Two Hospital Finance Leaders on Replacing Consultants to Save Millions
June 2, 2020
Even before the coronavirus disease 2019 (COVID-19) pandemic began this spring, provider organizations were actively pursuing cost-saving strategies while operating on razor-thin margins.
Replacing consultants, which account for billions in spending by health systems each year, with technology solutions has proven to be an effective approach for some organizations.
In recent years, two health systems, Southern Illinois Healthcare (SIH), a three-hospital nonprofit health system based in Carbondale, Illinois, and Care New England Health System (CNE), a Providence-based nonprofit health system that reported $3.8 million in income from operations last year, have embarked on similar cost-saving strategies.
Both organizations decided to drop consultants in favor of the Continuous Improvement solution from Strata Decision Technology. The software platform’s algorithm identifies “variation in quality and resource utilization” and recommends staffing models to “match historical patient demand,” according to an essay coauthored by both executives last month.
$61M IN 18 MONTHS
Corporate director of finance at SIH, Greg Wright, told HealthLeaders that the organization underwent an operations review in 2014 that examined the “various components of expenses,” including labor, human resources, supply, and pharmacy.
Wright said the move from human consultants to the Strata platform offerings was “successful in terms of achieving these specific financial objectives,” resulting in savings of $61 million over the course of 18 months.
Sustaining those achievements was key, according to Wright, especially without an automated means to track savings. He added that SIH has sustained half of those savings on an annual basis.
Wright said the pandemic has made healthcare finance leaders rethink opportunities in data analytics, forcing providers into a “new way of business.”
“I can imagine that some of [data analytics] will stick in terms of how we operate going forward,” Wright said. “I don’t think we’ll ever get to a point where you’re completely eliminating the human aspect. We’re all going to need consultants in some fashion down the road, but I think definitely there has been a shift in the use of technology and tools for those types of improvement initiatives.”
For fiscal year 2020, SIH has identified and is pursuing 110 cost-improvement initiatives. The system is aiming to reduce the length of stay at the DRG level for pneumonia, congestive heart failure, sepsis, and chronic obstructive pulmonary disease (COPD). Additionally, SIH is looking to track intravenous steroid utilization in patients with COPD.
According to Wright, SIH is also looking to reduce “the rate of quality events across service lines,” including respiratory failure with hypoxia or hypercapnia, drug-related adverse effects, as well as anesthesia or anesthetic-related adverse complications.
Despite the goals to pursue over 100 initiatives, Wright said a lot of the cost reporting has been “put on pause” due to the pandemic, though the organization is still tracking its savings. Since SIH’s fiscal year begins on April 1, he said the outbreak did not affect any financial results until the last two weeks of March.
Forward looking, he said he expects the organization to revisit its cost-savings plans in the coming weeks as states begin to reopen following the first wave of the pandemic.
EXAMINING INTERNAL PAIN POINTS IN RHODE ISLAND
In addition to SIH, CNE has also looked to replace its consultants with technology solutions.
According to vice president of operational excellence Erin Pelletier, MBA, PMP, CNE was focused on “organizational transformation.” At one point, CNE had hired seven leading healthcare consulting firms to examine the organization’s processes.
Though Pelletier said the consultants were successful in assisting CNE, the organization experienced “consultant fatigue” and sought to “take matters into our own hands” and identify improvement efforts.
Through its relationship with Strata, CNE has evaluated over $5 million in potential savings opportunities and is pursuing initiatives for reducing length of stay at the DRG level for sepsis, C-sections, and vaginal delivery.
Additional targets include a reduction of pregnancy and birth associated hemorrhages, as well as adverse drug reactions to glucocorticoids, opioids, and diagnostic imaging agents.
Pelletier said that while there is a “lull” whenever a consultant leaves the organization, CNE leadership has benefited from conversations involving the frontline staff to identify broken processes and discuss internal pain points.
“For us, that was the driving factor: engaging with the frontline that asked, ‘Why did we pay all this money to have these consultants come in and tell us what I could have told you?'” Pelletier said. “It was flipping the model upside down for us to listening and engaging. We developed an internal Lean training program. The top of the organization, all the vice presidents went through it, managers and directors have gone through it, and now we are hitting frontline departments. That engagement has been a critical factor for us.”
Thanks to the move towards the digital platform, engagement with the clinical staff has “skyrocketed,” according to Pelletier. She added that being able to have conversations with physicians about their preferences and how those costs can get passed along to the patient is also a new development for CNE.
She said that the system is not just looking at potential clinical improvements, but also at clinical documentation to ensure the CNE staff is still “working on the same definition.” Still, Pelletier said CNE is in the “discovery phase” of both of those implementations, though the changes are already being felt at the organization.
“Having the data to drive the discussions in a completely new way, that we’ve never been able to do with a consultant, [has been] fantastic,” Pelletier said. “It comes from a place of trust; we are on the same team, we all want the best outcome for the patient, the best for the hospital fiscally, and the highest quality. We all have the same shared values. It’s a completely different tone than having a consultant come in and say, ‘Well, the rest of the country does it this way.’ It’s a different vibe and it’s setting us up for success.”
Jack O’Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.