Why Accurate Financial Data Is Critical for Successful Value Transformation
Steve Vance: It’s good to be joining you again and discussing a topic that I have a lot of interest in which is the importance of accurate financial data. Kind of a numbers guy by background. I’ve been primarily in accounting and finance for the past 30 years of my career, with an undergraduate degree in accounting from Brigham Young University and an MBA with an emphasis in healthcare administration, and so I really love numbers and love talking about it as well.
So as we go through this webinar, I’ve got four learning objectives that I want to cover. First, why now is the time to embrace new payment methodologies as a result of changing environments. Then I’d like to cover the critical role of accurate financial data in value transformation and how this needs to be utilized in conjunction with clinical data. Then I’ll follow that by organizational and operational strategies, coupled with accurate financial data for successful transformation that I utilized while I was at Intermountain Healthcare, and then ending with an overview of the effective and actionable tools Health Catalyst has to support an innovative data-driven financial process, which is integrated with other data elements.
Last year the advisory board conducted a survey identifying CEO’s top concerns and the key forces in healthcare impacting those concerns, and it’s interesting to know as you look at these top concerns that three of the top five were financially related, and looking at the last two in terms of boosting outpatient market share and meeting rising consumer demands also have financial implications. As part of that same survey, key forces were identified, and you can see a number of those ranging from consumerism to competition, collaboration, technology, volume to value payments and reducing total cost of care. Primarily today in this webinar I’d like to focus on three of those. First on the volume to value payment, secondly on consumerism and then third in reducing the total cost of care.
On volume to value, on this shift many providers are reaping the rewards of a fee-for-service system and in doing so they’re focusing on volume and procedure growth, and benefiting from this incentive as long as possible, and this may be happening in your own organizations. The shift from volume to value varies across the country and by institution, but overall it’s estimated at about 15% nationwide on average. I think there are certainly those that feel that this hasn’t transitioned as quickly as thought, but the transition is definitely happening and we all need to be prepared as this is such a dramatic shift in approach to appropriately manage that shift.
Again, some of your organizations may still be primarily paid based on a fee-for-service payment methodology. However those of you who are prepared maybe left behind once this tipping point of around 26% of total payments are based on value as compared to fee-for-service, and that kind of reminds me of the saying what works today may not work tomorrow. So Sarah, that brings us to our first poll question in this webinar.
Sarah Stokes: Okay, I’ll go ahead and launch that for us. So in this first poll question Steve would like to know what percentage of your payments are tied to value or risk? And your options are number one, zero to 10%, option two is 11 to 20%, option three is 21% or more, and option four is not applicable or maybe you just don’t know. So I’ll give you a few moments to submit your responses there. People are being pretty quick about this one. Thank you for that, and as a reminder to our audience, we are recording today’s session. You will have access to that recording as well as the slides.
Okay, I think we’re going to go ahead and close that poll and share the results. So it looks like 24% were in that zero to 10% bracket. So that’s our majority of people who feel like they knew. 10% reported they were in the 11 to 20% bracket. 14% reported 21% or more, but 52% not sure.
Steve Vance: Okay.
Sarah Stokes: Is that kind of what you would’ve thought.
Steve Vance: Yeah, not too surprising, although I thought I might bias the results when I mentioned that it’s 15% nationwide and that seems to be the lowest category, but not too surprising and I think even those that might be in finance may not even know that answer as well at times. So now too surprising and we’ll talk a little bit more about the methods on moving that spectrum up a bit. So thank you, Sarah.
If you don’t know that number, I think also check with your finance department. If anything, that just shows them that you’re engaged and they’ll be impressed with you inquiring about that.
Sarah Stokes: Steve, it looks like the poll question is stuck on the screen, so I’m going to switch to my computer and then maybe back to yours, but you can just keep talking.
Steve Vance: Okay.
Sarah Stokes: I’ll just do this in the background.
Steve Vance: All right. So CMS is leading the charge in moving from volume to value, and since 2013 Medicare dollars at risk have been increasing steadily in the areas of hospital acquired conditions, readmissions, value based purchasing, and meaningful use. Some may argue that the benefits aren’t being realized to the level anticipated, but I’d really argue that many organizations aren’t prepared with the necessary strategies and tools to be successful with this value proposition.
Sarah Stokes: Your chart is getting cut off here in mine. I don’t know what’s going on with that.
