Accountable Care Organizations: Part 2
In the first part of this three-part series, we explored the constraints and opportunities during the healthcare sector’s transition to accountable care organizations (ACOs). At a global level, we concluded that there are two fundamental strategies that appear to be keys to the success of future ACOs: bringing health to the populace and capitalizing on the possibilities inherent to active living principles in designing the physical setting of the continuum of care.
In the extremely quick pace in which events are changing in the contemporary healthcare landscape, there now appear to be concerns that the ACO model may not attract a significant number of providers. However, it is also generally acknowledged that irrespective of the direction the healthcare sector adopts, the only solution to the problem is to reduce the cost of healthcare. The status quo is unsustainable. Thus, while the title of this article may suggest an ACO-specific discussion, it is in essence regarding the core issue plaguing contemporary American healthcare—healthcare cost. How should the physical environment be viewed in this new context of care?
This second part focuses on the acute care setting, which constitutes the most expensive segment of the continuum of care, and is not expected to diminish in role or scope, as argued in the first part of this series.
It is commonly agreed that the money available for providing care will diminish, due to numerous factors. As a result, cost control and reduction will constitute one of the key areas of focus in maintaining profitability, or financial viability. The capital costs of procuring healthcare facilities will (and already has) come under increasing scrutiny. A frequent inclination will be (and already is) to tighten the built facilities, where the primary focus will be on reducing the area of programmatic spaces as much as possible. Note that the emphasis here is on economizing, not on optimizing.
The key question in this context is whether economizing on programmatic areas will optimize healthcare cost reduction. While it is obvious that economizing on the built-up areas will reduce the capital (first) cost of delivering a hospital facility, we now explore how that may not be the best strategy for healthcare providers to reduce cost.
One perspective to view the strategy of economizing programmatic areas is the proportion of total cost of operation over the lifespan of a hospital that constitutes the cost of delivering it. According to estimates, 6% of the cost of an acute care hospital over its economic life is facility costs. Thereby, even if a 10% reduction in facility (first) cost is achieved, it may not translate to a tangible reduction in the cost of a hospital over its economic lifespan. In contrast, 45% of the cost is attributed to labor and 27% to other expenses—a combined total of 72% of the total cost over the economic lifespan.
This 72% includes inefficiencies, errors, and other costs that are typically addressed through process and policy interventions, where the physical environment can play a significant role in contributing to cost reductions. The choice, thus, towards the ultimate goal of reducing cost of care is between reducing a portion of the 6% first cost through programmatic economization as opposed to developing cost reduction strategies aimed at reducing portions of the 72%.
Two major issues affecting cost of care are efficiency and efficacy. Efficiency simply represents the amount of time and resources employed for a care task. For example, waste of time or resources represents a significant drag on efficiency. If the same care task can be delivered more efficiently, there will be a reduction in the cost of care.
For this discussion, I am using an expanded framework for efficacy to include medical errors, hospital-acquired conditions (HAC), and such sought-after phenomena as teamwork and innovations. The Centers for Medicare & Medicaid Services (CMS) has stopped reimbursing for certain HACs since 2008. Thus, HACs now represent a direct hit on an organization’s bottom line.
It is common knowledge that such events as falls, infections, medication errors, and so forth typically require considerable cost to rectify. On a different note, teamwork and innovations are highly sought-after phenomena in healthcare, since their impact on improved care quality and efficacy is established in literature. If more effective care can be delivered without errors and HACs, the cost of care delivery can be reduced significantly.
Interventions for cost reduction in all of these domains already are being targeted by healthcare providers. Why should the physical design be any part of this discussion? In essence, the physical environment is important since it influences all areas associated with healthcare cost reduction:
- The physical environment directly affects operational flexibility. It is rarely neutral in its influence on operations and can result in sub-optimal care models and workarounds.
- The physical environment can create such wasteful use of clinicians’ time as unnecessary walking, and hunting and gathering.
- The physical environment influences such HACs as patient falls.
- The physical environment has a direct influence on airborne and contact infections.
- Attributes of the physical environment such as type of standardization, noise, and lighting affect process errors.
- The physical environment has a key role in promoting, facilitating, and supporting teamwork and innovations.
