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Member Research by Dr. Brian J. Robb


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Emergency Physicians….Our decisions do drive value in the healthcare system!

Brian J. Robb, D.O., FACEP, FACOEP, MBA

I recently completed an MBA program from the Kelley Business School, Business of Medicine at Indiana University. As part of the program I found a class on Value analysis in healthcare to be of particular interest for Emergency Medicine. Emergency physicians have an important and vital impact on new revenue models from volume-based services to value-based services and we should be aware of the direct and indirect contributions we make to the value created by the decisions we make that impacts revenue. Hopefully, this project will allow the individual physician or the medical director of an emergency department to have a better understanding of the physician metrics we should measure to assist with driving value created by our decision making in the emergency departments and healthcare organizations we work.

Emergency Physician Decision Making

Value Analysis Project

I have chosen an ambitious value analysis project which may demonstrate great value in the cost of healthcare during these very chaotic, disruptive healthcare times. It is a new perspective of value analysis in the healthcare supply chain to determine the true value created by the decisions made by emergency physicians that are direct drivers of healthcare costs. Originally, my plan was to analyze several components of the emergency physician’s decisions in the critical transition of unscheduled, episodic care evaluated and treated in the emergency departments across the United States. Due to the limited timeframe of my project I will define the background and scope of my value analysis project and how unique this analysis is for healthcare systems to understand and expand new models of value, not just a rigorous analysis of the cost structure in the emergency department. I want to emphasize value, not just cost in the emergency medicine service line. A different method to present value analysis in the care coordination that has become increasingly more important in the emergency department setting. I will give some background on the role emergency physicians play in the emergency department, general overview of value analysis in the healthcare supply chain and the reasons why it is increasingly more important to look at all types of value analysis. I will define a model to project unrealized value by the decisions made by emergency physicians to readmission of patients to the hospital within a thirty day post discharge period. I am currently employed by Mosaic Life Care in St. Joseph, Missouri and they have been innovative with an ACO, cost sharing model, and I will briefly incorporate their thoughts and experiences with my model and the current Value Analysis Teams established and their results, both positive and negative. Recent healthcare trends are important to my analysis for many reasons. The U.S. Healthcare Industry represents 18% of the economy and has a projected growth rate of 5.8%, and is expected to reach $5.0 trillion by 2022. (1) The passage of the Patient Protection and Affordable Care Act (PPACA) aka the Affordable Care Act (Obamacare) in 2010 has accelerated the changing trends and landscape in healthcare cost analysis. There is an increased emphasis on clinical efficacy, safety, and cost benefit as it relates to the adoption and utilization of medical technologies. (2) Hospitals and healthcare systems face multiple challenges in their efforts to make real and significant changes to reduce healthcare spending. Per the article, Evidence-Based Value Analysis: Using Scientific Evidence to Drive Quality and Reduce Costs. (3) The healthcare environment will be even more challenging in the future as providers seek to:

  • Meet quality and safety mandates
  • Avoid Medicare cuts and earn a bonus payment as part of the value-based purchasing program and accountable care organization (ACO) provisions
  • Avert Medicare payment penalties for higher-than-expected readmission rates
  • Avoid financial penalties for high rates of nosocomial conditions and never events
  • Better manage anticipated Medicare reimbursement cuts over the next decade
  • Deliver healthcare services that align with evidence-based best practices
  • Improve the health of the populations they serve

The goal of the improvement in the triple aim of healthcare delivery by healthcare professionals to provide high-quality clinical care, improve patient outcomes, and realize significant cost savings at the same time. Clinical quality and financial sustainability can coexist. I will use the more modern approach to value analysis, described as Evidence-based value analysis (EBVA) to further explain my approach to value savings in the decision making process by the emergency physician, specifically on readmissions that are diverted within the thirty day penalty period imposed by Medicare on hospitals.

