To succeed in today’s rapidly evolving business environment, healthcare organizations must have accurate financial data. Approximately 50 percent of CMS payments are now tied to a value component; hospital operating margins are at an all-time low; and consumer demands are rising with their costs. In order to meet these new challenges, health systems must shift their strategy or risk being left behind. This article details the operational, organizational, and financial strategies that drive financial transformation, as well as examples of how to obtain and utilize financial data, find waste reduction opportunities, and much more.
Financial Alignment and ROI
Waste is a $3 trillion problem in the U.S. Fortunately, quality improvement theory (per W. Edwards Deming) intrinsically links high-quality care with financial performance and waste reduction. According to Deming, better outcomes eliminate waste, thereby reducing costs.
To improve quality and process and ultimately financial performance, an industry must first determine where it falls short of its theoretic potential. Healthcare fails in five critical areas:
Massive variation in clinical practices.
High rates of inappropriate care.
Unacceptable rates of preventable care-associated patient injury and death.
A striking inability to “do what we know works.”
Huge amounts of waste.
Delivering high-quality, cost-efficient care to specific patient populations within a service line is nearly impossible without a sophisticated costing methodology. Activity-based costing (ABC) provides a nuanced, comprehensive view of cost throughout a patient’s journey and reveals the “true cost” of care—the real cost for each product and service based on its actual consumption—which traditional costing systems don’t provide.
With the true cost of care at their fingertips, healthcare leaders can identify at-risk populations earlier—such as pregnant women diagnosed with gestational diabetes mellitus—and more quickly implement effective interventions (e.g., more scrupulous monitoring and earlier screenings). Health systems that leverage the actionable insight from ABC further benefit by implementing the same, or similar, process/clinical improvement measures across other service lines.
Author Douglas Laney is now tackling the topic of Infonomics: the practice of information economics. In his 2017 book, Infonomics: How to Monetize, Manage, and Measure Information as an asset for competitive advantage, Laney provides detailed rationale as well as a thoughtful framework for treating information as a modern-day organization’s most valuable asset.
This article walks through how healthcare organizations can leverage data to its full potential using this framework and the three principles of infonomics:
Measure – How much data does the organization have? What is it worth?
Manage – What data does the organization have? Where is it stored?
Monetize – How does the organization use data?
As health systems face more pressure than ever to deliver cost savings, they’re turning their attention to cost-per-case improvement projects. These strategies can produce quick wins for improvement teams looking to gain momentum and buy-in. This article addresses the following topics:
How to identify areas of opportunity.
The importance of costing accuracy.
Four strategies for implementing cost-per-case improvement projects.
Example projects for new teams.
How to sustain results.
Healthcare payers today must develop new business models to address the industry’s mounting challenges around cost, access, and quality. The best emerging models are simple and aligned, accommodate all stakeholders’ needs, and center on the patients/members.
Five key payer opportunities provide a framework for new models that will support the healthcare transformation goals of lower cost, better quality, and increased access:
Understand the impact of the Affordable Care Act.
Be ready for potential shifts due to regulatory impacts.
Understand how social determinants of health impact members.
Focus on provider relations.
Prepare for future trends.
In today’s challenging environment, healthcare leaders must seek opportunities to boost revenue through improved financial performance and reimbursement. Some common strategies include reducing the number of outstanding bill hold accounts, reducing A/R days, and managing discharged not final billed (DNFB) cases.
This article tackles, the following topics:
Common reasons accounts remain unbilled.
Identifying opportunities for improvement.
Using data analytics and process improvement to achieve financial goals.
Creating lasting improvements.
A hot topic in healthcare right now, especially in the medical coding world is the Hierarchical Condition Category (HCC) risk adjustment model and how accurate coding affects healthcare organizations’ reimbursement.
With almost one third of Medicare beneficiaries enrolled in Medicare Advantage plans, it’s more important than ever for healthcare organizations to pay attention to this model and make sure physicians are coding diagnoses appropriately to ensure fair compensation. This article walks through basics of the risk adjustment model, why coding accuracy is so important, and five action items for interdisciplinary work groups to take. They include:
Having an accurate problem list.
Ensuring patients are seen in each calendar year.
Improving decision support and EMR optimization.
Widespread education and communication.
Tracking performance and identifying opportunities.
Healthcare today is in the midst of a massive transformation. The opportunities for improvement are great if healthcare systems can do the following:
Reduce clinical variation.
Reduce rates of inappropriate care and care-associated patient injury and death.
Follow accepted best care practices.
This article covers the different types of waste in healthcare systems, ways to reduce them, financial alignment around waste reduction opportunities, and the importance of reducing clinical variation. The core driver of healthcare systems must be improving clinical quality. Almost always, with proper clinical management, better care is cheaper care through waste management.
