Meeting the Challenges of Healthcare Transformation...- How has the rise in consumerism changed patient expectations of accessing care? - How is the success of the access operation

Meeting the Challenges of Healthcare Transformation

Achieving Clinical and Operational Excellence

IntroductionChallenges and opportunities in the evolving healthcare market are creating a new imperative for change. Many hospitals and health systems are responding by focusing even more intensely on reducing costs while delivering high quality care.

In our experience, the level of change needed is not incremental, but transformational. Many healthcare system leaders believe they will need to improve overall performance by 20 percent to 40 percent over the next three to five years.

Operational and clinical improvements can contribute significantly to this overall goal. Even at high-performing organizations, a comprehensive, yet granular, approach to operational and clinical performance can create improvements of 15 percent to 24 percent.

This resource provides an overview of many of these opportunities. We hope it will be helpful as your organization prepares to thrive in the changing healthcare environment.

Huron Healthcare’s Model for Achieving Healthcare TransformationHealthcare leaders’ transformational strategy must leverage organizational strengths and local market dynamics to deliver measurable value across the four key areas illustrated here. Most organizations will need to create 20 to 40 percent improvement to thrive. This model creates a framework that helps inform and integrate change across the enterprise.

HUMAN CAPITAL

HU

MAN CAPITAL

2

Operational Excellence: Opportunity for 7% to 10% Improvement

+ Dollar figures based on a 350-bed hospital with $365 million net patient revenue

1

OPPORTUNITYTYPICAL EXPENSE % IMPROVEMENT OPPORTUNITY+ CHALLENGES OF IMPLEMENTING INTERNALLY KEY SELF-ASSESSMENT QUESTIONS

1) Care Access .5% – 1% in net patient revenue Non-standardized processes typically yield a less than ideal patient experience. Metrics to monitor performance are hard to define and even harder to gather in an automated fashion.

- How would a member of the community and/or a patient describe his or her experience of accessing care here? Do they find the scheduling experience to be a simple one?

- Is the patient scheduling experience uncoordinated and/or highly variable across care settings?

- How has the rise in consumerism changed patient expectations of accessing care?

- How is the success of the access operation measured?

MED

IUM

EASE OF IMPLEM

ENTING

2) Front-End Revenue Cycle Access, patient responsibility engagement and collections, insurance verification and authorization, and financial counseling

2% – 4% improvement in net patient revenue ($7.5 – $15 million)

Decentralized processes often mean many stakeholders are involved, and processes and tools can be inconsistent. Metrics to monitor performance are hard to define and even harder to gather in an automated fashion.

- Do we secure eligibility and authorization for more than 95% of our patients before they receive service?

- Are we using predictive indicators to proactively improve performance and hold staff accountable?

- Is Contract Management software in place and utilized?

HAR

D

3) Purchased Services Local and regional contracts including IT, equipment, management, clinical, administrative, printing and banking services, and many others.

5% – 15% improvement in purchased services spend($1 – $3 million)

Departments may negotiate and manage pricing and terms and conditions independently without testing the market. Even with competitive pricing, there are many opportunities to manage the overall cost of service. Specialists with deep knowledge are usually required to maximize the benefit.

- Are there agreements in place in all of these areas? - How frequently are contracts reviewed? Is this function centralized

or de-centralized? - How frequently are competitive bids solicited?

MED

IUM

Nearly all healthcare organizations are focusing on efficiency and operational excellence, and most have undertaken successful initiatives over the past five years or more. Our experience indicates that even high-performing organizations can achieve an additional 7 percent to 10 percent improvement by focusing on performance at every level of the organization.

Today’s operational excellence strategies must go beyond past initiatives to bring new discipline, processes, and structure across the enterprise, while maintaining or increasing quality and patient satisfaction levels. Further, as organizations develop new care delivery models, they may also need to expand the focus on excellence to new areas of the enterprise.

Specific areas of focus will vary. Yet, no matter how individual markets may change, organizations that increase efficiency and quality while reducing costs will be well positioned to thrive. Key opportunities for improvement are summarized below.

3

OPPORTUNITIES AND BENCHMARKS FOR OPERATIONAL EXCELLENCE


4) Maximizing 340B Pharmacy Benefit Program Discount

10% – 30% improvement in 340B program savings($1 – $2 million)

Program benefits must be coupled with careful management of compliance requirements. Deep expertise and analytical monitoring required to maximize the benefit.

- Are we compliant with the latest 340B regulations? - Have we developed a retail pharmacy strategy and network?- Have we established criteria and a timeline for a regular review of our

340B program, evaluating expansion options and compliance risks?