Clinical Value Analysis is a systematic process to review clinical products, equipment and technologies to evaluate their clinical efficacy, safety and impact on organizational resources. (4, 5) The three key components listed are:

  • Clinical products and equipment
  • Clinical services
  • Medical Technologies

The Value Analysis Team (VAT) is collaboration between clinical, finance and purchasing which intersects to bring together stakeholders who have product knowledge, financial analysis skills, and purchasing/contracting expertise to reduce overall cost while maintaining or improving quality. (6) I will propose to incorporate physician leadership with a broad understanding of the data, metrics and intersection of all the governmental regulatory guidelines that will directly impact hospital reimbursement and penalties. The traditional Value Analysis Team may not be sufficient to understand the newer value analysis of the emergency physician’s decision making in regards to hospital readmissions. We should know the cost of the decision and determine the value created by active clinical integrated and coordinated care by the emergency physician and emergency medicine service line, as well as all coordinated physician involvement especially the hospitalist.

The Association of Healthcare Value Analysis Professionals (AHVAP) states the value analysis process utilizes the combined efforts and expertise of:

  • Clinical consumers
  • Value analysis professionals
  • Purchasing, contracting, capital acquisition teams
  • Biomedical engineering
  • Safety/Risk management
  • Quality improvement
  • Revenue integrity
  • Information systems
  • Nursing education
  • Infection control
  • Senior leadership
  • Manufacturer and sales representatives

Of course, many VAT’s will have a variety of combination team members and I would encourage more physician leadership to highlight my model to determine value with the decision making made by physicians at critical care coordination of patients that has direct reimbursement impact for hospitals. What does a hospital save by the decision to discharge a patient to home, a nursing care facility or some other mode of disposition on a patient back in the ED within the thirty day period of discharge from a recent inpatient admission in the hospital? I suggest this is an opportunity to assess a service which creates value perhaps more dollars saved than the current more emphasized product/equipment value analysis that may be more easily measurable but not as valuable to savings. There is a quantitative and qualitative savings in this clinical value analysis to be captured and measured. I hope I have your attention for the further discussion of this process and achievable goals of this unique perspective to value analysis of clinical decision making by emergency physicians.

The traditional value-analysis programs use the Formulary model or a Payment-cap model, neither which would be able to assess the value of minimizing readmissions from the emergency department. The formulary model, products in a certain class of health technologies are purchased from a single source or a very limited number of vendors, results in pricing discounts for volume, reduced inventory costs and improved efficiencies associated with product familiarity. The Payment–cap model, hospitals establish a price ceiling for products within a certain technology class drives costs downward, ties product value to costs and usually offers more product choices. (7) I am proposing a more unique and informative approach to achieve a higher level of clinical decision making value analysis in contrast to these traditional value-analysis programs. The Evidence-based value analysis (EBVA) uses a clinically driven process to evaluate clinical care based on clinical effectiveness, patient safety, operational impact, and cost. (8) The ability to assess value by the decision not to readmit a patient in the thirty day readmission penalty period is a creative aspect of patient care that will incorporate physician buy-in and high-quality medical care if it becomes a metric that is transferable to the physicians reimbursement model and acceptance by the healthcare system as a substantial contributor to creating savings and value to the institution.

There is a growing mandate from the public, payers, hospitals, and Centers for Medicare and Medicaid Services (CMS) to measure and improve emergency department performance. (9) There has been an increased emphasis and awareness of measurable emergency medicine definitions and metrics for ED operations in the last six years and especially in the last four years since the passage of the Affordable Care Act. There are newer models of ED intake, growing evidence that ED crowding and prolonged length of stay are associated with lower-quality care and worse outcomes, and an intense national focus on measurement of health care quality. Lengths of stay, door-to-physician time, and left without being seen have been endorsed by the National Quality Forum as quality measures. Additionally, CMS have included 2 ED timing measures (length of stay for admitted and discharged patients and boarding time) to be published on the Hospital Compare Web site. (10) As medical director for an emergency department in the last thirty years I have seen these time metrics and proportion metrics become increasingly more important as a subjective judge of quality and efficiency. Fairly or unfairly these are the regulatory burdens we must recognize and understand. I propose these factors are important to quality, efficiency and patient satisfaction but indirect decision making on hospital admissions or discharges especially in the high risk patients during the thirty day penalty timeframe are financially and clinically critical to the value, not only cost in the emergency care of patients in the emergency department. This is a vital aspect of emergency care that will be demonstrated to create value and should be analyzed by our healthcare leaders.

