Cost Savings

Success Stories

Health Catalyst

Employer Health Plan Successfully Lowers Costs and Boosts Benefits

Offering competitive employee health benefits is a business essential, and a differentiator for attracting top talent, but as healthcare costs continue to rise, employers are challenged to offer affordable healthcare with extensive benefits. The traditional approach of reducing benefits and raising premiums is unsustainable as a long-term strategy, but without a good way to understand, rationalize, or reduce healthcare costs, these costs are unpredictable and unmanageable.
Health Catalyst decided to embrace self-insurance earlier than what would be typical for a company of its size to take the management of its healthcare costs and benefit design into its own hands, as well as gain access to the data it needed to manage its population health. The organization is leveraging data and analytics to help uncover insights into improvement opportunities and methods to drive behavior change in its team member population. The company designed an intelligent benefit plan based on the needs and preferences of its team member population and engaged team members in an ownership and accountability mindset. These efforts have resulted in:

Successfully moved from a fully-insured/unmanaged organization to a self-insured/managed organization in less than five years.
Reduced healthcare spending by more than 20 percent while increasing the benefits offered in significant ways.
Maintained cost-effective, data-driven quality solutions that sustained the overall level of benefits offered to team members.
Re-invested cost savings into enhancing employee benefits.

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Integration of Community Health Workers Improves Care Management Effectiveness

While the delivery of healthcare is essential to staying healthy and getting well, it is not the only determinant of health. Other factors such as psychosocial factors and environmental conditions in which people live, work, and age can have a far greater influence. These factors are referred to as social determinants of health. Existing evidence has found that addressing social determinants of health like housing and food, is effective in improving patient health outcomes and decreasing healthcare costs.
Social determinants of health can significantly affect a person’s overall health and quality of life. Patients with social determinants that negatively impact health, such as lack of access to transportation and the place in which they live, can be exceptionally challenging to keep healthy and often rely on the emergency department (ED) for care. Reaching and engaging with patients in primary care settings can be vital to addressing patient needs. The positive influence of community health workers (CHWs) acting as a bridge between vulnerable patients and the healthcare system has shown to decrease emergency department visits and hospital admissions.
Partners HealthCare, a non-profit health system located in Boston, recognized that meeting the needs of vulnerable patient populations was an opportunity to improve patient outcomes as well as reduce cost. Through its integrated care management program (iCMP), the Partners system had some success in improving the care delivered to underserved communities. Partners’ academic medical centers, Brigham and Women’s Hospital and Massachusetts General Hospital, conducted pilots which focused on the CHW role; one model that empowered CHWs to serve as care leads, and one model that incorporated CHWs into the care team.
Results:
Integration of CHWs into the iCMP is yielding positive results for both pilots. Using a pilot conducted at Brigham and Women’s Hospital and Massachusetts General Hospital, when comparing the difference in six months post-program outcomes to six months pre-program outcomes:

When the CHW functions as a lead, results include a:

$664 larger per member per month (PMPM) reduction in total medical expense and an 11 percent larger reduction in ED visits compared to the control group.

When the CHW functions as a part of the care team, results include a:

$635 larger PMPM increase in total medical expense, however, patients with a CHW team member had a 28 percent larger reduction in ED visits, and an 11 percent larger decrease in office no-show rates compared to the control group.

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Systematic, Data-Driven Approach Lowers Length of Stay and Improves Care Coordination

Improving and reducing length of stay (LOS) improves financial, operational, and clinical outcomes by decreasing the cost of care for a patient. It can also improve outcomes by minimizing the risk of hospital-acquired conditions.
Faced with declining revenue related to changes in Medicare and Medicaid reimbursements, Memorial Hospital at Gulfport knew additional methods of providing more efficient and cost-effective quality care were needed to maintain long-term success. The organization embraced the challenge of reducing LOS to lower costs and lessen risk for its patients. By adopting a systematic, data-driven, and multi-pronged approach, Memorial has achieved significant results in one year including:

$2 million in cost savings, the result of decreased LOS and decreased utilization of supplies and medications.
47-day percentage point reduction in LOS.

