How to Drive ROI in Your Healthcare Improvement Projects (Webinar)
How to Drive ROI in Your Health Care Improvement Projects (Transcript)
Hello! Thanks for joining us today.
I am very happy to introduce our presenters today, Bobbie Brown and Leslie Falk. Bobbie has been a team lead working on the installation of planning software at Ascension Health in St. Louis. She has also worked for Kaiser Permanente, Sutter Health, and Intermountain Healthcare in Senior Finance position.
Leslie has held positions as a Nurse Informaticist, Director of Biomedical Engineering, Clinical Engineer, and as a Pediatric ICU Nurse. She also worked with Hewlett-Packard in several clinical, marketing, sales, and support leadership roles.
Bobbi and Leslie will cover 3 topics today – why understanding IT ROI is increasingly important, they will take a look at ROI in health care versus other industries, and finally they will share the Health Catalyst 4-Step Approach for driving ROI, which includes ROI and communications tools that will be shared with you after the webinar.
Poll Question #1: What is your primary area of focus?
Now, before we begin, we would like to understand our webinar attendees’ area of focus to better target our discussion today. So, we have the poll up. So what is your primary area of focus? Are you a physician or a provider? Are you a nursing staff? Are you involved in finance, information systems or other? We’ll leave this poll up for just another few moments and we’ll share the results with you.
Alright. I’m going to go ahead and close the poll now in just a few seconds.
It looks like we’ve got a good 31% information systems, in other we’ve got 16% in finance. So here are those results.
Leslie, I’m going to go ahead and turn it over to you and Bobbi now.
The Increasing Importance of ROI in Health Care Improvement Projects
Thank you. So let’s start first by laying the framework for why it’s important to understand and establish an ROI in health care improvement projects.
Firstly, health care margins have been declining and they are stagnating. This puts pressure on health care organizations to make wise investments today for future results.
Health care organizations are also facing what I call competing trends. We’re being asked to improve quality and reduce costs. We’re being asked, for example, to eliminate waste while meeting increasing regulatory requirements, and payment models, as you know, are changing the payment’s link to quality of care, shared savings among providers and hospitals and the bundled payments. Given these stagnating margins and the trends that you see here, you can see why it’s important for health care organizations to understand the ROI of their health care improvement projects.
IT ROI in Health Care versus Other Industries
Before we talk about how to drive ROI in your health care improvement projects, I’d like to just take a few minutes to think about IT ROI in health care versus other industries.
ROI Measurements and Complexity of Environment
Most industries measure goals in terms of financial returns. This figure, showing health care versus other industry, typically talks about the measurement of ROI and the complexity of the environment. And this is across any industry. If you take a look at the X axis, we are looking at the complexity of the environment in which the investment is made, and then the Y axis is the measurement of the ROI. So if you look at these three different phases, again across any industry, phase 1 investments are those that have a direct savings or increased revenue. Their measures indeed are typically things like reduction in labor resources. So can you think of an example in health care? One example might be a financial patient billing system that replaces a large number of file or accounting resources.
As you go up into these different phases, now moving to phase 2, you are looking at investments that improve the productivity of the organization’s resources. Organizations measure the ROI of these investments more in terms of things like increased productivity, i.e., the ability to do more with less, a mantra that I’m sure most of you on the phone in health care are familiar with. If you think about health care investments that would fall in this category, it would be department systems, like Radiology, Lab and Pharmacy. You can see, as we move from phase 1 to phase 2, that it becomes more difficult to measure ROI. In phase 2, it’s not just about technology but process improvement.
Phase 3 investments improve the quality of the product or service. An example of this in health care might be EHR. Phase 3 can be complex to measure, and for any of those of you who have implemented EHR systems, you’ll know what I’m talking about. They can be complex to measure. But just because they’re complex doesn’t mean we shouldn’t measure them.
What makes them complex is that these types of investments can tend to impact all 3 phases, and they measure variables that are more difficult to quantify from an ROI perspective. Here are a few examples. How do you measure patient and provider satisfaction? Another one might be how do I measure the decrease in the liability of a risk.
So why am I focused on this slide and why did I share it? The answer, I really wanted to emphasize that in most industries, measuring ROI is considered a standard business practice, even when doing so requires more complex thinking and analysis. My premise is that the same type of rigor and analysis need to be done in health care.
So you might be thinking at this point that I don’t really understand health care, that health care is unique, that we’re more altruistic in our approach. We aren’t just about numbers. We’re concerned about patients and improving care and less about cost.
I’m a nurse. I care about patients and I care at the same time about improving the quality of the care that I deliver while at the same time making sure that I’m reducing cost as part of care transformation.
Unique Health Care Governance and Payment Model
What has been different in health care, and even this is beginning to change, is that health care governance and payments models have been different than other organizations.
