What clinical variation means to a hospital's bottom line: 4 insights from the C-suite

Eliminating clinical variation is critical not only to ensuring patients receive the safest, highest-quality care, but it is also an integral component of reducing the overall cost of healthcare — on both the national and individual hospital level.

"Clinical variation describes the different practices and services that permeate healthcare delivery today," Donna Hopkins, RN, vice president of national healthcare consulting firm Novia Strategies, said during a webinar hosted by Becker's Hospital Review. Clinical variation involves the overuse, underuse, different use and waste of healthcare practices and services with varying outcomes.

The U.S. healthcare system is the most expensive in the world, according to the most recent data from the Institute for Healthcare Improvement. Total national healthcare expenditures account for 17.1 percent of the GDP, and that percentage is projected to rise to nearly 20 percent by 2020. Central to the healthcare industry's goal to contain costs is the need to redesign care delivery, including reducing clinical variation.

"Reducing clinical variations means creating uniform clinical guidelines and order sets, reducing tests and procedures, eliminating care gaps and delivering true interdisciplinary care," said Ms. Hopkins. "In other words, reducing clinical variation means delivering the right care in the right venue at the right time and at the right costs."

Other factors, including the increasing prevalence of bundled payments, the Medicare Access and CHIP Reauthorization Act of 2015, the 30-day Hospital Readmissions Reduction Program and other quality-driven initiatives from CMS, as well as physician talent loss and staff shortages, compound the need to redesign care delivery to reduce clinical variation.

Successful clinical variation reduction efforts generate a myriad of positive effects. They lead to higher engagement among physicians, optimized staffing, increased profitability, reduced costs and, most importantly, improved quality and safety, according to Ms. Hopkins. As the industry shifts from volume- to value-based reimbursement models, each of these benefits will be fundamental to thriving in the new healthcare era.

During the webinar, Ms. Hopkins posed 10 questions to a panel of hospital and health system executives on how reducing clinical variation has positively affected their organizations' bottom line and how they partner with physicians to ensure related initiatives are a success. Here are four highlights from the webinar.

1. What was that aha moment when you realized you needed to address clinical variation?

Steven Goldstein, CEO of Strong Memorial Hospital in Rochester, N.Y., said it wasn't so much an "aha moment" but a realization over time that the shift from volume- to value-based reimbursement models necessitated a transformation in the way providers approach care. "When you have commercial insurers and federal payers moving away from fee-for-service, something needs to change in the way you deliver care and manage patients' health," he said.

In particular, Mr. Goldstein said reducing clinical variation within clinical redesign efforts is imperative for staying viable under risk-based payment models, and CMS' goal to link 50 percent of Medicare payments to value-based reimbursement models by 2018 has fueled the sense of urgency around such efforts.

Patrice M. Weiss, MD, CMO of Roanoke, Va.-based Carilion Clinic and a professor of obstetrics and gynecology at Virginia Tech Carilion School of Medicine, said there was a distinct aha moment for her. Before she was CMO, Dr. Weiss served as chair of Carilion's department of OB-GYN. After the American College of Obstetricians and Gynecologists recommended in 2013 to refrain from inducing elective deliveries before 39 weeks of gestation, Dr. Weiss led a push to eliminate them at Carilion altogether.

"We quickly became one of the lowest early induction rate hospitals," she said, noting her hospital's rate was less than 1 percent. "Then we received a letter from the state of Virginia that said a different Carilion hospital had a 17 percent early induction rate."

Dr. Weiss said she realized then that reducing clinical variation means hospital executives must know the differences in practices between hospitals, even within one system.

2. What is the connection between clinical variation and an organization's performance — both financially and in terms of quality and patient satisfaction?

Shelly Hunter, CFO of Mercy Hospital Joplin (Mo.), described how clinical variation affects a hospital's finances. "If you have wide variation, you have less predictability in your finances, which leads to lower operating performance," she said.

With standardized care, there are better outcomes for patients, fewer complications, lower rates of readmission and higher performance on other quality-based metrics that are tied to reimbursement. Importantly, as hospitals zero in on eliminating waste and duplicative services, standardized clinical pathways help reduce over-utilization of tests and labs. On the other hand, with high clinical variation and erratic utilization, it's much more difficult to accurately predict costs, according to Ms. Hunter.

In addition to quality-based metrics, patient satisfaction scores measured by HCAHPS affect federal reimbursement to hospitals. Clinical variation has the potential to derail patient satisfaction because lack of standardized care can lead to medical errors, complications, increased length of stay and readmissions, among other issues.

3. How do you effectively partner with physicians to reduce clinical variation?

"It is absolutely key that physicians are on board and engaged" with clinical variation reduction efforts, said Dr. Weiss. Achieving systemwide physician engagement requires identifying and naming physician champions to serve as leaders. A strong physician champion is clinically active, highly respected by their peers, enthusiastic about effecting positive change and a strong communicator. While hospital administrators might be inclined to turn to department chairs or the most productive physicians to serve as physician champions, these factors alone don't mean a provider will be a successful leader.

At Carilion, a physician leadership academy targets up-and-coming leaders — or those who have expressed a desire to head new initiatives — to develop them into physician champions. Additionally, according to Dr. Weiss, physicians are included on all committees, usually serving as chair or co-chair. Placing physicians in these roles not only increases their level of engagement, but it also creates the opportunity to incorporate their clinical input and expertise.

4. How important are risk-adjusted analytics in engaging physicians and reducing variation?

When it comes to engaging with physicians and getting them to change their behavior in clinical redesign efforts, it is important to remember that physicians are scientists; they are unlikely to change the way they practice medicine unless they see hard data on their performance and outcomes, according to Nancy Lakier, RN, CEO of Novia Strategies, a national healthcare consulting firm. "Once they look at the data, they will point to opportunities to improve themselves," said Ms. Lakier. "When physicians look at solid risk-adjusted data, and they don't feel that they are being told what to do but rather being supported with data, we find they very quickly use this information to improve the care they provide for their patients."

Physician scorecards, which detail various metrics such as utilization, cost, LOS, outcomes and readmissions, show physicians how their performance stacks up compared to their peers, as well as national benchmarks. Faced with this data, physicians who need to improve will be intrinsically motivated to do so, and therefore more inclined to adhere to clinical redesign processes that reduce variation and standardize care.

To view the webinar on YouTube, click here.

To download the webinar slides, click here.

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