Analytics can help hospitals survive and thrive in a value-based reimbursement environment

If you are the CEO or the CIO of a hospital, you are facing a huge transformation as the industry moves from a fee-for-service environment toward a value-based reimbursement system. It will take time and a new focus on patient outcomes, not just treatments given, to succeed. That’s why your strategy for success needs to include new resources for analytics. Use of analytics will be an existential capability in this environment because it will determine not just your success but your survival.

As payers turn increasingly to narrow networks, being the high-value, low-cost provider will be paramount, especially in a competitive market with duplication of high-end services. Analytic competency will help you be that top-tier provider.

While population health and risk stratification are the sexy topics in analytics these days, there are smaller, more discrete projects that use analytics and will sort the winners from the losers in the competition for higher reimbursements even more quickly than those larger projects.

You want to be the preferred provider for specific medical procedures as well as the top provider overall
In the kind of contracting hospitals have experienced in the past, a hospital is included or excluded from a network based on overall quality for all services. In the near future, however, as payers use analytics to identify cost and quality leaders for specific treatments and procedures, your hospital might be an approved or preferred provider for, say, hip replacement, but not for abdominal surgery. This will especially be true in markets where there is an overabundance of supply in some areas and real differences in quality and cost.

I chose this example specifically because there is a real-world example you should know about, especially if you are competing with University of Iowa Hospitals and Clinics in Iowa City for abdominal surgery patients. At HIMSS this year, the institution reported on a project that reduced surgical site infections for abdominal surgery patients by more than 70 percent over three years. They achieved this incredible result by using an analytics system that identifies which patients will likely need more advanced post-surgical preventive care. Not only did they reduce total infection rates for these surgeries, but they also avoided over-using expensive treatments targeted to increase wound healing, such as hyperbaric chambers and intensive nursing care, in patients that did not need such therapy.

This saves the payer money in three ways: less unnecessary use of expensive advanced treatment, less risk of complications from unneeded treatments and fewer infections. They cut millions of dollars out of the budget over those three years with this quality improvement project and smart use of resources.

If your hospital has average surgical site infection rates and your competitor has a rate that is 70 percent lower than yours, it won’t take much to convince a health plan to contract with your competitor and leave your hospital out of the network, at least for abdominal surgeries. And simply increasing use of preventive therapies likely won’t put your hospital on par with the competitor either. It will certainly bring down infection rates, but it will also increase your costs and the costs to payers and patients, because if you can’t predict who is at the highest risk for infection, you’ll end up over-using expensive resources. The critical factor in effective competition will be the ability to use analytics to predict where expensive resources can be most effective at improving outcomes.

I had a very interesting talk at HIMSS with John Cromwell, MD, who led the project for the University of Iowa. A video of that conversation is available on YouTube.

During that conversation, Dr. Cromwell noted that the analytic tools his team used could quite easily be modified for use in other types of patients, and he gave some good examples. It’s a short video, but it will give you a sense of how important this issue is. He also gives some good insights into how to get started on your own analytics program.

With this new tool, the University of Iowa Hospitals and Clinics has a great chance of becoming one of the top-tier hospitals for both cost and quality in a number of areas, and it won’t take long for them to start to dominate their market if they use analytics as wisely in other areas as they have in abdominal surgery.

Surgical site infections are just one area where analytics are improving care and reducing cost. Also at HIMSS this year, Nephi Walton, MD, reported on a study he did at Intermountain Healthcare in Salt Lake City using analytics to forecast spikes in inpatient census at Primary Children’s Medical Center. Unanticipated spikes in census can overload staff, degrading the quality of care, lowering staff morale and necessitating the use of high-cost temporary help and overtime pay. Knowing that a spike is coming — and preparing for it — can dramatically improve care and reduce costs. It’s a capability that could help this hospital become the high-quality, low-cost provider in the market, just as analytics can help the University of Iowa be a leader in its market.

It’s worth noting that these projects also have a fast realization of benefits, in the form of better outcomes and lower costs, which will be important drivers for reimbursement in a value-based reimbursement system. Because these improvements likely will benefit the bottom line, the value they add offers a very high return on the investments made.

You need people, not just resources and technology, to succeed with analytics
Another thing that struck me when looking at these projects is the depth of the credentials these physician leaders bring to the project. In addition to being director of gastrointestinal surgery at University of Iowa Hospitals and Clinics, Dr. Cromwell also leads the system's surgery quality and safety program and is an instructor in the medical school’s informatics program. Dr. Walton has a master’s degree in medical informatics in addition to his clinical qualifications. Their ability to successfully lead these projects comes, at least in part, from a mix of capabilities: clinical expertise; leadership and collaboration skills; and an understanding of the role of technology, data and analytics in quality improvement.

Those skills are just as important as the monetary and IT resources the teams used. This is not work that can be done in a silo. You have to bring together a pretty broad skill set to do this work, which means you must have leaders who have not only clinical expertise but the ability to collaborate with others and the vision to see where analytics can take your organization.

In the past, hospitals recruited physicians largely on their clinical expertise and their ability to attract new patients to the hospital. While those are both important considerations, hospital leaders need to be recruiting physicians who also have leadership and collaboration skills and an understanding of technology, data and analytics

The old era, in which hospitals considered physicians as their primary customers, is giving way to a new era in which the patient and the patient’s health plan are the primary customers. To succeed, they will need physician leaders who are patient-centric and understand the value of analytics and data in the quest for better patient outcomes and a more efficient use of resources, because patient outcomes and cost efficiency will be key to serving these customers and earning their loyalty.

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