Steve Vance: All right. Let’s see if we can advance and go back. Perhaps that’ll help.
Sarah Stokes: Yeah, I don’t know it’s …
Steve Vance: All right, well, you’ll have-
Sarah Stokes: Sorry about that.
Steve Vance: You’ll all have these slides at the end of the presentation that we can go through. So many argue that those benefits aren’t being realized, and as I mentioned I think it’s really a situation of many organizations not prepared with the necessary strategies and tools to be successful. This is shifting over to some commercial payers. In my time at Intermountain Healthcare, the hospitals took on full risk for our internal health plan with Medicare advantage, Medicaid, and our large employer products, and this brought us certainly towards the tipping point of what I spoke of earlier, and other integrative systems are also moving that direction to help accelerate the move to value. This helps alleviate the competing incentives associated with living in both worlds of fee-for-service and value at the same time.
Sarah Stokes: Next slide, okay.
Steve Vance: And the change from volume to value, that certainly creates and shift in incentive. We’ve historically been paid on a fee, based on a fee-for-service world with the major financial incentive being higher volumes, but in contrast with value-based care the incentive shifts to keeping people healthy and maintaining utilization at appropriately low levels. This incentive shift along with a shift in volumes from inpatient to outpatient care has created excess in patient capacity and the need to reevaluate space planning. I was often asked while I was a CFO how business at the hospital was going, and I always felt a little uncomfortable saying that our inpatient beds were near capacity and outpatient volumes were strong, especially since we were the only acute care facility in the area. Really it just meant that the community was sicker and needed more care. It certainly feels more comfortable and natural to be incentivized in keeping the community healthy and receiving the appropriate minimally necessary care.
Living in both a fee-for-service and a value world creates the challenge of payment models being at odds with each other. Although this is challenging, it is possible to thrive if your organization has the right tools and data, which I’ll be covering later in this webinar.
Now, I’ve got two numbers up here on the screen. $1 trillion and $3 trillion and I would suspect that there are some of you who may know what these numbers represent. One trillion represents the dollar amount of waste in healthcare. These are costs that provide no benefit in health improvement. JAMA recently calculated a similar number ranging slightly below that one trillion number, but however you look at it, this is a significant amount of waste. These are dollars expended on care that had zero benefit or value. In some cases these expenses caused harm to patients. The $3 million represents the overall total cost of care. So that certainly represents a large component of the overall costs.
To bring this closer to home, so to speak, forget about healthcare for a moment and think about your own personal expenses. What would you be able to accomplish in your own personal situation if you were able to have an extra 33% available to spend or save? And by the way, this is much better than a 33% salary raise, as you wouldn’t net that much in your take home pay if you had a raise. These are dollars that would go directly to your bottom line. For many of you that would represent a home mortgage or a lease payment, so certainly quite significant, but back to healthcare the dollars associated with waste are also significant. I’m generally an optimist so I see this as an opportunity for improvement to capture significant savings and have experienced that as I’ve gone through my career.
Waste is found in three major categories, as identified by Dr. Brent James. He’s one that you’ll be able to listen to in I believe next week’s webinar.
Sarah Stokes: Yeah.
Steve Vance: And these three areas are efficiency within case variation and case rate utilization. Dr. James along with Greg Poulsen, both from Intermountain Healthcare, previously identified the greatest amount of waste in case rate utilization, which represents about 45% of overall waste followed by within case variation and efficiency. Within case variation represents the number and types of units per case providing healthcare and then the third category being efficiency represents the cost per unit of care. Knowing how eliminating waste is financially incentivized is certainly important. In a fee-for-service environment, only an improvement in efficiency is financially beneficial to the providers as can be seen by the red and the green arrows. At the other end of the payment spectrum a capitated environment where the provider is fully at risk. Any waste elimination category directly benefits the provider. In a fee-for-service environment the insurance provider is actually the one that would benefit from waste elimination generated outside of efficiency and that was one of the reasons why at Intermountain we tried to shift that risk to the hospital so that we as the provider could benefit from that reduction in waste.
The provider risk model certainly aligns financial incentives in reducing that waste. Next area I want to cover is consumer at risk, and this is certainly another key reason to consider in embracing the value proposition. Consumers of healthcare are now participating more directly in the cost of care they receive, much more than they have historically. I know many organizations have offered the high deductible health plans, and some still offer both but certainly many more are moving towards these high deductible health plans, and with healthcare costs inflating at greater rates than other areas of consumer spending, consumers have increased the percentage of disposable income spent on healthcare by almost 25% from 2007 to 2014 at the time this was reported in The Wall Street Journal.
