Presentation to:

Health Management Academy

“HEALTHBALL”: Retrospective Statistical Analysis and Its Role in Hospital Administration

June 10, 2004 Inspiration: by Michael Lewis

• Details the success of the

– ’s lowest payroll – Baseball’s second winningest team the last four years (after the Atlanta Braves)

• Explores the “collision of reason and baseball”. Reason wins! Capital Ideas

• “Moneyball is the best business book Lewis has written. It may be the best business book anyone has written.” – Mark Gearson, “The Weekly Standard”

3255 2 Major League Baseball: Institutionalized Knowledge or Ignorance?

Conventional Baseball Wisdom Overvalues… Inaccurate Measurement Tools

• speed • errors: a totally subjective measure • pitching velocity • defense/fielding skills • batting average: doesn’t tell the whole story • “manufactured” runs • pitch speed: doesn’t mean much without • scouts’ instincts accuracy/deception • the impact of superstars

Results Opportunity

• 2% of draftees play in the majors • use objective analysis to measure • significant “market” inefficiency performance •“calcified” organizational • find “undervalued” players management • design game tactics to maximize run – resistant to change production – anti-intellectual • Win!

3255 3 : The Secret of Their Success

• Willingness to rethink everything – disregard conventional wisdom – distrust intuition – determine the right measurement tools – trust the numbers

• Relentless search and ruthless exploitation of market inefficiencies

• Exhaustive data collection and analysis – evaluate talent MATH WORKS! – determine game tactics

3255 4 “Beane Ball”

Avoid outs (discourage sacrifice bunts and stolen bases)

1990’s: Volatility and Emphasize mental discipline Reconfiguration De-emphasize speed/defense

Key Statistic: On-base % + Slugging %

Hitters undervalued relative to pitchers

No high school draftees

Closers are easy to find

Operating Realities Package capabilities (aka “replacing Giambi”)

Control more important than pitch velocity Oakland A’s General Manager

3255 5 Beane Ball Continued: The Jeremy Brown Case Study

Why- Facts

• Only player in SEC history with 300+ hits and 200+ walks • 2001-02: 390 at bats; 98 walks; 38 2002 Draft-day Conversation strike-outs; 21 home runs Jeremy Brown: Catcher- University of Alabama • 2002: Led the nation in walks 1st Round Pick: 35th Overall • Consistent, superior hitter

“This kid wears a large pair of underwear” Why Not- Intuition

“A body like that can be low energy” • Bad baseball body- fat and getting fatter “…when he walks his thighs stick together” • Not listed in Baseball America’s list of top 25 amateur catchers “…if you put him in corduroys, he’d start a fire.” • 19th round pick in 2001 (Red Sox) • Not fast “He’s got big thighs, a big butt. He’s huge in the ass.” • Unorthodox throwing motion “Every year that body has just gotten worse and worse and worse” Early Returns

• .500 on-base % in rookie ball • A-Ball: lead team in batting average (.310); on-base % (.444) and slugging % (.545) • Only player from Oakland’s 2002 draft invited to 2003 big league spring training

3255 6 In a Nutshell: Quote from John Henry (owner of the Florida Marlins)

“People in both fields (business and baseball) operate with beliefs and biases. To the extent you can eliminate both and replace them with data, you gain a clear advantage. Many people think they are smarter than others in the stock market and that the market itself has no intrinsic intelligence- as if it’s inert. Many people think they are smarter than others in baseball and that the game on the field is simply what they think it is through their set of images/beliefs. Actual data from the market means more than individual perception/belief. The same is true in baseball.”

3255 7 Imitation is the Sincerest Form of Flattery

Tuesday, April 27, 2004

Billy Beane’s Legacy: New-Style General Managers • Red Sox (Theo Epstein) • Blue Jays (J.P. Ricciardi) • Dodgers (Paul DePodesta)

3255 8 Healthball: Are There Parallels?

Why is volume down? “Less flu this winter”

VALUE “An unexplainable outbreak of wellness

“It’s the economy, stupid! Patients are postponing elective surgery”

 There is an industry-wide tendency to rely on conventional wisdom and intuition when trying to understand complex events.

3255 9 And What About the Measurement Tools?

Typical Performance Indicators

huge amount of data available • Operating Margin- doesn’t tell the whole story. Cash-flow indicators more powerful. much of it is incomplete or even irrelevant • Market Share- typically based on inpatient activity (incomplete), usually dated and hard to find. the real focus should be on measuring quality and efficiency • Average Age of Plant- what does this really tell us? what does it mean to be a “data-driven” • Occupancy %- shows activity but organization? ignores efficiency.

 There still is significant inefficiency in the delivery of health care services. Attacking this inefficiency will reduce costs and improve quality.

3255 10 Is There a Role for Retrospective Statistical Analysis in Hospital Management?

Patient Volume

Advanced Statistical Analysis

• search for VALUEcorrelation Resource Utilization • understand complex relationships

• identify sources of medical error

Treatment Patterns

 A retrospective understanding of causation and correlation should improve predictive capability.

3255 11 Concluding Thoughts

• “There are lies, damn lies and statistics.” – George Bernard Shaw

• “If you build it, they will come.” – Field of Dreams

• “Predictions are difficult, especiallyCapital about Ideas the future.” – Yogi Berra

• “Measurement improves performance.” • “Quality costs less, not more.” – W. Edwards Deming

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