Improved care coordination and physician engagement have successfully reduced LOS.
The 30-day readmission rate has remained stable.

Three percent increase in the number of discharges occurring on the weekend.

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Machine Learning Automates Outpatient Coding

Accurate service line reporting is necessary for a healthcare organization to understand its total cost of care. Organizations that do not understand the total cost of care cannot be successful in risk-sharing and other forms of value-based payment, resulting in a loss of reimbursement.
In an effort to reduce costs, MultiCare Health System, an integrated delivery system serving Washington, decided to outsource all encounter coding, which eliminated the coding of outpatient encounters, negatively impacting service line reporting. To ensure accurate reporting, MultiCare asked its coders to assign an MS DRG code to all hospital-based outpatient encounters, which brought significant additional costs. To mitigate this, MultiCare utilized data analytics and machine learning to develop an algorithm that predicts the MS DRG code for hospital-based outpatient encounters.
By employing machine learning, MultiCare has achieved impressive results, including:

Successfully restoring service line reporting, enabling the organization to better understand the total cost of care, and supporting future participation in value-based care and risk-sharing agreements.
Ability to avoid additional labor costs that would be required to perform dual coding, saving more than $1M annually.

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Care Transitions Improvements Reduces 30-Day All-Cause Readmissions Saving Nearly $2 Million

Researchers estimate that in just one year, $25 to $45 billion is spent on avoidable complications and unnecessary hospital readmissions, the result of inadequate care coordination and insufficient management of care transitions.
While increasing its efforts to reduce its hospital readmission rate, the University of Texas Medical Branch (UTMB) discovered that it lacked standard discharge processes to address transitions of care, leading to a higher than desired 30-day readmission rate. To address this problem, UTMB implemented several care coordination programs, and leveraged its analytics platform and analytics applications to improve the accuracy and timeliness of data for informing decision making and monitoring performance.
This combination of approaches proved successful, resulting in:

14.5 percent relative reduction in 30-day all-cause readmission rate.
$1.9 million in cost avoidance, the result of a reduction in 30-day all-cause readmission rate.

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Dedication to Quality Improvement Delivers on the Triple Aim: Saves Tens of Millions Annually

Unwarranted variation in clinical care is costly: representing as much as $30 million of actionable savings opportunity for a typical organization. Addressing clinical care at Allina Health, however, was challenging—as a large system with limited resources, the organization struggled to standardize work to impact outcomes and reduce costs.
Allina Health’s executive team understood that, due to market and system demands, it needed sharper focus on increasing clinical value to improve financial margins. In response, the organization launched its Clinical Value Program, a systemwide effort to measure and improve clinical value. The program quantifies the value of clinical change work to improve outcomes, while reducing costs and increasing revenue for reinvestment in care.
With a data-driven, multidisciplinary team effort, Allina Health’s Clinical Value Program has improved care and delivered on the Triple Aim, achieving the following results:

More than $33 million positive margin impact by expense reduction and additional hospital in/outpatient revenue.
Identified $13 million in additional opportunities for cost reductions, which have been integrated into the health system budget plan.

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Activity-Based Costing and Clinical Service Lines Team up to Improve Financial and Clinical Outcomes

Healthcare costs continue to increase at a disproportionate rate relative to gross domestic product, and Americans are becoming increasingly aware that they aren’t getting their money’s worth. To build a sustainable healthcare system, healthcare organizations must identify and address waste and reduce the total cost of care.
UPMC recognized that the common denominator to addressing threats to sustainability is to fully understand and effectively manage costs. It implemented activity-based costing (ABC), facilitated by the Health Catalyst CORUS™ Suite, to deliver detailed and actionable cost data across the analytics environment, and support service line reporting, contract modeling, and clinical process improvement. UPMC has used this approach to effectively drive cost savings and improve clinical outcomes in many of its service lines, including Surgical Services, Women’s Health, Orthopedics, and Cardiovascular. For example:

$3M cost savings/avoidance over 2 years through the implementation of the ERAS program.
Increased insight into cost variation and drivers of inefficiency in the operating room setting.
Improved patient outcomes and quality (readmissions, complications, patient reported outcomes, patient satisfaction, etc.) for patients undergoing joint replacement.

