healthcare financial management

Ross Hammarstedt
Deborah Bulger

performance improvement
a “left brain ...
intimately understand its customers’ buying            results, incision time and so on—are cre-          language. These ...
quickly identify variances and drill down to      month collecting data for the Joint              ized short-term mortali...
at 4 p.m. than at 9 a.m. (Wright, M.C., et al.,         profit leaders in cardiology and orthopedics       million per yea...
Hospitals frequently engage consulting          A., et al., “Hospital Quality: Ingredients for       be charged with manag...
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Performance Improvement Article Hfm 12 06


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Clinical analytics enables hosptials to combine clinical and financial data in developing better strategies for business intelligence and performance improvements

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Performance Improvement Article Hfm 12 06

  1. 1. healthcare financial management DECEMBER 2006 Ross Hammarstedt Deborah Bulger performance improvement a “left brain meets right brain” approach Clinical analytics enables hospitals to combine clinical and financial data in developing better strategies for performance improvement. In 1979, Betty Edwards introduced the Not surprisingly, most of us develop a dom- lack of community services, patient com- world to a new drawing technique in her inant mode of thinking based on what is plications, and higher-than-expected book Drawing on the Right Side of the Brain. more comfortable for us, which results in severity and conclude that the organization The book, which shot to The New York Times lopsided problem-solving skills. needs more staff. The answer may lie some- bestseller list within two weeks and stayed where in the middle, or better yet, may be a there for more than a year, became popular Before flipping to the table of contents to matter of optimizing capacity and through- for its easy-to-learn approach to drawing, make sure you’re reading the right publica- put by properly aligning existing resources. which Edwards contends anyone can learn. tion, consider how these two modes of pro- Doing so requires developing a shared per- It’s a matter of bringing out the abilities of cessing information might apply to the spective based on the ability to tie clinical the right side—the “creative” side—of the financial and clinical sides of a hospital. outcomes to financial outcomes, also brain, she says. Financial analysts focus on cost, budgets, known as clinical analytics. credit rating, revenue, and patient days to Developing a Shared Perspective In addition to teaching millions of people determine the bottom line. Clinicians focus with no apparent talent how to draw, on safety, compliance, and outcomes to Clinical analytics involves the application of Edwards helped to popularize a new brain determine the quality of patient care. business intelligence systems to health theory. To develop her drawing technique, Before the advent of pay for performance, care. Global corporations have been com- she drew on the words of scientist and neu- there was very little overlap between these peting on such systems since the 1970s, rosurgeon Richard Bergland (The Fabric of two perspectives. relying on them to mine vast stores of raw Mind, New York: Viking Penguin, Inc., data and transform complex relationships 1985, p. 1): Take, for example, a hospital on the path to into easy-to-use metrics. quality improvement whose average length You have two brains: a left and a right. of stay for heart failure and shock is run- The sophisticated mining and reporting Modern brain scientists now know that ning 1.25 days above benchmark. Given that power needed to compete in this way your left brain is your verbal and rational same information, a CFO and a chief nurs- requires a vendor-neutral data warehouse brain; it thinks serially and reduces its ing officer will typically draw very different that extracts, aggregates, and normalizes data thoughts to numbers, letters and words conclusions as to why. The CFO will look at from multiple transactional repositories. ... Your right brain is your nonverbal and patient days, billing delays, claim denials, Rather than replicating entire systems, the intuitive brain; it thinks in patterns, or and deferred admissions and conclude that data warehouse extrapolates only data rele- pictures, composed of ‘whole things,’ the organization needs more beds. The vant to that organization. Business logic is and does not comprehend reductions, CNO will see discharge planning failure, then applied that enables the organization to either numbers, letters, or words. hfm DECEMBER 2006 I
