Jeni Williams

The ability to provide high-quality care while driving down costs is critical in a reform environment. Learn the innovative strategies that three organizations have incorporated to increase the value of the care and services they provide.

At a Glance

Effective approaches for increasing the value of care and services provided include the following:

  • Developing a clinical quality value analysis model to help determine areas where expenses could be reduced while supporting high-quality, cost-effective care  
  • Predicting what health care will look like 10 years from now and developing strategies that will position the organization to meet the challenges ahead  
  • Integrating with physicians to improve the quality and efficiency of care  

The emphasis on value in health care-defined as quality over cost-has perhaps never been greater than it is today.

There is a universal demand for improved quality of care and service, from consumers, employers, and both government and commercial payers. The nation's economic challenges, combined with an exponential growth in healthcare expenses, require that hospitals reduce costs and eliminate waste while enhancing the quality of the care they provide. Payment system reforms, such as bundled payment and value-based purchasing, are shifting a greater portion of the financial risks associated with providing care-the risks, for example, that errors, poor quality of care, or poor outcomes will not be paid for or will result in financial penalties-to healthcare organizations. And the payment that healthcare organizations receive for the care and service they provide will not keep pace with the costs associated with this care and service. Reform legislation calls for payment cuts to hospitals $148.7 billion over 10 years from Medicare market basket updates and Medicare and Medicaid disproportionate share payment.

"The ability to drive higher quality, lower cost, and ultimately, greater value will be critical to a hospital's success in a reform environment," says Richard L. Clarke, DHA, FHFMA, president and CEO, HFMA. "It is imperative that all healthcare organizations work toward enhancing the value of care and service they provide by improving quality while driving down costs."

Value will be a major determinant of a hospital's success under healthcare reform. Here, three healthcare organizations share the innovative ways in which they have worked with physicians, clinicians, and staff to strengthen the value of the care and services they provide.

Catholic Health East

In 2006, leaders for Catholic Health East in Philadelphia developed "Vision 2017," a strategic framework for a patient-centered healthcare delivery model that demonstrates excellence in clinical quality, service, access, and value.

"Our organization's leaders envisioned what health care might look like 10 years down the road, then developed a road map for ensuring that Catholic Health East would be well-positioned to meet the needs and challenges that lie ahead," says Scott Share, vice president, system communications, Catholic Health East. "We developed a plan for providing coordinated, integrated care management across the continuum of care, enhancing the value of the care we provide, and improving access to high-quality care for people who are marginalized and have poor access."

As part of Vision 2017, Catholic Health East, which comprises regional healthcare systems in 11 eastern states, has developed a number of pilot programs that focus on providing more patient-centered care. The lessons learned through these programs will benefit Catholic Health East in an era of reform, as greater emphasis is placed on comprehensive care management.

"We have a pilot of an accountable care organization and other programs that deliver comprehensive care management for patients," says Dan Feinberg, MD, vice president, clinical excellence for Catholic Health East. "Some of our regional healthcare systems operate medical homes, and where those do not exist, we're partnering with other organizations to help smooth the transition for patients.

We're driving toward value," Feinberg says. "For example, in our accountable care pilots, there is a focus on disease management, remote monitoring, communicating with other healthcare organizations, and establishing stronger connections with the primary care physicians caring for those patients. The goal is to help keep patients from being readmitted to the hospital. We've been able to demonstrate improved quality outcomes, decreased length of stay, and reduced readmissions through programs like this."

Data from an accountable care organization (ACO) pilot at Sisters of Providence Health System in Springfield, Mass., demonstrate the value of Catholic Health East's approach. Admissions for managed Medicare patients were significantly lower than those for unmanaged Medicare patients. Meanwhile, observation days were higher for managed Medicare patients-179 per 1,000 member days for managed patients, compared with 33 per 1,000 patients for unmanaged Medicare patients. Length of stay was lower for the managed Medicare population (5.8 days for managed patients, compared with 6.2 days for unmanaged patients), and total hospital days for managed Medicare patients were less than 50 percent of the total for unmanaged Medicare patients. Additionally, the number of home visits increased, from 65,000 in 2008 to 80,000 in 2009.