Economic Impact of Admission and/or Readmissions

“Use of hospital emergency departments is growing faster than the use of other parts of the American medical system,” said Art Kellermann, the study’s senior author and a senior researcher at RAND, a nonprofit research organization. “While more can be done to reduce the number of unnecessary visits to emergency rooms, our research suggests emergency rooms can play a key role in limiting growth of preventable hospital admissions.” Emergency physicians now serve as the major decision maker for about half of all hospitals admission in the United States. Hospital admissions account for most of hospital revenue and inpatient medical care accounts for 31 percent of nationwide health spending, making emergency room physicians a major nexus in influencing health care costs. (11) The ability to measure and determine a method that demonstrates value with the decision making in a more integrated approach to the outpatient and inpatient care systems surrounding emergency medicine care with better case management and coordination.

Readmissions are both a clinical and financial problem. CMS began penalizing hospitals for 30-day readmissions Oct. 1, 2012 at 1 percent, upping the penalty to 2 percent for fiscal year 2014 and 3 percent for fiscal year 2015. The Healthcare Cost Utilization Project (12) has been crunching the numbers on spending and healthcare use for the last decade. I will summarize in the following manner:

  • Congestive heart failure – The mean cost per CHF readmission is $13,000, with a 25.1 percent readmission rate. This is a 118 percent of the cost of an initial admission for CHF, which costs $11,000 on average (2009 data)
  • All-cause admissions – The average cost of a readmission for any given cause is $11,200, with a 21.2 percent readmission rate (2009 data)
  • Heart attack – The average cost for a readmission after a heart attack is $13,000, with a 17.1 percent readmission rate. (2009 data)
  • Pneumonia – The average cost of a pneumonia readmission is $13,000, with a 15.3 percent readmission rate. (2009 data)
  • COPD – The average cost for readmission from COPD as the principle diagnosis is $8,400 and from a diagnosis including COPD is $10,400 with a readmission rate of 7.1 percent and 17.3 percent, respectively. (2008 data)
  • Joint Replacement – The cost of a total hip replacement readmission averages $12,300 with an 8.2 percent readmission rate. Cost of total knee replacement readmission averages $10,200 with a 5.1 readmission rate. (2009 data)

The study of best practices for reducing readmission remains an area for growth and innovation with decision making opportunities by emergency physicians in a prime position to create value and savings for hospital organizations. These economic numbers on the clinical conditions defined by CMS as targets for penalties are substantial for savings to the hospital if the decisions in the emergency department are determined to be safe to discharge and not readmit after evaluation and treatment. More intriguing and of value is the savings created by less readmissions for these defined conditions and the cost savings with an annual lower Medicare readmission penalties assessed to the hospital. This is a synergistic savings approach to the key emergency department care coordination and decision making process.

It is with irony the American College of Emergency Physicians has tried to minimize the cost of emergency care in the United States to combat the political messaging of unnecessary emergency visits and high cost of emergency care in this country. The Agency for Healthcare Research and Quality’s Medical Expenditure Panel Survey (MEPS) estimates $48.2 billion of spending on emergency care in 2010, or 1.9 percent of the nation’s total health care expenditures of $2.6 trillion. With the message that “The total cost is small relative to the entire health care system,” the American College of Emergency Physicians (ACEP) has embraced the AHRQ figure in its “Just 2 percent” public relations campaign. This may be counterproductive as discussed in the interesting approach presented by Dr. Michael Lee. (13) U.S. emergency care costs may be more than twice previously published estimates, according to a new analysis that critiques those estimates, argues for improved accounting, and suggests considering the value of emergency care as well as total spending. The challenge of properly accounting for the costs of emergency care, Lee said, becomes crucial as health care financing moves from a fee-for-service model to bundled payments for patient populations or episodes of care. (14) Lee and his co-authors allege that MEPS undercounts the number of ED visits and the number of patients admitted to hospitals. Adjusting for their alleged discrepancies the authors estimate that ED costs are between 4.9 percent to 5.8 percent of total health care spending. They further analyzed the data from a private health insurer and charges from doctors and hospitals for imaging, testing, and other procedures. The author’s estimates from this data set are ED spending is 6.2 to 10 percent of total health care spending. According to Lee, the cost structure of the ED remains poorly understood and is significantly more complex than what is modeled in existing studies. (15) The following discussions from excerpts in this article, Emergency Care Costs are too low, News from Brown, are critical to rethinking the value analysis and methods to discuss the decision making of an emergency physician. (16)

