What Does a Data Warehouse Cost? How to Get a Return on Your Investment
CEOs and CIOs of health systems often ask me how much a healthcare enterprise data warehouse will cost them. As I delve into the topic with them, it becomes clear that what they are really concerned about is their return on investment. These executives are aware that many data warehousing projects require significant upfront investment but may not deliver a return for years, if ever. That feels very high risk to them—and to me as well.
I’d like to share what I believe is the lowest-risk, most economical plan for investing in a healthcare enterprise data warehouse.
Tangible, Incremental ROI with a Healthcare Data Warehouse
If I were a CIO or CEO creating a strategy for a data warehouse platform on which to build for years to come, I’d look for a framework that allowed me to structure my investment in manageable, bite-sized chunks. Each chunk of investment would, ideally, be associated with a tangible benefit or ROI. My initial investment would be tied to a projected tangible benefit or ROI within a finite period — say 6- to 9 months. If the first project demonstrates a return after that time period, I would move forward with the next investment decision.
This approach has been advocated by several veterans of the healthcare data warehouse space. CIOs and CEOs should be pressing vendors to show a return within a finite period and scope levels of investment so they can see tangible progress before investing further in the solution.
Investing in Healthcare Analytics in Four Stages
At Health Catalyst, we have sought to follow this model, with four stages of investment in a data warehousing initiative. The stages include implementing both the enterprise data warehouse platform itself and analytic applications that run on the platform. Each stage delivers a measurable, tangible benefit or ROI within a finite time period.
Stage 1: Implementing the Enterprise Data Warehouse Platform in Healthcare.
The first phase we recommend is getting the enterprise data warehouse platform itself in place. Aggregating data from disparate sources into a single data warehouse platform gives organizations a foundation on which to build all future analytics initiatives. We typically execute against this stage in 3 to 9 months so clients can see its completion within a single budget cycle.
The ROI for this stage is admittedly less tangible than the others, but there are some clear, tangible benefits that a client can experience. After this phase, clients can see that the data warehouse is up and running and they can begin to experience a new level of visibility into what is actually going on within the health system clinically, financially, and operationally. This begins to highlight the power of the data warehouse platform in knowing where to focus, in realizing measurable care improvement, and in significantly and systematically improving efficiency.
Importantly, the cost of this first phase is less than a quarter of what the health system will likely invest in the total solution. In other words, this phased approach reduces upfront investment by 75 percent and allows the health system to get a sense of their potential return before committing further dollars.
Stages 2-4: Bundles of Analytic Applications.
The three subsequent phases involve implementing bundles of analytic applications that leverage data to drive meaningful, tangible, direct ROI. The time frame for each of these phases is anywhere from 3 to 12 months, depending on the application bundles implemented. Here is a summary of these remaining phases:
- We implement a bundle of applications that we refer to as our foundational applications. These include, for example, applications that enable health systems to see every population and every care process family’s performance across over one hundred different clinical, financial, regulatory and operational metrics.
- We launch discovery applications that enable clients to prioritize their analytics and improvement initiatives. For example, one of our discovery applications analyzes data to determine which clinical care processes represent the greatest improvement opportunities for a healthcare organization. Pinpointing processes that can yield the greatest return is invaluable to health systems.
- The final stage is one that our health system clients spend multiple years executing against, though they receive measurable returns in 3- to 12-month increments with each application they install. This is the stage where health systems use the advanced clinical modules to really hone in on and execute the greatest opportunities for care and efficiency improvement. Typically, clients start by focusing on a few modules. Once they execute well and achieve an ROI, they add more modules to the mix, all the while ensuring they hold their gains over time. Some of our most advanced clients are executing against dozens of modules per year, each producing a tangible care improvement benefit along with a measurable financial ROI.
This phased approach enables executives to evaluate quantifiable improvements in financial performance and care quality before making any further investments in the enterprise data warehouse platform.
How Texas Children’s Effectively Implemented a Hospital Data Warehouse
Texas Children’s Hospital is a prime example of a client that has effectively executed this type of phased approach. We have had the honor of partnering with Texas Children’s Hospital for the past two years, and look forward to continuing that partnership in the months and years ahead. During the first few months of the partnership, we focused on installing the platform and populating the data warehouse. Over the next several months, we deployed applications to analyze the data and identify where the greatest opportunities existed.
In Texas Children’s case, improving care and efficiency in asthma and appendectomy were identified as the most promising opportunities. We spent the next several months together executing against that goal, and the care improvement was measurable and sustained, along with real efficiency improvements as well. For example, their team produced a 15 percent reduction in unnecessary chest X-rays to asthma patients within 45 days of installing that module. In the last half of the second year of our relationship, Texas Children’s expanded its scope to include six additional clinical application areas. As we continue forward we will likely be expanding our focus to dozens of additional areas, deploying modules and measuring the results all along the way.
Keep the discussion going. Jot down your concerns about investing in a healthcare enterprise data warehouse solution below. And let us know your opinion of a phased approach.