Public Hospital Example

Cost Effectiveness Analysis Proof of Value

At first glance, Cost Effectiveness Analysis (CEA) is best used in healthcare organizations that are tightly driven by strict budgetary processes predicated on decision making intended to spend the least amount with the greatest benefit to patients. While this mindset and fiduciary responsibility fits most for profit and nonprofit hospitals in today’s marketplace, many public hospitals represent a different niche where other factors of social responsibility, long-term health management responsibilities and unmet needs of special and at risk populations outweigh the immediate quid pro quo transactional nature of other healthcare/hospital entities.

Most hospital organizations must operate based on a budget, with strict resource allocation based upon the budget report. Cost effectiveness Analysis is a very appropriate tool for this challenge. However, public hospitals are often more responsible for the impact of their organizational efforts on a particular or target population, and the effectiveness in CEA, measured in quality adjusted life years, is especially useful in this regard. Combined with the decision tree aspect of the modeling involved, CEA can provide strong evidence to explain a budget use to the appropriations decision-maker. It is the proper use of Broad Data™ to rigorously support the conclusion to fund.

A recent example of this was proposed at our firm. A public healthcare provider specialized in caring for indigent patients in their community. Their funding came from the state budget. The company had instituted a new clinic program and a new mental health program that increased system use by 20% and 58% respectively. At first it may appear that it is just a simple expansion. However, if one uses Broad Data to analyze all the possibilities, the impact of increased use in the new systems decreased overall cost to the state because the patients were being treated earlier and with fewer complications. This not only decreased costs but resulted in better health outcomes (and thus an increase in quality of health or effectiveness).  Therefore, what at first appeared as just increased costs was actually more cost effective care and disease intervention that allowed that particular healthcare system to run more efficiently while simultaneously better meeting its state mandated requirements. Only through the implementation of a Broad Data analysis were we able to ascertain this conclusion.

The uses of Broad Data analysis are many. In this example the healthcare system, was armed with compelling data to justify the next year’s budget, impacting many indigent patients in a very positive way. Many public healthcare organizations can use Broad Data analysis to help support their targeted innovative programs.

If your objective is to provide the best decision-making for your organization and take a global view of your business, expanding your sights beyond ROI, and educating other decision-makers, Cost Effectiveness Analysis can make your organization more competitive and more profitable.

William Matzner, MD. is a recognized expert in Healthcare and Neuro Economics. With a Ph.D. in Economics, MBA and Medical Doctor degree, Dr. William Matzner will provide you with expert analysis on health and wellness programming, populations health management, disease management, new program development, facility development, equipment acquisitions, and other healthcare programs, acquisitions and initiatives. For more information about cost effectiveness analysis and improved financial accountability for your organization, visit Dr. Matzner at Dr. Matzner is also available for speaking engagements, retreat presentations and topic specific addresses.