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Using Data to Spotlight Variation and Transform Total Joint Care

Total Hip (THA) and Total Knee (TKA) Arthroplasty are the most prevalent surgeries for Medicare patients, numbering over 400,000 cases in 2014, costing more than seven billion dollars annually for the hospitalization alone. Today, more than seven million Americans have hip or knee implants, and the number is rising. Furthermore, substantial variation in the cost per case has raised questions about the quality of care. At Thibodaux Regional Medical Center, total joint replacement for hips and knees emerged as one of the top two cost-driving clinical areas with variation in care processes.
To address this, Thibodaux Regional maintained its focus on the IHI Triple Aim while developing organizational and clinical strategies to transform the care of patients undergoing THA and TKA. It commissioned a Care Transformation Orthopedic Team that set multiple outcome goals. Among its many efforts, the team established standard care processes, created an educational program, redesigned order sets and workflows, and deployed a joint replacement analytics application.
Thibodaux Regional reduced variability and decreased costs significantly while maintaining high levels of patient satisfaction:

76.5 percent relative reduction in complication rate for total hip and total knee replacement.
38.5 percent relative reduction in LOS for patients with total hip replacements.
23.3 percent relative reduction in LOS for patients with total knee replacement.
$815,103 cost savings, achieved in less than two years.

 
 

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Health Catalyst

Clinical and Financial Partnership Reduces Denials and Write-Offs by More than $3 Million

CMS denies nearly 26 percent of all claims, of which up to 40 percent are never resubmitted. The bane of many healthcare systems is the inability to identify and correct the root causes of these denials, which can end up costing a single system tens of millions of dollars. Yet almost two-thirds of denials are recoverable and 90 percent are preventable.1 Despite previous initiatives, The University of Kansas Health System’s denial rate (25 percent) was higher than best practice (five percent), and leadership realized that, to provide its patients with world-class financial and clinical outcomes, it would need to engage differently with its clinical partners.
To effectively reduce revenue cycle and implement effective change, The University of Kansas Health System needed to proactively identify issues that occurred early in the revenue cycle process. To rethink its denials process, it simultaneously increased organizational commitment, refined its improvement task force structure, developed new data capabilities to inform the work, and built collaborative partnerships between clinicians and the finance team.
As a result of its renewed efforts, process re-design, stakeholder engagement, and improved analytics, The University of Kansas Health System achieved impressive savings in just eight months.

$3 million in recurring benefit, the direct result of denials reduction.
$4 million annualized recurring benefit.
Successfully partnered with clinical leadership to transition ongoing denial reduction efforts to operational leaders.

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Health Catalyst

Blood Conservation Program Yields Millions of Dollars in Savings

Every three seconds, someone in the United States will need a blood transfusion, which adds up to nearly 17 million blood components transfused annually. Yet, evidence shows that up to 60 percent of red cell transfusions may not be necessary. In 2011, Allina Health, a healthcare delivery system that serves Minnesota and western Wisconsin, had a wide variation in transfusion practices throughout the system and a transfusion rate that was 25 percent above national benchmarks. In an effort to improve outcomes of high-risk transfusions, Allina Health turned to its data to develop an evidence-based blood conservation program aimed at reducing costs and saving valuable blood resources.
Results:

$3.2M decrease in annual blood product acquisition costs since 2011
30,283 units saved annually
111 units of red cells saved per 1000 inpatient admissions

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Data-Driven Approach Identifies Nearly $33 Million of Savings Annually