  • Authors argue for an accounting based approach to ED costs using a methodology known as “Time-Driven Activity Based Costing (ABC),” which has been applied to health care by Robert Kaplan and Michael Porter, professors at the Harvard Business School.
  • The method maps all clinical, administrative and diagnostic steps in a patient encounter and assigns costs to each activity, explicitly accounting for the time spent on each task. This may be the best model and method to incorporate the actual value created by emergency physician’s decisions to NOT readmit patients and further explore the additional savings and value created by the decision to discharge from an emergency department visit rather than admission to the hospital.
  • ABC accounting might provide a more realistic and transparent measure of ED costs because of the emphasis on time and decision making which is particularly relevant to emergency medicine and value analysis.
  • The ABC accounting gives “the ED manager’s specific data they can use to improve the value of care by identifying high-cost steps (i.e. decision to readmit patients) in the process.”
  • Emphasize value, not cost.
  • The high share of spending affirms the importance of emergency medicine within the health care system with 130 + million visits, 28 percent of all acute care visits, and accounting for nearly half of all admissions. I personally suspect the percentage of readmissions is much higher than fifty percent of initial admissions.
  • There may be potential for cost savings by focusing on reducing unnecessary diagnostic testing in the ED or unnecessary admissions that originate from the ED.
  • The authors of this article call for the debate to include value, not just cost.
  • More attention should be devoted to quantifying the value of specific aspects of emergency care. Rather than minimize the issue of cost, we should recognize the economic and strategic importance of the ED within the healthcare system and demonstrate that costs are commensurate with value. My specific contention in addressing the importance of emergency physician decision making in regards to readmissions after assessment in the emergency department.
  • Lee acknowledges that this remains a challenge for the field of emergency medicine. The core of our business is ruling out critical diagnosis. Many of the things we look for are low probability but highly dangerous conditions. The big question is how do you quantify value when your work is often focused on trying to demonstrate the absence of something?”

This article is intriguing considering my proposition that critical value is achieved by the decision making of emergency physicians in the determination of readmissions. Many reports in the literature estimate the cost of readmissions to be more than 280 million dollars annually as determined by CMS. I have discussed the uniqueness of the achievable value created by the emergency physician and realize the quantification is possible to accurately analyze the savings by minimizing readmissions in the thirty day penalty period. The exact model and formulas required to quantify the savings is beyond the scope of this project but could be determined by value analysis teams with the awareness of the issue and importance of the achievable savings. These metrics, avoidable readmissions, by prudent and appropriate analysis of the emergency physician’s actions are unrealized value that should be credited to the physician. My research of this topic has uncovered the unawareness to the value in this decision making process by emergency physicians, medical directors, administrators and leaders of value analysis teams. The more traditional models of value analysis as it relates to products and technology evaluations and savings are much more common than my proposed savings associated with decision making value analysis.

Value analysis is evidenced-based, patient-centered, customer focused, process oriented and data driven. (17) All aspects of this definition can be utilized in my proposition to model the value created by readmission prevention as directed by the emergency physician decisions.

Mosaic Life Care Experience

After a long career in emergency medicine at Liberty Hospital I recently moved to a staff emergency physician at Mosaic Life Care aka Heartland Healthcare in St. Joseph, Missouri. I was leaving an institution with an immature understanding of value analysis to a more sophisticated, innovative hospital system with exciting opportunities to be exposed to Accountable Care Organizations and Shared Savings Programs with population health management and care coordination. This organization was more mature in the understanding of the value analysis process, clinical integration and care coordination models. I had multiple discussions with members of the Mosaic leadership team to assess the value analysis process and discussed my proposition on determining value in the decision making process by the emergency physician in readmission penalties. There was interest in my suggestion there was value to the decision making process but more aspects of the value analysis teams were directed in traditional models of volume discounted savings. I tried to determine if the traditional Medicare population of patients was analyzed in a different method in comparison to the ACO Medicare population and do not believe there was a difference.

