For the last 20 years, and especially since the Affordable Care Act (ACA) was signed into law in 2010 (with post-election changes pending), the U.S. healthcare system has been evolving at a furious pace. Between 1998 and 2015, 3,009 hospitals merged or were acquired, 1,260 between 2010 and 2015 alone.1 But mergers and acquisitions are only the biggest, most visible sign of change. Healthcare systems are working hard to integrate supply chains; systems are partnering with provider groups; provider groups are entering new arrangements with each other.
ll this makes sense as consolidation, centralization and cooperation can increase the capability of an individual system or group to collect richer data for analytics, thereby improving both facility and population health management. Systems and groups that scale up can sometimes use their size to negotiate higher rates from payers. However, mere consolidation, and even cooperation, does not address the question of how to align systems with the communities they serve. Indeed, size can distance providers from their patients and systems from their populations, with negative consequences.
Behind all these efforts lie enormous investments of time and money. The question is: Will they be rewarded by better patient care, greater operational efficiencies and, down the road, reduced cost of care? And beneath that question lies the foundational problem of effectively aligning systems with the communities they serve by developing sound strategies and then executing those strategies consistently and reliably.
When a disconnect emerges between healthcare systems and the people they serve, there is no way to devise a sound strategy or execute an effective one. There is no way to invest in facilities, processes and staff in in a rational, efficient way or deploy them to reduce costs and improve the health of populations. For example, the growth of urgent care facilities – which can reduce the high costs of emergency medicine for almost all systems and payers – has been proceeding “independently of organized care design, without sustaining data or analysis.”2 Consequently, neither payers nor providers today are retrieving the savings that a considered engagement strategy with urgent care facilities could provide. More importantly, patients are not being served as well as they could be.
Experts have correctly noted that providers must take a processual perspective when devising long-term strategies. In her review article “The Merger and Acquisition Process,” Annette Risberg writes: "It is not enough to look upon fragments of the process, but one must take the whole process into consideration to understand the parts."3 In other words, for a strategy to be successful, it must be holistic. For providers, this means considerations must be given to account for the primary, secondary and tertiary interests of the system. In healthcare especially, these interests are highly interconnected. Absent critical information developed through rigorous clinical, operational, technological and cultural processes, healthcare leaders are flying blind.
Thoughtful healthcare strategy requires that systems assess the factors affecting health in the communities they serve, establish processes geared toward addressing disparities, and make continuous revisions based upon carefully tracked indicators. [See Figure 1, “Assess, Forecast, Plan, Execute.”]
Data Is the Starting Point, But Not the Endpoint
Today, healthcare providers are grappling with many factors that will have long-term implications for their bottom lines, most significantly an aging population, rising costs, and evolving and growing care networks.
To devise a long-term strategy that accounts for these factors, providers must address: operations, developing new and optimizing old service lines, infrastructure, health information technology (HIT), physical structures and networks that meet the needs of their communities. Above all, they must execute, and that execution must be iterative and sufficiently flexible to account for rapid demographic change and both unpredictable (new competition) and predictable (consolidation) market forces.
For providers situated at strategic crossroads, there are more options and resources available than ever before. Reconfigurations, spin-offs and acquisitions have been employed by hundreds of systems in the hope of strengthening their interests. It has become increasingly possible to peer into the crystal ball and reconsider strategic decisions based upon stratified results and outcomes. By using resources like data analytics, enterprise resource planning tools, microsimulation and demand modeling, providers can see how a decision today can affect operational, clinical and financial outcomes tomorrow.
In all cases, improving care, service and the bottom line – now and for the future – must involve end-to-end planning supported by robust analysis that can only come from good and broadly collected data. The more informed upstream planning is, the better a system’s downstream decision making will be. [See Figure 2, “How Data Leads to Strategy.”]
That said, health systems and provider groups already have collected a great deal of data and, without boiling the ocean, they can use the data they already possess to gain quick wins and retrieve immediate ROI. The key is knowing where that data is, how it’s stored and ordered, and what’s missing – right now – that would prevent a system from formulating a robust and executable strategy.