HAR

DEASE OF IM

PLEMENTING

5) Non Clinical Supply Costs — Linen Utilization

5% – 20% improvement in linen costs($50,000 – $200,000)

Processes that create overutilization are so ingrained into workflow that opportunities for savings are not recognized. Discipline and rigor are required to create new processes and maintain benefits. Information on usage is not provided and/or acted upon.

- How does our performance compare to industry benchmarks? - What departments are using the most linen?- Have we considered new workflows that would change our utilization

levels?

MED

IUM

6) Supply Chain Operations Improved pricing, efficiency, and productivity

Value equal to 5% to 10% of department operating costs

Many organizations have long-tenured employees and/or use outdated processes and technology to manage this area, which can account for 30% to 40% of total expenses.

- Have I compared my performance metrics against industry standards?- Are we leveraging technology such as RFID, bar-coding, ePayment, or

Contract Management?

EASIER

7) Retirement Benefits-Defined Contribution Plans

1% – 3% of payroll($1 – $3 million)

Defined contribution plans that evolve independently from employees’ total rewards are hard to re-evaluate and change. It may be politically difficult to set and communicate employees’ responsibility for retirement.

- Do we know where we fall in the market to determine if we are competitive — or overly competitive?

- How are we benchmarking our retirement benefits relative to our total rewards philosophy?

- What is our strategy for employee engagement and helping employees build personal accountability for their retirement income?

HAR

D

8) HR Benefits Medical employee, prescription, dental, vision, long- and short-term disability

6% – 8% improvement in benefit spend($2.2 – $3.0 million)

Providers may not have the specialized expertise in new reform requirements, compliance, 340B, patient-centered medical homes, population health management, and other areas needed to maximize investment in benefits.

- How often are our benefits reviewed, and by whom? - Is our total employee labor expense less than 45% of our total operating

expense? - Are we positioned for further changes required under the Affordable Care

Act?

MED

IUM

9) Premium Pay Program Redesign Shift differentials, charge pay, call practices, weekend programs, and specialty pay

10% – 20% improvement in premium pay costs($1 – $2 million)

Legacy premiums once needed for market competitiveness are no longer required, yet are politically and culturally difficult to repeal. Alignment and consensus from a broad stakeholder group are necessary to achieve change.

- Which of our premium pay programs are market drivers, attracting and retaining the best talent, and which are not?

- What is the intended purpose and result of each of our premium pay practices? Do they still support our business needs?

- Do we have benchmark data to evaluate overall program competitiveness and to generate options for redesign or elimination?

HAR

D

4

Operational Excellence: Opportunity for 7% to 10% Improvement1


5

Operational Excellence: Opportunity for 7% to 10% Improvement1


10) Staffing to Demand Tools to forecast volumes, staffing requirement grids, and scheduling tools to better match and flex staffing in nursing, ancillary, and support functions

3% – 7% improvement in labor costs per department($10 – $16 million)

Many providers do not have the tools or infrastructure in place to closely manage staffing on a real-time basis. Creating full benefit requires a high level of discipline.

- Do we have a realistic producivity target?- What labor productivity measurements do we use?- What are our agency nurse costs per quarter?- How do our labor costs compare to industry and peer-to-peer

benchmarks?

HAR

DEASE OF IM

PLEMENTING

11) Position Control A robust position control process that is based on objective data (status to productivity target, and volume, overtime, and agency trending) coupled with manager and executive training to ensure disclipline

1% – 2% of labor costs($.75 – $1.5 million)

Organizations can struggle with adhering to the process to ensure integrity and avoid “end runs.” To maintain benefits over time requires sustained discipline.

- Do we have a position control/request process that is data-driven? - Are all requests from executives at all levels treated with equal scrutiny?- Do managers, directors and VPs have a list of questions to ensure all of

the merits of a request are fully vetted?

HAR

D

12) Absense Management 10% – 12.5% of regular payroll Vacation, PTO, and Disability policy changes are emotional issues for employees. However, leave plans should be reviewed periodically to ensure that the combined plans form an absence continuum. Vacation and PTO plans should include a reasonable amount of time for rest and rejuvenation. Disability plans should provide employees with coverage in the event of extended absences, but should also provide motivation for a timely return to work.

- Does your organization's leave policies support employees' need for time away? Do they support the organization's staffing needs and business objectives?

- Are your leave policies market competitive?- Are your employees using all of their allocated vacation or PTO days? Or,

are they carrying them over or selling unused amounts?

