Health Policy 95 (2010) 137–143 Contents lists available at ScienceDirect Health Policy journa l homepage: www.e lsev ier .com/ locate /hea l thpol Disinve s to healthc Sabina N Laboratorio Ma 33, 5612 a r t i c l Keywords: Health prioriti Benchmarking Efficiency Health resourc g servi e aim ly on h 07 data impact on the level of resources used. For each indicator, the first step was to estimate the gap between the performance of each Health Authority (HA) and the best performance or the regional average. The second step was to measure this gap in terms of financial value. The results of the analysis demonstrated that, at the regional level, 2–7% of the healthcare budget can be re-allocated if all the institutions achieve the regional average or the best 1. Introdu Resourc require hea constrained ethical prin ness” throu argue for a opposed to The typ gets based o lead to sub- approaches tematic and [2,3] even i ∗ Correspon E-mail add 0168-8510/$ – doi:10.1016/j.practice. The implicationsof this studycanbeuseful forpolicymakersand theHAtopmanagement. In the context of resource scarcity, it allows managers to identify the areas where the institutions can achieve a higher level of efficiency without negative effects on quality of care and instead re-allocate resources toward services with more value for patients. © 2009 Elsevier Ireland Ltd. All rights reserved. ction e scarcity and increasing demand for services lth systems to cope with difficult choices within budgets. A range of concerns, ranging from ciples such as “accountability for reasonable- gh to economic goals of increasing productivity thoughtful approach that targets reductions as across-the-board cuts. ical health system approach of deriving bud- n historical spending or political pressures can optimal use of limited resources [1]. Economic can help decision makers by providing a sys- explicit way to set evidence-based priorities f they are not the sole consideration [4,5]. ding author. Tel.: +39 050883871; fax: +39 050883890. ress: snuti@sssup.it (S. Nuti). In the process of resource re-allocation, different countries have followed varying approaches for setting pri- orities at national level [6]. Since 1970s many countries have adopted the Program budgeting and marginal analysis (PBMA) in thehealth sector [4,7]. PBMAhasbeendeveloped as an attempt to rationalize the incremental budgeting approach, based on applications of opportunity cost and marginal analysis [8]. PBMA can be deployed at the micro- level (i.e. specific service areas or treatments) but also at the meso-level (Health Authorities) and the macro-level (Regional Health Systems or National Health Systems) [9]. Other budgeting and re-allocation techniques have used Health Technology Assessment techniques to guide disin- vestment decisions in ineffective treatments (e.g. guidance on disinvestment from NICE) [10,11]. This paper describes a study carried out in the Regional Health System of Tuscany, Italy. Using 2007 performance data, the study measures the impact that performance improvement could have on the amount of resources that see front matter © 2009 Elsevier Ireland Ltd. All rights reserved. healthpol.2009.11.011stment for re-allocation: A proces are uti ∗, Milena Vainieri, Anna Bonini nagement e Sanità, Scuola Superiore Sant’Anna, piazza Martiri delle Libertà e i n f o es es a b s t r a c t Resource scarcity and increasin within constrained budgets. Th the Tuscan Health System in Ita re-allocation. The analysis was based on 20identify priorities in 7 Pisa, Italy ce demand lead health systems to cope with choices of the paper is to describe the study carried out in ow to set priorities in the disinvestment process for benchmarking of the Tuscan Health System with an 138 S. Nuti et al. / Health Policy 95 (2010) 137–143 Health Authorities (HAs) and the Regional Health Sys- tem could save and re-allocate to other services. This exercise highlights the role that benchmarking best prac- tices can play in disinvestment decisions. For this study, “disinvestm withdrawin practices, p that are de tive to their resources [ service red ings achiev benchmark Perform method in h the debate vice on how models for highly desi an OECD re improving p ciency and t rising dema ing. In this s disinvestm by improvi resource ut 2. Backgro The use be very us is the wid [14]. This is (HAs) that h used inter- efforts. Du gets, Health reduce thei and existin Officers (CE rion is not rates are o cases. They have achiev approach to is no ability basis. This situ the Region mance Eval 12 Local He tals (THs) [ up of 130 in lation healt satisfaction performanc to provide opportunity The maj on the basis dards available. When there is no standard the evaluation is given on the basis of the regional mean or median. The performance assessment is divided into five classes: ry goo od per erage or per