So you can see personal healthcare spending is competing directly with other categories that individuals have to work with in terms of food, housing, clothing, transportation, and so forth. Clearly this is not sustainable in the long run, and at the same time the average family deductible is increased by 85% by over $3,000 in 2016 with about 44% of consumers participating in high deductible health plans and that continues to grow. So with consumers directly paying for a larger share of their healthcare as I mentioned before, this is not sustainable. While I was at Intermountain I certainly saw an increase in bad debt and surety as a result of this change, and really bad debt and surety aren’t just attributed anymore to those without insurance as deductibles increase more, the financial burden is placed on the patient who may not have enough funds in their health savings account to cover their deductible.
So what is it that consumers want? With this shift in patient participation, consumers are demanding more information and are looking for it on the Internet and social media. Like other services and costs, consumers have, they are looking for cost estimates and other related information before they receive services. Many healthcare organizations are not prepared to share accurate estimates for treating ahead of time, and many really aren’t set up to offer online payment management or provide ease of talking with financial counselors to help manage costs, and these are all areas that consumers are looking for. So as a result almost a third of consumers are dissatisfied with hospital transparency.
This really requires a shift in mindset to be successful with this changing payer environment. Where increased volumes and a focus on revenue has worked in the past, the shift is now focused on providing appropriate and efficient care with an emphasis on reducing waste. So unless you’re quite young you should remember these two historically very large and successful companies, Blockbuster and Kodak. History gives us an example of companies that failed to develop strategies to adapt to a changing environment. Kodak ironically was one of the first to introduce digital cameras in 1975, but they felt this would compete directly and detract with their film products, and as the digital age took route, Kodak was late to make a successful entrance and filed for bankruptcy protection in 2012. Similarly Blockbuster, they were very successful in renting VHS and Beta format movies beginning in 1985. They did move to DVDs and then tried to compete with Netflix, but obviously Netflix won that battle. So certainly don’t be that Blockbuster or Kodak that failed to adapt to a changing environment. I think in both of these situations it was a slow moving transition and we’re seeing that as well, but certainly need to be prepared to adapt to that changing environment.
So moving to the next section on critical need for accurate financial data. Once we’ve embraced these new payment methodologies, it really is critical that we have accurate financial data and there are certainly some issues and reasons why we need to have that accurate financial data. We have a shifting pair mix. Many healthcare organizations are seeing declining volumes with the increased cost that we talked about earlier, shrinking payments, changing consumer demands that we touched on and new competition. According to HFMA, not for profit hospitals, their operating margins are on an all-time average low of 1.6% and approximately 30% of those hospitals are operating at a loss. There’s a number of factors that are contributing to that situation, but really the short answer is payments are shrinking while costs are escalating, and that shifting payer mix and other reasons I identified earlier are also contributing to that situation as well.
Knowing profitability is key, and margins as I’m sure most of you know are the difference between net revenue or the payments collected less all the expenses associated with generating that revenue. It’s so important that organizations understand the various components that drive these margins. Margin components need to be known not only at a system level or an overall hospital level, but down to a department level, to a DRG level, and even a case or procedure level to really have the necessary information that’s needed to make decisions. This accurate financial data is needed as the basis for strategies and tools that I’ll be talking a little bit later in the webinar about.
I think it doesn’t take too long to figure out if you don’t have accurate financial data when you’re sharing physicians’ personal financial metrics as compared to their peers. Something that I personally have found out, I had two analysts working for me whose sole responsibility was to work with physicians and share comparative financial quality and clinical data and it was a process that helped improve the accurate of our financial data at the time. These analysts had to explain and defend the information they were sharing. It did take quite some time to develop trust with these physicians and when having their cost information explained to them was a challenge at first, and I think the first reaction that these physicians often had was they didn’t believe the data. We often looked at a physician’s cost per case compared to their peers and what we did learn was that the cost in data needs to be easily explained to physicians or they disengage.
It’s always difficult to explain to physicians that their expenses are calculated on relative value units. We’ll talk a little bit about that if you don’t know what those are, or based on a ratio compared to their charges. It’s hard for them to relate to what that means. It’s certainly more accurate and easier to explain their costs based on the actual activities that make up those costs and we’ll talk a little bit more about that also later in the webinar. So Sarah, that brings us to our second poll question.
