How to Drive ROI from Your Healthcare Projects: Practical Tools, Templates, and How Tos

© 2013 Health Catalyst
www.healthcatalyst.com
Proprietary and Confidential
www.healthcatalyst.comProprietary and Confidential
Bobbi Brown (Vice President Financial Engagement)
Leslie Hough Falk (RN, MBA, PMP)
How to Drive ROI in Your Health
Care Improvement Projects

Agenda
• Why IT ROI is increasingly important in
Health Care improvement projects
• ROI in Health Care versus other industries
• Health Catalyst 4- step approach for driving ROI
2

Poll Question #1
What is your primary area of focus?
 Physician/Provider
 Nursing
 Finance
 Information System
 Other
3

The Increasing Importance of
ROI in Health Care
Improvement Projects
4

Stagnating Margins
5
Source: Medpac report March 2013
-20%
-15%
-10%
-5%
0%
5%
10%
15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Medicare Margins for Hospitals
IP
OP
Overall

Competing Trends
6
Accountable Care
Organizations
Shared savings
for groups of
doctors and
hospitals, and
other providers who deliver
quality care and spend wisely.
Bundled Payments
Payment
arrangements
that include
financial and
performance accountability for
episodes of care.
Health Care
Organizations
Improve Quality Reduce Costs
Increase Value
Value Based Purchasing
Links payment
more directly to
the quality of care.
Population Health
Balancing the need
for individuals and
populations while
caring for a larger
number of patients.
Reduced Readmissions
Becoming more
efficient at
preventing services
that once
contributed to the bottom line.
Eliminate Waste
Improving quality
and reducing costs
while meeting
expanded regulatory data
collection and surveillance
requirements.

IT ROI in Health Care versus
Other Industries
7

ROI Measurements and
Complexity of Environment
8
Source: Journal of Healthcare Information Management — Vol. 17, No. 4
Phase 1
Investments with Direct Cost
Savings or Revenue Increases
(e.g. financial systems)
Phase 2
Investments to improve
Productivity and Reporting (e.g.
department systems)
Phase 3
Investments to improve Quality of
Product or Service (e.g. clinical
systems)
More
Hard
Complexity of the Environment into which
IT Investment is Made
Easy
Measurement of
Return on
Investment
Less

Unique Health Care
Governance and Payment Model
9
Source: Journal of Healthcare Information Management — Vol. 17, No. 4
Physicians
Patient
Other
Caregivers
Facility
Payer
PaysPays Enrolls
Provides
care to

HIMSS Health Value STEPS Model
10
Source: HIMSS Resource Center. http://www.himss.org/valuesuite

Use Case Example
Scenario: Clinical Improvement project
Project Goals: Shift clinical resources from surveillance
to interventions, and reduce Catheter-Associated Urinary
Tract Infections by XX %
Team: Providers, nursing, patient safety and quality,
information systems
Missing results: Financial impact of reduced CAUTIs
such as length of stay and improved productivity related
to decreased surveillance activities
Team feedback: “Yes, we should consider LOS and
productivity gains. However, we don’t track that. I’m sure
someone else in the hospital does but we are clinicians.”
11

Poll Question #2
Do you currently measure ROI in your Health
Care IT improvement projects?
 Always
 Sometimes
 Not usually
 No
 Unsure
12

The Health Catalyst 4-step
ROI Approach
13

Step 4: Evaluate Costs,
Revenue & Direct Benefits
Step 3: Recruit, Train,
Plan and Implement
Step 2: Begin to
Quantify ROI
Four Step Approach
14
Step 1: Define the Project
and Business Need
• State proposal
• Justify business need

Project Proposal:
Heart Failure Readmission Analytics
Proposal
Expand capabilities of the enterprise data warehouse and
purchase an advanced heart failure application with a total
cost of $400,000. Focus will be readmission rate.
Business Need
Cardiovascular clinical program is our largest program.
Heart failure readmit rate has been climbing over the past
three years and is now above the national average at 26%.
Due to the readmit rate in 2014, Sample Medical Center
received a penalty of 0.4% from CMS.
Sample Proposal
15
• State the proposal succinctly
in one to two sentences
• The business need is a
justification for the proposal
that ties into the overall
organization strategy

Four Step Approach
16
• Identify all costs
• Estimate benefits
• Identify direct benefits
• Identify indirect or
intangible benefits and
set improvement targets
• Identify all revenue
opportunities
• Document assumptions
• Perform a sensitivity
analysis
• Identify risks and
alternatives
Plan and Implement
Step 2: Begin to
Quantify ROI
and Business Need