ry poo asses or th ch ind uring t propo in oth itted a eview al con gers, p s the s now vels a order tifying e was s all ted h s that the sa 2007 a ercent rmanc poor p with 07 and ty and teratu gth of on rat Likew lower ethod line ts [13 rform s, the r on 20 rces t nstru entifi tion o can be he calc HA an lation osed o alth a tion anent” in healthcare describes the processes of g health resources from existing healthcare rocedures, technologies or pharmaceuticals emed to deliver little or no health gain rela- cost, and thus, no efficient allocation or health 10]. This means that disinvestment includes uctions due to inappropriateness and sav- ed through better efficiency identified through ing (e.g. lower cost for the same output). ance benchmarking is a common improvement ospitals in Anglo-American countries. Despite that has developed in UK National Health Ser- best practices were disseminated and used as emulation, benchmarking is still considered a rable policy instrument [12]. Johnston [13] in port suggests that benchmarking is useful for erformance, particularly improvements in effi- hat it may provide a valuable way of reconciling nds for healthcare with limits on public financ- ense benchmarking could be useful as a guide to ent because it identifies where to free resources ng performance indicators with an impact on ilization. und of benchmarking as a managerial tool may eful in the Italian health sector where there espread belief that costs cannot be reduced especially true within the Health Authorities ave typically not competed with each other or regional benchmarking to guide improvement ring the evaluation of annual Regional bud- Authorities typically argue that they cannot r spending due to already constrained budgets g deficits. In fact, most of HAs Chief Executive Os) argue that the current capitation crite- linked to true population needs and that DRG ut-of-date, particularly for highly complexity typically argue that it is self-evident that they ed maximum efficiency. Without a systematic evaluating the performance of each HA, there to respond to these claims from an evidence ation has changed in the Tuscany Region, where has introduced a multidimensional Perfor- uation System (PES) to assess and monitor its alth Authorities (LHAs) and 4 Teaching Hospi- 15,16]. The PES is based on 50 measures, made dicators, organized into six dimensions: popu- h, regional policy targets, quality of care, patient , staff satisfaction, and efficiency and financial e. Each measure is benchmarked and published management, providers, and consumers the to compare the results across all organizations. ority part of indicators receives an evaluation of the international, national or regional stan- 1. ve 2. go 3. av 4. po 5. ve Cl mean for ea D agers used subm also r annu mana guide PES i HA le In quan manc acros repor ment were In the p perfo very lated in 20 quali the li in len missi [20]. with 3. M In repor of pe ence based resou Co the id tifica that (3) t each trans comp of He strucd performance; formance; performance; formance; r performance. are identified on the basis of the standard, the e median and the regional standard deviation icator. he pilot phase of PES, regional and HA top man- sed a list of indicators, some of them already er countries [17–19]. Clinical indicators were nd approved by the Region. All indicators were ed a variety of consensus exercises including an sensus conferences involving HA and regional rofessionals and consumers. The same process inclusion of new indicators each year [15]. The a central part of governance at the regional and nd is linked to CEOs’ compensation. to support regional and HAs management in the achievable level of efficiency if perfor- at the highest observed (benchmark) level HAs, a research team presented the results ere, that translate the performance improve- the system could achieve if efficiency levels me as benchmark performers. nd 2008 the overall performance (calculated as age of PES indicators with good and very good e minus the number of indicators with poor and erformance) is significantly and inversely corre- the adjusted per-capita cost (r = −0.70, p < 0.05 r = −0.58, p < 0.05 in 2008). This finding, that cost are inversely related, is consistent with re for some indicators. For example, reductions stay have not led to increases in 30-day read- es or the volume of physician visits for patients ise, shorter hospital stays have been associated post-discharge death rates [21]. ology with other European healthcare performance ], the Tuscan PES shows substantial variability ance across HAs [22]. Based on these differ- esearch team created an exploratory simulation 07 performance data to quantify the amount of hat could be saved. ction of the simulation followed four steps: (1) cation of indicators to be analyzed, (2) the iden- f the minimum