The five metrics measured for reimbursement bonuses to the employed emergency physicians are:

  • Press Ganey scores > 90%
  • AMI – PCI < 90 minutes, 100% of time
  • Appropriate antibiotics for pneumonia patients, 100% of time
  • Door to physician time < 30 minutes, > 90%
  • Provider to discharge < 90 minutes (90%) and Provider to admit < 180 minutes (90%)

These are all standard metrics important to hospital organizations but may be short sited in understanding the true value of emergency physician performance and value to the organization. I believe these are important metrics to benchmark and follow with scorecards to monitor trends of the emergency department performance but the question still exists, do these create the most clinical and financial value?

The quote from Donald Rumsfeld describes the following:

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”

I believe this statement is important to understand the recommendation I have made in this project in trying to understand where healthcare organizations are in the maturity of determination in the value created by emergency physician’s decision making in regards to readmission decisions. The decision to not admit or readmit is critical in cost savings and value creation to the institution but may not currently be recognized as a known known and fall somewhere between the known unknown and unknown unknown spectrum of value analysis.

Value analysis in healthcare will become more significant as hospitals, healthcare institutions realize more healthcare revenue is “at risk” at the back end of a patient encounter. For example, we can value analyze the supply chain utilization and cost of a product (orthopedic joint replacement hardware) with current models and determine savings and value. It is much more difficult to model the value and savings of the decision making that allows or avoids readmission to the hospital. This value is not easily recognized and must be considered in current and future value analysis not unlike the focus on the impact of value analysis by healthcare systems on medical devices, surgical tools, D&T technologies, information technology, pharmaceutical utilization and clinical preference items. (18) This process improvement takes an understanding of the Affordable Care Act and the components of the Value Based Purchasing program by CMS to properly define the value created by emergency physicians in the role to avoidance of readmissions. The actual quantitative and qualitative value to the decision making is an opportunity to impact the revenue generated and maintained by the healthcare systems in this new generation of reimbursement models from volume based to value based scrutiny.

What is Value in Health Care?, an article written by Michael Porter, Ph.D. in the New England Journal of Medicine (19) presents an interesting perspective around the topic of value analysis in today’s age of healthcare delivery. He defines Value as neither an abstract ideal nor a code word for cost reduction – should define the framework for performance improvement in health care. Rigorous, disciplined measurement and improvement of value is the best way to drive system progress. Yet value in health care remains largely unmeasured and misunderstood.

Value should always be defined around the customer, and in a well-functioning health care system, the creation of value for patients should determine the rewards for all other actors in the system. Since value depends on results, not inputs, value in healthcare is measured by the outcomes achieved, not the volume of services delivered, and shifting focus from volume to value is a central challenge. Nor is value measured by the process of care used; process measurement and improvement are important tactics but are no substitutes for measuring outcomes and costs. (20) This amplifies my justification to systematically determine the value created by decision making by the emergency physician to the avoidance of readmissions. Since value, according to Porter, is defined as outcomes relative to costs, it encompasses efficiency. Cost reduction without regard to outcomes achieved is dangerous and self-defeating, leading to false “savings” and potentially limiting effective care. Outcomes, the numerator of the value equation, are inherently condition-specific and multidimensional. For any medical condition, no single outcome captures the results of care. Cost, the equation’s denominator, refers to the total costs of the full cycle of care for the patient’s medical condition, not the cost of individual services. To reduce cost, the best approach is often to spend more on some services to reduce the need for others. To define the total cost of episodic care from three days prior to admission to the thirty days post discharge involves outpatient care, inpatient care and transitional care. (21) The emergency physician has a tremendous value to the transitional care timeframe. I contend the cost components are Direct (labor costs, supplies, other non-labor costs) and Indirect (Facilities, Technology, Support services, other) but also involves the cost of decision making as determined by value analysis if the direct costs of health care utilization in the emergency department, the cost of readmission, the savings of evaluation and home discharge in a referral to the ED after discharge from an inpatient admission during the thirty day episode of care. This ill-defined component of the cost of care for an episode of care is a tremendous opportunity to achieve value in the new age of healthcare delivery.

I hope the topic and ability to shed light on this specific aspect of healthcare delivery by the decisions made in the emergency department will be recognized as a great opportunity to achieve value to the institution and more effort in the future to develop specific quantitative analysis models of this measurable aspect of healthcare value. I believe this illusive aspect of patient care in the emergency department has the capability to achieve cost efficiency, quality health care delivery and a more satisfying patient experience. The triple aim of health care can be achieved with a demonstrable value in the decision making process of emergency care as it relates to readmissions, both indirect and direct value can be defined. I hope to continue the evaluation and research on this topic and feel it is prudent in today’s health care analysis to create value by looking at all aspects in this episode of emergency care.