HAR

D

13) HR Purchased Services Temporary staffing, background and drug screening, HR and benefit vendor service agreements, employee recognition programs

3% to 6% improvement in HR purchased services spend

Facilities and their departments may negotiate their agreements independently without leveraging a centralized function to ensure standard contracts and pricing are in place. There may be limited resources to formally evaluate the market on a periodic basis. Vendor Management Systems may not be in place to ensure vendors, contracts, and pricing are standardized and to prevent utilization of non-approved vendors, terms, and pricing.

- Are you using multiple vendors for the same services?- Do you have a vendor management system in place?- Do you have standardized agreements and pricing in place?- How often do you perform market evaluations on your agreements?- When was the last time you did?

HAR

D


Have we fully optimized our labor operations?

Is our total employee labor expense 50 to 55 percent of our total operating expense?

Are agency paid hours less than 0.5 percent of our total paid hours?

Do we have fewer than 110 total paid labor hours per adjusted discharge? For academic medical centers, labor hours should be fewer than 165.

Do we evaluate and adjust staffing on a 4-hour basis for variable departments?

Is direct patient care time for RNs on nursing units greater than 60 percent of total shift time?

Is overall span of control greater than 1 to 15, and staff to CEO no more than four layers?

Do we have a high-performance revenue cycle?

Do we secure eligibility and authorization for more than 95 percent of our patients before they receive service?

Do more than 80 percent of our claims pay correctly — without further corrections or interventions?

Do we hold our bad debt — including true self-pay and third party residual self-pay balances — to less than 2 percent of our net patient revenue?

Are more than 90 percent of our uninsured patients screened by financial counselors before discharge to look for possible payers or other sponsors?

Do we have a comprehensive patient responsibility solution that is grounded in an appropriate financial clearance policy, engages with patients around their financial responsibilities, and addresses patient liability collection from front-end to back-end?

Have we maximized our non-labor and supply-chain cost containment?

Have we compared our supply expense per adjusted discharge (and other metrics) to other similar organizations?

Do we have written contracts in place for 80 percent or more of our supply and purchased service spend?

Have we benchmarked our supply expenses per procedure — especially those related to high cost, Medicare DRGs — to pinpoint our current utilization levels and trends within our organization?

Have we identified and added physician champions to our value analysis processes to ensure cost savings on supplies, even when changes to physician preference supplies are being considered?

Is our contract compliance rate above 90 percent?

Operational Excellence: Self-Assessment Questions11

2

3

4

1

2

3

4

5

1

2

3

4

5

5

6

6


Changes in the payment model are driving fundamental changes in care delivery. As these changes progress, organizations are focusing on care delivery models that address all levels of care at all delivery points — starting before patients enter the hospital and continuing after they leave.

To prepare, organizations are looking closely at improving access, reducing variations in care, and providing more proactive case management and better coordination to provide seamless, integrated care across the system. They are working to develop highly engaged physicians and physician leadership. They are also seeking strategies to support and foster patient engagement and patient satisfaction.

In our experience, embracing transformative rather than incremental change across the clinical enterprise creates the opportunity to improve performance by 8 percent to 14 percent over three to five years. Key areas of focus are summarized below.

OPPORTUNITIES AND BENCHMARKS FOR CLINICAL TRANSFORMATION INITIATIVES

2 Clinical and Revenue Transformation: Opportunity for 8% to 14% Improvement

7


1) Population Health For at-risk cohorts of patients (e.g., Medicare Advantage, Medicaid Risk, ACO members), a 30% reduction in ED use, a 25% reduction in hospital days, and a 15% improvement in pharmaceutical costs are typical. Degree of margin improvement depends upon size of at-risk population and degree of clinical integration of your health system.

To be successful in population health management (lower total cost of care + better patient outcomes) requires these enterprise competencies: 1) clinical transformation of most service lines; 2) an infrastructure of patient segmentation and targeted intervention; 3) culture change; and 4) the informatics engine to power it all. Most health systems feel they need the help of a trusted, experienced partner to point the way as well as to help implement those changes shoulder-to-shoulder.

- What is different about the current era of population health management when compared to the 1990s version? How do we ensure success for ourselves this time?

- What are the objective measures of clinical integration? How well suited is our health system for taking on financial and outcomes risk for a cohort of patients?

- How, exactly, are margin and market share improved in population health management? How do we ensure that the leading indicators of those milestones faithfully happen?

- How do we obtain the engagement and commitment from our physicians and physician leaders?

