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The Quarterly


Margaret Tobin Challenge Presentation 2011 Print E-mail
The Quarterly 2011


How Value, Quality and the Patient Journey Intersect:
Lessons from a MS Excel© Spreadsheet


My presentation today concerns the link between value, quality and the patient's journey through the health system, and how this link can be shown by the examination of financial data on an Excel spreadsheet applying a clinical perspective. I will begin by briefly discussing the concepts of value and quality, and then describe a redesign project concerning pathology invoice management conducted at Royal North Shore Hospital (RNSH), describe the findings of that study, and the results after implementation.

What is Value and Quality in Healthcare?

Professor Michael Porter, the Bishop William Lawrence University Professor at Harvard Business School is best known for his development of the five forces competition theory and competitive strategy. Since 2001 he has turned his attention to healthcare publishing Redefining Health Care: Creating Value-Based Competition on Results in 2006 (1). In this book he defines value as "good health outcomes per dollar spent", and proposes that value encompasses less complications, less unnecessary interventions and therefore better quality. In other words, rather than the zero sum game of cutting services to control costs and therefore provide "value", he argues that providing better care with less complications and unnecessary interventions is actually more cost effective over the entire episode of care. Intuitively most clinicians know this, but have we ever seen this in action?

When it comes to quality Porter points out that patients and doctors use different parameters to judge what quality in healthcare is. Risk adjusted outcomes, patient satisfaction, disease free intervals, mortality, length of stay, repeat surgeries and infection rates are all measures we are familiar with. These multiple parameters also tell us that quality is hard to define and mean different things to different stakeholders in the healthcare system.

What then is quality healthcare? The Institute for Healthcare Innovation (IHI) states that high quality care should be safe, effective, timely, patient centred, efficient and equitable (2). So we know quality healthcare when we see it, even if it is hard to define and means different things to different people.

The Redesign Project at RNSH

Moving now to my redesign project, I investigated the process of pathology test ordering at RNSH. The project was commissioned after a KPMG initial review in July 2010 identified billing for tests without item (descriptor) numbers, invalid tests, sample charges (collection fees) and items older than two years found on monthly invoices. A full 22 week project was commissioned and was completed in February 2011. The project entailed a diagnostic phase, solution design and an implementation phase.

Five major areas of concern were identified:

  1. Invoice generation and management,
  2. High cost tests,
  3. Bundles of (unnecessary) tests,
  4. Point of care testing, and
  5. Inappropriate routine testing

High costs tests included genetic tests often greater than $350 per test. Bundling of tests such as cholesterol routinely added on to liver function tests was also identified. Point of care testing such as blood gas machines at the bedside operated by hospital staff but still generating collection fees, and repeated routine testing of baseline tests were identified.

To put the overall problem into context RNSH spends over $1.6 million per month on Pathology.

Through the Looking Glass

I began looking closely at invoice generation and management, and this is where, like Alice in Wonderland I entered another world. Passing through the pathology looking glass I found a world of Excel spreadsheets, pivot tables, MBS numbers, rules, cones, and billing engines. I found services without numbers, numbers without services, and a very troublesome kestrel (apologies to Lewis Carroll and the flamingo) I needed to become very very small indeed to deal with multitudes of very small bits of information contained within spreadsheets.

Through the looking glass I discovered the "invoice merry-go-round". Curiously when an Excel spreadsheet was placed upon it, it returned as an invoice with almost twice as many entries and charges.

The monthly spreadsheet downloaded from the pathology database Auslab would pass through the kestrel billing engine to head office, from there to the Ministry of Health where a consolidated invoice would be allocated back through the cluster organisation and local health network and back to the hospital, where our budget would be "adjusted". And so the cycle would continue...

For example, in May 2010 the Auslab database dump consisted of 36020 lines. On its return it now had 65404 lines with unidentified item numbers, items older than two years, and collection fees added; curiouser and curiouser!

So I began to sort the 65,000 line items by the usual suspects.

Sorting of tests by the usual suspects

Sorting tests by item numbers identified potentially $3.6M of unknown services and blood products billed each year. Sorting tests by request number (request slip) identified collection fees of $3M per annum, $600,000 associated with blood gas machines alone. Remember that hospital staff performs the collecting for bedside tests. Sorting by doctor revealed bundling of HDL and Chol with LFTs costing around $100,000 per annum. Sorting tests by costs revealed genetic tests and especially overseas "sendaways", amounting to $280,000 per annum. Work in all these areas would generate significant savings for the organisation

But no one had ever thought to sort tests by patient. What if we did sort tests by patient, a patient centred approach? What would we find?