In my experience at Hewlett-Packard, the individuals who decided what product to produce and deliver, production, operations, and those who marketed the services were for the most part within our company.
Health care, on the other hand, as you can see in this diagram had had a bit of a different structure. There are three primary structures. You have the facility, and that includes the staff of nurses and doctors, you also have physicians and providers, and you have payers. What you’re seeing also on this diagram is that I included the patient. While they’re not part of the governance structure, they are part of the value chain. So what has made this challenging in the past in this 3-structure framework is that you’re delivering a kind of product to the patient. However, organizationally and even in terms of financial incentives, these three areas, the facility, physicians, and payers, belong to different organizations, and in many cases had different financial incentives. The good news is that these differences are beginning to be addressed as we saw earlier in the slide about competing trends, with models like ACOs and shared savings.
HIMSS Health Value STEPS Model
The HIMSS Health Value STEPS model is a model that HIMSS put together to stimulate people’s thinking on how to ask about the ROI value of health care investments. HIMSS recognized, as we do at Health Catalyst, that health care IT investments and clinical operations improvement are interrelated. And frankly, , as an industry, we need to do a better job at showing ROI value in these types of projects.
What we’re going to share with you today are some Health Catalyst tools that take into account the five areas that are suggested here by HIMSS and establish a framework that enables communications between your multidisciplinary team members. That includes finance and providing guidance for making investments that will increase quality and lower cost.
Use Case Example
Before we discuss the Health Catalyst 4-Step ROI Improvement Framework Tools, I’d like to share with you a real-time example of a disconnect that can sometimes happen in our projects versus other industries.
Less than a month ago, I was working with a group that was working on a project associated with catheter-associated urinary tract infections. Based on my experience at Hewlett-Packard and the work that we do at Health Catalyst, I have always been of the framework that when we look at these kind of projects, that we look at all of our key measures including financial measures. And so, I asked the question around what the projections were for reduced length of stay and for surveillance resources. It may not surprise you to know that they could not answer this question. I talked with multiple clinicians and IT personnel. They knew someone in their finance department probably knew the answer; however, finance wasn’t involved and they weren’t tracking any financial measures.
You will agree with me that this really needs to change. Health care transformation is causing us to be able to ask the questions about what the ROI on our projects are and how we’re increasing value and reducing costs.
Poll Question #2: Do you currently measure ROI in your Health Care IT Improvement Projects?
The next section of our presentation will focus on the Health Catalyst 4-Step approach to ROI. But before we move on to that, I’d like to take another quick poll and ask how many of you currently measure ROI in your projects?
Alright. Leslie, we have that poll up right now. Please take your time. As you are filling out the poll, we remind you that you can ask questions by typing your question in to the questions pane in your control panel. We’ll leave this poll up for another 5 seconds and then close it…
Okay. The poll is now closed. And let me get the results.
Okay. So what the results are showing us is that about a third of the people sometimes measure it and then we would ask the question in those times when you’re not, why are we not measuring those. And then we’ll see that over or about 50% of the folks either do not usually do it, don’t do it, or they’re unsure. And I think that is exactly why we’re presenting this information today because we see a real opportunity in health care to be able to measure ROI.
And Bobbi, I will turn it over to you now to talk about the Health Catalyst Approach.
The Health Catalyst 4-Step ROI Approach
Thanks Leslie. I have a book on my desk and actually it’s the book that scares people. I didn’t put it there to scare people. I am a finance person by background and I’m not overly mean but the book is called “Show Me The Money” by Jack and Patricia Phillips. When people see that they go, oh, okay, and they kind of back out of my office. But there’s a 4-step process in that book as well and the first step is “show me“, the second step is “show me the money“, the third step is “show me the real money,” and the fourth step is “show me the real money and make me believe it.” And I just love it. It’s not our four-step approach but it is something that makes me think, you know, we have to really believe that we want to do this and we have to really get in and try to do it.
Just talking about ROI, what is it? It’s the net savings divided by the costs. So for example, if you were going to save $450,000 and that included the cost, that was the net number there and overall you had cost of $300, it would be 1.5 or 150%. So for every dollar of investment, you’re going to make 1.5. So that’s a good ROI. So just again what we’re talking about here is the financial measure. There are other financial measures that you can use, but we are using the term “drive your ROI” today.
So we hope today to cover all areas. We’re going to talk about information that can be used by a payer, by a physician, or by a hospital. We all have an interest in this, and we all want cost to go down and quality to improve.