For example, at Washington State’s CHI Franciscan Health System, standardization is the order of the day, and the work to implement it does not depend solely on technology; it involves face-to-face, cross-functional meetings to examine workflows and processes carefully. As Dr. Gary Kaplan, chairman and CEO of Virginia Mason Medical Center in Seattle, says, “You don’t want to automate bad process – otherwise you’re going to move garbage at the speed of light.”4
On the execution side, Chicago-based Presence Health assigned a dozen hospital room staffers to figure out how to shorten surgical suite turnover times. In short order, according to an article in Modern Healthcare, they reduced it by 6.5 minutes, and the system estimates that has the potential to increase revenue $600,000 annually.5 (Under the leadership of a new CEO, described in the article as not a fan of “lean,” it’s not certain Presence will continue these initiatives.)
One way to get a feel for what data you already have, how it can be leveraged, and whether you are using it to execute effectively and efficiently is to ask yourself, “Can I tell my board, with sound and defensible data, what my patient population will look like in five to 10 years, and why our strategic action plan makes sense in terms of providing quality, efficient care to succeed in this market?”
The following examples demonstrate how two systems leveraged data – data they had and the data they worked to collect – by pulling it together to develop executable strategic plans for a future they did not have to guess at.
How Upstream Analysis Led to Downstream Improvements for Two Systems
Historically, investments in healthcare facilities and operations have been incremental, based on slowly changing demographic shifts. The goal always has been to maximize facility utilization and a system’s available resources. Today, however, the demographic profile of patient populations is changing rapidly. Per a recent study by the Pew Institute, 14 percent of the U.S. population today is foreign-born, compared with just 5 percent in 1965. This change places new demands on healthcare systems that, unless recognized and planned for, can impair their ability to deliver needed services. Even more importantly, the U.S. population is rapidly aging, placing greater pressure on healthcare systems and facilities. Today, there are more Americans 15 years old or younger than there are people 65 or older; by 2030, that will flip.6
The ongoing shift from volume-based care toward value-based care encouraged by the ACA, among other factors, will be challenged by this growing older cohort, as it constitutes a far heavier consumer of healthcare resources, but it will also present healthcare systems with vast process improvement opportunities.
One system’s successful fight against CAP
A large integrated healthcare delivery system in the western United States began seeing its costs rising across several dimensions: procedural, operational, legal and clinical. By observing, recording and reporting clinical outcomes, the system discovered an increasing incidence of community acquired pneumonia (CAP), a costly and debilitating disease responsible each year for 4.25 million visits to doctors’ offices, emergency departments and outpatient clinics in the United States, according to a 2011 American Family Physician study.7 A 2013 study put the annual aggregate cost of treating working age patients with CAP at over $10 billion annually in direct and indirect costs, with costs rising for patients with comorbid conditions.8
The health system made CAP a focus and began revising, refining and reimagining its care processes, making education a priority across its facilities and addressing basic safety procedures for physicians (such as hand washing). The system also realized that the ideal way to contain and reduce the incidence of CAP would be to create decentralized care units, departing from the monolithic, big-hospital-on-the-hill model. This would limit the incidence of hospital-wide infections and decrease the spread of the disease.
This understanding of CAP’s incidence and etiology allowed the system to embed that thinking in its upstream planning processes to make better downstream decisions on facilities and layout. For instance, it physically redesigned its hospital layout to improve communication (and thereby outcomes) by decentralizing the traditional nursing station and placing one outside each patient’s room. This increased time at the bedside and improved patient safety. The system also created a framework for its primary care services focused not on volume, but on patient needs for specific ailments, such as CAP.
After retooling its care processes, people and infrastructure – informed by empirical evidence – the system developed a new, accurate method of predicting patient risk for acquiring CAP. It developed a risk-based algorithm to screen and manage patients presenting pneumonia symptoms, with the severity of a risk factor dictating how a patient would be managed to prevent him or her from developing CAP. (Indeed, the system has since devised protocols for 70 conditions that comprise more than 90 percent of its overall caseload.)
