John Glaser
Peter Markell
John Stone

Data may soon become a healthcare organization's most critical asset. Here's what providers should be thinking about now to prepare

At a Glance

  • Two factors-accountability for care and an increased adoption of interoperable electronic health records (EHRs)-will significantly increase the importance of data for healthcare organizations.
  • These factors have significant data ramifications in four areas: payment reform, data use policies, IT strategy, and data management.
  • As data become a strategic asset, healthcare finance executives will need to become significant contributors to their organizations' EHR initiatives and data management strategies.

For many years, healthcare finance executives have had to address management challenges associated with data. Poor-quality coding can lead to missed revenue opportunities. Inadequate registration can result in claims denials. Insufficiently thoughtful expense allocation can hinder the determination of service line financial performance.

For these reasons, data, data management, and data analyses have long been important to healthcare providers. Healthcare leaders routinely confront the need for good data as they try to answer questions such as:

  • Which services make money? Which ones lose money?
  • What is the ROI of a capital purchase?
  • Can we afford to sign this managed care contract?
  • Where should we focus our cost reduction initiatives?
  • Are we gaining or losing market share?
  • Are our care processes following established protocols?

The challenge of managing data extends well beyond ensuring that data reside in some database that has analysis tools. A substantial portion of a healthcare provider's resources are devoted to creating, processing, and analyzing data. A key objective of many process reengineering efforts is improving the efficiency and effectiveness of organizational processes that create, consume, and change data (e.g., streamlining front-end registration processes in an effort to improve the revenue cycle). In addition, organizations must protect the privacy of patient data and the security of data.

Data as a Strategic Asset

These data management challenges will only increase. Even apart from the inevitable effects of increased accountability for care and the adoption of EHRs, many data initiatives, including ICD-10 implementation and coping with the rapid increase in genetic testing, will demand the attention of leaders in healthcare finance.

However, accountability and adoption of EHRs are factors that will elevate data to the realm of a strategic asset for healthcare organizations, making it vitally important for finance executives to take very specific steps to prepare their organizations for the increased importance of data to the long-term health of their operations.

Accountability. Purchasers of care are becoming more interested in understanding the costs and quality of care. Pay-for-performance efforts have had mixed results. The potential value of payment approaches based on bundles of care, episodes, or capitation is unclear, and the complexity and uneven impact of these approaches make these conceptually appealing ideas difficult to implement.

Regardless of the spotty track record, the direction is very clear: Provider reimbursement will increasingly be based on care quality and efficiency, and a variety of stakeholders will demand data on clinical performance. Purchasers and other stakeholders also will seek to require that providers follow various evidence-based protocols and decision support guidelines.

Interoperable EHRs. The adoption of EHRs is expected to increase significantly in the years ahead. This adoption is driven by several factors, most notably the meaningful use incentives that are part of the American Recovery and Reinvestment Act (ARRA).

It's impossible to predict the level of EHR adoption five years from now, or the degree to which health information will be exchanged among providers. Regardless, the industry can reasonably expect to see significant increases in both EHR adoption and exchange.

Far-Reaching Effects

These two factors and provider responses to them will have ramifications for four areas that have data at the epicenter:

  • Payment reform
  • Data use policies
  • IT strategy
  • Data management

Payment reform. Demands for accountability will lead to progressive reform of provider payment methods. Purchasers of care will assume that providers have adopted EHRs and that these EHRs are exchanging data with each other. Hence, purchasers are likely to base their data and performance demands on the presence of those systems and the changes in care practices that EHRs enable.

Common themes of the various payment reform alternatives are to:

  • Encourage a longitudinal view of care as distinct from a view of disconnected encounters
  • Require patient risk prediction and stratification models
  • Promote the funding of lower-cost services that substitute for higher-cost admissions, emergency department visits, or face-to-face physician encounters
  • Encourage the substitution of lower-cost providers for tasks they are competent to perform
  • Promote patient self-management
  • Advocate systems of care where information flows among providers within and between organizations

Payment reform will result in significant changes in the data needs and strategies of provider organizations. For example, providers will need to be able to link patient encounters by disease and to assess the processes of care that occur over lengthy periods of time across a range of care settings, specific care activities (e.g., medications prescribed), care results (e.g., laboratory test results), and costs of care delivered. As a result, finance analytics databases will have to include a much broader and deeper set of longitudinal clinical data.