Sarah Stokes: All right. Let’s go ahead and launch this here. So in Steve’s second poll question today he’d like to know how comfortable are you with the accuracy of your financial data. And your options are number one, very comfortable, number two, somewhat comfortable, number three, somewhat uncomfortable, number four, very uncomfortable, and number five, not applicable or you just don’t have an opinion on this one. We’ll give you just a few moments to submit your responses. Again, we have a pretty quick responding audience today.
Steve Vance: Great.
Sarah Stokes: People are on the ball today. Again, if you joined late, we are recording today’s session. You will have access to the slides, so just be aware of that. All right, I’m going to go ahead and close that poll and share the results.
Okay, so we had 15% reported they were very comfortable. 25% were somewhat comfortable. 22% somewhat uncomfortable. Only 7% very uncomfortable, and 30% are still kind of unsure. So what, we have 40% who are saying that they’re decently comfortable but then a chunk that are a little worried it seems.
Steve Vance: Great. I would’ve expected the majority to have been somewhat comfortable, which we are, and I’d encourage you those of you that don’t, aren’t as familiar or have no opinion on that to work with your CFO or your accounting or finance departments to get more comfortable with that information and what’s available out there. I’m an accountant and I get excited when people will show an interest in what I do, so I’m sure that would go a long ways in your organization as well.
So back to talking about accurate financial data, there are certainly different levers that individuals have to pull, and with these shrinking margins, these levers around charges, around net revenue or what’s actually paid in expenses are different categories that we have at our disposal. These are all affected by adjusting rates, by adjusting volumes, or a mix of expenses in gross revenue, and certainly it’s harder to pull some of these levers than others, certainly difficult to change volumes or the mix of patients as compared to adjusting rates, but at the heart of all of this is really having the accurate financial data to be able to see what those impacts or how those leverage are being impacted.
In looking at different waste categories and also looking at the financial leverage from waste elimination, we can see that most often hospitals focus on top line revenue, which can occur be developing tactics to increase market share or acquisitions. As volume increases, expenses to provide those services also increase, goes back to kind of the example I proposed to you on getting a 33% bonus in terms of expenses as you get paid for those things, there’s associated expenses with that. If you can eliminate expenses, those go through to the bottom line. So there’s a much greater impact from waste elimination, which can provide as much as a 50 to a 100% contribution per dollar saved. So with there being about a third of waste and healthcare costs, there certainly is a lot of savings potential and opportunities to be realized.
So on this next slide, I know there’s a lot to look at here, but really the main point that I want to get across is that in the current state you can see that many individuals are receiving care that potentially should not be, and in terms of what care should be included in the current state, oftentimes there are more procedures, or labs, or drugs that are administered and are really necessary, and also in an inefficient manner. Certainly in an ideal state we want to make sure that those individuals that are needing the care are receiving the care and those that don’t need to have the care or not that we are also providing the right amount of labs and drug work and such in an efficient manner. So certainly as we eliminate that, that waste puts us more towards that ideal state.
Revisiting again the slide that we looked at before is the case rate utilization within case variation and the efficiency and how that payment method is impacted based on eliminating that waste. As we move more to boards the fully at risk or the provider at risk model, all of those efforts that we make on reducing that waste benefit the provider at risk. If we are on the other end of the spectrum, on the fee for service side of things, any reduction in waste, although good isn’t going to benefit the provider but will benefit the insurer there as well. It’s again, very important to have accurate financial data as we look for those hidden opportunities that may exist in these waste categories and certainly inaccurate financial data will often lead down rabbit holes were opportunity for waste elimination really may not exist. So again, very critical that the financial information be accurate.
In this next slide, after addressing some of the low hanging fruit with efficiency opportunities within case variation helps uncover more significant opportunities, and I mentioned previously that I had two variation analysts that helped identify variation and physician expenses and practice patterns, and they would identify differences in different physician areas such as OR minutes, implant cost, physician preference cards and many others. In this graphic that I’m going to show you, represents that type of variation that we would see.
