Higher qual­ity, health­ier fi­nances

Anal­y­sis shows 15 Top Health Sys­tems out­per­form their peers on clin­i­cal and fi­nan­cial mea­sures

Modern Healthcare - - HIGH-PERFORMING HEALTH SYSTEMS - By Rachel Lan­den

Even as hos­pi­tals face is­sues of de­clin­ing re­im­burse­ments and in­creas­ing costs, reg­u­la­tory com­pli­ance and pay-for-per­for­mance pro­grams, some health sys­tems have found a way to bal­ance and ex­cel at two fun­da­men­tal goals—fi­nan­cial suc­cess and qual­ity im­prove­ment. “Any­time you have a very dis­ci­plined ap­proach to all that you do, whether it’s man­age­ment of your fi­nances or your ap­proach to of­fer­ing qual­ity ser­vices to pa­tients, it will lead to a bet­ter prod­uct,” said Jeff Tay­lor, se­nior vice pres­i­dent and chief fi­nan­cial of­fi­cer of St. Luke’s Health Sys­tem, a six-hospi­tal sys­tem based in Boise, Idaho.

That dis­ci­plined ap­proach helped St. Luke’s land on Tru­ven Health An­a­lyt­ics’ list of the 15 Top Health Sys­tems for the first time this year as one of the top medium-size health sys­tems in the na­tion, based on clin­i­cal per­for-

mance, ef­fi­ciency and pa­tient sat­is­fac­tion. The sixth an­nual list in­cludes each of the top five large, medium and small health sys­tems cat­e­go­rized by their to­tal op­er­at­ing ex­penses.

Tru­ven eval­u­ated the sys­tems based on eight qual­ity met­rics from pub­licly avail­able govern­ment data ad­justed for the ill­ness sever­ity of the sys­tems’ pa­tient pop­u­la­tions. The data in­clude death rates, com­pli­ca­tions, 30-day read­mis­sions, lengths of stay, a pa­tient-safety in­dex and Hospi­tal Con­sumer As­sess­ment of Health­care Providers and Sys­tems scores.

On aver­age, the top health sys­tems per­formed bet­ter than their peers on all mea­sures. The 15 Top sys­tems had fewer ad­verse pa­tient-safety events, com­pli­ca­tions and deaths. And the aver­age length of a pa­tient’s stay in a top sys­tem’s hospi­tal was 10% shorter than that in one of its peer sys­tems not on the list.

Stronger mar­gins

But what Tru­ven also found is that those or­ga­ni­za­tions that were top per­form­ers for qual­ity of pa­tient care also tended to have the strong­est fi­nan­cial po­si­tion com­pared with sys­tems in their peer groups. Though fi­nan­cial mea­sures are not an of­fi­cial part of the an­nual as­sess­ment of health sys­tems, this year Tru­ven went be­yond its qual­ity and safety anal­y­sis to fur­ther in­ves­ti­gate and com­pare as­so­ci­ated fi­nan­cial per­for­mance.

Us­ing the sys­tems’ au­dited fi­nan­cial state­ments, Tru­ven cal­cu­lated three key fi­nan­cial mea­sures—op­er­at­ing mar­gin, days of cash on hand and long-term debt to cap­i­tal­iza­tion ra­tio—for the 15 Top sys­tems and their peers.

“Even though the 15 Top health sys­tems were cho­sen based on qual­ity and pa­tient per­cep­tion of care, the 15 sys­tems also out­per­formed their peers fi­nan­cially on all three met­rics,” said Jean Chenoweth, se­nior vice pres­i­dent of per­for­mance im­prove­ment for Tru­ven.

For medium-size sys­tems—those with be­tween $750 mil­lion and $1.5 bil­lion in op­er­at­ing ex­penses, the cat­e­gory that in­cludes St. Luke’s—that meant an aver­age op­er­at­ing mar­gin per­cent­age that was 1.4% higher than their peer group. The per­cent­age was cal­cu­lated as the dif­fer­ence be­tween op­er­at­ing rev­enue and op­er­at­ing ex­penses, di­vided by op­er­at­ing rev­enue. The win­ning large and small sys­tems also had higher op­er­at­ing mar­gins com­pared with their peers.

“The or­ga­ni­za­tions that have the greater fi­nan­cial re­sources—with in­come com­ing from their op­er­at­ing mar­gins and cash com­ing from their abil­ity to bor­row—are able to make broader in­vest­ments in im­prov­ing qual­ity,” said Jeff Jones, man­ag­ing di­rec­tor at con­sul­tancy Huron Health­care. “We’re start­ing to see those in­vest­ments re­turned as we’re mea­sur­ing qual­ity more reg­u­larly.”

In 2011, St. Luke’s started a pro­gram to im­prove care and lower costs by re­duc­ing sur­gi­cal-site in­fec­tions. Known as Project Zero, the team— which in­cluded physi­cians, rep­re­sen­ta­tives from pub­lic health and equip­ment pro­cess­ing, op­er­at­ing room nurs­ing staff and sur­gi­cal tech­nol­o­gists—es­tab­lished a goal to cut in half St. Luke’s ortho/neuro ser­vice line in­fec­tion rate of 1.1% by the end of 2012. By re­search­ing and adopt­ing best prac­tices, the sys­tem was able to sus­tain in­fec­tion rates at or be­low 0.5% as they con­tinue work­ing to cut rates even fur­ther.

That pos­i­tive ef­fect has been felt by pa­tients and the sys­tem’s bot­tom line. Dur­ing the first 18 months, Project Zero pre­vented ap­prox­i­mately 28 in­fec­tions for to­tal joint and spine fu­sion pro­ce­dures and saved about $2.8 mil­lion, ac­cord­ing to St. Luke’s.