Linkage of care requirements may necessitate that encounter data from outside the organization (enabled by health information exchanges) and, eventually, data entered by patients through personal health records (PHRs) also be incorporated. Moreover, the analytical capabilities of providers will expand to include software that supports the identification of patients who are at greater risk of needing care, enabling the organization to strengthen care support for those patients. Providers will find themselves assessing the costs and quality of alternative care settings and modeling the implications of moving treatment to settings other than a hospital or physician's office.

Many finance executives have led or have contributed to efforts to improve the quality of their organizations' data. These efforts have often centered on improving the collection of data at the time of admission or upon check-in for an outpatient appointment. In the future, these efforts will expand to focus more on clinical data-for example, ensuring that the problem list is complete and physicians are writing their prescriptions electronically.

But finance executives will not be the only leaders interested in the quality of clinical data: Physician leaders also will depend on the accuracy of EHR data in developing care protocols and applying decision support effectively.

Finance executives therefore will need to develop strong collaborative relationships with these physician leaders, especially because finance leaders will need to be actively involved in efforts such as ensuring that the problem list is accurate (since it will drive payment and quality analyses), managing care improvements that are highlighted by data analyses, and making the alterations in care processes that will be necessitated by payment reform (e.g., reengineering care practices such that patients are seen by nurse practitioners where appropriate). Tomorrow's finance executives should be knowledgeable about their organizations' operations and skilled in effecting changes in those operations.

Data use policies. The impact of greater accountability and broader adoption of interoperable EHRs will prompt organizations to examine several of their data policies and procedures. For example, changes in privacy regulations will require advances in data access controls and tracking of data movement within and between organizations. Impending federal and state security standards and regulations will impose requirements ranging from encryption of data on mobile devices to more rigorous audit trails of EHR data access.

Data exchange among healthcare entities raises data management questions for both the senders and recipients of data. For example, under what conditions can data from one organization be used by another organization (such as for care operations assessment or clinical research)? And if one organization needs to amend data it has exchanged with others, how will that amendment be propagated to the various recipients?

Broad EHR adoption will open the door to a diverse set of secondary uses of clinical data for clinical research, care improvement, population health, and post-market medication surveillance. Early efforts to leverage EHR-based data in these areas show promise, but also have exposed data quality issues. Providers may be approached by data aggregators who are interested in pooling data from multiple organizations to pursue these secondary uses. The contributing organizations will need to establish policies and agreements that enable them to benefit from these arrangements, but also protect themselves.

Widespread EHR adoption may accelerate use of PHRs. Patients using PHRs will likely increase their contributions of data, such as measurements from home monitoring equipment, to their EHRs. Policies will be needed to guide the use of PHR data for care improvement activities, clinical research, and revenue analyses.

These developments will cause the definition of medical record to become more fluid. To the degree that a medical record is defined as data that a provider accessed or had access to while providing care, the medical record's definition will expand to include data received from other providers and patients, and computer-generated clinical decision support warnings, alerts, and reminders. This broader definition will have malpractice and care implications.

Finance executives will be essential contributors to their organization's efforts to address these policy implications.

IT strategy. Clearly, increased accountability and the acceleration of the adoption of interoperable EHRs will have a material impact on the organization's IT strategy. IT capital and operating budgets will increase at hospitals nationwide. Although ARRA funds might offset some of those increases, those funds are not intended to cover all of an organization's IT costs. Moreover, the ARRA payments will expire in 2015.

Organizations also will find that their IT investments will be concentrated on the EHR. The level of increase in EHR investments will depend on how aggressively organizations pursue ARRA incentives and the current status of their EHR efforts. And these investments will not be confined to clinical information systems: Investments may also be needed in revenue cycle systems, business analytics, and technical infrastructure (e.g., the changes to networks to ensure encryption of data).

Tomorrow's providers will engage in regional and statewide health information exchanges. Hospital and ambulatory electronic EHRs will need to "open up" and link to external networks for the purposes of routing prescriptions to pharmacy benefits managers and dispensing locations, transmitting discharge summaries to nonacute settings, and routing patient summaries to
consulting physicians.

Providers also will extend EHRs into the home and work settings of patients through the implementation of PHRs. Other types of patient IT also will become more prevalent, such as remote monitoring of patients with congestive heart failure.

