Comprehensive Healthcare Transformation Requires Comprehensive Change

Healthcare is changing fast, and the various changes impacting the industry are affecting the bottom lines of hospitals and health systems across the country. For example, the federal sequester spurred a nationwide 2 percent Medicare cut, and various states also have cut hospital funds. Further potential reduction to hospital and health system profits and operating budgets stems from the shift from fee-for-service to a pay-for-performance environment.

Healthcare organizations have taken different approaches historically to cutting costs to meet budget constraints, usually focusing heavily on supply chain costs. "There's always been a sort of piecemeal approach to cost management," says Dan Piro, president of Advisory Solutions for MedAssets, a healthcare performance improvement company. "But that was always based on the foundation of having fee-for-service reimbursement, which healthcare as a whole is moving steadily away from."

Because of the dramatic industry shift, Mr. Piro recommends shifting away from a focus on individual supply chain cost silos and instead going for a comprehensive approach to lower the total cost of care and better align those costs to reimbursement.

Comprehensive changes

It can seem like a staggering task to achieve comprehensive change in all aspects of a healthcare organization. In order to become more efficient and lower the total cost of care, it involves changing the underlying cost structure and even culture.

While comprehensive change is massive, Mr. Piro warns it is important to start now. "If you don't think about it at the core of the organization from the top down, you probably won't get to the level of change needed to be successful in the new landscape," he says. "Making simple cost reductions will no longer be enough. You need to take a system-wide, continuum of care view to controlling costs and improving efficiency and outcomes to gain sustainable long-term organizational success."

San Antonio-based University Health System is one system that heeded the market's warnings and decided to make some major changes. "We were seeing state- and federal-level cuts and decided to continue to plan for reductions in payments," says Christann Vasquez, executive vice president and COO of University Health System. "We started looking for answers."

At first, University Health System considered taking the "traditional" approach of cutting costs. "Initially, we looked at supplies and standardization," says Ms. Vasquez, but then system leaders realized the opportunities for change expanded beyond those traditional cost silos. University Health System eventually teamed with MedAssets to help guide the system in its journey to transform its operations, finances and culture.

Vasquez adds, "A health system can no longer make these significant changes on its own. System-wide changes need to occur simultaneously across the organization in an aligned and proven method. It was the right course to engage a third party with deep expertise to help lead us through this process and significantly augment my team."

Through the collaborative business relationship, MedAssets and University Health System tackled several initiatives, including:

•    Managing supply expenses
•    Improving clinical resource utilization and standardization
•    Improving labor expense management
•    Changing culture through Lean
•    Enhancing revenue through an expedited claims process

University Health System is a little more than a year into its three year agreement with MedAssets, but it has already seen major improvements in cost and enhanced revenue. In the first 14 months, University Health System has saved $16.2 million in costs, accelerated cash flow by $14 million, reduced average length-of-stay, increased cash collections by $48 million over previous year levels, and overall tracked expenses per discharge declined 3.5 percent.

Even with all of that achievement, the system is not yet satisfied and is continually looking at ways to further improve. "We [used to] think we didn't need to find things to fix, but now we always are. That's part of the cultural change," says Ms. Vasquez.

Partnering up

A large part of the transformation success University Health System realized is due to its initial decision to bring in a single outside company as opposed to an endless line of suitors, says Ms. Vasquez. "It was best to have one partner in this endeavor…instead of introducing flavors-of-the-week," she says. "It also was essential for us to tap into a company with experts that had seen our issues hundreds or thousands of times. We no longer had the luxury of time to figure out answers, or learn from our mistakes."

Besides bringing consistency to a large ongoing project, a single outside expert can bring many more advantages to a hospital or health system during a comprehensive transformation, including the following:

National expertise. Typically, executives and managers in a hospital or health system are experts in their field on a local or state level, but few have experience on the national scale. That's where a partner can come in handy: "[A partner] can bring in someone who has expertise dealing with operations on a national level," says Ms. Vasquez.

Ability to retain focus. When a hospital is in the midst of making major changes to its operations and finances, it can be easy to get caught up in the big picture and leave the day-to-day operations in the wayside — not the ideal for an organization seeking future and current success. "A pragmatic consulting firm is an extra set of hands, because [leaders] have their day jobs too," says Mr. Piro. "You have to continue to deliver high-quality care at the same time as you're making fundamental changes."

The consulting team can keep a close eye on the overall long-term changes happening throughout the organization, taking some of the pressure off of the organization's own leaders so they can focus on their normal, day-to-day responsibilities without being overwhelmed.

What to look for. While an outside firm can provide the benefits detailed above, it is important for hospital and health system leaders to find the right one for the organization. Not every consulting company will be the right fit for every organization. The following are a few key elements healthcare leaders should seek out when looking for a company to help their organizations transform.

Trust. It's is the most important thing to look for in a potential company. Making comprehensive change with an outside party requires opening up the entire hospital, which can be difficult without a level of trust. "There needs to be a level of mutual respect and understanding," says Mr. Piro, in order for the relationship to be successful.

Compatibility. Along with trust, organizations and their potential consultants also need to be able to work together in a compatible way in order to achieve success. The consultant firm should not just tell you what you "should do", but help to make the pragmatic changes needed. "They selected people [to work with us] that fit into our culture," says Ms. Vasquez of the MedAssets staff selected for the University Health System engagement. "Having the right mix [of people] made it work so well."

Tools. Mr. Piro encourages healthcare leaders to ask the following question before settling on a company: What are the tools in their tool bag that will augment the relationship and make the change successful? A viable potential outside consultant should bring in data and insights and the analytical tools to help organizations benchmark not only against national data, but against local market competitors and similar organizations in their operating region.

Well-rounded knowledge. Success in the new healthcare system requires unlocking insight within and the interconnections among financial, operational and clinical performance. Any outside company engaged needs to have the ability to look and work across the organization versus just "silo expertise."

Healthcare is making a comprehensive change, and hospitals and health systems should be straying from their usual focus on change within silos to making comprehensive, organization-wide change. Finding the right company to assist in the change can put healthcare organizations on the fast track to future and sustainable success in the new world.

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