Today’s healthcare industry, in which a lack of insight into clinical variation has contributed to increased expenses, has significant opportunities to use data and analytics to improve outcomes and reduce costs. As part of its ongoing commitment to improve clinical value, Allina Health has employed a systemwide process to identify, measure, and improve clinical value. The health system has been able to quantify the value of clinical change work to improve outcomes, while reducing costs and increasing revenue for reinvestment in care.
Allina Health achieved the following meaningful results with this collaborative, data-driven opportunity analysis process:

Identified nearly $33 million in potential cost savings for the first three quarters of 2017.
Achieved over $10 million of confirmed savings during the first three quarters of the year.
Elevated discussions of cost concerns, leading to the development of standard processes, and significantly reducing unwarranted clinical variation.

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Comprehensive Approach to CAUTI Prevention Leads to Dramatic Reduction in Infections

Despite being common, healthcare-associated infections are potentially deadly and carry a significant financial cost. Of healthcare associated infections, catheter-associated urinary tract infections (CAUTI) are one of the most common, despite most instances of CAUTI being preventable.
As CAUTI was determined to be one of the top five influential factors in the publicly report quality scores, Piedmont Healthcare looked to data for more visibility into factors that were contributing to CAUTI rate in an effort to permanently reduce the number of infections. By engaging staff for compliance with CAUTI prevention best practices, Piedmont has seen sustainable improvements.
Results:

50.2 percent relative reduction in CAUTI standardized infection ratio (SIR). This translates to 37 fewer patients with infections than expected.
6.7 percent relative improvement in insertion bundle compliance.
Maintenance bundle compliance improved dramatically, with nearly a three-fold increase in the percentage of patients receiving the maintenance bundle.

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Labor and Delivery Transformations Lower Costs and Improve Care

One in three women delivers via cesarean in the U.S., and more than 90 percent of them have repeat operations in subsequent deliveries. Despite numerous evidence-based guidelines and established best practices for labor and delivery, clinical care varies widely for many practices. Labor and delivery care varied at Thibodaux Regional Medical Center, causing the organization to look for ways to standardize care.
To better understand variations in care, and opportunities to reduce its cost, the labor and delivery care transformation team at Thibodaux Regional used the Health Catalyst Labor and Delivery Advanced Application as well as the Financial Management Explorer application, which integrates data from billing and costing, and creates snapshots of current financial metrics.
Informing and educating providers with provider-specific data in conjunction with redesigned workflow, standardized supplies, and new, standardized protocols enabled the labor and delivery care transformation team at Thibodaux Regional to experience cost savings and improved outcomes, including:

24.4 percent relative reduction in the cost of care for uncomplicated vaginal delivery. Projected annual cost savings of $266,067.
22 percent relative reduction in the cost of care for cesarean deliveries. Projected annual cost savings of $346,856.

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Successfully Sustaining Sepsis Outcomes

Increasingly, high-functioning healthcare organizations are recognizing the challenge of sustaining results following successful clinical improvement initiatives. Sepsis is a major driver of mortality in the U.S. In fact, it is estimated that up to half of all hospital deaths are linked to sepsis. After executing a successful strategy to improve outcomes for patients with sepsis, Piedmont Healthcare was determined to sustain those critical reductions in mortality, length of stay, and cost.
The health system “hardwired” process changes into the EHR, monitored performance compliance via a well-developed analytics application, and fostered strong leadership on the frontlines to champion a culture of continuous improvement. In the second year of its latest sepsis improvement effort, Piedmont was able to not only sustain, but also to further improve upon its first-year improvement results.
Second-year results:

14.2 percent reduction in mortality for severe sepsis and septic shock translating to 68 lives saved in one year.
30.7 percent improvement in number of patients receiving calculated fluid target.
$1.2 million saved in one year from decreased variable cost.

