Data Analytics in Healthcare Delivery: Bigger is Not Always Better

Michael Kuchenreuther, Ph.D., Research Analysts, and Michael Abrams, MA, Managing Partner, Numerof & Associates Inc. - Print  | 

Recent reform efforts responding to the unsustainably rising costs and relatively disappointing quality of healthcare in the U.S. have sent all sectors of the healthcare industry scrambling to understand how their business models must change moving forward.

Declining reimbursement rates, financial penalties related to clinical metrics and increased regulations have driven healthcare providers to increasingly focus on achieving improved outcomes at lower costs. Value-based purchasing, care coordination, and a focus on preventive health represent just a few of the strategies that providers are implementing to meet the growing demands of payers and other key stakeholders. Regardless of the specific strategies providers elect to pursue, one thing is certain — increased reliance on data analytics is critical to their success. 

Perhaps it is not surprising then that "big data" has quickly become one of the latest buzzwords in healthcare. In fact, payers and providers have already begun to adopt or develop big data analytic capabilities to track outcomes and to understand the value associated with specific practices and products. By definition, big data describes massive amounts of information that can be interpreted by analytics to deduce causal relationships or summarize trends. Value can certainly be realized through the proper use of big data. For example, providers investing in data warehouses may be well-positioned to conduct comparative effectiveness research, safety monitoring investigations and long-term studies aimed to improve patient outcomes and/or ensure proper management of a particular patient population.  But now is not the time for most healthcare delivery organizations to spend limited resources on big data.

Many provider organizations are treating big data as an end in itself, pursuing alliances in which they give or get access to gigabytes and petabytes of data, competing in a kind of digital arms race. This is a mistake. Simply stated, while big data may in the long term offer insights about care delivery that may be generalizable across providers, it is not the silver bullet solution providers would like it to be, or what they need now. While big data by definition captures a large amount of detail on a large number of patients, it often fails to provide insight into how providers can deliver more cost effective care in their own institution. Providers are facing potential reductions in revenue that will require unprecedented changes in their business model to cut overhead and the cost of care. Given the lack of insight most providers have into their own cost structure, they have much more to gain by focusing on their own data to generate a structured model that relates inputs (e.g. services delivered) to outputs (e.g. quality metrics and costs).

As healthcare providers continue to build infrastructure to capitalize on big data, they must realize that they likely already have substantial amounts of small yet powerful data that can drive important quality improvements and cost reduction within their own care networks.  Freestanding ASCs and physician practices need to fully understand their own supply, utilization, financial and patient population data before deploying extensive resources into large and complex pools of external data where value is more difficult to realize. In other words, it isn't nearly as important how much data providers have as it is to ensure that they are asking the right questions upfront and using the data they do have correctly.

Michael Kuchenreuther, Ph.D. is a research analyst, and Michael Abrams, MA, is managing partner at Numerof & Associates Inc. (NAI), a strategic management consulting firm focused on organizations in dynamic, rapidly changing industries. Working globally with clients in delivery, pharmaceuticals, medical devices and diagnostics, payers, and policy, we bring a unique cross-disciplinary approach to a broad range of engagements designed to sharpen strategic focus, increase revenues, reduce costs and enhance customer value.  For more information, visit our website at

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