  2. 2. intimately understand its customers’ buying results, incision time and so on—are cre- language. These scorecards establish an habits, for example, and personalize its ated during the care process and never used early warning system for clinical and finan- products and services to maximize profit. again. When combined with other data cial variances, enabling stakeholders to Data can be sliced, diced, and presented to points and imbued with clinical knowledge, head off errors and drive process improve- stakeholders in the form of web-based they can provide great insight. ment. scorecards that enable them to drill down into key metrics and quickly draw conclu- The exhibits below and on page 103 illus- A good scorecard focuses attention on only sions. trate the incremental value of combined the most meaningful metrics for that stake- clinical and financial data. Suppose you holder. Physicians and other clinicians Clinical analytics requires a similar want to determine the impact of periopera- must be able to see a clear connection to approach: extracting clinical, financial, and tive care on the cost of a total hip replace- their daily practice. A nurse manager, for operational data from multiple repositories ment. Relying on financial data alone, you example, would be interested in metrics and loading it into a warehouse optimized could determine whether the patient was related to barcode medication administra- for reporting and root cause analytics. Many charged for an anti-infective and a glucose tion compliance on her unit that provide hospitals overtax the reporting features of test on the day of the surgery—information ongoing feedback regarding whether care is their clinical repositories, which are useful only from a cost perspective. Clinical improving as a result of barcode scanning designed to manage real-time clinical work- data alone will allow you to determine, (e.g., whether her nurses are responding flow related to individual patients during through time stamps, whether the prophy- appropriately to alerts). Metrics are mean- episodes of care, not for reporting beyond ad lactic anti-infective and glucose test were ingless as ends in themselves; their value is hoc queries to help clinical supervisors administered according to evidence-based in helping stakeholders know where to organize care. In contrast, data warehouses guidelines and how long the surgery lasted. drive process changes that will ultimately are designed to aggregate data retrospectively This information is somewhat more useful. be reflected in higher scores. and help the enterprise achieve desired out- Only by combining financial and clinical comes for populations of patients across a data and applying embedded clinical Creating a metric-driven culture also continuum of care. Embedded clinical knowledge, however, can we get at what we requires data integrity. Besides being knowledge, or healthcare-specific business really want to know. Using clinical analyt- expensive and time-consuming to collect, logic, transforms the normalized data into actionable information. Clinical analytics provides the long-elusive Five Ways to Compete on Quality transparency needed to directly Clinical analytics provides the long-elusive link care and cost, thus introducing transparency needed to directly link care and cost, thus introducing a tremendous a tremendous competitive advantage. competitive advantage. As a result, organi- zations can compete on quality in five important ways. ics, we can determine the degree to which manual data provide only a snapshot in procedure duration and noncompliance time for a sample of the population. Manual Clinical analytics enables clinical performance with guidelines impact readmissions, total data are generally gathered to meet specific to be measured using clinical data. For more cost of care, percentage of postoperative reporting requirements or answer specific than 20 years, we’ve measured performance infections, and other important measures, questions. Should a new requirement arise using cost accounting, largely because such as complications by payer and patient or the data gathered beg a new question, it’s charge codes with Uniform Bill-92 billing satisfaction. back to the charts. In contrast, clinical ana- codes have been readily available and fairly lytics has a rapid refresh rate because data Clinical analytics supports a metric-driven cul- inexpensive. However, the inadequacy of are regularly feeding the warehouse. This ture. administrative data to provide insight into enables ongoing trend analysis for an entire the quality and appropriateness of care, A key characteristic of high-performing population. It can also eliminate objections including errors of omission or commis- organizations is the ability of every about sample size when a given clinician’s sion, has long been acknowledged. Clinical employee to articulate the meaning of qual- performance is questioned. As new ques- analytics taps data produced as a byproduct ity in their organization and the impact they tions arise, the data can always be re- of patient care rather than as a consequence have on quality. Via scorecards, the quality mined. of patient billing. Thousands of data imperative can be communicated deep points—on medication administration, lab within the organization using a common Finally, scorecards should enable users to healthcare financial management II DECEMBER 2006