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Driving Down Costly COPD-related Readmissions with NOREADMITS Bundle

Nationally, approximately 700,000 hospitalizations occur each year with the principle diagnosis of Chronic Obstructive Pulmonary Disease (COPD), with one in five patients being readmitted within 30 days. Even with a national cost for each COPD readmission costing between $9,000 and $12,000, evidence-based measures that improve patient outcomes and decrease COPD readmissions are largely lacking.
When reviewing organizational performance for 30-day all cause readmission, MultiCare Health System identified COPD as one of the top two readmission diagnoses, along with a rate higher than expected. This prompted the organization to take action. MultiCare implemented a NOREADMITS bundle, using the Health Catalyst Analytics Platform and integrating performance measures for each element of the bundle, resulting in:

16.5 percent reduction in readmission rate.

Approximately 34 fewer patients with COPD readmitted each year, saving an estimated $360,000 annually based on national benchmarks.

95 percent of COPD patients were assessed for readmission risk.
Two-fold increase in COPD order set utilization.

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Integrated Care Management—Improves Care and Population Health While Reducing Costs

One hundred thirty-three million Americans, 45 percent of the population, have at least one chronic disease. Chronic diseases are responsible for 7 of 10 deaths each year, killing more than 1.7 million Americans annually. Moreover, chronic disease accounts for 86 percent of our nation’s healthcare costs.
An integrated delivery system and an accountable care organization with two large academic medical centers and six community hospitals, Partners HealthCare is increasingly compensated for outcomes of care. Recognizing the need to more effectively manage its chronically ill patients, Partners implemented an integrated care management program (iCMP) to improve the outcomes of rising-risk patients and better manage treatment costs. The iCMP is a primary-care embedded, longitudinal care management program led by a nurse care manager working collaboratively with the primary care provider and care team.
The iCMP is contributing to Partners effective management of patients and financial success in at-risk contracts. In its Pilot Phase as a Medicare Demonstration Project, the program achieved the following results:

20 percent lower hospitalization rate per 1,000 patients.
13 percent lower rates of emergency department (ED) utilization.
25 percent relative difference in mortality.

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Care Management: A Critical Component of Effective Population Health Management

Unprecedented changes in the healthcare payment system have resulted in health organizations across the country investing in the pursuit of the Institute for Healthcare Improvement’s (IHI’s) Triple Aim to improve population health, improve patient experience and outcomes, and reduce costs per capita. Health organizations must develop effective population health management strategies, and they need the right data and analytics to inform their initiatives.
Once armed with the information to make data-driven decisions, leading healthcare providers are implementing care management programs, which have proven to be helpful mechanisms for achieving the Triple Aim. Many healthcare organizations have identified specific patient cohorts to monitor the impact of care management interventions on individual and population health outcomes.
Data-driven care management programs that target high-risk and rising-risk patients can achieve impressive results, including:

Up to 20 percent lower rates of hospitalization in mature care management programs.
Lower rates of emergency department utilization.
Decreased costs.

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How to Significantly Reduce Sepsis Mortality

Up to 50 percent of all hospital deaths in the United States are linked to sepsis. That sepsis mortality statistic was not lost on Piedmont Healthcare, a system of six hospitals and more than 100 physician and specialist offices across greater Atlanta and North Georgia. Sepsis accounted for half of Piedmont’s mortality rate, despite years of progress in sepsis care.
Piedmont leaders recognized that they needed an innovative quality improvement methodology to spread best practices and sustain improvement, supported by an accessible source of timely, reliable, and actionable information. They therefore implemented a “core and spread” team structure to promote enterprise-wide adoption of best practices. The health system also deployed a sepsis prevention analytics application to deliver performance insight to all levels of the organization, and discovered a high correlation between better patient and financial outcomes and the number of bundle elements the patient received.  Being able to tie outcomes to interventions, along with the incorporation of nurse driven protocols, resulted in sustained practice change and greater engagement from physicians, nursing and frontline staff, all the way to the Board level.
As a result, Piedmont achieved the following impressive outcomes:

5.8 percent reduction in mortality for all patients with severe sepsis and septic shock, translating to 26 lives saved in one year.
2.5 percent reduction in total inpatient length of stay (LOS).
8.2 percent reduction in variable cost per case, equating to $4.3 million saved in one year.

