A Northeast health care system composed of acute care hospitals, a medical group, home care and emergency medical services and occupational health care services was challenged to cut costs through an enterprisewide continuous financial improvement initiative.
Three hospitals in the Northeast always worked individually to keep costs in check, but after the hospitals merged it was time to reach for loftier goals.
“Cost pressures on all health care organizations continue to increase, and as a result, we needed to escalate our cost-saving measures and activities,” said the senior vice president and chief operating officer of the newly formed hospital system. “We’ve done okay on our own, but we had to do better — and that meant finding more significant savings opportunities while keeping our main goal of maintaining and improving health care quality at the forefront."
The health system was focused on reducing supply acquisition costs. But now the system was seeking savings opportunities in the more complex areas of utilization, clinical operations, and purchased services. With emerging payment models and shifting reimbursement measures, nothing was untouchable — from revenue cycle, pharmacy, and physician preference items to clinical variation, and outsourced services.
“There may have been sacred cows in the past, but we can’t have those anymore,” said the senior vice president and chief operating officer. “We had to address absolutely everything.”
That included how care was provided. “We had to ask ourselves how we could reorganize our clinical care so that we could deliver a higher quality of care at a lower cost,” said the system's chief medical officer. “What could we do to reduce unnecessary variations in care?”
Certain categories of physician preference items, especially in their utilization, were uncharted territory for the organization. “We knew that areas such as spine and interventional radiology would be some of the most challenging areas for us because we hadn’t addressed them before,” said their corporate director of materials distribution.
Staffing and scheduling to meet patient volume and physician expectations in the cardiac catheterization lab were overlooked as opportunities to reduce clinical variation. But data supported the need to link hours of operation and caseload by day of the week to staffing patterns. It also showed an opportunity to better correlate procedure scheduling with actual case times.
Purchased services emerged as another priority area. For example, an ePayables credit card program was not delivering an acceptable bottom-line benefit. In addition, the print management program for a sizable fleet of copier and printing equipment was an opportunity for significant savings.
Vizient data analytics, subject matter expertise, and willingness to customize an engagement specifically for the health system were exactly what the health system needed to reach its savings goals.
The organization began a comprehensive financial improvement project with Vizient in December 2012. Initially focused on focused on two hospitals, the project expanded to the system’s newly merged newly merged hospital as well.
Although their chief operating officer had had initial concerns about choosing an outside consultant, Vizient quickly put them to rest. “With any consulting firm, there’s always the possibility that they’ll demonstrate to us what they believe the opportunities are, we’ll pay them a significant fee, and they’ll leave — leaving us with only an implementation plan,” he said. But Vizient proved different.
Together, the member and Vizient established a goal to save $5 million over 15 months. The organization's culture of accountability helped overcome any resistance to change in order to reach this goal. “When our subject matter experts put together their work plans, their executive champion ensured the appropriate service lien leaders and teams that were aligned with the initiative shared in the cost-savings goals,” said Rob Gorham, Vizient project manager.
Their chief operating officer immediately met with physician executives to explain the project’s necessity and importance and emphasize that it was a group effort. “We agreed to present opportunities through objective data that the physicians could validate, and we would achieve those savings and efficiencies together so long as we could support them with empirical data and factual information,” he said. “We supported that with data through Vizient’s subject matter experts in each area.”
Once the subject matter experts identified and compiled data in each area, they presented it to the appropriate team of individuals, including physicians, nurse leaders, supply chain leaders, and critical department staff.
“One of the most remarkable aspects of this organization's executive team members was their ability to serve as role models and leaders across the organization,” said Lani Berman, Vizient vice president of performance services. “Because they are so deeply entrenched in a culture of accountability, it really allowed for success and paved the way to maximize our partnership.”
Standardization of care
“There were many areas that our team targeted for cost reductions, whether it was in the area of supply chain, product standardization and conversion opportunities, workflow, nursing productivity, or length of stay,” said Gorham. “But one of the utilization projects that we uncovered was the bone morphogenic protein (BMP) project.” When it comes to clinical utilization and variations in care, two things are almost always true: gaining physicians’ trust isn’t easy, and good data is difficult to argue against.