- Once at-risk for a cohort of patients, how do we manage their individual and collective health behavior?

- What informatics infrastructure is needed to drive outcomes?

MED

IUM

EASE OF IMPLEM

ENTING


8



2) Investment in Physician Organization

10% – 15% improvement in annual investment reduction ($2 – $4 million in annually recurring additional benefit for a typical 100 – 150-physician multispecialty group)

Internal resources have insufficient experience and/or capacity to address the magnitude of financial, operational, cultural, and political issues that present barriers to improved performance.

- Do we track and measure the current investment per M.D. in order to rationalize the required level of support?

- Is our physician compensation plan aligned with the health system's operational and financial goals from a patient care, revenue enhancement, and cost containment perspective?

- Do we evaluate the medical group as though it were a standalone entity, enabling us to properly identify sources and uses of revenue and expense?

MED

IUM

EASE OF IMPLEM

ENTING

3) Improving Ambulatory Throughput in Physician Offices

7% – 10% improvement in revenue($2 – $3 million in annually recurring additional revenue for a typical 100 – 150-physician multispecialty group)

Physicians do not typically have the tools and metrics in place to measure capacity utilization and analyze and improve throughput. Resources specializing in physician office improvement typically are not available to activate and implement change.

- What is our current utilization of provider capacity? - What metrics are used as an indicator of practice efficiency?- How do these compare to industry and peer-to-peer

benchmarks?

EASIER

4) Interdisciplinary Care Team Rounds

This process, along with several other clinical operations improvements, can generate a 5% – 10% improvement in length of stay (LOS)

($5 – $10 million in direct variable cost reduction. More revenue opportunity through patient volume increases is possible for capacity-constrained organizations.)

It is very difficult for internal resources to disrupt entrenched care team patterns of working. There may be a lack of experience in facilitating effective interdisciplinary care rounds that have rigor, consistency, and accountability metrics to support effectiveness and efficiency.

- Do we have daily interdisciplinary rounds on all nursing units?

- Can each unit discuss all of their patients efficiently — within 30 – 45 minutes?

- Do we have participation from all key constituent groups including physicians, nurses, case managers, social workers, and key ancillary department representatives?

HAR

D

5) Care Variation Management for Targeted DRGs

Approximately 20% reduction in cost-per-case for targeted DRGs for organizations with optimized clinical operations. ($2 – $5 million)

Significant cultural and operational changes to all of the patient care processes that impact a target DRG are required; internal resources often are not equipped to address these. It can be difficult to access, organize, and operationalize data and metrics crucial to success.

- Do we have meaningful trending data on the use of existing order sets and care pathways?

- Do we have a process and multidisciplinary team that can identify target patient populations and DRGs and develop revised clinical pathways?

- Do we have the appropriate personnel to facilitate lean redesign workshops, rapidly redesign care, and drive outcomes and process metrics in targeted DRGs?

HAR

D


6) Readmission Management Approximately 5% – 15% improvement in 30-day readmission rates

- Organizations are often challenged to bring together multidisciplinary, cross-continuum care teams to align on readmission risk stratification, processes, and tools.

- An effective readmission management program may also require defining new roles and responsibilities, and new care models.

- Have Medicare readmission penalties been incurred?- Have we experienced denials or penalties imposed by

commercial payers for readmissions?- Do we have higher readmission rates than the median rates

for these conditions? Heart Failure: 24.60% AMI: 19.60% Pneumonia: 18.40%

- Are we part of, or moving toward becoming, an accountable care organization?

MED

IUM

EASE OF IMPLEM

ENTING

7) Clinical Documentation Improvement

4% – 6% increase in the Case Mix Index (CMI) ($1 – $10 million)

Many organizations lack a rigorous process for validating clinical documentation data, resulting in lost opportunity for capturing revenue. It may be hard to make a case for CDI interventions if the organization does not track benefit through to the bottom line.

- Do we have a routine validation process to ensure that clinical data is accurate?

- Is our clinical data at or above 99% accurate? - Do we capture quality core measures in our documentation?

MED

IUM

8) Purchased Services — Medical Equipment Maintenance

10% – 20% improvement in equipment maintenance spend($200,000 – $400,000)

Departments can be resistant to changing existing technicians. It can be difficult to compile data to establish a comprehensive and accurate baseline for evaluation of potential changes.

- Are we leveraging the volume of our service to garner competitive service agreements with outside vendors?

- Do we have the variety of expertise needed to negotiate on pricing in-house?

- Are we evaluating the repair history with our service fees?