and maximum improvement required to achieve benchmark performance, ulation of gaps between the performance of d the mean or best performance, and (4) the of gaps into financial terms. An advisory panel f top managers from the Regional Department nd HAs provided advice throughout the con- d analysis of the simulation. S. Nuti et al. / Health Policy 95 (2010) 137–143 139 Table 1 List of selected indicators. No. Indicators Intervention regarding 1 General practitioners expenses Primary care 2 Paediatrics expenses 3 Other services expenses 4 Pharmaceutical expenses Pharmaceuticals 5 Inappropriate hospitalization rate Hospital 6 Ave DRG 7 Pre 8 Rea 9 % H day 10 Pot 11 Abs The firs board valid research tea indicator se Indicato • Expected to concre literature ommenda • Indicators latable in The 11 i primary car resources m cators, six a (ALOS) for e interventio ceutical exp focus on the on these ind For hum potential re number of units/wards Once this in provides fo or re-alloca The abs organizatio employees (i.e. the pe there is a organize se The hosp vides an est 1 The indica than 60 and 65 when they are extent the ind builds off of work on both the use of small area varia- tions in utilization management [24,25] and ambulatory care sensitive conditions [26]. Reductions in inappropriate or avoidable hospitalizations should reduce costs and pro- vide opport than 30 day high value organized a considered e read is an hat pr ing sh e seco um a pected pothes ained ched t pothes ained ional b ble 2 he mi e hos an ho durin se an as an i ator th e appr t equiv d ALO ent au 8,29]. e thir real p o hyp een th djuste e fina iffere od for riticalrage length of stay for medical s -surgical length of stay dmission within 30 days ospitalization with LOS > 30 s Continuity ential retirees Human resources management enteeism rate t step was to select indicators. The advisory ated the criteria of selection put forward by the m and selected 11 indicators from the 130 PES t. r selection was based on the following criteria: improvement in the indicator had to be linked te and feasible actions through evidence in the or the consensus process or advisory board rec- tions. had to be expressed in Euros or easily trans- to Euros. ndicators described performance in hospitals, e, pharmaceuticals, or on continuity and human anagement (see Table 1). Among the 11 indi- re efficiency indicators: average length of stay ach medical DRGs, pre-surgical LOS for planned ns, three primary care indicators and pharma- enses (mostly linked to off-label use). They all way resources have been used. Improvements icators directly translate into potential savings. an resources management, the indicator on tirees1 shows the opportunities (in terms of employees) to re-allocate resources among /services by reducing the number of personnel. dicator has been translated in financial terms, it rward-looking statements of potential savings Th tions HA t plann Th minim be ex • Hy obt rea • Hy obt reg Ta ses: t for th medi mark becau seen indic vativ effor aroun differ [21,2 Th HA’s the tw betw HAs a Th cial d meth and ctions. enteeism rate is an indirect indicator of the nal climate. High rate of absence means that are not satisfied with their working conditions rception of equitable treatment) [23]. When high rate of absence, HAs are obliged to re- rvices with resulting extraordinary expenses. italization rate over the regional median, pro- imate of potential inappropriate care. This work tor counts the number of employees with an age of more . According to the Italian labour law clinicians could retiree 60, usually they end of working when they are 65. To this icator highlights the number of potential retirees. selected we the indicat different m Table 3): • The avera retirees). • The total absenteei • The total ization ra • The total (ALOS andunities for disinvestment. Hospital stays longer s provide an indicator of continuity of care: a is a signal that primary and hospital care is not round patients. These long lengths of stay were partially avoidable. mission rate within 30 days for similar condi- indicator of preventable hospitalizations [27]: ovided appropriate treatment and discharge ould have a lower rate of readmission. nd step was to point out, for each indicator, the nd the maximum level of improvement that can from HAs. The two hypotheses were: is 1 (minimum improvement): changes to be if all HAs with a poor and very poor performance he mean or minimum standard. is 2 (maximum improvement): changes to be if all HAs could reach the regional target or enchmark. shows the two exceptions to above hypothe- nimum and maximum improvement are equal pitalization rate and the ALOS indicators. The spitalization rate, was chosen as the bench- g the consensus indicator selection exercise hospitalization rate below the median could be ndicator of poor