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.

Health systems’ volumes have dropped drastically during the COVID-19 pandemic — even in “hot spots” overwhelmed with COVID-19 patients.

In these hard-hit areas, overall visits are down 54.5 percent, inpatient volumes are down 41 percent and emergency room volumes are down 60 percent, according a new report from Strata Decision Technology analyzing over two million patient visits and procedures from 51 healthcare delivery systems using the company’s financial planning, analytics and performance platform, StrataJazz®.

These across-the-board low volumes translate into revenue losses and fiscal hardship for health systems throughout the U.S. During a May 15 webinar sponsored by Strata Decision Technology and hosted by Becker’s Hospital Review, Strata’s John Baker, senior director of continuous improvement, and Liz Kirk, senior vice president of strategic services, outlined five key steps to financial recovery:

1. Establish leadership and ownership. Every financial recovery program needs an executive champion to set the tone for improvement, as well as a designated “recovery program owner” to coordinate the entire program, Mr. Baker said. The involvement of C-suite executives creates urgency and ensures accountability while helping to remove barriers and avoid indecision.

“Having an executive around the table, fully engaged, is going to make things move faster,” Mr. Baker said.

2. Set a reasonable, clear target. Although the months ahead are uncertain, health systems can calculate financial improvement targets using core principals, Ms. Kirk said. That starts with determining how much cash on hand will be needed at the end of the recovery period, then subtracting financial gains such as estimated federal relief or current cash balance of unrestricted assets. From there, systems should create projections as to what cash flow is expected to look like when volumes return to somewhat normal levels.

“That gives you the target you need to activate your organization around to find savings,” Ms. Kirk said.

3. Establish guiding principles. Financial recovery shouldn’t come at the expense of quality outcomes or physician and employee satisfaction, said Mr. Baker. Organizations can help employees rally around financial targets by showing them the thought and reasoning behind targets, while instilling confidence about efforts to maintain a high-performing culture.

4. Stay on top of governance and accountability. First, identify opportunities for financial improvement and test whether initiatives in those areas can be backed by analytics. Data-supported initiatives can be implemented and moved to the performance management and tracking stage. From there, health systems need to ensure they’re able to track how well hundreds of simultaneous initiatives deliver on results — and that they can course-correct as needed, with a strong accountability structure in place.

5. Break down the messaging. Communicate financial goals in a way that makes sense to front-line providers and senior leadership alike, Ms. Kirk advised. Telling a physician that the health system needs to find $100 million to recover from COVID-19, for instance, won’t be productive. Instead, frame the project in terms of cost reduction per inpatient case or operating room cases per day — metrics that seem far more manageable and will therefore drive crucial engagement.

Like most other hospitals and health systems, Yale New Haven Health (YNHH) has experienced widespread disruption to its business model due to the coronavirus disease 2019 (COVID-19) pandemic.

Vincent Tammaro, CFO of YNHH, tells HealthLeaders that his organization, the Connecticut-based nonprofit health system with more than 2,500 beds across six facilities, began to see its patient volume impacted by the pandemic during the second week of March.

For the month of March, YNHH experienced a 25% decline in patient volume, according to Tammaro, while the organization expects similar trends to continue through April and May.

CORONAVIRUS SURGE AND VOLUME IMPACT AT YNHH

  • Yale New Haven Hospital prepared for 1,200 COVID-19 patients per day, the surge peaked at 480 patients per day.
  • Greenwich Hospital prepared for 300 COVID-19 patients per day, the surge peaked at 130 patients per day.
  • Current daily census of COVID-19 patients across YNHH facilities is 510, the surge peaked at 850 patients.

Despite the clinical challenges related to the outbreak, Tammaro says that the organization has remained on solid financial footing with reliable access to available capital.

YNHH also received $87 million from the Health Resources & Services Administration as part of the Provider Relief Fund created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Tammaro says that he expects another stimulus package from the federal government to address providers’ financial concerns as a result of canceling elective procedures for about two months.

However, he says that YNHH, like other organizations, is also preparing for changes to care delivery that could lead to financial challenges.