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ICU Avoidance: Lowering Costs, Patient Risk, and LOS

A stay in the intensive care unit (ICU) is both costly and risky. In a sobering example of the latter, nearly one third of patients admitted to the ICU experience delirium, a state of cognitive impairment that can increase risk of death in the hospital. Still, many cardiovascular patients need intensive care that can only be provided safely in an intensive care unit, requiring hospitals to assure enough beds and skilled ICU staff for these patients—while quickly identifying which patients can receive care as good or better in another unit.
Allina Health has achieved this dual objective with a concerted ICU avoidance strategy for specific complex sub-populations of cardiovascular (CV) patients. The foundation of this strategy is risk-informed decisions about which patients can avoid the ICU; clinical staff education; and an analytics platform and enterprise data warehouse (EDW) from Health Catalyst that enables CV care leaders to monitor safety metrics for those patients who avoid a stay in the ICU. So far, Allina Health’s efforts have resulted in the following achievements:

636 additional ICU days made available for more critically ill patients by employing ICU avoidance strategies
One-day reduction length of stay (LOS) for Transcatheter Aortic Valve Replacement (TAVR) patients
$589,000 cumulative cost savings

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Nurse-Driven Protocol Optimizes Management of Post Op Afib While Reducing LOS and Costs

Post Operative Atrial Fibrillation occurs in up to 30 percent of all patients after cardiac surgery. This serious complication increases the length of the patient’s hospital stay, and is associated with a twofold increase in the incidence of cerebral infarction and an increased risk of 30-day mortality. Timely and consistent management of Post Op Afib can prevent significant complications and help prevent death. To standardize such an approach to managing Post Op Afib, Allina Health’s Minneapolis Heart Institute created a physician committee to raise consensus on and develop a protocol for Post Op Afib management.
The committee ultimately created a nurse-driven protocol and decision support algorithm linked to the health system’s electronic health record (EHR). Additionally, it uses analytics, supported by Health Catalyst’s Late-Binding™ Enterprise Data Warehouse (EDW), to track physician ordering rate, patient outcomes, and cost. This combination of people, processes, and analytics tools has made a significant difference for Allina and its patients.

Two-day reduction in ICU LOS.
5.9 percentage point reduction in ICU readmission rate.
$1.5 million savings.

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Leveraging Risk Assessment to Decrease LOS and Cost for PCI Patients

Percutaneous Cardiac Intervention (PCI) is a minimally-invasive alternative to open heart surgery—a procedure that approximately 600,000 U.S. patients will undergo this year.
Allina Health, a non-profit health system with 90+ clinics and 13 hospitals with locations throughout Minnesota and western Wisconsin, is a leading provider of the procedure in Minnesota. Allina Health discovered that major bleeding events following PCI procedures (the most common non cardiac complication of PCI), though not affecting mortality, were increasing length of stay (LOS) and cost.
To improve the quality of its PCI procedures and decrease costs, Allina Health recognized the need to accurately assess bleeding risk and then implemented best-practice interventions to prevent major bleeding events.
Already, physicians and patients have seen that these new interventions, which includes a bleeding risk assessment tool, allows clinicians to focus interventions based on risk and reduce complications. The top results from Allina Health’s interventions include:

5.3 percentage point reduction (a 21.7 percent relative reduction) in complication rate.
$1.8M cost savings.
1.4 percentage point reduction (a 36.5 percent relative reduction) in LOS for patients at high risk for bleeding who receive a closure device.