There is also another book that’s pretty popular right now, “Competing on Analytics” by Thomas Davenport. And it was interesting to me, again, getting in and looking at other industries and some of them that are the leaders in this – Amazon, Walmart, Federal Express, UPS, Marriott. Everytime I check in to a Marriott, I’m just amazed that they know me, they know all my likes and dislikes, and everytime it changes a little bit. So they continue to improve their product and they continue to use it as a differentiation and actually it kind of works for me.
For those companies that are high performers than analytics, they have above 77% of what they consider to be above average analytical capability and 65% of them have significant analytical capabilities compared with 22% of the total of all of the companies. So you can again see that those people that are trying to compete on analytics put a lot of investment into their analytical platform.
I was fortunate enough to work for Kaiser. That was a company that really used analytics. I could many years ago get on and make my appointments, and see my lab results. It really was fun to do that and see how Kaiser is adapting over time.
And some of you may remember Frito Lay. They were going through what we are experiencing today we are right as an industry. They had a lot of batch reports that were being produced, competitors were coming in, small competitors were coming in, they were growing, and they had a well-run company. They had a good mission, they wanted to sell fresh tasty snack food as rapidly as possible, but all of a sudden the IT platform was holding them back. They could not get the information they needed quick enough. So they made a large investment, and they made a journey over several years where operations had to commit to costs by 4.5% within one year. And they did that. They were able to cut their distribution centers, reduce their sellable products by 50% and their sales during that same period increased 40%. They were able to save 30,000 or 40,000 hours of paperwork every week with this new platform.
So those are the kind of things that we in health care want to be able to say we can do to make a transformation.
Four Step Approach
1) Define the Business Need
Let’s look at our four-step process that we have here. First step, I’m just going to go through this quickly with you and then we’ll drill in to each one of them a little deeper. 1) Define the Project and the Business Need; 2) Begin to Quantify the ROI; 3) Recruit, Train, Plan and Implement – this is the do stage; and then as for our last step is to 4) Evaluate What Has Happened. Do always go back and make sure and check and make sure that what you thought was going to happen happened.
So I’ll ask you a question too. Do you have a fear of ROI? We didn’t make that a poll question. I should have made that a poll question. I used to be afraid of it. You need to be able to get in and try to justify what you’re doing and you need to believe in your projects. Companies always need to invest. I happened to work at a company, I went online to a turnaround, I went on-site to a turnaround company for about 6 months as an interim person and they had lost $60 million. And your immediate reaction may be, huh! Oh no! You know, we don’t want to do any investments. Well actually we honed down. We didn’t do a lot of investments but we honed down the four things that we knew we had to do if we wanted to stay in business; otherwise, we would have just closed the door. So investments are very important to companies and it’s being able to help companies prioritize the investment and come up with big results that will make your project go further.
So let’s look at the first one – State the proposal in simple words. I can tell you I used to read a lot of these in some of my roles, and sometimes I couldn’t figure out what people were trying to do. Were they trying to purchase something, or were they trying to lease something? Many times they’ll give me the justification for the project ahead of what they’re trying to do. They’ll say, “We want to improve patient care. Well, how are we going to do that?”
So make your proposal very simple – “I want to expand the capabilities of our data warehouse, I’m going to purchase a heart failure application, the total cost is this, the focus is going to be on the readmission rate”. And then what problem am I trying to solve. Well I know cardiovascular is a large program, I know our readmission rate has been climbing over the past 3 years, and now we’re above the national average. I also know that in the other readmission programs from CMS, we’re going to receive a penalty of 0.4% next year. That’s not a lot of dollars but I still know it’s something that I did get clinical buy-in on and we could work on this and we could make a change.
Four Step Approach
Step 2: Begin to Quantify ROI
When you’ve finished that, I think it’s really important, after you get together your proposal or your thoughts, that you share it with a colleague. Am I answering the question? Can we do it better, cheaper, faster? How would this communicate to my boss’s boss? I make sure that this solution is a good enough solution, combined with a personal commitment. I used to see this a lot when people would bring projects forward. They didn’t really believe in the project sometimes. I had this small hospital administrator, and I just always liked to get his project because they were very well thought out, with lots of alternatives, sometimes too many alternatives, but he really had put thought into it and he really believed in what he wanted and he had a commitment to his organization and his medical staff and his employees that this is what I need. I know I need a new nurse call system, I know I need a CT scan, or I have a little hospital. So, believing in a project and don’t ever stab yourself. And when you go to present something, you have to believe in it.
Now we’re getting to the step of defining value and identifying all the costs. When you think about the equation, remember we talked about what ROI is: it’s the benefits divided by the costs. Where do you spend more time on that equation, on the benefit side or on the cost side? So think about that where you are spending time.
The other thing that I often got is, “Gee, my ROI isn’t 500%. It’s not going to get approved. You know, it’s going to die.” That probably is not true in any organization. Any organization I’ve been in, patient safety was our major area. Those were the first projects that were approved. And you need to find out what is the process for decision making in your organization, what’s the format in your company, and how do they package these and put them together.
