Southern Illinois Healthcare saved $61 million annually.
The performance improvement initiative at Southern Illinois Healthcare (SIH) had gone better than expected. During a 1½-year period, more than $61 million in annual cost reductions and revenue enhancements had been achieved, covering clinical services, labor, supplies, revenue cycle, and other areas. This was almost $20 million more than the health system had originally targeted.
However, leaders at Carbondale, Ill.-based SIH were concerned about how they would sustain these gains. SIH needed to stay on top of more than 200 improvement targets across the three-hospital system, from unit staffing and length of stay to linen par levels.
When asked how SIH would track whether the organization was meeting targets, the CFO pointed to a foot-high stack of binders and files on his desk. “That is our tracking system,” he said.
SIH had a cost accounting system that provided clean cost information, but it did not have a data analytics solution to automatically pull costs and other information from various IT systems to track results. Recognizing they could not rely on stacks of spreadsheets and reports to monitor an improvement initiative this immense, SIH leaders adopted a turn-key data analytics and tracking solution.
Achieving Savings and Gains
In 2014, SIH was facing budget shortfalls due in part to Medicare payment cuts. In addition, SIH was seeing a significant uptick in Medicaid patients after Illinois expanded the program under the Affordable Care Act. Medicaid payments were not fully covering the costs of care.
SIH finance leaders estimated that Medicare and Medicaid changes could add hundreds of millions of dollars in losses if SIH did not reduce costs and optimize revenues. The health system launched “VisionSIH” in late 2014 with the intention of leaving no stone unturned in the search for improvement.
SIH brought in a consulting firm to work with leaders and staff to identify specific opportunities. They found almost $25 million in additional annual revenue through improved denials management and billing protocols. In addition, approximately $35 million could be saved each year by reducing unwarranted variability, ensuring strong labor productivity management, and improving supply chain functions (e.g., utilization and contract arrangements).
These key savings were identified.
Clinical variation and length of stay. VisionSIH focused on reducing unwarranted clinical variation in three patient diagnoses: sepsis, chronic obstructive pulmonary disease, and pneumonia. Hospital staff and consultants assessed and refined SIH’s existing clinical pathways for these three conditions. For example, the sepsis review involved discussing early sepsis identification, resuscitation, and inpatient management. Then, teams met with medical committees to drive revised pathway adherence through physician education and electronic health record (EHR) reminders.
Linen. By comparing the pounds of linen that SIH used per adjusted occupied bed against national benchmarks, the consultants found that SIH’s linen usage was somewhat high. To learn more, they reviewed the vendor contract, invoices, and inventory par levels and floor stocks.
This analysis revealed that actual linen usage was lower than the amount delivered, and the reason was due to a minimum threshold clause in the contract. SIH was being charged an extra fee whenever it did not use a previously negotiated amount of delivered linen.
After vendor negotiations to eliminate the minimum threshold, SIH is saving $294,000 per year, and linen amounts delivered better match actual usage.
Health benefit reductions. When a benchmarking analysis showed that SIH had a rich employee health plan compared with other health systems, the self-insured employer explored how to reduce costs without shifting too much financial burden to employees.
Recognizing that many staff sought care outside SIH, leaders offered incentives for them to use SIH’s physician group and hospitals. By keeping care inside the health system, clinicians could better manage high-cost cases.
The health plan now offers four tiers with varying deductibles and copayments depending on where employees and their families agree to seek care. Employees who stay within SIH have significantly lower out-of-pocket costs than those who go elsewhere for care.
This health benefit plan is saving SIH approximately $4.45 million a year, and employees have not seen their out-of-pocket premiums, copayments, or deductibles rise for two years.
Southern Illinois Healthcare Cost Savings
Previously, savings were tracked manually using Excel. These reports illustrated short-term progress but were unsustainable over time. To ensure continued tracking, SIH implemented a data analytics and tracking solution in 2016.
The new system eliminated the time-consuming task of searching through reports to determine whether the organization was maintaining year-over-year revenue and cost improvements. The tool pulls data from SIH’s cost accounting system, general ledger, and other financial systems to track all 200 opportunities identified through VisionSIH. Analytic algorithms are performed to identify specific shortfalls and opportunities for improvement.
The tracking system creates a monthly executive summary, which provides an at-a-glance progress overview toward fiscal year baseline goals. Other reports are available to help senior leaders compare savings by month or area as well as actual versus committed savings.
Drill-down capabilities enable leaders to identify outliers (e.g., departments, providers, supply types) that contribute to shortfalls. For example, VisionSIH identified on-call nursing coverage as a savings opportunity. Some departments had too many nurses on call given patient volumes. By limiting on-call nurses to an appropriate number based on actual call back utilization statistics, the health system saved approximately $200,000 in the first year of VisionSIH.
However, over time, the tracking tool showed that overall on-call spending had started to rise again. By drilling down into the data, SIH leaders were able to determine which departments and units had the highest on-call spend compared with actual utilization. This showcased the need for further education and policy development to ensure expected savings are sustained.
Another example is nesiritide, an expensive heart failure drug. Cost effective alternatives to nesiritide are available in SIH’s formulary, and physicians are encouraged to choose these options when clinically appropriate.
The tool allows pharmacy and physician leaders to easily see organizational and individual physician progress in reducing nesiritide use to achieve the annual $33,840 reduction goal.
Determining Tracking Preferences
SIH leaders needed to decide how to track a large initiative like VisionSIH. They found that less is sometimes more. Initially, the tracking tool would provide leaders with details on all 200 improvement opportunities, but busy executives would be overwhelmed with this amount of detail. As a result, the executive summary dashboard was narrowed to only highlight unfavorable variances, allowing leaders to zero in on risk areas.
There were approximately 75 unfavorable variances. While this gave leaders a wide-angle view, it was difficult for them to identify priorities. Eventually, the dashboard was revised again to highlight the top 10 unfavorable variances, based on potential savings or revenues.
Moving Toward Advanced Analytics
Once SIH’s new EHR and the tracking system are integrated, quality data and other information will be incorporated into performance reports. SIH also plans to launch cost algorithms that will continuously search for cost variations among similar inpatient stays.
Jennifer Ittner is director of continuous improvement, Strata Decision Technology.
Todd Wolk is senior director, Huron Consulting Group.
Greg Wright, FHFMA, is corporate director, finance, Southern Illinois Healthcare and a member and past president of HFMA’s Southern Illinois Chapter.