“When the patients come in, the cost of doing business is definitely going to increase. We have been exploring 24/7 [care], but that is expensive,” Tammaro says. “We need to space out more of these cases; the days of people waiting in a waiting room are over. But, again, that’s just going to contribute to the overall cost. Personal protective equipment and testing for our employees are all costs that we’re going to incur, as well as the testing and contact tracing for not only our employees, but also for our patients.”

BOTTOM LINE CHALLENGED, BUT STABLE

Unlike other provider organizations that were already dealing with a tight financial situation entering the crisis, Tammaro says the liquidity crunch was not a problem for YNHH, given the organization’s “tremendously solid balance sheet.” According to its most recently available financials, YNHH reported more than $4.6 billion in total revenue in 2018.

He adds that the organization has worked with bankers to address issues related to the ongoing outbreak while also preparing for a potential spike in patient cases in the fall.

Looking at the effect the pandemic will have on healthcare strategy, Tammaro says brick-and-mortar capital investments are likely “on the decline” as more organizations start to assess real estate capital investments going forward. He says the reexamination of healthcare real estate capital investments could present an opportunity for YNHH, as he notes that “liquidity is going to be at a premium.”

“Long-term, [with] the investments that we’ve made as the general public continues to get comfortable with coming back to healthcare organizations, I think we have an advantage that other freestanding organizations or freestanding ambulatory sites do not have,” Tammaro says.

Tammaro says that while he is optimistic about YNHH’s prospects to diversify its investment portfolio and adapt to a post-pandemic landscape, it may take some time for operations to normalize at the organization.

He says that YNHH is expecting a bump in patient volumes as the organization brings its elective procedures back; however, he says those metrics are unlikely to match pre-pandemic volumes. Tammaro partly attributes this to the emergence of telehealth services, noting that while YNHH has had a telehealth initiative in place for years, the organization never experienced adoption rates like it had over the past six-to-eight weeks.

Looking forward, Tammaro says YNHH is interested in how to use those virtual care options to handle the influx of patients seeking treatment, but also to address the incremental cost side as well.

“On the post-acute side, we’ve made some big investments in home care,” Tammaro says. “Obviously, we were doing those from a population health standpoint and making sure we were treating patients outside of the four walls of the hospital, which would be more cost effective. Between telehealth and the investments, we’ve already made on home care, I think we can continue to drive [care outside of the hospital] for patients, which is going to be of value.”

CLINICAL AND FINANCIAL DECLINES ACROSS THE INDUSTRY

HealthLeaders’ interview with Tammaro took place the same day that Strata Decision Technology released a report that estimated hospitals are losing $60 billion per month due to the pandemic.

The study, which was based off of 2 million patient visits and procedures, found that 55% fewer patients sought hospital care in March and April due to the coronavirus outbreak.

The analysis also indicated that the number of uninsured patients treated by health systems rose 114% over 90 days.

Several care service lines faced more significant estimated volume losses compared to this time last year. Ophthalmology led the way with a projected volume loss of 81%, followed by spine at 76%, gynecology at 75%, orthopedics at 74%, and eyes, nose, and throat at 72%.

Correction: An earlier version of this story stated that Yale New Haven Health received $55 million as part of the CARES Act. Tammaro stated that the organization received $87 million as part of the stimulus package. This article has been updated to reflect that.

Jack O’Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Hospitals and health systems have had an extremely rough couple of months as they continue to combat the COVID-19 coronavirus pandemic. But with the infection rate slowing and several states experimenting with gradual reopenings of their economies, the healthcare industry is looking to a time when the worst of the pandemic has passed — and they’d like to get back on track financially.

That’s easier said than done. Models run by Strata Decision Technology, which has access to reams of industry data, shows that while January and February were largely business-as-usual for the nation’s hospitals, March and April saw a significant impact from the virus. Either volumes spiked because of an influx of coronavirus cases, or they tanked due to the temporary loss of elective surgeries.