I’m giving you some ideas today but if you go and talk to the finance area, they will tell you exactly what numbers they want to look at, exact format they want to put it, this should be a 3-year project, a 5-year project. They will tell you that. They will tell you what’s the most important and help you through that. They can many times explain to you in the decision making process how are the projects prioritized. So it’s a little bit of training that you might need to get rid of, training that you can then use as you put together these proposals. Many times vendors will put together proposals for you. I never checked a vendor’s proposal. Many times I had to redo it, re-document the assumption. But it’s the starting point. And again, use your executive’s format, so they can make a quick decision and get your project approved.
Customer Example: Enhanced Efficiency and Productivity
We’re going to look at some of those different categories. We’re going to start with the direct benefit category and these are the dark green colors. These are the ones that I love. The HIMSS proposal that you saw earlier gives you many ideas. We’re going to look at the worksheet that we have that will also give you some ideas to try to get you thinking of where can we make changes that will have a positive impact on the financial health in my organization.
So on the next slide, Leslie has an example of one that we’ve done with one of our own organizations.
Right, Bobbie. This is one that you and I worked on with a Children’s Hospital. And as you said, this is an example of what we would call, back to our first slide, a phase 2 type of project where they were increased in terms of labor productivity. If you take a look at the far right, you will look at results that they were able to achieve, and what they found is that by using their enterprise data warehouse versus their EHR, for reporting, they were able to save 67% on their labor cost by reducing the amount of time it took to build the reports.
They also found that for each one of these EDW reports that they built, that it was equal to 10 EHR reports. So they were able to increase productivity, and in the very last result, you’ll see there, also improved their business partner client satisfaction, because in the past, for those of you on the clinical side, when you work with IT and you requests a report, you know that sometimes there’s a backlog. And in this particular case, with the enterprise data warehouse solution, they were also able to deliver reports 25% faster to their business partners.
Step Two: Direct Benefit Categories
Types of Waste
Great! So you saw some direct benefits there, some things that we could easily put into financial calculation and then some other things that were probably a little harder to justify. But again, we’re trying to start measuring things, trying to see where we were before, where we were after the proposal, and trying to get a good feel for things.
Now, we’re going to talk about some other clinical and waste reduction strategies that some of our clients have documented. There are different kinds of wastes. We all know there’s a lot of waste in health care: the ordering waste, the workflow waste, the time you have to sit in an emergency room, and then these things having to do with defects, falls, and adverse drug events.
I’m a member of HFMA, and they did a value project survey in 2011, and what they said was, how many people actually measure the cost of adverse events? Only 37%. And how many people measure the cost of waste in health care? Only 29%. And how many people actually are trying to manage the cost of waste in healthcare? 21%. Those numbers are not good for us. What it means though is we have a lot to work with. We have a lot that we can use to justify our ROI. We’re going to show you a couple examples here of some clinical improvements.
Customer Example, Clinical Improvement
Thank you, Bobbi. So you covered a couple of things there, Bobbi. One was around clinical improvement and the other was around waste, and I found the statistics from the HFMA very enlightening, especially the part about the 29% that are measuring. That’s a pretty low number.
So if we look here first at clinical improvement, this is an example where their aim or their project goal, if you will, was to reduce their 30 and 90-day readmission rates for heart failure. I think that most of our audience could relate to this example.
So in this particular client’s case, they focused on three evidenced-based process interventions. Faster and more consistent med rec, post discharge provider appointments, and post discharge follow-up phone calls. So what was the result? They saw a 21% reduction in 30-day and a 14% reduction in 90-day heart failure readmissions.
Customer Example, Ordering Waste
Our next example is around waste. And as you talked about, Bobbi, there are three categories of waste, and this particular example is around ordering waste. I have, in my role as a nurse informaticist, been responsible for developing evidence-based order sets. And if you have that job or know somebody who’s had it, you know that organizations can have thousands of these order sets. There’s the definition part of them, there’s the review process part of them, and then there’s the upkeep of these order sets. It can frankly be a very daunting task.
As part of this health care improvement project that we’re seeing on the screen, the client found that they did have a faulty order set. The result of correcting this order set is that they achieved and sustained a 49% decrease in unnecessary chest x-rays over 16 months.
Step Two: Indirect Benefits and Revenue Opportunities
Okay. Let’s talk a little bit about the light green dollars or the soft dollars. We know they’re more difficult to measure but Leslie and I together, we keep asking questions and that’s the key here I think – is to keep asking questions. We worked with the clinical teams. We were just going through a project on breastfeeding and it was the clinical team, they came up with 5 or 6 great ideas of potential that we could look at for ROI, for example pacifier use or hypoglycemia, and then we found out that protocol is not established in every hospital. Now we’re not quite ready to measure that yet, but we put that on our list. That’s a good one to come back to in another six months. As we know, if we can help prevent this hypoglycemia, we’re going to prevent NICU admissions, which is a much more expensive overall cost to our health care system.