“Bet­ter qual­ity ac­tu­ally does re­sult in lower costs be­cause you do things right the first time,” said Dr. David Pate, pres­i­dent and CEO of St. Luke’s.

Em­ploy­ing best prac­tices

That phi­los­o­phy is echoed at Asante in Med­ford, Ore., a three-hospi­tal sys­tem that made Tru­ven’s list for the sec­ond time in the small heath sys­tem cat­e­gory—those with less than $750 mil­lion in op­er­at­ing ex­penses.

“Con­sis­tently uti­liz­ing best prac­tices and pro­to­cols, help­ful re­minders and con­sis­tent or­der sets for spe­cific dis­eases leads to bet­ter out­comes for pa­tients,” said Roy Vin­yard, Asante’s pres­i­dent and CEO. “You tend to be a more ef­fi­cient provider of care, and that goes di­rectly to the cost of pro­vid­ing that care.”

Us­ing a bal­anced score­card ap­proach, Asante has set tar­gets for qual­ity of care, em­ployee en­gage­ment and pro­duc­tiv­ity, and fi­nan­cial ac­count­abil­ity that Vin­yard says are all highly cor­re­lated and in­ter­con­nected.

For ex­am­ple, for the quar­ter ended in March, Asante es­tab­lished a tar­get of 1.14 for the rate of health­care-ac­quired con­di­tions, but re­ported that it beat the

tar­get with a rate of 0.31. Mean­while, Asante also set a goal for its op­er­at­ing EBIDA—earn­ings be­fore in­ter­est, de­pre­ci­a­tion and amor­ti­za­tion—mar­gin of 10.5%. The ac­tual op­er­at­ing EBIDA mar­gin for the quar­ter was also bet­ter than the tar­get at 12.3%.

“If you’re us­ing qual­ity met­rics to mea­sure the care that you pro­vide, your rates of mor­tal­ity, health­care-ac­quired con­di­tions and read­mis­sions are all go­ing to be much im­proved, and those are the things that add to the cost of health­care,” Vin­yard said. “It fol­lows that your fi­nan­cial re­sults will be stronger.”

That’s also been true at Illi­nois hospi­tal sys­tem Ad­vo­cate Health Care, which made Tru­ven’s 15 Top list for the fifth time in the large health sys­tem cat­e­gory. De­spite ris­ing ex­penses, Ad­vo­cate’s 2013 op­er­at­ing sur­plus topped $300 mil­lion, up slightly from $298 mil­lion in the pre­vi­ous year. Rev­enue rose 7.4% to $4.94 bil­lion, giv­ing the sys­tem an op­er­at­ing mar­gin of 6.1%.

For the same year, Ad­vo­cate also re­ported that six of its 11 fa­cil­i­ties had no cases of cen­tral line-as­so­ci­ated in­fec­tions. Ex­ec­u­tives credit that suc­cess to the ap­pli­ca­tion of best prac­tices across the sys­tem. Af­ter notic­ing that

Af­ter notic­ing that the in­ten­sive-care unit at Ad­vo­cate BroMenn Med­i­cal Cen­ter in Nor­mal, Ill., had gone more than six years with­out a cen­tral line-as­so­ci­ated blood stream in­fec­tion, lead­ers took prac­tices from that hospi­tal and put them into ef­fect at their other fa­cil­i­ties.

the in­ten­sive-care unit at Ad­vo­cate BroMenn Med­i­cal Cen­ter in Nor­mal, Ill., had gone more than six years with­out a cen­tral line-as­so­ci­ated blood stream in­fec­tion, lead­ers took prac­tices from that hospi­tal and put them into ef­fect at their other fa­cil­i­ties.

Such sys­temwide shar­ing has also been a re­cent key to suc­cess at Asante, where Vin­yard says they try to ap­ply stud­ies of their prac­tices, in­clud­ing their look at wait times in the emer- gency depart­ment, from one lo­ca­tion to the oth­ers. “That’s be­gin­ning to pay big div­i­dends be­cause it’s much bet­ter to look at a process one time than three times,” he said.

Though it’s an im­por­tant les­son for sys­tems of all sizes, it could be es­pe­cially im­por­tant in the case of a small sys­tem such as Asante. Tru­ven’s anal­y­sis showed that small sys­tems are, in gen­eral, weaker fi­nan­cially than larger sys­tems—not sur­pris­ing given their more limited re­sources. The op­er­at­ing mar­gins of the win­ning small sys­tems were slim­mer than those of the win­ning large sys­tems. Smaller sys­tems were also more lever­aged than the group of large sys­tems, those reporting more than $1.5 bil­lion in op­er­at­ing ex­penses.

But find­ing the right bal­ance be­tween long-term debt and cap­i­tal can be a bal­anc­ing act for a sys­tem, no mat­ter the size, ex­ec­u­tives said.

“When we are plan­ning new fa­cil­i­ties, pro­grams, ser­vices or cap­i­tal pur­chases, we re­ally have to look both at what the pa­tient-care im­pli­ca­tions are and what the fi­nan­cial im­pli­ca­tions are,” Vin­yard said. “But gen­er­ally speak­ing, if it’s the right thing to do in terms of pa­tient care, then I think there’s a ten­dency to be able to make it work.”

St. Luke’s Health Sys­tem in Boise, Idaho, launched Project Zero to re­duce sur­gi­cal-site in­fec­tions. The mul­ti­dis­ci­plinary ap­proach cut cer­tain in­fec­tion rates in half and saved the sys­tem nearly $3 mil­lion over 18 months.

The use of best prac­tices at Asante health sys­tem in Ore­gon is cred­ited with im­prov­ing the or­ga­ni­za­tion’s op­er­at­ing mar­gins.

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