"This organization has leveraged home care, and ensured that a dedicated pool of physicians is available to see these patients while they are in observation status, whereas many of those patients might have been denied benefits if they had been moved directly forward as inpatient admissions," Feinberg says. "There have also been significant physician satisfaction outcomes associated with this initiative. Primary care physicians receive incentives for participating in this model, and the number of physicians who have chosen to participate has nearly tripled, from 48 primary care physicians in 2008 to 124 physicians in 2010. So it's been a desirable program for physicians to participate in, and that's been terrific for our community as well."

Feinberg believes that Catholic Health East's proactive efforts in mapping out a vision of care delivery for the future and developing strategies based on that vision has positioned the health system well in an era of reform. "We have the tools and programs in place to support a very patient-centered model of care delivery that demonstrates value in a very tangible way," he says.

Advocate Health Care

At Advocate Health Care, Oak Brook, Ill., a clinical integration program is driving higher-quality outcomes, enhancing efficiency, and reducing costs.

In 2004, Advocate Health Care, a not-for-profit healthcare system comprising 12 hospitals in the Chicago area, established the Advocate Physician Partners Clinical Integration Program with the goal of enhancing quality of care and reducing the direct and indirect costs of care. The program is a joint venture between the health system and 3,600 physicians on Advocate's medical staff.

Advocate's Clinical Integration Program brings physicians together with the health system to address the quality and costs associated with an entire episode of care. Physicians receive incentives for adhering to evidence-based protocols, safety measures, and interventions that the program has identified for each key result area (116 measures in all; about two dozen measures apply to each specialty). All measures are approved by the Advocate Physician Partners board, which is comprised of physician and system members. Education regarding new measures is provided through a web-based application, so that physicians can take part in the learning modules at their convenience. Adherence to the measures is tracked electronically through an online disease registry and reporting system, and physicians and their office managers receive a report each quarter from Advocate Physician Partners that provides information on their performance.

"We've focused on two levels of value," says Marty Manning, president, Advocate Physician Partners. "The first has been in the ambulatory setting: managing chronic diseases and reducing unnecessary use of generic medications. These actions create long-term savings-for instance, by managing diabetes, you can wipe out the long-term expense of managing blindness or amputation or organ failure that can result when the disease is not well managed. Physicians also work directly with patients to reduce the physical and financial effects of disease and illness by designing treatment plans that include medical intervention and lifestyle changes.

"We've also begun to integrate the management of post-acute services," Manning says. "Obviously, reducing readmissions is a way to create value. To reduce readmissions, we're reviewing evidence-based medicine related to post-acute care that can help us answer what a perfect discharge entails, and we're defining a set of protocols around reducing readmissions. By putting into place a defined set of protocols and a process to measure adherence to those protocols, and by engaging physicians in working with the health system to improve quality of care and reduce costs, we are creating tremendous value."

Advocate's Clinical Integration Program has demonstrated significant improvements in quality of care and patient outcomes:

  • Physicians who participate in the program successfully implemented annual asthma action plans for 83 percent of Advocate's asthma patients in 2009, compared with a 35 percent rate of completion nationally. The initiative has resulted in $16 million in direct and indirect savings.
  • In 2009, physicians provided depression screenings to 69 percent of patients with diabetes, heart failure, and heart conditions, far exceeding the national compliance rates of 33 percent for diabetic patients and 25 percent of patients with heart failure or coronary artery disease. The screenings and subsequent treatment resulted in direct and indirect savings of more than $10.8 million.
  • Turnaround times for radiology reports have decreased 65 percent-from 25 hours in the fourth quarter of 2007 to eight hours in the fourth quarter of 2009-as a result of efforts by Advocate Physician Partners.
  • The use of generic medications has increased 20 percent since 2005 as a result of the Clinical Integration Program, and these medications are prescribed 71 percent of the time, saving nearly $52 million.