So this dot here represents Dr. J. He has 15 cases, or she, $60,000 average cost per case, and the mean cost per case with all his peers including himself is $20,000. So certainly Dr. J is an outlier. That difference of $40,000 times his 15 cases represents a $600,000 opportunity, and as I had my physician variation analyst work with these physicians, this was the type of information that was presented, and once we gained the trust with these physicians and worked with them, and identified that their outcomes weren’t necessarily any different than others, and drilling down on what the opportunities are, we began to realize this. So although this is a fictitious example, these are certainly the types of results that we saw when looking at this. So the total opportunity there with Dr. J, 600,000, but there’s other physicians that are also outliers and as those physicians are brought towards the mean cost per case of $20,000, that total opportunity significantly increases as well.
Sarah Stokes: Sorry Steven, I’m going to have to play catch up now. We’re getting a few reports there’s some static on the line. So catching up to your slides here and then we’re just going to switch the audio to my computer, so you’ll just talk here instead of through that mic.
Steve Vance: Okay.
Sarah Stokes: But I’m caught up here so let me just hurry and switch our audio source. Thanks everyone for bearing with us for just a second. Okay, so we’re back in business. Can you hear us okay here?
Speaker 4: Yeah.
Sarah Stokes: Okay, we’re getting positive feedback here.
Steve Vance: Great.
Sarah Stokes: So I’m just going to angle this toward you Steve and you’ll just keep going.
Steve Vance: Good. All right, hopefully you can all hear me fine now.
So looking at different variation principles, as my analyst and I shared these differences with physicians we of course needed to adjust for severity of illness. Oftentimes physicians would say, “Yeah, well, the reason why my costs are higher is because my patients are sicker.” So it would naturally be expected that if a physician is treating sicker patients the cost would be higher, and it’s important to have an apples to apples comparison, and this goes hand in hand with the trust issue that I shared earlier. And the two primary causes of variation are clinical variation and data variation, and I’d like to focus on the differences in the way care is delivered, while at the same time uncovering and addressing the way data is captured and documented. So as that variation is reduced, we’re seeing benefits in both the clinical variation as well as the data variation.
So for the complete data concept, an organization needs to have clinical quality and financial data tied to each other, and that’s not really only for your own entity, but for all providers in the continuum of care, and this concept needs to extend outside hospital walls. A healthcare organization uses multiple systems to achieve operating business goals in utilizing their EHR, their supply chain, their financial reporting systems, benchmarking, payroll, HR data, many different types of data just to name a few that all are very important to be integrated with the financial data to give us that complete data concept that an organization needs to achieve that transformation. So many different metrics and data sources are needed and certainly important to look at those collectively.
So moving to the next section on organizational and operational strategies for transformation, while I was at Intermountain we were very fortunate, as I mentioned before, to have Dr. Brent James in our organization. Our region made it mandatory that all manager level individuals and above be trained in Dr. James quality and process improvement methodologies, and he would come down to our region once a year to train those individuals. Not only did we train our own hospital staff but also our medical directors, many other physicians and our board members. We then began the process of reducing waste through what we termed at the time as QUE two studies, and this was the second iteration or revival of the original QUE studies, which stands for Quality, Utilization, and Efficiency that Dr. James and others instituted at Intermountain several decades ago. At the time we didn’t really have all the sophisticated tools in place that Health Catalyst has developed and implemented, but we did have the processes and some of the simple tools to start this transformation. In the following slides I’ve highlighted some of those strategies and learnings that occurred.
First starting off with data strategies. We found that you need to know where variation exists and where those opportunities are. While at Intermountain we developed internally in my region a tool called the QUEST tool, kind of a spin on the QUE studies, which stood for Quality, Utilization, and Efficiency Selection Tool, and really all this did was calculated the potential opportunities by DRG based on direct variable costs and standard deviations from the mean. So that pointed us in a certain direction of being, of knowing where we needed to focus. The second data strategy that we realized was quality and cost are generally tied to each other. As quality increased we usually saw costs decrease, and we also learned that these data now extend outside of the hospital walls. Where a patient is discharged whether that be home, to a SNF, or they stay longer in the facility. It all has different ramifications and understanding that data is key in being able to work efficiently and eliminate waste. We also learned that leading indicators need to be looked at on a regular basis. Having lagging indicators or utilizing post monthly reports are often too late. So the more that we can look at those indicators on a regular basis, the more successful we were.
