How next-generation cost benchmarking & performance management technology helped OSF HealthCare reduce costs by $160M & counting


In a Sept. 25 webinar hosted by Becker's Hospital Review and sponsored by healthcare analytics provider iVantage Health Analytics, David Stenerson, vice president of finance central region for OSF HealthCare System in Peoria, Ill., explained how the health system significantly cut cost and improved performance using comparative analytics. Linda Albery, EDD, RN, senior vice president at iVantage helped set the context for how next generation benchmarking technology can help organizations succeed in today's low margin, complex market environment.

Cost management not only remains a priority and at the forefront of concerns for financial decision makers, but in fact, “Cost reduction topped the list of CFO priorities," Ms. Albery said, referencing 2018 survey of healthcare finance leaders published in the January 2018 edition of Healthcare Financial News. "This isn't a new perspective, but what is different now is there is more cost pressure than ever along with a continuation of limited confidence in data accuracy. Financial decision makers also have more knowledge of how to use data to reduce costs and make those cost reductions sticky."

To succeed in this environment, leaders need full visibility into their enterprise performance. They must have ready access to rigorously accurate and transparent data. This requires an integrated understanding of the true drivers of cost as well as the interdependencies of productivity, utilization, care management and clinical quality. A culture of transparent data sharing throughout the enterprise is a fundamental need to help organizations move from knowledge to action. The current challenge for healthcare leaders is to find tools that help them see clearly, manage effectively and achieve sustainable performance improvement in a world of ever-increasing complexity.

Recognizing this need, in 2012 OSF HealthCare decided to embrace a new paradigm on their journey towards performance improvement and cost reduction. Based on those efforts, "Today, we are more of an operationally driven company that is not just a confederacy of local markets," Mr. Stenerson said. "Rather, we have much more standardization, having centralized many functions and improved our cultural transition to be able to move to making changes based on data for performance improvement."

The shift in organizational culture

As a first step, OSF HealthCare reached out to a consultant for guidance on how to institute a well-functioning performance improvement program, but the health system quickly shifted towards leveraging internal resources, building out their own core-competencies. The organization focused a great deal of their foundational efforts on initiatives designed to shift the cultural paradigm to support the sustainability of performance improvement efforts:

• Rolled out a structured brainstorming process, gathering improvement ideas from across the system to establish program transparency, inclusion, trust and buy-in.
• Prioritized the gathered improvement suggestions based on the criteria of significant financial benefit and likelihood of success in collaboration and with support from the senior leadership team.
• Made certain to always stay true to the mission. For OSF HealthCare, it was vital to adhere to its mission as a faith-based organization. "Some ideas that had large financial returns were not pursued because of the potential harm to our mission," Mr. Stenerson said.
• Ensured a clear focus on taking action and accountability. "Another key point of this action plan was to track progress of our teams," Mr. Stenerson said. Through the implementation of a reporting structure based on green, red and yellow light indicators, OSF HealthCare was able to act on any barriers identified, monitor individual levels of activity, understand what problems were arising, immediately address problems and celebrate success.

Examples of sustained improvement:

1. Labor cost reduction

Leveraging the iVantage Platform for leading practices and cost targets based on high performing benchmark organizations, OSF HealthCare established a review process for new full-time positions as well as other ways to make sure the appropriate care level was being administered. In a specific initiative, within the neonatal department, a multidisciplinary team considered the various factors driving excessive costs. After clinical protocols were then put in place to determine the levels of care required during the patient's stay, OSF HealthCare learned there was an opportunity to transfer patients to intermediate care, requiring fewer staff than intensive care. Through this strategy and others, OSF HealthCare saved $1.5 million in labor costs without sacrificing care quality.

2. Supply cost reduction

Based on an opportunity assessment and benchmark targets, OSF HealthCare standardized supplies across the organization and improved pharmaceutical acquisition resulting in significant savings. In a specific initiative, OSF HealthCare realized that by reprocessing certain disposable items for re-use, they could save more than $1.1 million annually.

Overall results

Immediately, in the very first year after initiating their new performance improvement program —by shifting their culture orientation and adopting benchmarking technology — OSF HealthCare saw a significant drop is their overall cost structure. Costs continued to decline for the next three years. By the fourth year of implementation, OSF HealthCare's cost savings totaled $160 million, with that figure continuing to rise year-over-year.

Planning for the future

OSF HealthCare leaders have prioritized clinical efficiency, cost reduction and employee engagement throughout the entire performance improvement journey. These concerns remain top-of-mind for OSF HealthCare leadership as the system continues leveraging next generation benchmarking for further cost reduction and performance improvement. "As we have moved through functional transformation and become more of an operational company, the big ideas are taking advantage of the organization-wide departments to be able to leverage and use the expertise and nimbleness to focus on the big picture," Mr. Stenerson said. "When looking across a $2.8 billion organization with departments that cover the entire organization, small changes can result in big dollars."

To watch the webinar, click here.
To view the webinar slides, click here.
To learn more about iVantage, click here.

More articles on benchmarking:
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CHI's operating loss shrinks as cost-cutting efforts take hold

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