access. Likewise, for the ALOS e consensus exercise suggested that a conser- oach keeping the benchmark and the minimum alent because of limits on case mix adjustment S. This is a conservative approach given that thors have used more aggressive approaches d step was to estimate the gap between each erformance and the performance required by otheses. This was done by taking the difference e identified target for improvement and each d observed performance from 2007. l step was to determine the potential finan- nce under each hypothesis. The appropriate translating measures into costs has been widely ly discussed [30–34]. One-third of indicators re already valued in financial terms but where ors were not valued in financial terms, three ethods to attribute costs were applied (see ge wage that would be eliminated (potential personnel costs that would be avoided (the sm rate). excess volume of DRGs (inappropriate hospital- tes). direct costs linked to the excess use of beds readmission rates). 140 S. Nuti et al. / Health Policy 95 (2010) 137–143 Table 2 The criteria applied for each indicators in the two hypotheses. No. Interventions Hypothesis 1 Hypothesis 2 1 General practitioners expenses Regional mean Regional best performance 2 Paediatrics expenses 3 Other services expenses 4 Pharmaceutical expenses 5 Inappropriate hospitalization rate Regional med 6 Average length of stay for medical DRGs Regional mea 7 Pre-surgical length of stay Regional mea 8 Readmission within 30 days Regional mea 9 % Hospitalization with LOS > 30 days Regional mea 10 65 year 11 nal Mea Table 3 Method of val No. Interv 1 Gener 2 Paedi 3 Other 4 Pharm 5 Inapp 6 Avera DRGs 7 Pre-su 8 Readm 9 % Hos days 10 Poten 11 Absen In each number of h able inpatie depends on type of inte scenarios: 1. If the nu variable avoidabl with eac for all HA 2. If the nu ical war with a c short pe nel to ot appears 2 This cut of discussion on out that perso cut correspon (instruments, beds. ger pe ns. the nu or), st mbers lated to ance re bas e resu top H f man . Nota mstan tial saPotential retirees Over Absenteeism rate Regio uation applied to each indicators. entions Method of valorization al practitioners expenses Already expressed in costs atrics expenses services expenses aceutical expenses ropriate hospitalization rate DRGs fares ge length of stay for medical Use of direct costs linked to the number of beds that can be re-allocated rgical length of stay ission within 30 days pitalization with LOS > 30 tial retirees No. of potential lon cia 3. If flo nu re ten we Th to all part o group circu potenretirees × average wage teeism rate Absenteeism rate × total personnel costs case, direct avoidable costs related to the ospital beds derives from the number of avoid- nt bed days. The amount of resources saved the number of beds and on the basis of the rvention that can be planned based on three mber of beds is lower than 12,2 only some costs (laundry, food, pharmaceuticals, etc.) are e. In this case, the financial value associated h inpatient bed day is a fixed amount of D40 s. mber of beds is some multiple of 12 (a typ- d), reorganization of personnel is possible, onsequent additional reduction in costs. In a riod of time the opportunity to move person- her services, including community-based care, to be feasible especially for nurses, while over f was identified by the top managers of HAs involved in the the basis of their health information system. They pointed nnel can be moved across the units/wards when the activity ds to a number of beds equal to 12, while other resources space, etc. and other fixed costs) could drop reaching 30 4. Results Table 4 of the 2007 allocated if or the best sum of all t considering It is imp would be m realized ove allocated to performanc the continu hospital sta At local tial savings efficient bu example, Fi improveme than 9% of s An inter could prov ventions. E interventio ment. The ventions is on local st allocated b reached Hy it appearsian Regional median n per DRGs Regional mean per DRGs n Regional target n Regional best performance n Regional target s Over 60 years n Regional best performance riods of time it may be possible to move physi- mber of beds is some multiple of 30 (a typical ructural interventions such as reduction in bed are also possible with a reduction of both costs care and fixed or overhead costs such as main- and amortization costs. All of these calculations ed on 2007 costs. lts from this exploratory study were reported A and regional managers and then reviewed as agement training courses for this management bly, this review did not identify any exceptional ces or problems that would argue against the vings. shows that at the regional level, from 2 to 7% D6.1 million healthcare budget could be re- all the institutions achieve the regional average practice. These estimates are derived