HAR

D

9) Blood Management (How and when blood is used; appropriate blood utilization criteria; and other products, such as cell salvage, blood expanders, etc.)

10% – 20% improvement in blood management costs($100,000 – $200,000)

It can be difficult for physicians to make peer-to-peer changes on blood practices and a challenge to develop the processes and metrics needed to track opportunities, improvement, and sustainability of the program.

- What criteria are in place for blood transfusion? - What processes are in place to manage the overall cost of

blood and blood products? - How has the total cost of blood changed over the past few

years in relation to our volume?

HAR

D

10) Reprocessing Single-Use Clinical Devices

15% – 30% improvement in single-use clinical device costs ($100,000 – $200,000)

Misperceptions around reprocessing may prevent organizations from pursuing improvement opportunity in this area. Reprocessing single-use clinical devices is FDA-regulated, and many studies have proven that reprocessed devices are safe.

- Have we considered the latest evidence-based research related to reprocessing?

- Do we have a system or structure in place to effectively and efficiently execute reprocessing?

- Have we gained buy-in from key stakeholders on a reprocessing effort?

MED

IUM

9



10

Do we have high performing, efficient, and effective clinical operations?

Is our risk-adjusted length of stay by DRG greater than 75th percentile?

Are we estimating patients’ length of stay accurately — to within one day of discharge — more than 90 percent of the time?

Is our bed turnaround time under 45 minutes, from patient discharge to being ready for a new patient?

Is our physician response rate to CDS queries at 100 percent — and our physician agreement rate above 90 percent?

Is our patient to case manager ratio close to or below 1:25?

Are our medical groups running at peak efficiency?

Do we track and measure the current investment per physician in order to rationalize the required level of support?

Are our physicians incented based on quality and value-based metrics in addition to traditional measures such as productivity or collections?

Are more than 80 percent of our physicians performing above the 65th percentile in wRUVs or are they measured by productive and efficient metrics on management of patient panels?

Do we have data that helps us track and measure patient retention rates and utilization of provider capacity across the spectrum of provider services?

Do we evaluate the medical group as though it were a standalone entity, enabling us to properly identify sources and uses of revenue and expense?

Does our organization’s structure and culture support clinical integration?

Does our governance and committee structure support clinical transformation and integration goals?

How comprehensive and predictive are the clinical analytics we using to measure and track performance?

How aggressively are we pursuing the implementation of evidence-based medicine, and what structures and metrics are we using to support our efforts?

Do we have a thoughtful approach to treating patients that requires high resource use, such as those with complex chronic conditions?

Does the organization have a physician/ patient engagement model that actively engages/markets to patients in such a way that encourages them to seek care within the network?

Clinical and Revenue Transformation: Self-Assessment Questions

1

2

3

4

1

2

3

4

5

1

2

3

4

5

2

5

ConclusionThe imperative of providing high value at a lower cost creates challenges and opportunities for hospitals and health systems. Many healthcare leaders now see the need to improve overall performance by 20 percent to 40 percent over the next three to five years. The opportunities for transformational change summarized here are a sample of the many ways Huron Healthcare helps organizations thrive in the changing healthcare environment.

To discuss opportunities at your organization, or to learn how Huron Healthcare has helped providers in your area, please contact [email protected], or visit us online at www.huronconsultinggroup.com/healthcare.

3

11

About Huron HealthcareHuron Healthcare is the premier provider of performance improvement and clinical transformation solutions for hospitals and health systems. In 2015, Huron acquired Studer Group, the market leader in driving healthcare cultural transformation. The combination of Huron and Studer Group is focused on improving healthcare providers’ clinical, operational, and financial outcomes. By partnering with clients, Huron delivers solutions that improve quality, increase revenue, reduce expenses, and enhance physician, patient, and employee satisfaction across the healthcare enterprise. Clients include leading national and regional integrated healthcare systems, academic medical centers, community hospitals, and physician practices. Modern Healthcare ranked Huron Healthcare fourth on its 2015 list of the largest healthcare management consulting firms.

© 2015 Huron Consulting Group Inc. All Rights Reserved. Huron is a management consulting firm and not a CPA firm, and does not provide attest services, audits, or other engagements in accordance with standards established by the AICPA or auditing standards promulgated by the Public Company Accounting Oversight Board (“PCAOB”). Huron is not a law firm; it does not offer, and is not authorized to provide, legal advice or counseling in any jurisdiction.

Documents

Meeting the Challenges of Healthcare Transformation...- How has the rise in consumerism changed patient expectations of accessing care? - How is the success of the access operation