So we have tried to simplify, working on time that we’re going to save on the nurse side. We’ve made it a lot easier to be able to get data into the system and make the data correct in the system. And so, that’s what we’re going to be measuring. So we have, again as we went through the process, we asked the clinical people a lot of questions, got a lot of feedback, got a lot of thoughts out …, you can’t do this, you can’t do that. In this particular one, when the mother leaves with the baby from the hospital, we can’t, many times know where they’re going. We don’t have the full continuum of health care at this particular institution. So we lose that ability to follow up. However, we kept asking and I think now we have some good ideas that we’re going to be able to use in the future, and we go back and revisit this project.
So Leslie, again, we’re going to look at some examples from some of our clients on indirect benefits.
Customer Example – Indirect Benefits: Opportunity Cost
Bobbi, I really appreciate that story that you shared about the newborn piece and the persistence – because as you said, even though we might have started out with an initial ask in terms of what the benefits were and we found that they weren’t measurable, to your point, we were able, as we had a conversation to find out that they were actually hiring external resources. We also found out that they had to manually use registered nurses to go in and pull data because when they tried to pull it from their EHR, it actually crashed their system. And so to your point, what we started with, we weren’t able to measure at this point but we will continue to work on that if there were things we could measure.
So in this particular example, this is about opportunity cost. With this client, they were working on hospital-acquired infections and one of the things that they were looking at was using a point solution. In your organization, depending on the size of it, it’s often times the case that you’re not aware of other systems that can be leveraged. And in this case, the client was originally going to invest a million dollars in a point solution which would have also had a cost of about 100k to support it annually. When they found out about our application and were able to leverage it, they ended up not happy to make this investment.
Customer Example – Shared Savings
A second example is an example around shared savings, and in this case, this is a client, North Memorial, who reduced their elective early term deliveries prior to 39 weeks. And as you know, if you’ve done a project like this, you can actually decrease your revenues by doing a project like this. So how do you deal with that? It really goes back to these changes that we talked about in the beginning. Payers and providers in this case came together and they developed a shared savings model. The providers in this case exceeded their reduction rate and they received a 6-figure bonus payment.
Sensitivity and Risk Analysis
Okay. We’re at the part of this presentation or the part of putting your ROI together. Now, we need to do some, what we call, the finance people, we call sensitivity and risk analysis.
So I have a quote here, “What we anticipate seldom happens, what we least expect generally happens.” So this is the part in your proposal when you try to answer that and say, okay, what is most likely to happen? And then do some sensitivity analysis. And this again could be for any type of project. What if we can lower the readmit rate by 20%, what if I lower by 15%, what if I lower by 10%. Leslie and I often times will go through this. We’ll have a spreadsheet in front of us and say, gee, what would happen if we did this, what does it mean to the bottom line, what does it mean to our proposal if we’re at this rate? What if we, instead of just making one follow-up call, we’re working with a group, what if we started making two follow-up calls, what’s the cost of that, and do we think that additional cost is going to be offset by additional benefits? What if instead of using just a scheduler, we use a nurse through all of our follow-up calls? What payers are starting to think about care management strategies, what’s the fast way to do that and what has the best potential result? So again trying to model, I think what does 1% represent? If I were to process by 1%, how many dollars do I get? We’re just working with a hospital on this readmit rate and as they changed their readmit rate by 1%, it could mean as much as $615,000 to them.
So now you’re trying to get down to the hypothetical benefits becoming reality. And then we’re also starting to look at alternatives, options and just an overall risk analysis describing the concerns that you might have about this project. You might have a new physician and new in this position. It might help in that situation to have finance provide some education, have a nurse manager there that’s well respected and helps and assists in the orientations to get the group going. So those are the kind of things you want to think through, you want to document and then have them in your mind so that you can be prepared because somebody is – if you thought about it, somebody is probably going to ask you the same questions.
Health Catalyst Clinical Improvement Financial Tool
We have a tool that we developed. It’s a simple Excel tool and it should be up on your screen and we start by putting at the very top, there’s a place where you can enter some information.
Clinical Improvement Financial Tool
Bobbi, if you don’t mind, I’m jumping in here for a minute. I had a quick question when I looked at this. So you’ve got project cost and you’ve got IT cost and it looks like you’ve split those out.