Step Two:
Direct Benefit Categories
17
General categories –
I. Enhanced efficiency and productivity
• Examples: reductions in FTEs or less overtime; business
process improvement; supply chain standardization allowing
lower supply costs; increased departmental capacity; and
reductions in capital expense

Customer Example
Enhanced Efficiency and Productivity
18
“Our clinicians thought that the EHR would be a silver bullet to get the data they
needed for quality improvement and operational reporting and they blamed IT when the
information wasn’t forthcoming. …Implementing an EDW should really be an appendix
to the implementation of an EHR because the surge of data is just unbelievable and the
appetite for it is huge.”
– Myra Davis, M.E., VP of Information Services.
Objective
• Meet the increasing
demands by clinicians and
operations for EHR data
and reports
• Reduce reporting costs
and free IT resources to
focus on analysis versus
report writing
• Reduce turnaround time
on remaining EHR report
requests
Health Catalyst Solution
• Late-Binding™ Data
Warehouse
• Foundational Applications
• Discovery Applications
• Advanced Applications
• Installation Services
• Improvement Services
Results to date
• 67% average savings on
labor costs
• Average time to build
reports declined from 97
hours to under 30 hours
• 1 EDW report = 10 EHR
reports
• 25% faster turnaround on
remaining EHR reports

Step Two:
Direct Benefit Categories
General categories –
I. Enhanced efficiency and productivity
• Examples: reductions in FTEs or less overtime; business
process improvement; supply chain standardization allowing
lower supply costs; increased departmental capacity; and
reductions in capital expense
II. Clinical improvement and waste reduction
• Examples: lowering LOS; reductions in uncompensated
hospital readmissions; lower medication cost per case or per
capita; fewer ICU days; and patient safety improvements
leading to fewer complications or medical errors
19

Ordering Waste Workflow Waste Defect Waste
Ordering of tests that are
neither diagnostic nor
contributory
Variation in OR room
turnover (cycle time) or
Emergency Care wait time
ADEs, transfusion reactions,
pressure ulcers, HAIs, VTE,
falls, wrong surgery
20
Types of Waste
Variation in OR room
turnover (cycle time) or
Emergency Care wait times
ADEs, transfusion reactions,
pressure ulcers, HAIs, VTE,
falls, wrong surgery

Customer Example
Clinical Improvement
21
21
Objective
• Define Heart Failure (HF)
baseline measures for 30
and 90-day readmissions
rates
• Implement evidence-
based practice
interventions to drive HF
readmission rate
reductions
• Establish balance metrics
including ED visits,
observation days and
patient satisfaction
• Develop sustaining
processes for evaluating
readmission rates to
ensure continuous process
improvement
• Late-Binding TM data
warehouse that enables
faster time-to-value
• Integration of clinical,
patient satisfaction and
financial data to establish
baseline, ongoing and
balance measures
• Discovery, Foundational
and Advanced HF
applications including
cohort finder, registry and
evidence- based clinical
content
• Healthcare analytic
visualization including
gauges and trend lines for
at-a-glance view
Results to date
• Seasonally adjusted rate
reduction of 21% in 30-day
and 14% in 90-day HF
readmissions
• 2X increase in the
number of phone calls
made to patients within 48
hours of discharge
• Average of 63 % increase
in physician medication
reconciliation within 48
hours of discharge
• Follow-up appointment
intervention baseline and
balance measures
established

Customer Example
Ordering Waste
22
“We knew we couldn’t completely create predictor models, as science isn’t that refined.
But we have reduced the number of chest X-rays to a very respectable level. We have
been able to minimize quite a bit of waste in other areas too, so overall, this approach
in using the analytics has really helped us to manage our disease processes”.
Dr. Charles Macias, TCH Attending Physician and Director
Evidence Based Outcome Center.
Objective
• Improve clinical outcome
for asthma patients across
the care continue
• Better manage populations
in a new Valued Based
Purchasing environment
• Measure and ensure
sustained clinical quality
improvements
• Late-Binding™ Data
Warehouse
• Key Process Analysis
(KPA) Application
• Population Analytics
Advanced Application-
Asthma Module
• Installation Services
• Clinical Improvement
Services
Results to date
• Decreased average LOS
by 11 hours
• Achieved and sustained
a 49% decrease in
unnecessary Chest
X-rays over 16 months
• 80% order set utilization
…67% sustained increase
over 8 months
• 90% usage of asthma
action plan by providers