from the he inefficiencies in the 11 indicators analyzed, the two hypotheses. ortant to emphasize that not all of these savings onetized immediately. Some would need to r a longer period of time and some would be re- other services in order to realize the improved e. In fact, some actions such as those regarding ity of care require cooperation of physicians, ff, and institutions in different places. level, large variation in the amount of poten- in 2007, suggest that some HAs were already t others had large room for improvement. For g. 1 shows that under Hypothesis 2 (maximum nt), HAs could re-allocate between 1% and more pending. esting finding from this simulation is that it ide a way of setting priorities among inter- ach HA can now distinguish areas where ns are possible and there is room for improve- mix of potential savings coming from inter- different from one HA to another, depending rengths. Fig. 2 shows the resources to be re- y HAs for each type of intervention, if all HAs pothesis 2 (benchmark) standard. For instance, that TH 1 should concentrate its effort on the S. Nuti et al. / Health Policy 95 (2010) 137–143 141 Table 4 Regional amount of resources to be re-allocated in the two hypotheses. No. Interventions Area of interventions Hypothesis 1 Hypothesis 2 1 General practitioners expenses Primary care D 4,415,057 D 19,882,497 2 Paediatrics expenses D 2,695,250 D 9,045,799 3 Other services expenses D 9,852,081 D 35,685,081 4 Pharmaceutical expenses Pharmaceuticals D 19,506,522 D 137,932,174 5 Inappropriate hospitalization rate Hospital D 7,185,468 D 11,294,459 6 Average length of stay for Medical DRGs D 59,844,704 D 59,844,704 7 Pre-surgical length of stay D 11,658,164 D 53,369,217 8 Readmission within 30 days Continuity D 340,477 D 6,714,571 9 % Hospitalization with LOS > 30 days D 486,397 D 536,404 10 Potential retirees Human resources management D 6,036,021 D 60,113,119 11 Absenteeism rate D 6,442,001 D 34,162,281 Total D 128,462,142 D 428,580,305 % on the regional annual budget 6.100 million of Euro 2.11% 7.03% Fig. 1. Percentage of resources that could be re-allocated on the 2007 budget by each HA – Hypothesis 2. Fig. 2. Resources to be re-allocated by HA for each interventions – Hypothesis 2. 142 S. Nuti et al. / Health Policy 95 (2010) 137–143 average pre-surgical length of stay; its major inefficiency with a potential pay-off of more than 38,000 bed days, equal to 105 hospital beds or D21 million. 5. Limitati There a notably, lim marks as gu with overla ventions. T be optimist best perfor of the best target. This under-spen pharmaceu improving problems a or audit. There is example, th the overall amount of r the sum of overall hos counting th was used b priorities ac in the stud is an overe ber of indic means that produce ne of resource than the to research co detailed fin to other pe Other li used to app an over/und human reso the real eff absent or re estimation, overestima Another heterogene are already could impa large variab to organiza aspects. Further ing the lim practical gu ing the savi system are and what a to identify vices that represent a much higher return in benefits to the population’s health. Experience in a number of juris- dictions suggests that re-investment decisions should be made in as transparent and evidence-based fashion as pos- and w 4,35]. nclus is ben of com ation p shown p. It w HA ha they n e imp ct on . Mana ing, no rms, b ventio the re l chan me diffi to arg ve fina ase. Th lish p ing a n oweve r are n al wit ve the hmark ts a m rce re mplica oth po public than practic esourc edium velop ices. A ods pr n and easure me in ://ww some ros th g valu Effecti y in a the fir s enab rces t servicons and further developments re a number of limits on the results, most its resulting from the use of means and bench- ides to achievable benchmarks and problems p and attribution of savings to specific inter- his means that the results presented here may ic estimates of possible savings. In some cases, mance (Hypothesis 2) is defined on the basis performer instead of a national or regional could lead to some problems such as the ding (that could occur, for instance, to the tical expenses indicator without maintaining or quality) or data manipulation. These sorts of re likely only amenable to more detailed study also a problem of overlap across indicators: for e reducing 30 day readmissions also reduces hospitalization rate. In this case the total esources that could be disinvested is less than those savings attributable to readmission and pitalization rate reductions. Despite the risk of e same savings multiple times, the total amount ecause of its power to support identification of ross actions. In addition, the actions monitored y concern only 11 indicators; so even if there stimation, it may be offset by the small num- ators involved in this exploratory