Sure. My thought went I did that was again just trying to list potentials of operating expense that you might have for data architects, for training materials, travel. And then down below looking at the IT, the cost that may or may not be capital in your organization, depending on what capital means in your organization. And so we have a place for equipment, place for different modules that you’re buying. So then that’s trying to get the total cost here. And when you get the total cost, you want to make sure that you include everything but you don’t have to get overly nit picky on this. You don’t have to get everybody down to .5 FTE or anything like that but you do want to get an overall representation of what this project is going to cost over and you usually do it over a 3 to 4-year time period.
Opportunity or Indirect Benefits/Savings and Direct Benefits/Savings
There’s also off to the right some assumptions and notes where again you really want to document what you wrote down. And I actually did this, I added some calculations over there so that I could put in just a rate and the number of people and it would populate on the right-hand side, you know, on the left-hand side to dollars. So…
That makes sense. And then at the very beginning, you talked about benefits divided by cost, and then in that section here, if you’ll slow down just a bit, it looks like again back to what you’ve covered already where you have indirect benefits and then you split those between indirect and direct. Can you talk a little bit about the difference in those categories between those and give some, just give an overview in terms of the difference between those two?
Sure. Indirect in my mind were the ones that were a little hard, could be harder to quantify, something like better faster decision. If you can find a way to quantify that, please put that on the web and I’ll be happy to take it into account. But things like reduction in mortality, turnover, where you think you can put a dollar to it but it’s more of an indirect, it’s not going to show on the bottom line but it is something that you’re trying to measure.
The direct benefits again were the ones that I put in there that I call the dark green that are going to have an impact to the bottom line. Reductions in labor, where we’ve seen the most exciting things going on, it’s people sending less time during manual work, less time searching for data and more time doing analytics and doing the work that they were supposed to do. We worked on a community care project and we were actually able to save physicians some time in front of the patients by being able to gather the information, have it quickly in one place and reach, we did some reworking of the front office staff that they were asking questions that then the physician could pull up and see the answer and again spend less time and give and make sure that all the preventative measures were being taken, how has the patient got all the care that they needed.
Clinical Improvement/Waste Reduction
So again we were able to come up with some efficiency productivity savings and then the clinical improvement/waste reduction. We know some of these may have some impact on your revenue, you would need to talk to your finance team to make sure you are calculating that properly.
And then the very last section I have is the revenue section and we have had some interesting ones there just by going in and using a data warehouse-type tool to do some data mining in your account receivable. We’ve been able to look at denials, we’ve been able to look at where we had some coding problems, some backlog, and I just can’t, to me, data architects are wonderful people and they gave me some great information that we could work with a client on and make some change.
And the last one we have, we were able to see referrals we’re going out the door. So where were they going? And we were able to document that and now we’re in the process of – there are particular clients trying to make some change and get those referrals back into their organization.
And Bobbi, if I remember correctly, that was around the million dollars…this particular client.
Yeah. It was about a million dollars a year. So…
And you know, one of the questions that came in and I was looking at it as the question was coming in is what about direct benefits that are related to patient self-management? And you brought up the community care, the primary care. And I think one of the things as I think back on that that would be related to the patient’s self-management is what’s the impact in terms of visits that they’re making, either clinic visits, visits to the emergency department, observation visit. So clearly as we look at our population health modules and the work that we’re doing there, there are benefits that can be tied to this as a part of patients doing self-management.
Yes, absolutely. I agree. So again what we do, what Leslie and I do, we sit around, we talk about these things, we exchange ideas. So then she’ll say, well what does this cost, what does an ER visit cost? How do we measure that, how do we put it in dollars and cents and we may try different options. We may put different things in this worksheet. If we don’t like it, we will take it out, then talk to the clinical team and our clients, then talk with finance that are clients but no, we don’t look at it that way. But we go back and forth and we keep iterating and we keep asking questions. That’s the important thing in this.
And down below you’ll see direct benefits and total benefits, the direct benefits. Again, depending on your organization, you may just want to look at everything that’s just direct benefits compared to the cost and so you can get the various financial calculations with that or you can include all benefits.
Four Step Approach
Step 3: Recruit, Train, Plan, and Implement
Okay, we’re at the doing part now. We’re at the part where the teams are working, they have agreed on an aim, and we know what our ROI measures are going to be. The important thing is to do timely updates. This is also a time where I think finance should be helping you out and I think it’s a time when we learn from each other. Everytime I do this, everytime I work with a physician, I learn something new. Just yesterday, I was working with a physician on population health and he mentioned to me that “some of these measures are not going to have a short-term financial ROI to you. They’re going to be a longer-term financial ROI”. I said, oh okay, I’m going to have to again re-think what I did. In one of my first projects when I was very young and I was working with physicians, I said, “I want you to fill out the PDR and if you want a capital project, you fill out the PDR. And to me that was a project request.