We also learned that healthcare organizations working on process improvement initiatives need to regularly review that data on a consistent basis. We held monthly review meetings while I was at Intermountain with multidisciplinary teams that were working on these process improvement efforts to reduce variation. Not only did we look at cost but we also looked at length of stay, readmission rates, return to surgery, mortality, infection rates, many other metrics that we looked at as well, and as that variation was reduced and best practices were implemented, we experienced significant positive results. We then continued to periodically review that data and sustain those gains.
As far as organizational strategies are concerned I think one important thing is the CFO needs to partner with clinicians and other providers. These relationships help to build the trust and synergy needed for that change, and in order to be able to partner, there needs to be a strategic direction or a focus, and that direction is provided by senior leadership and based on the strategy that’s developed. Once that strategy is developed, goals and incentives need to be aligned at all levels of the organization. All team members need to be focused on the same things, and that’s when we saw the greatest results while we were going through this transformation process, was having everyone focus on the same thing where appropriate. The C-suite really does need to be aligned and no longer siloed. Transformation is really a team effort and as the C-suit works in coordination with each other is when you do begin to see those significant results, and a governance structure helps with that in addition to data governance to provide that focus and direction from senior leadership, and as those processes are put into place, you will be able to proactively address issues rather than being in a reactive mode in an operational situation. So that moves us to our third poll question.
Sarah Stokes: Right. Let’s go ahead and launch this poll question. In this question we would like to know has your organization engaged in any at-risk models with commercial payers? And your options are number one, yes, number two, no, or number three, not applicable or you’re not sure. Again, we’ll give you just a few moments there. This is also a great time if you get your poll response submitted, if you have any questions that are top of mind, you know we are in the latter part of the presentation, go ahead and submit those questions and we’ll make sure that Steve gets to those in the Q&A time.
Okay, I think we’re going to go ahead and close that poll and share the results. It looks like 29% reported a yes. 21% reported no, and 50% still not totally sure, which kind of lands us what we saw in the other questions, right?
Steve Vance: Right, exactly. Yeah, not too surprising. Some payers have been slow to move towards at-risk models, but this does appear to be gaining some momentum and I think that suggests that, certainly in some geographical areas more than others.
So that moves us to some of the financial strategies that I learned. First of all, an adequate tool belt is needed. That helps identify opportunities as well as the ability to drill down. I think that’s really key to be able to drill down in what’s causing the nature of that variation. As I mentioned previously, knowing profitability at a system level alone isn’t adequate. Profitability is needed to be known at all levels of the organization to be able to make those strategic decisions, and the CFO needs to be a strategic thinker in utilizing this financial data coupled with quality and other metrics. Focusing on financial ratios and traditional financial thinking is really not sufficient in the long run. To aid with the strategy is deeply understanding profitability tied to these value and quality indicators for all segments of healthcare delivery down to the provider and to the patient level. Lastly accurate costing data is the heart of the financial data for variation discovery.
So having these operational, organizational, and financial strategies in mind will then put you in the best position to begin your transformation journey. Once your process improvement project is identified and supported by senior leadership, the following framework helps guide you through seven essential questions you need to answer to realize these improvement results. You’ll have this information later. I don’t plan on going through all of this, but it really is a good process to follow and it isn’t always a sequential process. You may need to go back and revisit previous questions before moving forward.
So in our last section is on some of the Health Catalyst tools that have been developed and differentiate and support transformation. Some of you may not be familiar with Health Catalyst. For those of you who are not, we enable a data driven-journey to massive improvement. So certainly enabling the things that I talked about previously. We measure our success through this transformation in terms of patient lives saved or improved as well as millions of dollars saved through waste reduction and elimination. This is all based on best practice or what we should be doing on adoption, or how we do things in analytics, or how we are doing. All three of these key components are put together and implemented, and when that happens is when massive outcomes and improvement is realized. So we’ve got our fourth and final poll question.
Sarah Stokes: All right. Go ahead and launch this one. So in this question we have this statement for you and we want to know how well you agree with this, and the statement is, my organization has the necessary tools to improve quality and efficiency. And your options are number one, strongly agree, number two, somewhat agree, number three, somewhat disagree, number four, strongly disagree, and lastly again are not applicable or no opinion. So we’ll give you just a few more moments there to get your responses in on this last poll. All right. Looks like things are slowing down. I’m going to go ahead and close that poll and share our results.