Ultimately, the system’s new approach reduced patient mortality and, by limiting complications, shortened the length of patient hospital stays. This generated significant operational savings, reduced the incidence of hospital-acquired illnesses and improved patient satisfaction (no one likes being in the hospital).
All this change began by using patient data to identify variation in clinical processes, devising protocols based on best practices and observing outcomes through continuous data collection.
A physician’s group adjusts to an aging population
By 2050, the U.S. population age 80 and older will nearly triple. And this is an expensive population. In 2011, beneficiaries 80 and older comprised 24 percent of the Medicare population but accounted for 33 percent of its spending.9 A physician group in the southeast United States recognized the significant contribution that elderly patients with multiple chronic conditions presented to the group’s overall cost of providing care.
To address this demographic fact, the physicians formed a group to focus on elderly patients with five or more chronic conditions such as diabetes, arthritis, hypertension, respiratory disease, and kidney and bladder problems. By working with data about these patients and understanding their overlapping needs, the group reconfigured its office space to create an open layout that would foster greater collaboration among physicians. Offices were designed to mimic an emergency room, complete with a centralized station from which specialists and staff could be deployed easily to any examination room where they could do the most good. At the same time, the patient-physician ratio was reduced significantly to allow for greater interaction between caregivers and their patients and make possible the same-day appointments so critical to reducing hospital admissions.
Recognizing, as a study published in BMC Geriatrics noted,10 that many elderly patients “may struggle in following medication instructions,” and “generally lack knowledge on side-effects,” the group also built an onsite pharmacy, providing their patients easier access to medications and giving their doctors enhanced oversight over treatment compliance as well as potential drug interactions.
On the high investment end, the group purchased HIT that allowed for better patient monitoring, increased access to patient records, and enabled collection and storage of the data it needed to analyze efficiency and throughput within the group’s facilities. On the lower investment end, the group established a shuttle service (at no cost to patients) to assist those who needed it to get to their appointments.
Taken together, these process improvements significantly reduced patient bed days and improved outcomes and patient longevity. This patient-centered care resulted in an overall reduction of hospital stays and days.
There’s No Strategy Without Data
Although the political future of healthcare in the United States may be murky, the facts on the ground will not change. Healthcare systems will continue to need to reduce costs, better utilize both physical and expert resources through efficiency gains, and improve the quality of patient care. To do so, they will need to collect, analyze and model data about the populations they serve to develop robust upstream strategies that will allow them to make thoughtful, prudent and patient-centric decisions downstream. Systems that embrace data and its stepwise deployment will be better able to confront the challenges they can predict and adapt to the developments they can’t.
1: Irving Levin Associates, Inc. “Trends Affecting Hospitals and Health Systems.” The Health Care Services Acquisition Report, 22nd Edition.
2: Shah, Keith. “The Urgent Need for Urgent Care.” FTI Journal.
3: Risberg, Annette. “The Merger and Acquisition Process.” Journal of International Business Studies.
4: Galoozis, Christina. “Leveraging Data & Analytics to Improve Outcomes.” Modern Healthcare.
5: Rice, Sabriya. “Presence Health Rethinks its Lean Iinitiative.” Modern Healthcare.
6: Cohn, D’vera and Caumont, Andrea. “10 Demographic Trends That are Shaping the U.S. and the World.” Pew Research.
7: Watkins, Richard R. and Lemonovich, Tracy L. “Diagnosis of Community Acquired Pneumonia in Adults.” American Family Physician.
8: Broulette, J., Yu, H., Pyenson, B., Iwasaki, K., and Sato, R. “The Incidence Rate and Economic Burden of Community-Acquired Pneumonia in a Working-Age Population.” American Health & Drug Benefits.
9: Neuman, T., Cubanski, J., Huang, J., and Damico, A. “The Rising Cost of Living Longer.” Kaiser Family Foundation.
10: Chan, F.W., Wong, F.Y., So, W.Y., Kung, K., and Wong, C.K. “How Much do Elders with Chronic Conditions Know About Their Medications?” BMC Geriatrics.