So we have so many abbreviations, it’s so much fun to train different people, different clinical people, especially when we’re going into all these new payment models to bring all of our different perspectives together and speak together, the groups, what does it mean, what does it mean to our ROI projects, and how can we give timely updates? We have a tool here that Leslie and I talked about showing one way to show different members of your team and different executives and updates.
So Bobbi, you bring up a really good point, which is when you’re doing a project, it’s not just about completing the project but it’s also how do you communicate the results within the teams and most importantly to your executives.
So what we’re showing here is an executive communications tool. So this provides a consistent easy way to understand the project milestones. And so, if I look at the bottom here, I’m looking at what are the key milestones. Recruit and train the team, kick-off, etc., all the way to results. So what I’m able to do with this tool at the bottom section is to really track again on a milestones basis to say where am I versus where do I need to be. You can also see that we have a section where we could talk about the key accomplishments, next steps and issues and where they need help as a team. On the upper part of it, we have also the key success in financial measures. So it’s not just about is the project on time, were we on budget, that’s this part of it. The other part of it is what are the key success metrics that we defined in the beginning and where are we relative to those success and financial measures?
This tool is something that you can use to communicate project progress and also see where you’re at in terms of the key success financial measure perspective.
Four Step Approach
Step 4: Evaluate Costs, Revenue & Direct Benefits
Finally we’re at the last step of our four steps and we ask ourselves questions: did we have all of our project cost in there, has anything else changed, do I need to update my financial ROI based on the actual? Generally, you almost always have to make some adjustments. So make some minor tweaks, how can we get back on track and we have to be able to monitor, ensure that we’re going to have sustained results. When a lot of these first clinical measures first came out I was so excited when we would get to 100%. And so what was interesting, I talked to a friend of mine and I said, you know, they’re not monitoring that and she said, oh yeah. The minute we stopped monitoring that, it dropped. So we had to start monitoring it again. So with dashboards now it’s easy to pull this data up and keep watching it and make sure that you do ensure sustained results.
Last night I was watching TV and there was a great commercial on the TV. This gentleman made an investment in a dog door for his dog and he kept trying to get the dog to use it and the dog wouldn’t use it, so the guy walked away and says, “I’m going to go get a cat,” and the dog stands up, opens the door with the doorknob and walks out the door. I thought, well there’s an investment that you didn’t even need to make. But all of our investments are, we know they’re going to be good investments and you’re going to take this opportunity to document your project, try to measure what you can measure and again this is just an example of what we put together and this has to do with readmissions and what happens, the different things that happens in the readmission process and costs that we had to incur. So we documented it all, came up with an ROI of 168% and we were able to pay back within 6 months.
So I’ll just show you that it can be done. So, Leslie…
The Opportunity for Change
Okay. So thanks Bobbi. In summary, there’s a tremendous opportunity and that opportunity frankly is right now – to achieve increased quality and reduced cost. If you’re in the 70% that Bobbi talked about who are currently not measuring waste or even if you’re in the 30% who are but you want to do it more effectively, contact us. We can help you learn more about how to drive ROI in your healthcare improvement projects.
And now, Tyler, I will turn it over to you as we look at questions.
Tyler: Alright. Well we have reached our question and answer portion of our presentation today. I’d like to remind all of you that you can ask your questions by typing them in to the questions pane on your control panel. Leslie, Bobbi, look, do you have a few questions to start with?
Leslie: Okay. So one of the questions that I see up there is, “is the aim based on assessment, interventions and measure?” So typically and I think the person is referring to the executive communications tool and on that you’ll see that we have an aim or a project statement. Typically what that is related to is what is your goal. And often times what we’ve seen in healthcare analytics is you’ll have a short-term and a long-term goal. Let’s take heart failure as an example.
So your long-term aim in this case might be to reduce your 30 and 90-day readmissions by a certain percent by the year 2015. Your short-term aim on project 1 might be just to establish your baseline around what those readmission rates are. And then your next one could be, what is the first evidence-based process that I’m going to put in place and measure how that, what the results are in terms of reducing readmissions related to that particular intervention. And the second aim then would be, or the third aim, would then be your second intervention. That’s what we mean by aim specifically.
Bobbi: There’s a question about ROI for reduction in your AR. And yes, cash is king. We always want more cash in our organization. So what you need, to go down and ask your finance team, what’s the value of one day to your organization. Where I was, it was about $40 million, so it was a big number. And again, so that’s an area where you could have very large work on denials, work on various things that could have large impact on your organization.
Leslie: Here’s another question that we have. It says, “some of these returns are hard to quantify. How do you account for these ones that are harder to quantify?”