Step Two: Indirect Benefits and
Revenue Opportunities
• Can be more difficult to measure
• Longer-term benefits
• Example: an improved medical outcome such as a
reduction in future hospitalizations associated with
neonatal respiratory distress syndrome (RDS), which will
require long-term analysis to reveal an impact on costs
23

Customer Example
Indirect Benefits: Opportunity Cost
24
Objective
• Define CLABSI and CA-
UTI baseline and on-going
CLABSI and CA-UTI rate
measures
• Implement evidence-
based practice
interventions to drive
CLABSI and CA-UTI rate
reductions
• Leverage National
Healthcare Safety Network
(NHSN) definitions and
calculation algorithms
• Shift clinical resources
from surveillance and
chart abstraction to
interventions
• Late-Binding TM data
warehouse that enables
faster time-to-value
• Discovery, Foundational
and Advanced ID
applications including
cohort finder, registry and
evidence- based clinical
content
• IDEA platform that
tracked intervention
compliance within days
versus months
• Visualization and Gantt
charts for clinicians that
provide data behind
NHSN algorithm results
in one consolidated view
Results to date
• Surveillance requirements
reduced by 90%
• Increased clinical
resources on the floor to
drive interventions
• Opportunity costs savings
exceeding an estimated
$1M in year 1 and $100K
annually as a result of not
purchasing, maintaining
and supporting a one-off
measurement and tracking
system
• 164% increase in CLABSI
maintenance bundle
compliance

Customer Example
Shared Savings
• 75 percent reduction in rate of
elective deliveries occurring prior
to 39 weeks of gestation in the
first six months
• 6-figure bonus payment from
payer for exceeding target
reduction rate
25

Sensitivity and Risk Analysis
Examples
Sensitivity Analysis- modeling various assumptions
• What if we can lower the readmit rate by 20%?
• What if we make two follow-up calls?
• What if we use a nurse for all follow-up calls?
Risk Analysis- describing concerns and tactics
• Physician lead is new in position
• Finance will provide education
• Nurse manager respected in position and can assist in orientation
26

Health Catalyst Clinical
Improvement Financial Tool
• Financial framework to help clinicians work with their
finance team member(s) to estimate quantitative and
qualitative costs and benefits
• Download the ROI Executive Brief and Tool at:
www.healthcatalyst.com/driveroi
27

Four Step Approach
28
• Establish multi-disciplinary
outcomes-improvement
teams
• Agree on business
objectives and an Aim
statement
• Agree on ROI measures
• Provide timely executive
updates
Plan and Implement
Step 2: Begin to
Quantify ROI
and Business Need

Accomplishments Next Steps Issues / Help needed
Cardiovascular: Heart Failure Date: [complete] Overall Status
Risks and Uncertainties
Recruit /Train Kickoff AIM Intervention Rollout plan Results
Month Year Month Year Month Year Month Year Month Year Month/Year
Leadership team
Mission, charter,
roles confirmed
Review draft cohort
and data
Finalize cohort Define rollout plan Review initial results
Content and
Analytics Leader
Review AIM options
Data quality issues
identified
Identify
intervention(s)
Guidance team
validation
Implementation plan
adjusted
Guidance team
Best practice
gathering
Direct observation Direct observation
Solicit front-line plan
input
Review lessons
learned
Workgroup team
Profile prelim. data
and cohort
Prioritize, select AIM Solicit front line input Finalize rollout plan
Create AIM statement
#2
Training workshop 2-3 AIM candidates
Additional cohort
criteria
Analytics dev & test
Guidance team
validation
Repeat process
Guidance team
validation
Guidance team
validation
Project Progress
Key
Not
started
In
process
Done
well
Some
concerns
Strong
concerns
Sample Long
Term AIM Goal
To achieve and sustain a 30% reduction in the 30-day and a 15% reduction in 90-day all cause readmission rates for patients with
heart failure by November 2014, and sustained reduction in readmission rates through 2015.
Short Term Project
Goal
Define and rollout 30-day and 90-day baseline measures and three process interventions: medication reconciliation; post discharge appointment;
and,
follow-up phone call by January 1, 2014 - track compliance toward long-term heart failures readmission rate reductions.
Launch/Rolloutdate:XX
Key Success and Financial Measures Target Actuals
Readmission rates: 30-day and 90-day %
Balance measures: ED visits and observation stays #
Intervention compliance rates %
Project costs (e.g., resources, travel, healthcare care analytic apps …) $
Opportunity costs (e.g., not purchasing a Point Solution, no reduction in Medicare reimbursements …) $
Direct benefits: productivity (e.g., previous manual data pulls…); waste reduction (e.g., length of stay….) $
Indirect benefits (e.g., patient satisfaction…) $
Long term project ROI %