As a performance-based incentive program, DSRIP (the Delivery System Reform Incentive Payment) is designed to help participating states reform Medicaid. To date, 13 states have implemented DSRIP and received a Section 1115 waiver from CMS to transform their Medicaid programs and align them with value-based reimbursement. These states have agreed to budget neutrality, transparency, statewide quality metrics, and frequent reporting of outcomes.
While each state’s program structure and objectives are unique, under DSRIP, participating states share three key goals:
Reducing the total medical spend.
Improving patient outcomes.
Establishing a direct link between provider performance and payment.
UPMC and Health Catalyst created a great business partnership focused on sharing risks and rewards to innovate how activity-based costing (ABC) is done in healthcare. The partners relied on complementary intellectual property, complementary talent, and complementary risks and rewards to drive benefits that extend beyond either organization’s borders. Health Catalyst licensed UPMC’s activity-based costing software, which served as the foundation for the Health Catalyst CORUS suite. Together, the partners will continue to work for innovations in ABC to drive outcomes improvements in healthcare.
Since accountable care took the healthcare industry by a storm in 2010, health systems have had to move from their predictable revenue streams based on volume to a model that includes quality measures. While the switch will ultimately improve both quality and cost outcomes, health systems now need the capability of tracking and analyzing the data from both clinical and financial systems. A late-binding enterprise data warehouse provides the flexible architecture that makes it possible to liberate both kinds of data to link it together to provide a full picture of trends and opportunities.
By committing to transforming healthcare analytics, organizations can eventually save hundreds of millions of dollars (depending on their size) and achieve comprehensive outcomes improvement. The transformation helps organizations achieve the analytics efficiency needed to navigate the complex healthcare landscape of technology, regulatory, and financial challenges and the challenges of value-based care.
To achieve analytics transformation and ROI within a short timeframe, organizations can follow five phases to become data driven:
Establish a data-driven culture.
Acquire and access data.
Establish data stewardship.
Establish data quality.
Spread data use.
Health systems that meet the 2018 Hospital Value-Based Purchasing Program measures stand to benefit from CMS’s $1.9 billion incentive pool. Under the 2018 regulations, CMS continues to emphasize quality. To reduce the risk of penalty and vie for bonuses, it’s increasingly critical that organizations leverage data to build skills and processes that meet more demanding reimbursement measures.
To thrive under value-based payment, healthcare systems must understand CMS’s four quality domains, and their associated measures, for 2018:
Patient- and Caregiver-Centered Experience of Care/Care Coordination
Efficiency and Cost Reduction
Healthcare organizations have long relied on traditional benchmarking to compare their performance to others and determine where they can do better; however, to identify the highest ROI improvement opportunities and understand how to take action, organizations need more comprehensive data.
Next-generation opportunity analysis tools, such as Health Catalyst® Touchstone™, use machine learning to identify projects with the greatest need for improvement and the greatest potential ROI. Because Touchstone determines prioritization with data from across the continuum of care, users can drive improvement decisions with information appropriate to their patient population and the domains they’re addressing.
Uncompensated care can cost large health systems billions of dollars annually, making outstanding balances one of their biggest costs. Propensity-to-pay tools help organizations target unpaid accounts by using artificial intelligence (AI) to leverage external and internal financial and socioeconomic data and identify the likelihood that patients in a population will pay their balances (propensity to pay). With propensity-to-pay insight, financial teams can focus their efforts on patients most likely to pay, and connect patients who are unable to pay with charity care or government assistance. Both health systems and patients benefit, as patients can avoid bad debt and organizations receive compensation for care they’ve delivered.
When expenses exceed revenue, business has a financial problem. In healthcare, the focus has been on revenue for so long, we’ve lost sight of runaway costs brought about by high labor and technology expenses, inefficient use of resources, and supply waste. Recognizing the cost problem is a big first step toward solving it.
Five expense-controlling strategies can play a significant role in returning healthcare systems to a stronger financial position:
Refocus on labor management.
Manage employed physicians.
Change the patient encounter environment.
Augment standard approaches with technology.
Manage patient access and flow through the healthcare system.
With new, value-based payment structures, shrinking margins, and decreasing reimbursements, this insight offers some new ways to think about expense inefficiency and how to get costs under control.
Besides improving your information systems and educating your staff on the ins and outs of managing revenue, there are many more opportunities for improvement. Here are five suggestions to help health systems improve their revenue cycle management:
Trend and benchmark your healthcare data.
Use DOS to Mine Your Healthcare Data.
Constantly ask frontline staff for suggestions.
Monitor all payer contracts.
Maintain convenient and caring touch points with patients.
Influential healthcare financial trends in 2017 emerged in three areas:
Transitions in payment.
Disruption from familiar players and newcomers.
Emerging data skillsets.