Bobbi: I think that’s one where we just kept asking questions and kept trying to get added in other ways. If you see a change in this, what patient satisfaction may be a good one. It is the value-based purchasing metric. So, is that an area right now where you need to focus, probably everyone is focusing on that area to improve that, but what’s the impact to that, what’s the impact to the value-based purchasing potential incentive. If you have seen patient satisfaction go up in particular areas, has it meant any more from additional volume? So again, trying to look at different ways to, what different kind of questions can you ask about that, did you have to spend a lot of money to improve that patient satisfaction, is it a poor value at your organization. So if it’s a core value and that’s part of your organization, then that’s where your investment should go.
We also got a question about hospital accounting systems and are they good at measuring the value. You would have to find, you know, again, talk to your finance staff and assigning them accurately to a cost center. We could never get 100% accuracy in anything but hopefully the nurse time for people is correctly recorded to the right cost center. Like I said, you’ll always have a mistake. My travel ended up on Leslie’s cost center, those kind of things, more manual type of things but hopefully overall. And again your finance team can tell you where they know they have some shortfalls or where they know they have to work. So get friendly with finance.
Leslie: So another question that we have and maybe more of a statement than a question is, “you make this sound simple. It isn’t.” And I think Bobbi and I would be the first people to agree. It isn’t simple. It does require multidisciplinary teams and upfront and ongoing commitment to include financial ROI as part of the project. It also requires ongoing teams and ongoing measurements to ensure that these types of gains are sustained.
Bobbi: We have a question about financing and that always used to come up a lot. People would say, gee, I’m listing this. So what do you care? Or I’m getting this for free There is no free. And again, you have to work with your finance department. And depending on the CFO, what the CFO wants to be doing and how they are dealing with that. The cost of the investment may be smaller, which will improve your ROI.
Leslie: So another question that we got is “what’s the typical ROI on your project?” And what I would say to that, and Bobbi, you can chime in here as well, I think every health organization has different targets in terms of their internal rate of return and what they need or want for their projects and the projects can have different goals. And so, the fact that you have different projects that have different aims and the fact that each organization has their own targets means that there’s really no such thing as a typical ROI. It will be very dependent on the project and your organization goals.
Bobbi: Yeah. And we have seen some of them that we’ve done have been in the 200% to 300% range. At Intermountain, under Dale Sanders, he did a, this was a longer scale type ROI analysis. It went out across several years, both the benefits and the costs. He had done a lot of work, making sure that he could work with supply chain and he could work with our contracting divisions. So lots of data was in. We had a very complete data warehouse, and as a result we could show some very substantial savings because of payback. And you know, less than a year on the investment that he made, a 1300% ROI. And sometimes when things get a little too good, they always make me smile. But I love them. So keep asking and keep trying.
And we’ve got a question about finance departments. Everybody in finance, I was asked for one of our clients to give a little lecture to the finance people of how they would work with clinical people. And again, it’s the question and answer, it’s learning, I need to learn. Everytime, like I said, I learn more about how to pronounce words, what abbreviations are. I learned that AP is not Accounts Payable, it’s Anatomical Pathology. So I learn something new everytime I do this. And so, you need to help us out in finance and we really want to help you out.
Leslie: So another question that we have here is, “since 31% of us were IT, how can we state ROI in phase 3 and justify it?” And what I would say back on that is I think it again goes back to the deployment that you have and the fact that you use multidisciplinary teams. If you involve finance and you do the kind of process that Bobbi and I were talking about where you do an iterative process, you look at it and say, what are my costs? What are my benefits? Is it direct or indirect? And you work with your finance people, you will be able then to calculate the ROI.
Okay. The next question here we have is, “how do you convince IT staff to focus on helping other departments make better decisions and get them the data they want in a timely fashion?” Okay…
Leslie: Yeah. So in terms of helping IT focus on helping other departments make better decisions and giving them the data, what I would say on this is much of the data that we shared for today, I would package that up and I would take it to, like for example, my clinical counterparts, and share with them the different kinds of wastes that exists and the statistics that exist out there in terms of how many people are not measuring it. If you can share the information that we have shared with you, that would be a good starting point.
Bobbi: Yeah, that would be.
Tyler: Okay. Bobbi and Leslie, we have reached the top of the hour. We’d like to thank everyone for joining us and for your questions. Again, if we did not address your question in this webinar, we will follow up with you afterwards. And after the meeting closes, you will have the opportunity to take a short 6-question survey. Please take a few minutes and fill out the survey. We can continue to bring you relevant content. Also as a reminder we will send you an email with links to the tools that Bobbi and Leslie shared today and also links to slide and the on-demand recording.
On behalf of Bobbi and Leslie, as well as all of us here at Health Catalyst, thank you so much for joining us today. Have a great day. This webinar has now concluded.