Future factors needed for future analysis of this innovative value analysis within the healthcare spectrum:

  • 2009 data reveals all-cause readmissions cost $11,200 and this is very close to the cost of readmissions for the five clinical conditions monitored by CMS.
  • What is the cost to a shared savings plan, ACO medicare patient, when a readmission occurs, at least $11,200? Would the decision to not readmit save these real dollars for the ACO patient population?
  • What is the value of diagnostic, ancillary utilization of testing on this population of patients in the emergency department?
  • The complicated formula by CMS and penalties assessed on hospitals for penalties, up to 3% for readmissions is substantial and can a value for each readmission be determined quantifiable with a financial amount, therefore allowing the computation of value analysis for my proposition concerning decision making by the emergency physician.
  • Many other cost saving and value creating decisions are made by emergency physicians concerning reportable comparisons of data and outcomes, other penalties assessed such as Hospital Acquired Infections, Aspirin for MI patients, Time to cath lab for MI patients, door to doc times, door to discharge times, door to admission times, etc. What would the value be with this aspect of emergency care?
  • What is the value with the working relationship between the emergency physicians and hospitalist to coordination of care in this financial high risk classification of patients?
  • Mosaic Life Care recently analyzed the number of readmissions per hospitalist and the number of patients seen by ED physicians in the thirty day post inpatient discharge with trends for the hospitalist with the most returns to the ER in thirty days and the emergency physicians who readmit the higher percentage of these patients. Imagine the value of these decisions.
  • What is the correlation between inpatient days, DRG costs for inpatient admissions by the hospitalist and do the shorter stays (better by DRG standards) create more readmissions? Ironic, but the kudos to the hospitalist with the shortest inpatient stays may actually be costing more in readmission penalties.
  • We are currently analyzing this captured data and attempting to develop a value analysis model to better account for the financial and clinical impact.

Short list of several of many questions created by this innovative clinical value analysis possibility outside the realm of product, service and medical technology. I believe I may have asked a question too large to answer at this time but hopefully opened the door to a discussion and analysis that could be beneficial in our current healthcare environment.

References and Citing Articles

1 Pearson, Jim. “Today’s Healthcare Environment and the Impact of Value Analysis on Innovation.” Lecture. CEO of NICO Corporation Slide #3

2, 3, 5, 7, 8 Hayes, Winifred S., PhD. “Evidence-Based Value Analysis: Using Scientific Evidence to Drive Quality and Reduce Costs.” www, hayesinc.com. N.P., n.d. Web.

4, 6 “Value Analysis in Healthcare.” AHVAP. N.p., n.d. Web.

9, 10 Welch, Shari J. “Emergency Department Operational Metrics, Measures and Definitions: Results of the Second Performance Measures and Benchmarking Summit.” (2010): n. pag. Web.

11 Morganti, Kristy G. “Hospital Emergency Department Use, Importance Rises in U.S. Health Care System.” Www.rand.org. N.p., 20 May 2013. Web.

12 Rizzo, Ellie. “6 Stats on the Cost of Readmissions for CMS-Tracked Conditions.” Www.beckershospitalreview.com. Web.

13, 14, 15, 16 Orenstein, David. “Brown University.” News and Events. News.brown.edu, Apr. 2013. Web. 05 Mar. 2015.

17 “Premier’s Value Analysis Guide.” 2014. Web.

18 X532 Medical Technology Evaluation. Module 1. January 22, 2015 Residency Session, slide # 8, BOM

19, 20 Porter, Michael. “What Is Value in Health Care?” (2010). Web.

21 X532 Medical Technology Evaluation. Module 1. January 22, 2015 Residency Session, slide # 20, BOM

Donald Rumsfeld Quotes

All materials on X532 Medical Technology Evaluation, reading files, residency slide sets and in residency discussion notes, presented by Prof. Vicki Smith-Daniels and Guest lecturers

Multiple additional researched articles which were not specifically cited but may be supplied on request

My education, training and experience in the emergency department was useful in the research and discussions presented in this project analysis

X532_ValueAnalysisProject_Robb_2