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Data-Driven Approach to Improving Cardiovascular Care and Operations Leads to $75M in Improvements

Health spending in the United States is greater than the gross domestic product of most nations, and the costs for cardiovascular disease (CVD) and stroke care alone total $193.1 billion. CVD accounts for approximately one out of every three deaths in the U.S. and contributes to the shorter life expectancy of Americans. Thirty-five percent of CVD related deaths occur before the age of 75 years, and 19 percent before the age of 65.
Allina Health is a large integrated healthcare delivery network operating in Minnesota and western Wisconsin that includes three large cardiac centers. Due to the prevalence and mortality rate of CVD, leaders at Allina Health recognized that they needed to focus on cardiovascular health in order to truly impact the population health and patient outcomes of the communities they serve.
By leveraging real-time data from its enterprise data warehouse (EDW), Allina Health effectively identified and addressed clinical practice variation and operational issues affecting cardiovascular care and costs. In doing so, the health system realized more than $75 million in performance enhancement savings and revenue increase over a four-year period by focusing on supply chain, lab test and blood utilization, clinical practice changes and clinical documentation improvement.
 

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A Service Line Approach Improves Women’s Health at UPMC

By the age of 60, more than one-third of women in the United States have had a hysterectomy. Healthcare systems across the country are recognizing that a women’s health service line offers a pathway to improving care and decreasing cost for these patients. Having accurate activity-based costing information is necessary to uncover opportunities for clinical practice improvement and cost reduction.
The University of Pittsburgh Medical Center (UPMC) made the decision to organize Women’s Health as a service line across the entire health system. UPMC fortified this approach with strong and collaborative leadership, an enterprise data warehouse, and an activity-based cost management system. The results:

20 percent reduction in inpatient length of stay for hysterectomies (over a three-year time period)
34 percent reduction in open hysterectomies
28.3 percent reduction in 30-day readmissions for hysterectomies

These results were obtained during a time when this clinical service saw a 25 percent improvement in its contribution margin.

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Service Lines and Activity-Based Costing Reveal True Cost of Care for UPMC

Between 2007 and 2014, U.S. healthcare costs per capita increased by almost 25 percent. The way in which health systems are typically organized, managed, and budgeted (as departments and units within separate hospitals) works against them when they attempt to improve population health and decrease costs. The University of Pittsburgh Medical Center (UPMC), a large health system with more than 20 hospitals and 500 clinics, was keenly aware of this challenge as it embarked on population health and value-based care initiatives that spanned the entire organization.
The health system determined that it needed to break down the virtual walls between care centers and standardize service lines across the enterprise. By extension, this organizational change mandated the need for activity-based costing in healthcare that would deliver the insight necessary to run a service line effectively. UPMC organized six service lines within the health system, each spearheaded by clinical, operational, and financial leadership. Each service line uses the health system’s innovative, data-driven activity-based costing methodology to understand the true cost of care.
Notable, measurable results of UPMC’s service lines and activity-based costing methodology to date include:

$42 million of cost reduction opportunities (approximately 2 percent of targeted service line cost)
$5 million in supplies savings
Transparency toward identification of contribution margin variation for specific procedures
Up to 97 percent improvement in time to access information

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How to Reduce Clinical Variation and Improve Outcomes While Demonstrating a Positive ROI

Clinical variation can be frustrating for patients and their families, often leaving the impression that healthcare team members are not on the same page and don’t agree on the plan for the patient’s diagnosis or treatment. It is also costly—the Institute of Medicine estimates that $265 billion (30 percent) of healthcare spending is waste that directly results from clinical variation.
To reduce unwanted variation, Texas Children’s Hospital invested considerable resources to develop clinical standards tools, including evidence-based order sets; however, demonstrating the effectiveness and utilization of those guidelines, pathways, and order sets had been daunting. To that end, Texas Children’s deployed an analytics platform from Health Catalyst to aggregate and analyze the data needed to perform both of these critical functions.
Results:

$2,401 reduction in cost per patient with order set utilization, and an 8.4-day difference in average length of stay (LOS).
$15 million reduction in total direct variable costs in Fiscal Year 2015, $32 million anticipated reduction in Fiscal Year 2016 at the current order set usage rate, and a potential $64 million annual reduction with a hypothetical 80 percent order set usage rate.
1,629 percent return on investment (ROI).

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