measure Was

• Important
• Scientifically sound
• Feasible
• Actionable

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Summary of Findings
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Overview of Talk

• Highlight motivation for current work
• Present RANDs typology
• Review existing measures
• Examples
• Concluding thoughts

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Conclusion

• Disconnect between academic world and vendors on
  efficiency measurement offers opportunity
• Although steps have been taken to achieve
  consensus among stakeholders, more work needs to
  be done
• Typology can assist in structuring more explicit
  discussions about key issues
• Scientific soundness of both academic and
  vendor-developed measures is largely unknown
• Ability of potential users to act on the results
  of these measures is not well understood

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Some Priorities for the Future

• Be explicit about the perspective, output, and
  inputs used in measure
• Whats the purpose, approach?
• Develop measures to fill important gaps
• When is it most important to incorporate quality
  measures?
• Measures that use health outcomes as outputs
• Measures for units of analysis other than
  hospital
• Evaluate whether efficiency measures are
  scientifically sound, feasible, actionable

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