In both scenarios, margin projections for the year took a serious hit. How much of that loss hospitals are able to recapture is a mark of an organization’s recovery, but success will require a high level of energy and effort.

“(Hospitals) did some incredible things in the mitigation of the crisis,” said John Baker, Strata’s senior director of continuous improvement. “Think of the barriers that were taken down in days, sometimes hours: pop-up hospitals, discharging patients at a much more rapid pace than historically. That same energy, that same incredible innovative spirit, has actually got to take place in recovery. People are going to want to wipe their brows and be relieved that they’re out of the crisis, but they’ve got to maintain that energy. It’s just as important in the recovery.”

Baker, who led successful cost improvement programs at UnityPoint, Northwestern and several other health systems prior to joining Strata, envisions a plan that can help the healthcare industry climb its way out of the hole. The plan involves a seven-step process that hospitals can start implementing immediately.

THE STEPS

The first step, according to Baker, is simply to establish ownership, and that needs to take place on two different levels. On the first level there needs to be someone, preferably in the C-Suite, who can remove indecision and hold people accountable; if this person is an executive, their presence alone can drive some the accountability that’s needed. On the second level should be a dedicated staff member who acts as a central point of coordination for program leadership and management — someone with exceptional organizational and administrative skills who can understand and communicate the tactics that are being deployed, and translate that back to the leadership.

The second step is setting the target. There need to be numbers that would indicate a successful financial recovery — so what are those numbers? The target needs to be established mathematically, but that data then needs to be translated into a form that’s easy for the broader organization to digest. That’s where a graphic comes into play.

It may seem elementary, but a core graphic or visual can highlight the reasons for the established recovery target; being able to explain the target is what creates organizational buy-in at all levels. Arbitrary targets that don’t resonate with staff will result in weak engagement and minimal commitment to the program. Another factor organizations may want to consider is creating alternative methods of communicating to different audiences — some may respond to margin, some to reducing cost per case, or another metric. It’s a modern implementation of the old adage, “A picture is worth a thousand words.”

The third step is a simple one: Name the recovery program. Brand it.

“The reason for it is more practical than you might think,” said Baker. “A branded program not only helps with effective communication, but think of the logistics — different care teams can immediately know what the program is all about.”

Step 4 is to establish guiding principles, which sounds like an administrative task, but is an important means of determining the “true north” for any and all financial opportunities.

“Achieve targets, don’t achieve savings at the expense of quality — things like that,” said Baker. “You’re going to get a lot of ideas, and you want to make sure those ideas are consistent with those guiding principles. You don’t want to come across as saving for the sake of savings. The purpose should be about evolving and transforming and being better as an organization, not just about cuts. If it’s just about cuts, it’s painful.”

Program governance is the cornerstone of Step 5. Baker calls it “designing the machines” because there are two conceptual “machines” that should continually be feeding into each other. The first machine is where new ideas are vetted for their potential. Some will be rejected because they’re not supported mathematically, and some will be prioritized for tracking. That’s the second machine: Project performance management. That’s where teams track how the program is doing versus its potential. These two machines churn in a constant feedback loop and can help an organization get a handle on whether they’re making progress.

Step 6 is all about getting a handle on resources.

“If we think we’re going to eliminate an orthopedic device because it has similar outcomes to another device, who’s going to do the math, look at the data, develop improvement strategies, meet with physicians? That requires resources,” said Baker. “However, we have to acknowledge that a 10-person consulting team doesn’t exist at every organization that’s going to be pursuing a recovery program, and that’s why an effective governance structure is all the more important, because as long as you’re feeding all the initiatives into an accountability structure, you can can get progress on initiatives.”

The seventh and final step is to communicate, communicate, communicate. The recovery program shouldn’t be sequestered in the upper echelons of organizational leadership. It should be understood from the very tippy-top of the organization all the way to the front lines, because the entire organization should be mobilized toward recovery — much as they were mobilized during the preparation and mitigation of the crisis.

“Sure, you can do 2 to 3% cuts every year, but when it comes into double digits, you need to do something different, something transformational,” said Baker. “If organizations do the same cuts, they’re going to cut into the bone. Applying these steps and principles and concepts will make the recovery program effective.”

