Question

Case Study 2

Seattle General Hospital (SGH) is committed to quality care and patient safety. Since its founding in 1895, SGH has been at the forefront of patient safety and care quality. When founder Dr. John Nelsen arrived in Seattle more than a century ago, he quickly discovered there were no hospitals that lived up to his standards for care quality and sterile technique. And so he created one. Dr. Nelsen's legacy and leadership live on today at SGH, where its highest priority continues to be on quality and safety for every patient. Since its founding more than 100 years ago, SGH has grown into one of the largest, most comprehensive medical systems in the Pacific Northwest. Yet, it continues to pursue its mission to improve the health and well-being of every patient who walks in the door at any one of its campuses. SGH’s vision is to prove its commitment to the highest quality, best-value care. Although SGH operates in a market with a diverse payor mix, it has seen its revenue shrink. Over the past two years, the financial performance of hospitals and health systems in the United States become significantly worse. This deterioration is striking because it is occurring at the top of an economic cycle with, as yet, no impact of cutbacks in funding from the Republican Congress. Financial economists have posited that the root cause for this deterioration is twofold: a mismatch between organizations’ strategies and actual market demand, and a lack of operational discipline. To be financially sustainable, it has become imperative for hospitals and health systems to revamp their strategies and ensure that their investments in alternative payment methodologies and physician employees generate steady returns. For the past decade, hospital and health-system leaders have adopted strategies to achieve economies of scale in regional markets through mergers and acquisitions, to hire medical staffs as employees, and to assume greater financial risk in payor contracts and health plans. In the past 18 months, the bill for this strategy has come due, posing serious financial challenges for many leading U.S. health systems. Valley View Cancer Center lost $225 million on operations in FY 2016 and another $350 million in FY 2017. The prestigious Hartford Hospital in New Brunswick lost $128 million on operations in FY 2016, its second operating loss in four years. The Holy Names Clinic suffered a 74% decline in its operating income in FY 2017. While some of these financial problems can be attributed to suboptimal IT implementations or losses suffered by certain types of health plans, all share one thing in common: operating expenses grew at a much faster rate than growth in revenues. Although the expansion of coverage facilitated by the Affordable Care Act provided a modest boost in inpatient admissions, hospitals have steadily seen hospital admissions decline. At the same time, hospitals have been unsuccessful in setting prices that mirror the rate of inflation. Revenues from private payors have been insufficient to offset the reductions in Medicare payments resulting from the ACA and federal budget sequestration initiated in 2012. Many hospitals and health systems attempted to gain market share at the expense of competitors by deeply discounting their rates for new “narrow network” health plans targeted at public and private health exchanges, but enrollments have fallen significant short of expectations.

The main cause of the operating losses, however, has been organizations’ lack of discipline in managing the size of their workforces, which account for approximately half of all hospital expenses. Despite declining inpatient demand and modest outpatient growth, hospitals have added 540,000 workers in the past decade.

SGH currently offers an acute postoperative pain management service through a privatelyowned pain management practice for patients who need nerve catheters to manage pain following total knee replacements. SGH performs in excess of 3,000 procedures annually. The pain service consists of physicians and advanced registered nurse practitioners (ARNP). The MDs are tasked with post-operative catheter placement; post-procedure pain management is done by the MDs or ARNPs. This service requires MDs/ARNPs to check-in with patients on a daily basis until the catheter is removed, although at the time of discharge, patients are given a phone number to an on-call MD who is available 24x7. On average, the catheter is removed on PostOp Day (POD) 4. However, there are patients who require the catheter through POD 6. The average time it takes to check in with one patient is 5 minutes, assuming the patient is available when the MD/ARNP calls. 90% of the calls are routine and do not require any intervention.

The Chief Operating Office has asked you to prepare perform an exhaustive analysis of whether the current pain management service is the most cost-effective. During this analysis, you discover that the pain service scheduling seems inefficient. MDs are often not utilized for significant parts of the afternoon but must stay on the clock until the last knee replacement procedure of the day is completed.

In a casual hallway conversation, you learn about a cloud-based mobile application that SGH has successfully used to reduce the number of colorectal surgery cancellations by implementing a workflow that proactively guides this patient population through the preoperative preparation. You immediately schedule a demo of the app to assess its usability for pain management. A preliminary evaluation of the app indicates that there is significant potential to develop a workflow for pain management. The one-time set up cost is $57,500; there is also an annual licensing fee of $5,000 and a cost of $25 per patient who is enrolled in this program.

You now need to propose the different alternatives that the SGH executive leadership should consider in an attempt to make its pain service cost-effective. The COO also wants your reccomendation.

Answer 1

In order to make the pain service cost-effective, the following alternatives may be taken into consideration:

• Option 1: Integrating a cloud-based application to intimate the doctors about their requirement. The doctors will be available post requirement only.
• Option 2: Having a doctor and a nurse work in shifts for the pain service, so that every time a doctor and a nurse are available in the department
• Option 3: Divide of work with junior doctors taking the routine cases and the specialist doctor called only for critical cases

I would recommend the integration of Options 1 and 3 be integrated so as to make pain service cost efficient. This way, the overall hospital process will get optimized and optimization in business processes will lead to cost effectiveness. The junior doctors are paid quite less than the senior doctors and so they can be made available on requirement basis. Only in need of a critical case, would a senior doctor be involved. Also the hospital management will be kept in sync through the mobile application, through which they can keep a track of appointments and the nature of cases.