Examining Business Cases for Interventions to Improve Quality of Care: Presentation to the Washington State Conference

1. Examining Business Cases for Interventions to Improve Quality of Care: Presentation to the Washington State Conference on Quality-Based Health Care Purchasing Douglas A. Conrad, PhD University of Washington December 4, 2006

2. Perspectives in Establishing a �Business Case� for Quality Define the �Business� of Interest: Health Plan (Insurance Firm or Self-Insured Employer) Employer (not self-insured for employee health care costs) Healthcare Provider Integrated Health System Hospital Medical Group Independent Medical Practice

3. Next Step in Establishing the Business Case Identify the costs and benefits of quality improvement from the perspective of the specific �business� Logic is that the expected value of the benefits captured by the business must exceed the costs borne by the business to motivate the entity to invest in a particular quality improvement (QI) initiative �Externalities� (benefits and costs of the business� QI shifted to other parties) matter

4. Business Case �Next Steps� (continued) Investment perspective dictates the variables to be considered in analysis of the business case:(cash flows are key in capital decisions) Time horizon for the QI initiative Level of upfront investment required (including working capital requirements) Expected ongoing cash (or equivalent) costs of QI initiative by time period Expected cash revenue � � by time period Required return on comparably risky investments