This list represents just the starting point to explore the potentials. These articulations of the role of the physical design do not imply in any manner that treatment interventions, process design, operational policies and philosophies, and organizational culture are secondary. Rather, the contention is that if addressed together, treatment, people, processes, cultures, and the physical environment have a significantly better chance of reducing healthcare cost, because they interact in meaningful ways. On the contrary, eliminating physical environment from the above strategy (with a primary focus on economizing programmatic areas) may actually impede the process of healthcare cost reduction.
There is evidence in the literature that pertains to the role of the physical design in optimizing efficiencies and efficacies. However, in the “fee-for-service” model in a booming economy and a liberal reimbursement climate over the past decades, the physical environment witnessed greater instrumental applications in the visual attributes of public access areas.
In an era when the cost of care delivery will be the most vital component determining financial viability and savings, the role of the physical environment in optimizing care efficiency and efficacy will assume an unprecedented level of criticality. Not capitalizing on the opportunities offered by the design of the care setting will represent a
missed opportunity at the very least, and may adversely affect cost-reduction strategies. That is because the physical design is a part of a set of extremely complex systems that interface and interact in complex ways.
Choosing the optimization route as opposed to economizing the physical design (programmatic area or square footage) does not necessarily mean that all options for reducing the first (capital) cost are surrendered. Experienced professionals can offer a host of strategies to reduce first cost while optimizing the design of care settings. Such strategies include decisions made during the design and construction phases.
Simple shapes, consolidated platforms, swing space use, shared supported spaces, and thoughtful adjacencies are samples of design strategies that can reduce first cost without compromising performance. Efficient execution can also render significant reductions in first cost, and available strategies are numerous. It is not the intent of this article to elaborate on these areas in detail—such strategies form the subject matter of a separate discussion.
While examining cost-cutting measures will continue into the future, procuring hospitals in the new healthcare climate will include at least three major areas of emphasis: flexibility and adaptability, communication, and ambulation.
Flexibility. If flexibility is important today, it will be critical to hospital operations in the future. Reducing cost of care through optimizing efficiency and efficacy will entail continuous process improvements and innovations. Since the physical design can impede processes, it will be crucial to ensure that the design of future healthcare settings allows continuous adoption of improved processes. This could be achieved through no change to the physical environment (adaptability) or nominal investment of time and money (convertibility). Achieving flexibility (adaptability or convertibility) may not be compatible with the economizing strategy.
Communication. Interdepartmental communication and communication among clients, consultants, and contractors will be vital to the success of healthcare projects. Communication is important today, but will be significantly more important in the future, since the stakes will be higher. Data from a recent CADRE study suggest that one of the main reasons for not achieving high operational flexibility in new inpatient units is the communication gap that exists among stakeholders in operations, information systems, human resources, and finance.
This communication should not only occur during the design phase, but before the architectural consultant is hired and after the facility is occupied. Furthermore, better communication between consultant and contractor organizations could result in improved construction efficiency and reduction in construction wastes. Hospitals in the new era may explore and experiment more in new delivery models, such as integrated project delivery (IPD) using advanced informational platforms such as building information models (BIM).
Ambulation. In the first part of this series, we explored how the principles of active living are synergetic with the goals of future provider organizations, and can influence the design of healthcare settings. Zooming into an acute care hospital using that lens, it only makes sense that acute care spaces should be designed to promote greater patient ambulation.
In contrast, current planning and design (including furniture choices) assume a patient is static on the hospital bed. A greater degree of ambulation makes sense since it is associated with faster recovery and, hence, shorter lengths of stay and greater savings. Migrating from a “static-patient” model of care (for most patients) to one focused on promoting patient ambulation could lead to novel design concepts that may drastically change the look and feel of future hospitals.
To summarize, the new healthcare climate will push flexibility, communication, and ambulation into the front-tier issues of design decision-making. Acute care hospitals may reduce in size. However, changes to programmatic areas will (and should) occur as a result of an optimization strategy as opposed to economizing. This appears to be the best way to target healthcare cost reduction and savings.
See the following link for Part 1 of this series: http://www.healthcaredesignmagazine.com/article/accountable-care-organizations