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A Business Case for Health Care Quality
A Business Case for Health Care Quality: Initiatives Saves Lives and Dollars
Society of Actuaries Study of Michigan Hospitals Links Quality and Costs
Farmington Hills, MI,–Does quality pay for hospitals with a strong quality improvement program? A Society of Actuaries-sponsored study of five Southeast Michigan hospitals showed on average, the payback periods for investment in quality ranged from 0.1 to 3.3 months.
"Linking Quality and Costs: An Analysis of the Hospital Quality Information Initiatives Measure," is the title of an SOA–sponsored study conducted by MPRO, Michigan's Quality Improvement Organization. As part of this study, MPRO worked with participating hospitals to collect financial data and carefully assess the costs and benefits of implementing quality improvement initiatives. Financial models were developed to account for the development, transition and operations costs of implementing interventions along with the resulting revenue and savings. The MPRO methodology for assessing the return on investment made certain operational and market assumptions and calculated the payback period for the quality initiative.
"Only benefits that could be assigned a monetary value were taken into account in the payback period calculation and there were variations across hospitals in terms of physical characteristics," said Canopy Roychoudhury, PhD, director of statistical analysis at MPRO.
Interventions targeted in this study were related to the clinical area of surgical infection prevention (SIP) which has importance from a patient safety standpoint. The medium to large–sized participating hospitals provided costs and revenue information of implementing quality improvement intervention in their facilities and MPRO retrospectively calculated their payback periods. SIP involves administering prophylactic antibiotics within one hour before surgical incision and discontinuing antibiotics within 24 hours of surgery. SIP was introduced as a national clinical topic by the Centers for Medicare & Medicaid Services in 2002 to decrease morbidity and mortality associated with post–operative infection.
In Michigan, data indicates that each surgical site infection is estimated to increase a hospital stay by an average of seven days and adds more than $3,000 in charges. Patients who develop surgical site infections are 60% more likely to spend time in an intensive care unit, five times more likely to be re–admitted and have twice the incidence of mortality.
Each hospital sustained minimal costs to develop, transition and implement proposed SIP interventions, leading to more efficient use of staff time and lower pharmacy bills.
Quality in medical care has become a hot topic for health insurers, providers and the general public. "Health actuaries increasingly need to be involved in forecasting quality improvement and monitoring it as well," said Steve Siegel, research actuary, SOA. "This study will help actuaries and other health professionals to further understand the financial impact of these programs."
About MPRO: MPRO is a recognized leader in health care quality improvement, utilization review, data analysis, research, clinical outreach and consumer education. A non–profit organization, MPRO works with federal and state agencies, private industry, managed care organizations, health care networks, providers, purchasers and employer groups to improve the quality of health care.
About SOA: The Society of Actuaries is an educational, research and professional organization dedicated to serving the public and its 17,000 members. The SOA's vision is for actuaries – business professionals who analyze the financial consequence of risk – to be recognized as the leading professionals in the modeling and management of financial risk and contingent events. The SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems involving uncertain future events.
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