The True Cost of Care: How the University of Utah Pursues Value-Driven Outcomes

University of Utah Health Care has created a tool to help the university and other providers understand the true cost of care.

In September 2011, Robert Kaplan, PhD, and Michael Porter, PhD — both Harvard Business School professors — published a paper in Harvard Business Review titled "The Big Idea: How to Solve the Cost Crisis in Health Care."

The paper identified the cost-measuring system as a fundamental source of ballooning healthcare spending. "To put it bluntly, there is an almost complete lack of understanding of how much it costs to deliver patient care, much less how those costs compare with the outcomes achieved," Drs. Kaplan and Porter wrote.

Spurred by their take on the healthcare cost containment problem, Vivian S. Lee, MD, PhD, MBA — senior vice president for health sciences at the University of Utah, Dean of the University of Utah School of Medicine and CEO of University of Utah Health Care in Salt Lake City — launched the Value-Driven Outcomes  initiative, a project that brought together leaders from various departments such as quality improvement, biomedical informatics and IT to create a tool to help their university and other healthcare providers understand the true cost of care.

"We pulled together people from decision support, financial planning and the enterprise data warehouse team," says Amy Sletta, the VDO project manager. "The costing project had many facets."

VDO-Option3FlatAfter six months of hard work in an isolated environment, the project team produced the VDO tool, which translates big data into actionable information about true costs on the patient level. The tool won a 2013 Innovator Award in the Health Care's Most Wired Competition, sponsored by Hospitals & Health Networks Magazine.

"The VDO tool is incredibly powerful because it gives you granular and directive data," says Robert Pendleton, MD, associate professor of medicine at the University of Utah and chief medical quality officer of University of Utah Hospital and Clinics. Dr. Pendleton sits on the steering committee for the VDO project and has served as one of the team's advisors. "VDO allows us to turn data into information that you can really drive improvement with."

Digging into the data: How the tool works
The VDO tool determines the true cost of healthcare services using a five-step process. First, the tool identifies and harnesses huge quantities of data from sources throughout the university's healthcare system, including the general ledger, clinical electronic health records, and various other information systems  utilized for the tracking, entry or purchasing of payroll, labor, , supplies, billing, outcomes, imaging, orders, labs, medications, benchmarking and operating room data.

Next, the tool extracts data from these various sources. The third step involves loading that information into an enterprise data warehouse, where the information is integrated into simplified data tables that support the costing process, as well as the reports and analytics the tool's users can generate. Within the enterprise data warehouse, the information about each fiscal year for the university's healthcare system includes roughly 135 million rows of data representing clinical activity used for every patient visit. The tool also assigns unit costs for labor associated with healthcare services.

"Basically, what made all of this possible is doing our cost algorithms on the enterprise data warehouse," says Cary Martin, senior data warehouse architect. "In our institution, there are a lot of different systems that feed information on patient care. The enterprise data warehouse gave us an opportunity to bring all of those together. We wanted to be able to get as much data from different systems as we could to get the best actual cost for an item or the closest cost approximation if the actual cost was not available."

Fourth, the tool maps the data and presents it to users using intuitive and recognizable business and clinical terms. Finally, the VDO tool is able to generate reports, dashboards, business analytics, scorecards and other means of measurement to help users identify opportunities for improvement.

The tool allows users to select a diagnosis, procedure or diagnosis-related group and produce a chart that compares the variation between various providers side-by-side, says Charlton Park, MBA, MHSM, director of decision support at the University of Utah Hospitals and Clinics.

"You can start at a high level comparing the average cost per case for a group of physicians," he says. "Then you can drill into data to see where the variation is coming from. This is what we're using in several instances to drive change."

Mr. Park says the project focuses on major drivers of costs on the patient level, including the actual cost of labs, pharmaceuticals and supplies. They also enhanced how they allocate labor at the patient level to improve accuracy and make the resulting data more actionable.

Senior Data Warehouse Analyst Kip Williams says the enterprise data warehouse also has the advantage of flexibility to change the costing model, a feature many other out-of-the-box costing systems lack.

"The model is extendable and flexible," he says. "It's something that can grow and change as the business changes."

The University of Utah has already used the VDO tool to make care less costly and more efficient for several clinical conditions such as cellulitis (an uncomplicated skin infection). Dr. Pendleton says the VDO tool revealed significant variation in the use of antibiotics and imaging (MRI and CT scans) to treat cellulitis. During a 90-day "innovation cycle," he says the health system was able to craft a standardized care process for the condition and build in decision support in the electronic health record system.

"We reduced the cost of taking care of patients with cellulitis by $1,000 per patient," Dr. Pendleton says. "We also, because we were more structured in the care we were delivering, saw 50 percent fewer patients needing to come back to the emergency room or be readmitted because they weren't getting better."

The VDO tool has also helped the University of Utah Health Care discover best practices for physical therapy that both lower costs and lead to better outcomes for patients. The tool helped reveal sources of opportunity in costs for joint replacements. The University put together a team of clinicians who examined the differences in care delivery and found those who undergo physical therapy on the same day of their surgery have a lower total cost and decreased lengths of stay, says Michael Swanicke, a value engineer.

For the 156 cases the health system handled after creating a new care joint replacement pathway with the VDO tool, the average total facility direct cost was reduced by 8 percent and discharge delays dropped from 6 percent to 3 percent.

"We really leverage that data to help us find where we should focus our attention," Mr. Swanicke says. "More and more of our patients get physical therapy on the day of surgery."

Sharing with others and factoring in quality: What lies ahead for the VDO tool
Mr. Park says the University of Utah is looking to share its methodology with other providers. Several academic medical centers have shown interest in launching similar projects, and other health systems have also reached out to the VDO team seeking to develop the same sort of tool.

Mr. Williams says officials from Chicago-based University Health System Consortium, an alliance of academic medical centers and teaching hospitals, have shown interest in knowing more about the VDO tool and addressing the question of how to provide robust cost comparison data for their members..

"UHC has been trying to do a similar thing, where they want to capture costs for their members," he says.

The University of Utah is dedicated to making sure the VDO tool has a wider impact, says Kensaku Kawamoto, MD, PhD, associate chief medical information officer and director of knowledge management and mobilization at the University of Utah Health Sciences Center.

"Our leadership here is extremely interested in how we can disseminate our technology and our approach and the successes we've had," he says. "We've really tried to make a point to share our experience at various conferences…we are also actively exploring whether we can make the technology available as an open source resource or find a community partner to make it widely available."

In addition to working to share their methodology, the University of Utah team is focusing on making the tool more advanced. Since releasing the first VDO iteration, the team has been working to integrate quality data including mortality, readmissions, length of stay and bleeding, infection rates and other patient outcomes. 

At the end of the day, the VDO team's focus is ultimately quality, not cost.

"We are really convinced that as we increase the quality of the care we provide to our patients, we will drive costs lower," says Sandi Gulbransen, manager of value engineering at University of Utah Health Care. "We want to standardize care where possible, which we believe will lead to better quality. This effort is about understanding costs and outcomes. I don't want that message to get lost."

More Articles on Healthcare Costs:
CMS Approves Plan to Cap Hospital Revenue Growth in Maryland  
9 Drivers of High Healthcare Costs in the U.S.  
Survey: 32% of Patients Ask About Cost Before Appointment or Hospital Visit 

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