One of the lessons Manning shares with other organizations that wish to follow Advocate's example: Don't be afraid to start small. "Don't think that your organization has to have a full-blown electronic health record system to operate a program such as this," he says. "We started off with a simple Excel-based disease registry system, and we achieved significant results in those early years. I recommend starting an initiative such as this with measures related to diabetes care protocols and prescriptions of generic medications, because you can create significant value very quickly in these two areas."

Floyd Memorial Hospital

What began as an initiative to reduce supply chain costs by $1.1 million in one year has resulted in more than $4 million in savings over a two-year period, increased collaboration between administrators and clinicians, enhanced quality of care and processes, and reduced waste throughout Floyd Memorial Hospital in New Albany, Ind. The 215-bed hospital serves seven counties in southern Indiana and the Louisville region, and has received the HealthGrades Distinguished Hospital Award for Clinical Excellence, awarded to 5 percent of hospitals nationwide, three of the past four years.

Floyd Memorial used a clinical quality value analysis model to identify areas for nonsalary cost reductions. "We used an objective, standardized process to help us determine areas where nonlabor expenses could be reduced while supporting and maintaining safe, high-quality, cost-effective care," says Ted Miller, CFO. "By taking a clinical quality value analysis approach rather than a traditional 'cookie cutter' approach to reducing supply chain expenses, we believed our efforts would best support quality of care and patient safety and take into account our organization's unique challenges and culture."

View Exhibit 1  


The hospital chose 100 clinicians and staff-including members of the executive team, department directors, the hospital's clinical quality value analysis coordinator (the position was created to lead this effort), and members of the hospital's supply chain, finance, and IT departments-to serve on one of seven committees reflecting specific specialties: cath lab, laboratory, patient services, pharmacy, surgery, support services, and inventory management.

These representatives spent a day and a half in training sessions, learning the principles of clinical quality value analysis. Then they set to work in identifying areas where savings could potentially be achieved while maintaining or enhancing quality of care and patient safety. For each savings opportunity that is identified, a steering committee evaluates the proposal and determines whether the hospital should move forward with the idea. When a proposal directly affects members of the medical staff, the committee seeks input from key physicians.

"Initially, our focus was on reducing costs on items that were not physician preference items," Miller says. "We also worked with our group purchasing organization to explore opportunities to save money on existing contracts and explore new options for products. These 'quick wins' helped us realize savings almost immediately and provided the momentum for the teams to tackle clinical and physician preference items."

When the value analysis team determined that an opportunity to reduce costs could affect quality of care, those opportunities were declined. "In our first two years of implementing a clinical quality value analysis process, we rejected about half a million dollars in potential savings because we determined that an alternative product could adversely affect performance," Miller says. "We often conduct trials of new products and seek input from clinicians before implementing a change. Actions such as this give an organization a certain amount of validity with clinicians-not only nurses, but also physicians. They show that the organization is committed to enhancing quality of care and patient safety."

The savings achieved through the clinical quality value analysis approach more than doubled Floyd Memorial's goal in the first year alone (see Exhibit 2). More important, the initiative generated so much excitement from hospital staff that staff asked to add a new category of savings to the committee's efforts-"green" savings-and more than 60 employees volunteered to take part.

View Exhibit 2  


"We have many talented employees at our hospital who are excited about the opportunity to find ways to reduce expenses," Miller says. "Some of the areas where we've saved money have come as a surprise to us. One of the key things we've affirmed through our clinical quality value analysis is the importance of believing in and empowering our associates."

Establishing clear expectations for cost savings teams has been key to the success of the initiative. "One of the challenges that an organization faces with an initiative such as this is how to keep the momentum and the excitement going," Miller says. "At Floyd Memorial, we created team charters to help define the roles and responsibilities of the teams, met with them regularly to ensure that they knew what we wanted them to do, and gave them the tools they needed to evaluate opportunities for savings."