Across the range of IT applications, an emphasis will be placed on capabilities that support the management of the quality and costs of care delivered to populations. This emphasis can lead to the addition of reminder systems in outpatient EHRs, population cost analysis tools in business intelligence platforms, health information exchange with patient registries, and systems that reach into the home.

The range of IT strategies and investments will expand in this way for many reasons, but the primary reason will be the need to capture and analyze data and support organizational changes resulting from increased accountability for care.

Finance executives will play an essential role working with IT leaders and other leaders in defining their organizations' IT strategy, ensuring that related process and other organizational changes are made, prioritizing capital investments, and monitoring the progress and gains from IT projects.

Data management. Data management refers to the steps an organization takes to ensure that its data are well understood, are of good quality, are appropriately used, are protected, and have potent analyses tools. Data management is difficult. The work is not sexy-it can involve slogging through process changes, cajoling clinicians, engaging in difficult discussions on data meaning and edits, reducing multiple data silos, and fixing application software that has insufficient edits.

Efforts to improve the revenue cycle and manage costs and productivity have led many finance departments to implement core data management practices. These practices can include management mechanisms to:

  • Define how the organization will manage its data and the policies, procedures, technologies, and tools needed to facilitate this process
  • Outline the steps, communication, and tools necessary to determine the list of strategic data elements and their definitions
  • Define the roles and responsibilities for managing the organization's data asset
  • Prioritize the demand for business intelligence analyses and ensure that unmet demand does not lead to shadow systems
  • Review operational and clinical processes to improve the accuracy and comprehensiveness of data
  • Review application systems to ensure that the edits are sound and that application work flow supports good data capture

These efforts will need not only to continue, but also to expand. This expansion will largely occur in breadth encompassing EHR data, data exchanged with other organizations, and patient-contributed data.

Issues that challenge efforts to enhance the quality of data will become more complex and daunting. Steps to improve data capture often hinder operational efficiency. This challenge will spread from registration areas to the exam room. In addition, managers are often not confident about the quality of data that inhabit their reports and are unsure of the "source of truth." As the organization's data expand to encompass sources beyond the boundaries of the organization, confidence and truth become difficult to assert.

The Elevated Importance of Data Management

For most providers, data have been a secondary consideration. Data are often seen as less worthy of investment than are equipment, buildings, and IT support of clinical, operational, and finance processes. Most IT discussions center on applications, with the focus of the application being improvements in important processes such as ordering tests, generating claims, or scheduling patients.

Process improvements and investments in buildings and equipment will always be important. However, the management of data deserves the same level of importance. The factors cited above-accountability and interoperable EHRs-will lead to data graduating from the children's table to the adults' table at Thanksgiving.

In some instances, the quality and timeliness of data may be the most significant source of an organization's competitive advantage. Having detailed data regarding utilization may be more important to an organization than efficient ordering processes. Having reliable data about referring physicians may be more important than an error-free registration process. Knowing the demographics of the customers who use your services, and where and when they use these services, may be far more important than well-run inventory management.

Nonetheless, having well-run processes, too, is far from irrelevant. People prefer to obtain services from organizations with well-run processes. Often a well-run, efficient, and convenient process may be necessary to obtain high-quality data. But in some instances, the processes are subordinate to the need for data.

There are many examples of the competitive use of IT in which organizations have effectively focused on how they use their data, while accepting that their rivals will copy process improvements. For example, systems to support the making of an airline reservation evolved into the use of reservation data to develop frequent flyer programs, establish mileage programs linked to credit cards, and engage in fare wars. Those organizations that developed reservation systems sold the use of them to their competitors, recognizing that exclusive use of the systems themselves did not provide a sustainable process advantage.

The Finance Executive's Role

Data are on the way to becoming a critical strategic asset for healthcare organizations-perhaps the most important asset-and healthcare finance executives will need to play a central role in successfully managing that asset. Finance leaders should prepare to guide the processes of change required to meet the growing data management challenges posed by the increased accountability for care and the widespread adoption of interoperable EHRs. In short, finance executives can anticipate becoming significant contributors to their organizations' strategies and tactics for managing the critical asset that is data.

John Glaser, PhD, is vice president and CIO, Partners HealthCare, Boston (

Peter Markell is vice president, finance, Partners HealthCare, Boston (

John Stone is corporate director, financial and administrative systems, Partners HealthCare, Boston (

Publication Date: Monday, February 01, 2010

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