How Analytics Will Lower Waste and Reduce Costs for the Healthcare Industry

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Healthcare Costs Are Rising

Healthcare spending in the U.S. today is not sustainable. The following compelling statistics illustrate the need to reduce healthcare costs:

  • Average healthcare spending per capita in the U.S. exceeds $8,000.
  • This exceeds the spending of all other countries participating in the Organization for Economic Co-operation and Development (OECD).

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Unfortunately, our high spend is not producing better outcomes. In fact, the life expectancy for men and women ranks 19th and 26th respectively out of the 34 countries reporting in the OECD database.

We have plenty of room to improve healthcare quality.

Health Systems’ Revenue Curve Is Flattening

As healthcare costs rise on a per capita basis, hospital revenue has reached a plateau. As delivery systems move from a fee-for-service environment to value-based care, staying the course is not a sound option for hospitals.

Reducing healthcare costs is a major driving force in bundled payments, home-centered medical care, and accountable care organizations. Each new delivery model is built on the premise of reducing revenue per patient.

So what can health systems do to survive financially in this changing environment?

Reducing Healthcare Waste

One of the major contributing factors to escalating hospital costs is patient variation and waste associated with the delivery of care. Hospitals have begun to address waste through a variety of methods such as Six Sigma, LEAN and other healthcare quality process improvement techniques.

While these methods are effective at dealing with administrative costs, a much greater return can be gained by concentrating on the clinical or patient care costs.

Financial executives have been reluctant to embrace the elimination of patient care costs due to the predominant fee-for-service based systems. But with reimbursement changes moving toward a managed care platform, now is the time to address patient variation and the patient waste (costs) associated with current healthcare delivery models.

Clinical work teams coupled with data and healthcare analytics reduce costs by helping your organization reduce variation, leading to lowering cost trends as the revenue trend flattens.

Healthcare Enterprise Data Warehouse Stratifies Cost and Quality Data

To fully understand your costs and identify areas of waste, you need good data. A healthcare enterprise data warehouse (EDW) is the best method for integrating and harnessing the potential of all of your data. An EDW organizes a health system’s clinical, financial, patient satisfaction and administrative data into a single source of truth that serves as a foundation for data-driven improvement.

Billing, costing and clinical systems provide data by encounter count and charges and categories of cost, such as direct variable cost. With all this data aggregated in one place, you can organize it into clinical work processes to determine which processes make up the majority of the care.

Once the data has been grouped, it will expose potential variation within each clinical work process. Variation helps us identify, categorize, and eliminate waste.

Clinical Teams Use Data to Drive Cost Improvements

Data alone gives you the insight you need to more forward to reduce waste and the associated healthcare costs. But you also need effective teams of people to implement your targeted plans for quality and cost improvements.

The best method is to establish a work group team of physicians, nurses, other clinical members and business analysts for each clinical care program. These teams focus on quality improvement opportunities. Teams may decide to focus on length of stay reductions, procedures to lower readmission rates, reducing unnecessary diagnostic tests or decreasing infection rates.

A healthcare enterprise data warehouse that includes clinical, financial and patient satisfaction data provides the framework for the team to answer questions like these:

  • Can we reduce the number of procedures?
  • Can we lower the cost of a specific item?
  • Can we decrease time for test results?
  • Are there duplicate orders?

The work group team members then:

  • Determine a best practice
  • Develop a standardized care process model through collaboration, observation of the actual processes, research and experimentation
  • Implement the new quality healthcare improvement process across the organization to promote the best clinical and operational practices in the delivery of care
  • Develop standardized metrics that routinely capture measurements
  • Monitor these metrics to ensure ongoing compliance and track improvement

Learn More about How Healthcare Analytics Reduce Costs and Waste

If you’re interested in more information about how to reduce variation and waste that lead to lowering cost trends as the revenue trend flattens, download our whitepaper: Surviving Value-Based Purchasing in Healthcare: Connecting Your Clinical and Financial Data for the Best ROI.

The whitepaper includes more detail about:

  • Grouping data effectively into clinical work processes
  • Identifying areas of variation and waste
  • Gaining consensus among physicians for improvement efforts
  • Leveraging work group teams to implement better care processes

Let us know: How are you addressing the problem of reducing waste in your healthcare organization? Reply in the comments section below.

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