  3. 3. quickly identify variances and drill down to month collecting data for the Joint ized short-term mortality rates. How do we determine the cause with little or no analyt- Commission on Accreditation of Healthcare explain the other 94 percent of variation? ical training. Returning to what we know Organizations’ core measures for acute The researchers concluded that “multiple about left brain/right brain thinking, it’s myocardial infarction, heart failure, and measures that reflect a variety of processes important to let users customize views of pneumonia, and another 23 hours a month and also outcomes, such as risk-standard- their data to accommodate how they process analyzing the data, with total associated ized mortality rates, are needed to more information. Visually oriented right brain- costs of up to $100,000 a year (Anderson, fully characterize hospital performance” ers may respond to radar charts that look Kristine M., and Sinclair, Susan, “Easing (Bradley, Elizabeth, et al., “Hospital Quality like ink splats to number-crunching left the Burden of Quality Measures Reports,” for Acute Myocardial Infarction: brainers, who live and die by spreadsheets. Hospitals and Health Networks, Aug. 15, Correlation Among Process Measures and 2006). Relationship with Short-Term Mortality,” JAMA, July 5, 2006, pp. 72-78). A good scorecard focuses attention on only the Beyond required reporting, how do most meaningful metrics for that stakeholder. you explain care variations for your most costly populations—and elim- Physicians and other clinicians must be able to inate them while improving overall quality? A recent study found that see a clear connection to their daily practice. the likelihood of adverse events from anesthesia varies with the Clinical analytics can be used to manage regu- time of surgery, with procedures scheduled latory initiatives. If you don’t manage regula- Adding insult to injury, a recent study pub- at 9 a.m. having the lowest rate of anesthe- tory initiatives, they end up managing you. lished in JAMA concluded that the publicly sia-related events such as pain and postop- Yet few hospitals know how much time and reported AMI process measures for both erative nausea and vomiting. Adverse money they spend collecting and analyzing JCAHO and the Centers for Medicare and events were slightly more likely to occur at 7 data. In one study, a sample of providers Medicaid Services capture a scant 6 percent a.m. than at 9 a.m., and pain management spent between 50 hours and 90 hours a of the variation in hospitals’ risk-standard- events were four times more likely to occur PERIOPERATIVE ANALYSIS USING FINANCIAL DATA Financial Result Charge Code/Cost UB Px Code Cost and volume of anti-infective 525678 Rocephin 1 GM 81.51 Total hip and lab test on day of surgery 743210 Glucose Test replacement PERIOPERATIVE ANALYSIS USING CLINICAL DATA Clinical Result Medication Surgery IS > Prophylactic anti-infective Administration Left hip replacement administered > 30 minutes Data Incision time 10:45 before incision Rocephin 1 GM Close time 12:55 > Glucose > 150 mg/dl 10:04 > Procedure duration > 90 minutes Lab Results Glucose, fasting 175 mg/dl 06:00 hfm DECEMBER 2006 III
  4. 4. at 4 p.m. than at 9 a.m. (Wright, M.C., et al., profit leaders in cardiology and orthopedics million per year (Bates, D.W., et al., “Time of Day Effects on the Incidence of bearing the brunt of the rebasing impact. “Effect of Computerized Order Entry and a Anesthetic Adverse Events,” Quality and Can you predict the potential impact on Team Intervention on Prevention of Serious Safety in Health Care, August 2006, pp. 258- your organization based on your surgery Medication Errors,” JAMA, Oct. 21, 1998, 263). Interesting aggregate data for the volume and complications? pp. 1311-1316). sample population, but what is the experi- Clinical analytics enables you to document the ence in your ORs, and can you affect it? You can use clinical analytics to tap this and value of your IT investment. Calculating a more information from your own latent In addition to meeting today’s reporting hard-dollar return on investment for health data stores. requirements, providers must be able to IT remains elusive. One positive conse- Clinical analytics provides a basis for redefining evaluate the impact of future measures that quence of the current focus on quality and your business strategy. Another key charac- will address more diagnosis and procedure safety is a broader definition of ROI. In codes and cut across more clinical areas. addition to net present value, organizations teristic of high-performing organizations is CMS has promised to phase in a new diag- must now consider how the investment will accountability for quality at the CEO and nosis-related group weighting