I will present three examples. In the first (Figure 2) the patient presented with a closed head injury and after routine tests in the emergency department was transferred to the ICU under the care of a neurosurgeon. There all tests were repeated, and repeated again with a further 5 ABGs within one day. On transfer to the Neurosurgical step down, all tests were repeated twice during the next day. On the final day all tests were done again. Most of these tests were routine and of low cost (UEC, LFT, Hb). Not performing one single panel of these tests would save $74. If every patient had one less panel of these tests performed, extrapolated across 35,000 separations per year, this equates to $2.625M per year. The cost of routine tests across a system is very high.

In another example a surgical patient underwent surgery with tissue removal and had follow up daily Hb, UEC and LFTs. On day 10 post operative, the patient went to ICU where a further 35 tests were conducted in one day. This equates to around 225ml of blood, or one unit of packed cells. The use of bedside testing, particularly in ICU, allows blood to be easily taken for routine results that can often be gained by other means such as pulse oximetry. This case demonstrates what we often hear anecdotally, that sometimes we bleed patients enough to require transfusion.

A third case demonstrated how two doctors, one the admitting consultant and the other the ED consultant, ordered the same tests on the same patient at the same time on the same day. There was no system that warned the doctor that a test had not already been taken, nor presumably was any thought given by the requesting doctor to check.

Sorting invoices by patient therefore revealed duplication of tests under repeatable circumstances;

• when two or more senior doctors were involved in care,
• when patients moved from one area of a hospital to another,
• when routine tests were done "just in case"

At the commencement of the project we were largely concerned regarding high cost tests, but it was in fact the ordering of low cost tests frequently that had the greatest cost implications. High volume generates significant costs. Conversely a small change in behaviour could then be expected to generate significant reductions in cost, and better quality by ordering less unnecessary interventions.

How did Pathology ordering stack up against IHI criteria?

Our ordering practices are generally safe, but not if you bleed a patient enough to require transfusion. Our practices are not effective if we order tests we don’t use such as bundling HDL/Chol with every LFT. If by timely you mean performing a test when the patient needs it, we also fail on that criterion. We order tests at a time that suits us, such as moving between departments. Nor can our practices be patient centred if we order tests at our own convenience, rather than required by patient need. If efficiency is defined as maximum use for minimum cost then we do the reverse, by maximising both use and cost. But finally equitable, and we do treat patients equitably by testing everyone just as often as we can!


As the project was coming to its conclusion we started having conversations with medical staff regarding pathology ordering, including presentations at orientation sessions and at other medical staff meetings. In addition electronic pathology ordering that was scheduled for introduction in July 2011 had messages placed within it to remind staff when tests had already been ordered within a certain time frame (Figure 3). And finally high cost genetic testing came under the control of a committee structure chaired by the Director of Medical Sservices.

The results have been clear. Before the completion of the project pathology costs had generally been higher month by month, than the year before. After March 2011 costs have been uniformly less month on month than the year before (Figure 4)

Overall there has been a saving of $1,882,000 since project completion and we expect a sustainable saving of $100,000 going forward.

Project Learnings

Firstly to quote the Captain in "Cool Hand Luke" (Warner Bros 1967), "what we have here is failure to communicate". I discovered very late in my project that two other projects were independently looking at Pathology from financial perspectives. We all agreed that we had a high cost, inefficient service from the hospitals perspective. For me, as a clinician, this validated the approach of casting a clinical eye over financial invoices to arrive at financially sensible conclusions. The development of patient focused financial analysis is now on my "to do" list, as well as looking at radiology billings in the same way.


In this presentation I have clearly demonstrated how an Excel spreadsheet can be used to follow a patient and their clinical management within a hospital through sorting "by patient", and not using the usual financial suspects.

Following the patient’s journey in this way demonstrates clearly Porter’s value proposition in health, in particular demonstrating unnecessary or repeated interventions. Duplication of tests, multiple tests and inappropriate tests are neither safe, effective, patient centred nor efficient

Patient centred analysis of financial data does provide valuable insight that has practical application in the management of systems. As clinicians we should understand that while financial analysis is important, viewing information from the patient’s perspective is equally as valuable in the management of health systems.

Dr Glen Farrow
RACMA Candidate

1."Redefining Health Care" Porter and Teisberg, 2006. ISBN 1-59139-778-2
2.Institute for Healthcare Innovation, http://www.ihi.org

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