study. This an extension of the same methodology may w opportunities for savings. Thus, the amount s available for re-allocation is likely higher tals reported under either hypothesis. Further uld focus on the collection of more diverse and ancial information to extend the analysis also rformance indicators. mitations could be addressed to the method ly financial value: for instance there could be er estimation linked to the methods applied to urces management indicators: in these cases ect depends upon the type of personnel that is tired; for physicians there would be an under- for administrative personnel there would be an tion. limit of the study could be the impact of the ity on performance variability. Some indicators adjusted for age and sex but other elements ct on variability. It is authors’ opinion that the ility showed in the results is much more due tional factors than to other socio-geographical research should work to explore ways of reduc- itations on the study and on improving the idance that can be given to managers pursu- ngs targets. Once managers of the public health aware of the resources they can re-allocate ctions they can pursue, the next step will be the targets for re-allocation, that is, the ser- sible [10,3 6. Co Th tern alloc were ershi their that manc impa itself mark perfo inter used tiona beco ment achie incre demo build H pape to de achie benc resen resou the i for b in a more best the r the m to de pract meth vatio to m of so (http In of Eu mizin Cost cienc only it ha resou ity ofith the involvement of a wide set of stakeholders ions chmarking process changed the traditional pat- plaints around the budgeting and resource rocesses in Tuscany. The results of this study to all CEOs in a meeting with the Regional lead- orked as a warning to all CEOs who argued that d reached the maximum level of efficiency and eeded more money to achieve required perfor- rovements. This study has also had a significant the use of the performance evaluation system gers are now more aware of the value of bench- t only to comprehend how their organization ut also to support the identification of priority n areas to improve efficiency. Some HAs even sults as a starting point for planning organiza- ges in their institutions. In this context it has cult for HAs that show large room for improve- ue that they do not have enough resources to ncial balance and that they needed a budgetary is evidence has enabled the Tuscany Region to retexts, eliminating the word “impossible” and ew culture around the “possible.” r, the types of disinvestments suggested in this ot necessarily easy. They may force managers h professional behaviour change in order to savings. Publication and distribution of data ing, within and outside the organizations, rep- eans for managers [36] to make the case for -allocation to improve performance. Likewise, tions of this study may be extremely useful licy makers and the top management of HAs system that bases its action on cooperation competition. Benchmarking helps to identify es and subsequently allows measurement of es that can be disinvested and re-allocated in and long term. It will be important though capacity for sharing and learning from best lthough there are some differences with the eviously described, the NHS Institute for Inno- Improvement has adopted a similar approach in financial terms the possible improvements dicators using benchmarking available online w.productivity.nhs.uk/). cases, a single intervention could free millions at can be re-allocated for other services maxi- e for citizens through Cost Benefit Analysis or veness Analysis largely used for enhancing effi- variety of settings [37]. Even if this analysis is st step in the process of resource re-allocation, led HAs and Tuscany Region to identify those hat could be moved without reducing the qual- es. S. Nuti et al. / Health Policy 95 (2010) 137–143 143 Acknowledgments The authors wish to thank the researchers from Man- agement and Health Laboratory for their help in the development of this study and the top managers of Tuscan Health System. The authors also want to thank the col- leagues of the European Health Policy Group for the useful discussion and the reviewers of the paper, especially Prof. AdalsteinnBrownforhis excellent adviceduring the review process of the paper. References [1] Mitton CR, Donaldson C. Health care priority setting: principles, practice and challenges. Cost Effectiveness and Resource Allocation 2004;2:3. [2] Mitton CR, Donaldson C. Resource allocation in health care: health economics and beyond. Health Care Analysis 2003;11(3):245–57. [3] Mitton CR, Donaldson C, Waldner H, Eagle C. The evolution of PBMA: toward a macro-level priority setting framework for health regions. Health Care Management Science 2003;6:263–9. 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