All right, 15% reported that they strongly agree. 38% somewhat agree, so that’s our majority here. 19% somewhat disagree. 17% strongly disagree, and only 13% now have no opinion.
Steve Vance: Great.
Sarah Stokes: I guess this one was a little easier to answer. It’s just an opinion question.
Steve Vance: It was, it was. Well, that’s encouraging to see that over half either strongly agree or somewhat agree. So I’m hoping that those tools are being utilized to help improve that quality and efficiency.
So our tools are built on what we call DOS, or Data Operating Systems that links together all of your sources of data information, including tying clinical data from your EMR with other sources of data as I mentioned previously, which also includes our costing and financial data and how important that is to be able to link those all together. These are some of the applications that Health Catalyst has, including those specific to financial data, and we’ll look at a couple of these more closely, but besides financial tools we have a number of other applications around operational, clinical and population health areas. With this topic being on accurate financial data of course costing is an integral piece to that, and at the heart of this financial information is this costing data, and Health Catalyst has developed a tool called CORUS that accurately calculates cost based on activities rather than on other costing tools that base cost off of work RVUs or relative value units, or based on a percentage of charge code charges.
Patients that have the same charges will show the same cost when based on relative value units, as you can see on the left hand side, and there’s often some hidden potential there in terms of what’s actually going on if costs are being done based on activity. So you can see that there can be some differences in the amount of time expended, the volume of different procedures in place for those cases, and cost of supplies and drugs associated with that. If the costing is based on relative value units, that may be hidden. So certainly basing on activities, as I mentioned earlier, is easier to explain to physicians and becomes more accurate in terms of being able to also look for variation opportunities.
This second slide just breaks that down a little bit further from a time perspective in the associated labor costs, and even though the charges are the same, that time can be different among patients, and you can see the various components of that time, and the true variation in cost becomes hidden when based on RVUs rather than activities, and opportunities can be missed and potentially wrong decisions made if that’s not known.
Here’s another example of a report combining clinical and financial data. This is on a hysterectomies and you can see that on an overall basis the hysterectomies are contributing positively by $800, but as you drill down you can see that depending on how those hysterectomies are done or perform has some significant differences in terms of not only cost but in contribution margin and in outcome. So again, just a simple example of how combining that profitability and accurate financial data along with clinical data is so important.
This is an example of our financial management explorer. This tool combines cost and billing data for analysis among other things, and these types of reports can illustrate trending and allow for drill down and customization. We also have a team of experts in the revenue cycle area that can help assist with providing an overall assessment opportunity and implementation in addition to our self-analysis tools like Revenue Cycle Explorer. Here you can see that this is just one example of the type of information available in our Revenue Cycle Explorer, includes information around error management, error account details, collection rates, denials, and many others. All of these types of financial tools help to rapidly identify and understand important trends and variances so that appropriate action can be taken.
In my last couple of slides just highlighting some of the transformation benefits and improvements that have been seen and realized. This is Children’s Health Network. It has some significant improvement that occurred in utilizing these process improvement efforts. On a clinical and financial basis they had $23.2 million in improvement. Over $6 million in drug cost savings and approximately $8 million in sepsis cost savings among others. They were also able to eliminate some overutilization of testing as well as a six day reduction in their NICU length of stay. So some pretty significant improvements that they were able to realize.
Lastly another client, Allina Health was able to realize a $2 million increase in overall patient collections and this was done in the first year through developing and implementing predictive modeling and prioritization of workflow efforts and other strategies. So certainly a lot of opportunity exists and it’s important to have that accurate financial data to be able to make key decisions, regardless of whether you’re in a fee-for-service or a risk based model. As we’re getting, as we’re able to better understand our financial situation down to a procedure level, strategies can then be developed that puts that strategic direction in place, and significant variational waste exists in all healthcare organizations, and having the right tools and resources to help identify that waste can enable massive transformation. There’s significant opportunities out there with accurate financial data at the heart of finding those opportunities. I just want to thank you for your participation and interest in this topic and I know we have a few minutes to answer some questions that any of you might have.
Sarah Stokes: All right, great. We actually have one final poll question before we dive into the Q&A.
Steve Vance: Okay.
Sarah Stokes: But this is our poll question, this is not Steve’s. So I’m going to go ahead and launch that. While today’s webinar was focused on the importance of accurate financial data, some of you may want to learn more about the work that Health Catalyst is doing in this space or maybe you’d like to learn about our other products and professional services. If you would like to learn more, please answer this poll question. Now, I’m going to go ahead and leave that up as we dive into our questions here, and we have a few so far. If you’re still on the line and you have a question that you’ve been thinking of and you haven’t yet submitted, now is your time.