The member's utilization of BMP is one example. “There are no good national guidelines for when you should or shouldn’t use BMP, but Vizient offered data showing other hospitals using it less with outcomes just as good as ours,” said their chief medical officer.
“This is not a new dialogue with our doctors, but when we bring in an outside expert who said, ‘You may be doing this to excess and that doesn’t add value,’ they begin to listen,” continued their chief medical officer. “And that’s an incredibly important realization because you can’t achieve this type of change without physician involvement.”
For one of the neurosurgeons at the organization, Vizient data showing that the health system was over the 50th percentile in national utilization with highly variable practices by surgeon for BMP was “stunning,” as was the cost of the product. As a group, the health system’s six spine surgeons examined BMP utilization and overall cost. Ultimately, the group reduced its use by 80%, substituting other alternatives in the process.
The cost of BMP wasn’t the only surprise for the surgeon and his physician peers. The data showed clinical variation in length of stay (as compared with national and internal practice). The variation was primarily due to differences in discharge patterns for neurosurgeons versus orthopedic surgeons. “I don’t think many surgeons knew what we were paying for spine implants and joints until we were given that information to analyze,” he said. “I believe the Vizient data was the most critical piece to this whole project because you have to know where you stand in order to set a reasonable goal.”
A cap pricing approach meant that all surgeons could continue working with the implants of their choice. The physicians themselves approached the vendors with pricing proposals. “It was a great effort among the physicians, executive leadership, and Vizient,” said their chief operating officer.
Short- and long-term savings
By combining proactive executive leadership, supportive physicians, and Vizient data and subject matter experts, the member saved saved $5.8 million in 15 months — exceeding its original $5 million goal. But that’s just the beginning.
“The important thing to remember is that many of the projects we pursued with Vizient are multiyear contracts,” said their chief operating officer. “We’re looking at cost savings of more than $16 million across the next four to five years through these extended contracts.”
Major savings initiatives by year
Part of that savings includes transitioning to a new credit card vendor for ePayables. “Vizient used its resources and benchmarking capabilities and worked with our finance group to determine the best negotiation strategy and financial outcome for us as an organization,” said the organization's corporate director of materials distribution. “We were able to find significant cost savings through this program.”
The organization can now process its payables function more efficiently by using a single source of payment, with the additional benefit of a rebate structure based on expenditures. “Moving to this new agreement saved us more than $1 million,” the materials distribution director said.
Ways to sustain success with integrity
The member also implemented tools and processes to sustain its success, including the Vizient Clinical Quality Value Analysis™ (CQVA) program. The health system worked with Vizient to establish CQVA teams for critical areas such as the operating room, cardiac catheterization lab, interventional radiology, and nursing care. The teams meet regularly to review new medical products, technologies, and services and ensure they are a good fit for patients, physicians, and the organization.
“We were really able to enhance the CQVA program they had in place,” said Gorham. “We developed tools along with benchmarking metrics to measure and sustain key initiatives. Our Vizient team also provided a savings tracking tool that helps us monitor and control the CQVA initiatives after our project is completed.”
The health system also relies on Vizient PriceLYNX™, a business intelligence tool that helps users gain control of their supply chain, negotiate better prices, and increase cash flow. “We can now keep an eye on what’s happening in the marketplace as it relates to similar purchases or vendors compared to other health care organizations nationwide,” said their chief operating officer. “It allows our purchasing team to do a much better job of negotiating contracts.”
From the beginning, leadership wanted a comprehensive financial improvement project characterized by integrity: integrity toward physicians and departmental leaders, and integrity of data. Vizient helped the organization achieve that, in the process ensuring that physicians will support any future efforts.
“This process allowed us the opportunity to pursue change our way, opt for a capped pricing strategy, and decide how we would negotiate with vendors — all while continuing to use the products we wanted to use,” said the neurosurgeon.
“As physicians, we wanted to use the products we wanted to use, with techniques of our choosing. We just needed a way to achieve that at a lower cost, and Vizient gave that to us through data.”“If physicians are part of any conversions and own the process from the beginning, then everyone wins,” said their chief medical officer. “This initiative sent the message to everyone in the organization — from administrators to the doctors down in the trenches — that with a true teamwork approach we can save money without compromising quality, and perhaps even improving it.”
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