Celebrating the team's successes also has resulted in win-wins for the hospital. "Some of the things our employees have done have been pretty significant, and it's important to recognize their efforts," Miller says. "In addition to pizza parties, we held an event where staff could display storyboards detailing what they had accomplished, and how. Folks were energized and excited about being able to share what they've done and what they've achieved."

Balancing Two Worlds

When cutting costs related to clinical care, organizations frequently find themselves living in two worlds simultaneously. Although future payment systems will reward high value, today's payment system predominantly rewards high volume of services. Therefore, efforts to control cost by controlling utilization can actually hurt a hospital financially. In addition, although the future legal and regulatory environment and future organizational structures such as ACOs promise to allow sharing of benefit for high quality and low costs, many hospitals find that benefits of clinical cost management cannot accrue to the parties that need to invest in high value or that are in a position to influence value.

To a great extent, hospitals' current actions to manage clinical care costs are done without certainty of how the healthcare payment system will ultimately treat those efforts. Yet hospital and system leaders continue these efforts for several important reasons:

  • They need to contain costs to survive as payment falls.
  • The weakness of the economy does not promise the ability to "grow their way out" of the current tight margins.
  • The trajectory of payment toward a value basis is clear.
  • Enhancing quality while reducing costs is the right thing to do for the nation's healthcare system to survive.

Jeni Williams is associate managing editor, HFMA's Westchester, Ill., office.

Sidebar: HFMA Launches Value Project

A new HFMA initiative is designed to identify ways that healthcare organizations can drive down costs and enhance quality and provide the tools to support these efforts. Called HFMA's Value Project, this initiative has gathered leading healthcare organizations to:

  • Identify critical areas of health care where quality and cost intersect
  • Identify metrics for measuring performance related to the intersection of cost and quality
  • Identify processes to improve communication of information about cost and quality
  • Develop and identify practices to enhance value of care
  • Provide tools for measuring performance, applying successful practices, and improving value

HFMA has formed a Value Advisory Council. Among its representatives are organizations that are high performers in the areas of quality of care and cost containment. The council will build a new body of knowledge regarding:

  • The information needed (content and format) to make effective decisions on cost and quality improvement
  • Costing techniques that provide current and accurate costing of clinical and administrative processes
  • Metrics and analytics that allow executives to understand the impact of improvement projects on financial performance
  • How resources should be allocated among various components of the care delivery process

Other phases of the project will include industry research into benchmark practices to enhance value and issues around the key enablers needed to successfully manage value. Initial research will be released in 2011 at HFMA's ANI: The Healthcare Finance Conference. Look for more information regarding HFMA's Value Project in upcoming issues of hfm.

HFMA Value Project Sponsors

Baylor Health Care System
Geisinger Health System
Texas Health Resources
Catholic Health West
Rush University Medical Center
Cleveland Clinic Foundation
New York Presbyterian Hospital
Spectrum Health
Advocate Health Care
Partners Healthcare System, Inc.
BJC HealthCare
Catholic Health East
Presbyterian Healthcare Services
Bon Secours Health System
HCA-Hospital Corporation of America
University of Alabama, at Birmingham

Value Advisory Council Members Include:

Partners Healthcare System, Inc.
BJC HealthCare
Rush University Medical Center
New York Presbyterian Hospital
Cleveland Clinic Foundation
New York Presbyterian Hospital
Texas Health Resources
Baylor Health Care System
Health Texas Provider Network
Bon Secours Health System
Catholic Health East
Catholic Health West
Spectrum Health
Advocate Health Care
Geisinger Health System
HCA-Hospital Corporation of America
University of Alabama at Birmingham
Harborview Medical Center
Lee Memorial Health System
Winona Health
Enloe Medical Center
Unity Health System
Centura Health
United Regional Healthcare System
University of Wisconsin-Madison

Publication Date: Monday, November 01, 2010

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