So first we had, this was a comment that came in towards the beginning after your second poll question about feeling comfortable with financial data, and Mary Anne said, “Just a comment about being comfortable with financial data. When I asked our organization for financial data about my clinic I was told why do I want to know as you’re just a clinician. Is that something you’ve seen in your work?”
Steve Vance: Yeah, I think oftentimes I have seen that in terms of why do I want to know, you’re just a clinician, that sometimes happens. That’s unfortunate certainly and I would hope that that’s not widespread. I certainly, I think as I mentioned before, when anybody came to me asking for financial data, I was thrilled, I was encouraged that they were asking. So I hope that’s an isolated case, but that’s somewhat unusual I guess as I’m thinking about this now. But I certainly again think that’s very unfortunate because clinical and financial does need to be tied at the hip in being able to address those issues going forward.
Sarah Stokes: Right. Our next question comes from Kimberly who asks, “As health systems continue to acquire new system members and work to integrate financial systems and workflow processes, how have you accelerated standardization of clinical quality, operating, and financial data reporting and synthesis?”
Steve Vance: Yeah, might be synthesis. Well, I think in how we’ve accelerated that standardization in Health Catalyst is we do have a number of reports that are standardized. Many of our reporting structure is highly customizable as well, but we have had a number of clients that have made those modifications, but I think really the thing that we’ve seen that while I was at Intermountain in terms of standardizing that was getting that information out in front of individuals in terms of clinical quality and operating and financial data, and the more that that’s looked at, the more it’s refined and the more it’s standardized, and just having that data out there really does help move the wheel in terms of transformation.
Sarah Stokes: Okay. Next question is from Kevin and it’s around that hysterectomy example that you shared and he asked, “How was clinical quality factored into the results shown there?”
Steve Vance: There were a few and it was probably hard to see because there was a lot of data on that slide, and it was fictional data although very, very, very real, but looking at the infection rates was one, return to surgery. That data was also looked at as well and that certainly is very important to look at. Financial data alone, you do not want to just make your decisions based on that. Being an accountant, that may sound contrary what most people would think, but I have certainly learned that financial data alone is not sufficient. That needs to be tied closely with the clinical data, what the outcomes are and many times it makes sense to do things that are not necessarily as financially appealing based on the clinical results. So those two things need to tie hand in hand certainly.
Sarah Stokes: Okay. The next question is from Francisco asking about an integration with Salesforce. I’m guessing that’s around our tools and financial data that lives in Salesforce. If I’m wrong there Francisco and you’re still on the line let us know. But do you know of anything there?
Steve Vance: I don’t know what the nature of that is exactly, so I’d certainly be happy to follow up with Francisco on that offline if needed.
Sarah Stokes: Great. Yeah, Francisco, please do let us know if we’re off-base there and we’ll point in the right direction. We do have time for just a few more questions. If there are still any lingering questions out there, now is your final chance to get those in today, but in the meantime I’ll ask Steve, what processes can you put in place to help achieve accurate financial data?
Steve Vance: Yeah, I think as I mentioned before, to getting the information out there and to getting into the hands of individuals is certainly a way to accelerate that. Sharing that information with physicians and other clinicians really helps discover issues that might exist with the financial data, but I think one of the key things is to really get the information into the hands of clinicians. Again, going back to that situation of not wanting to share that financial information just kind of gets to me, certainly, but it’s unfortunate that that’s not the norm out there, but the more the information is there, the more the data is looked at, the quicker that that will improve.
Sarah Stokes: All right. We’re going to do one more question.
Steve Vance: Okay.
Sarah Stokes: And then wrap up, and the question is, what’s the best way to integrate clinical and financial individuals in using financial data for transformation?
Steve Vance: I think the one thing that was very helpful while I was a CFO was to have a CEO that was a 100% behind this transformation and getting that alignment and that focus at the top was certainly helpful. Kind of goes back to kind of having that C-suite alignment and having our goals all aligned together is certainly important. So I think as we get that synergy, the benefits will be there.
Sarah Stokes: All right. Well, we don’t have any more questions right now so I think we’re going to go ahead and wrap things up.