system that affect quality indicators as well as physi- board level. These individuals are actively accounts for patient severity. Unless a sec- cian, patient, and staff satisfaction. As early involved in building scorecards that reflect ond diagnosis is present on admission, you as 1998, the Adverse Drug Events the culture they are trying to shape, and may be paid less for complications such as Prevention Study Group used financial they take responsibility for each element. hospital-acquired infections. variables (cost reductions, length of stay, Boards of high-performing organizations revenue enhancements, risk avoidance) as spend much more time on quality issues CMS is also looking seriously at cardiac and well as clinical and organizational variables than boards of typical hospitals, often musculoskeletal complications. To prepare (improved outcomes, decline in mortality, opening their meetings with scorecard for the change, Baptist Healthcare System, fewer medical errors, improved stakeholder reviews. Ideally, the board-level scorecard based in Louisville, Ky., used clinical ana- satisfaction) to calculate the ROI for com- is the rudder that keeps your organization lytics to determine the potential impact. puterized provider order entry. The system steered in the direction charted by the Vice president and CFO Carl Herde predicts cost of $1.9 million plus $500,000 in strategic plan. Managing to metrics more than a $7 million reduction in CMS annual maintenance fees was estimated to requires you to strictly define your goals reimbursement, with traditional procedural be offset by a net savings of $5 million to $10 and be disciplined in your daily operations. PERIOPERATIVE ANALYSIS USING FINANCIAL AND CLINICAL DATA Charge Code/Cost UB Px Code Combined Result 525678 Rocephin 1 GM 81.51 Total hip replacement 743210 Glucose Test > Readmission % when prophylactic anti-infective administered > 30 minutes > Total cost of care for glucose > 150 mg/dl Patient Satisfaction Score Encounter Detail > % post op infections when procedure Hospital = 98 Physician = 76 Age = 56 duration > 90 minutes Payer = Blue Cross > Complications by payer > Patient satisfaction tied to periop care Surgery IS Medication Administration Data Left hip replacement Rocephin 1 GM 10:04 Incision time 10:45 Close time 12:55 Lab Results Glucose, fasting 175 mg/dl 06:00 ... into easy-to-use metrics Transforming complex data relationships ... healthcare financial management IV DECEMBER 2006
  5. 5. Hospitals frequently engage consulting A., et al., “Hospital Quality: Ingredients for be charged with managing the nerve center firms to gather and analyze the data neces- Success—Overview and Lessons Learned,” between the two halves of the organization’s sary to address a particular issue, like ER The Commonwealth Fund, July 2004). brain. overcrowding. When the consultants leave, A New Role: Chief Performance Achieving Left Brain and so does that level of attention and insight. Officer Right Brain Harmony To properly manage your business, you must be able to measure the impact of every In 1983, the prospective payment system The unprecedented ability to directly link decision you make regarding stents, beds, rocked our world. Hospitals grappled with everything that happened to the patient to IT—every aspect of care. Clinical analytics how to optimize payment and minimize the total bill—and to determine whether the lets you decide and execute on the right risk. Overnight, the role of DRG coordina- services delivered achieved the desired out- strategy based on solid information, not tor emerged. As public and private pay-for- come: keeping the patient out of the hospi- best guesses. “The best hospitals not only performance programs move beyond pilot tal—is enough to turn the most left-brained collect data on outcomes and cost, but also phases, CMS introduces DRG reweighting, analysts into quality champions, if not pull apart the numbers on surgeries, tests and the Bush administration calls for trans- artists. Clinical analytics is an important and other procedures to identify each step parency in price and quality for consumers, strategy to consider in closing the gap in the process where less-than-optimal we may see another new role emerge: the between clinical quality and financial out- medicine is practiced,” states a chief performance officer. Working closely comes. Commonwealth Fund report (Meyer, Jack with the CEO and board, this person would About the authors Ross Hammarstedt is vice president, benchmarking solutions, McKesson Provider Technologies, Hadley, Mass. ( Deborah Bulger is vice president, product market- ing, performance management solutions, McKesson Provider Technologies, Hadley, Mass. ( Reprinted from the December 2006 issue of Healthcare Financial Management. Copyright 2006 by Healthcare Financial Management Association, Two Westbrook Corporate Center, Suite 700, Westchester, IL 60154 For reprint information, call 1-800-252-HFMA hfm DECEMBER 2006 V