Especially in today’s uncertainty, the fiscal environment for many hospitals and health systems is shifting and unforgiving — margins are thin and there is virtually no room for operational waste. For this reason, hospital executives are targeting their organization’s greatest areas of cost for efficiency improvement initiatives. For many leaders, this requires a close examination of their organization’s surgical spend.

For California’s acute care hospitals, operating room time costs about $36 per minute, according to a 2018 study published in JAMA Surgery. These costs can make up a significant portion of a hospital’s overall spend. For hospital leaders looking to keep their organizations in good financial health, standardizing OR medical supply usage and physicians’ care documentation is essential.

Rancho Mirage-based Eisenhower Medical Center is one California hospital tackling surgical costs head on. In July 2019, the hospital partnered with healthcare solutions provider Strata Decision Technology’s Continuous Improvement module to reduce costs in the OR. Strata assisted Eisenhower with cost reduction opportunity identification and assisted with implementation strategies of those cost reduction opportunities.

Recently, Becker’s caught up with three leaders from Eisenhower Medical Center to discuss the organization’s efforts to reduce costs:

  • Ken Wheat, Senior Vice President and CFO
  • Scott Gering, MD, Vice President of Surgical Services
  • Dorothy Jones, DNP, Administrative Director of Surgical Services

Here, Mr. Wheat, Dr. Gering and Dr. Jones answer four questions about their organization’s efforts to reduce surgical costs.

Note: Responses have been lightly edited for length and clarity.

Question: What are some of the challenges your organization is facing today?

Ken Wheat: One of the biggest challenges from an economic standpoint is our payer mix. Our inpatient mix is about 65 percent Medicare and 15 percent Medi-Cal, so we’re essentially 80 percent government pay. We have a very small private payer, managed care population, so we

have a tremendous amount of margin pressure. It’s a major challenge.

Q: Can you talk about some of the measures Eisenhower has taken to address costs?

KW: It is a work in progress, but we are endeavoring to have cost committees across all service lines. We currently have physician vice presidents that oversee committees across a number of service lines throughout the organization. Dr. Gering, for example, is the VP of our surgical services committee. Surgery happens to be our largest driver of costs and the largest area of cost variation among providers. We launched the surgical cost committees along with the rollout

of our new cost accounting data and system from Strata that we’ve worked on over the past two years.

Dr. Scott Gering: A big part of the surgical cost committee is really looking at the variation in physician practices. One thing we did was to reduce variation around the simple use of Tylenol. We helped providers understand that a dose of intravenous Tylenol costs the hospital $30 or so to administer to a patient whereas a couple of tablets, which have equal efficacy as long as the patient’s intestinal tract is working, costs 20 cents.

We stand to make a lot of progress in the operating room by eliminating variations for very common surgeries. We’re working to use data to standardize best practice. I think we’re just scratching the surface here at Eisenhower.

Q: What challenges have you faced during this process and how have you worked to solve them?

Dr. Dorothy Jones: From a nursing perspective, the challenge really lies in changing the way nurses collaborate with physicians. We need our nurses to coordinate with the physicians, so we understand what supplies they need for patient care. We need to build up these relationships so we can help physicians. That’s the secret sauce.

Also, the surgical cost committee has introduced change incrementally, and we’ve tried to educate clinicians about the cost of supplies while also fostering collaboration. We played a ‘Price Is Right’ game to heighten awareness around costs. We got physicians involved and, because of their natural inclination toward competitiveness, all of them wanted to be the winner.

Q: What advice would you give other organizations working to more efficiently determine and execute cost savings projects?

SG: You’ve got to be able to translate the data. You’ve got to be able to deliver the insights to clinicians in real time. I think that’s what’s critical.

KW: Invest heavily in your data systems and put the right people around the table, and make sure some of those people are physicians. They have the power to either improve efficiency or drive up costs. You really have to get the physicians around the table.

DJ: Don’t wait to make the change. Have the courage to move forward and establish a physician champion.