Uncertainty has been a common theme for 2017. Organizations continue waiting for clarity on the future of the Affordable Care Act (ACA), while working to implement value-based care. Changes from established healthcare organizations as well as the arrival of prominent newcomers (e.g., Amazon) add to the unsettled outlook, as do emerging data skillsets.
Amid the uncertainty, however, healthcare is clearly continuing on the path to patient-centered care. Organizations best positioned for 2018 will understand their performance in 2017’s top three healthcare financial trends as they evaluate their preparedness for the coming year.
Many healthcare organizations invest for financial, strategic, and operational reasons. These investments cover a broad spectrum of opportunities, from medical technology, to delivery models, to promising new research. Health Catalyst follows these investment avenues, building long-term relationships, and connecting with its partners in three ways:
The sole focus of these investments and partnerships is outcomes improvement—a unique approach in healthcare—supported by the operating principles of ownership, pragmatic innovation, and transparency.
In this first article of a series, Kyle Salyers, Health Catalyst Senior Vice President of Business Development, explores the partnership “flywheel” and the collaborative nature that underscores a successful healthcare investment platform.
How can healthcare organizations set themselves up for success as the industry shifts from fee-for-service to value-based reimbursement? They need to understand risk of their patients and population to identify ways to reduce healthcare costs and improve quality of care. This makes total cost of care (TCOC) analysis a necessary skillset in this time of transition.
TCOC analysis leverages key elements of the healthcare analytics infrastructure to understand how money is being spent at the organization and identify the drivers of high cost:
An integrated EDW.
Payer reporting tools.
Claims and membership data.
Scorecards and dashboards.
Outdated technology and antiquated costing methodologies have left health system CFOs unable to see the true cost of the services they provide and impacts on patient outcomes. The move from fee-for-service to value-based contracts, however, means that CFOs need this information more than ever. Health Catalyst® has partnered with industry-leading health systems to develop a next-generation costing system: the CORUS™ Suite. Two integrated products comprise the suite:
Activity-Based Costing delivers accurate and actionable data from across the continuum of care in a scalable and maintainable tool.
Cost Insights analyzes and delivers early insights through a customizable dashboard powered by embedded logic and access to the most granular level of activity and costing data.
CORUS leverages Health Catalyst’s analytics platform and best-of-breed activity-based costing models to help users manage the true cost of care.
Healthcare Decision Support Helps CFOs Achieve Their Top Goal: Timely, Accurate, Agile Decision Making
Supporting decision making is a top goal for CFOs today, according to a 2017 Kaufmann Hall CFO survey. Healthcare decision support empowers CFOs and their finance teams to make accurate, agile, and timely decisions, from rolling forecasts of future trends to risk-adjusted scenario modeling.
In addition to helping CFOs make good decisions, healthcare decision support helps CFOs lead their teams and organizations improve in four key ways:
Data-driven growth and practice expansion.
Improved ability to negotiate favorable risk-based contracts with payers.
Effectively and fairly address important physician compensation issues.
Improve population health management.
With healthcare decision support, CFOs and their health systems have a distinct competitive advantage (e.g., shortened planning cycles and more accurate cost measurement). They can adjust to unexpected challenges and take advantage of new opportunities.
When it comes to transitioning to value-based reimbursement, health systems consistently ask two questions:
Why should I invest in reducing utilization when 90+ percent of my business is still fee-for-service (FFS)?
Where do I start?
This value-based reimbursement road map can help systems transition from barely surviving to successfully arriving (while respecting both shared-risk and FFS worlds):
Stop #1: Surviving— If you don’t get paid for the risk you take on, then you can’t survive long term.
Stop #2: Sustaining—Numerous clinical interventions occur in hospitals that systems can focus on to help improve the bottom line.
Stop #3: Succeeding—Build out competencies on a smaller population with aligned incentives so you can negotiate deeper alignment with key payers.
Stop #4: Arriving— The ultimate destination, where the lines between traditional healthcare delivery and public health are blurred.
Although healthcare is far from arriving at the value-based reimbursement destination, it can use this road map’s pragmatic strategies for heading down the right road.
Trump/Republican rhetoric recently met reality when it comes to the Affordable Care Act (ACA). The latest version of the bill that passed in the House is far from a complete repeal and replacement of the ACA. However, the bill includes significant changes to healthcare policy and coverage, from severe Medicaid cuts to shifting financial accountability.
ACA uncertainty has healthcare leaders concerned about how to plot a path forward, with three questions on the top of their minds:
What will the final bill look like?
How do I plan for the changes?
What should happen next to fix the problems with the ACA?
Answers to these questions, although helpful, distract the industry from the ultimate goal: delivering on healthcare’s longstanding mission to provide quality, affordable healthcare. In short, health systems need to continue prioritizing patients until the ACA dust settles in Washington.