A recent guide from the American Hospital Association and the Healthcare Research & Educational Trust provides a six-step approach to understanding and managing variation in your organization.

There will always be variation, and not all variation is undesirable or inappropriate. A hospital or health system leader's goal need not be to eliminate variation, but rather to understand and manage it so undesirable variation can be reduced-and the best outcomes at the lowest costs can be achieved.

The critical starting point for managing variation in utilization is a thorough understanding of internal data. ("Utilization" refers to the usage of available services within the hospital setting, e.g., treatments, procedures, or diagnostic tests.) Well-executed analysis of internal data on a historical, location/unit, or physician-by-physician basis can help identify many opportunities within the walls of one's own organization, and it also provides a base from which to make external comparisons. Once an analysis has been completed to identify undesirable variation in utilization, managers can turn their focus to understanding what is driving it and then begin to implement solutions.

Determine your strategic focus to reducing variation. The context in which your organization embarks on understanding and managing variation is critical. Potential strategic considerations include:

  • Reducing operational costs
  • Standardizing use of medical supplies
  • Strengthening shared decision making and patient involvement
  • Improving patient safety
  • Improving patient satisfaction
  • Reducing spending for the population
  • Preparing to accept financial risk

Set measurable goals. Once you establish your organization's strategic direction, identifying measurable goals is critical for tracking performance and evaluating if progress is being made. One example goal: Improve compliance with clinical metric-i.e., percentage of diabetics with HbA1c tests in the last 12 months-from 88 percent to 93.7 percent (the national 90th percentile) by year's end.

Acquire and analyze data. Ideally, to reduce unwarranted utilization across the care continuum, data would be collected from each relevant site of care per disease episode. In reality, most organizations do not have access to this level of detail within their own reporting systems. It is best to focus on these three aspects of data collection:

  • Collect data from internal systems that provide reliable and consistent information.
  • Focus on a few critical metrics-those most relevant to the operational or clinical process that you wish to improve.
  • Use multiple sources for data collection, including service line or unit reports, discharge records, and/or reports that track compliance to established care paths.

Partnering with your local employers or payers may provide additional avenues for collecting and using all payer data. State agencies may also have data available across payers that may be used for general analysis, though the data may not be organization-specific.

Many approaches can be employed to analyze data for managing variation, including the following simple, but powerful, analyses:

  • How has utilization varied over time?
  • How does utilization vary across different locations in the system and/or units within the hospital?
  • How does utilization vary by physician within the hospital or system?

Understand your data. By looking within your organization, you can compare yourself to the best performance internally and track trends over time. Focusing on internal data allows hospital leaders to make comparisons on an "apples-to-apples" basis and generate greater acceptance and buy-in, as stakeholders are less likely to claim that "our institution is different" from itself.

External data is also highly useful as a point of reference for performance and a basis for setting goals and objectives, such as achieving top quartile performance on a set of metrics compared to similar institutions. Many resources are available for external benchmarking, including the Dartmouth Atlas of Health Care or commercially available databases and tools.

Identify areas of focus. In determining which area to examine first, a hospital leader might consider:

  • Highest-volume services
  • Areas with the greatest financial impact, in terms of revenue or cost
  • Areas most likely to result in avoidable injury to a patient
  • Areas identified as high priorities to the organization and its leadership

Research has demonstrated that some of the greatest areas of utilization variation are:

  • Hospital readmissions
  • Appropriateness of admissions and diagnostic and treatment procedures
  • Emergency department utilization
  • Intensive care unit utilization
  • Home health utilization
  • Obstetrics utilization
  • Imaging tests
  • Surgical procedures
  • End-of-life care

Implement improvements. There are a number of specific interventions that can be implemented. These include:

  • Engaging clinicians with feedback of data
  • Standardizing operational processes using quality improvement interventions
  • Implementing evidence-based clinical guidelines
  • Emphasizing appropriateness criteria
  • Creating a culture change

Minimizing unwanted variability is critical in today's cost- and quality-conscious environment. The challenging tasks for hospital administrators are to identify priority areas for managing variation in utilization, to determine what variation is acceptable and what is not, and to develop an action plan to make any changes needed.


This article is excerpted with permission from the following resource: Joshi, M., Health Care Leader Action Guide: Understanding and Managing Variation, American Hospital Association/Health Research & Educational Trust, Chicago, Ill., February 2011.

Publication Date: Friday, February 18, 2011