Four Step Approach
30
• Identify all project costs
• Ensure nothing else has
changed
• Perform Financial ROI
calculations
• Review ROI calculations
with the team
• Make adjustments
• Monitor and ensure
sustained results
Plan and Implement
Step 2: Begin to
Quantify ROI
and Business Need

Proprietary and Confidential31 31
Clinical Improvement Financial Tool: Heart Failure
Financial Analysis
Project Cost Components Initial Year 1 Year 2 Year 3 Year 4
Clinical specialist - 173,056 178,248 183,595 189,103
Materials - 5,000 5,150 5,305 5,464
Other - Specify - - - - -
Total Non IT Project Costs -$ 178,056$ 183,398$ 188,900$ 194,567$
IT Cost Components
EDW Core 40,000$ -$ -$ -$ -$
Analytical Applications
Advanced Healthcare Apps - 400,000 - - -
Annual Maintenance and Support - 65,000 65,000 65,000
Total IT 40,000$ 400,000$ 65,000$ 65,000$ 65,000$
Total Costs 40,000$ 578,056$ 248,398$ 253,900$ 259,567$
Opportunity or Indirect Benefits/Savings
Indirect Benefits
Cost avoidance-software purchase - 500,000 - - -
Other-maintenance - 85,000 85,000 85,000
Other-ongoing - - - - -
Total Indirect Benefits -$ 500,000$ 85,000$ 85,000$ 85,000$
Direct Benefits/Savings Initial Year 1 Year 2 Year 3 Year 4
Efficiency
Nurse redeployment -$ 346,112$ 356,495$ 367,190$ 378,206$
Clinical Improvement/Waste Reduction
Reduction in readmits - 408,000 420,240 432,847 445,833
Reduction in LOS - - - - -
Total Direct Benefits -$ 754,112$ 776,735$ 800,037$ 824,039$
Total Benefits -$ 1,254,112$ 861,735$ 885,037$ 909,039$
Total Direct Benefits -$ 754,112$ 776,735$ 800,037$ 824,039$
(Less) Total Project Costs (40,000) (578,056) (248,398) (253,900) (259,567)
Improvement due to Direct Benefits (40,000)$ 176,056$ 528,338$ 546,138$ 564,472$
Total Benefits -$ 1,254,112$ 861,735$ 885,037$ 909,039$
(Less) Total Project Costs (40,000) (578,056) (248,398) (253,900) (259,567)
Improvement due to Total Benefits (40,000)$ 676,056$ 613,338$ 631,138$ 649,472$
Financial Return Calculations
Direct Benefits All Benefits
ROI 108% 168%
IRR 568% 1681%
NPV $1,753,242 $2,288,383
Benefit to Cost 2.0 2.6
Payback Timing 9.8 months 5.9 months

The Opportunity for Change
Taking the next step…
• Download the Health Catalyst
ROI Executive Brief
www.healthcatalyst.com/driveroi
• Contact us to learn more about
our solutions, ROI modeling
and communication tools
www.healthcatalyst.com/company/contact-us
32

Questions
33

Presenters
Bobbi Brown, Vice President of Financial Engagement, Health
Catalyst. Ms. Brown started her healthcare career with software
sales and service at McKesson in the Technology Solutions Group.
She worked at Intermountain Healthcare before moving to Sutter
Health and, later, Kaiser Permanente, where she served as Vice
President of Financial Planning and Performance. At Intermountain
Health Care, she partnered with clinical teams to analyze and
measure financial impact of the clinical programs. She holds an
MBA from the Thunderbird School of Global Management as well
as a BA in Spanish and Education from Misericordia University.
Leslie Hough Falk, RN, MBA, PMP, Health Catalyst. Prior to
joining Health Catalyst, Leslie held positions as a Nurse
Informaticist, Director of Biomedical Engineering, Clinical Engineer
for Kaiser Permanente-Northern Region and Pediatric ICU RN.
Ms. Falk also worked with Hewlett-Packard in several clinical,
marketing, sales and support leadership roles. She holds a Master
of Science degree in Community Counseling from Seattle Pacific
University as well as an MBA and Bachelor of Science in
Engineering from the University of Nevada, Las Vegas. She is also
a certified Project Management Professional (PMP), Lean Green
Belt and Information Privacy Professional (CIPP/CIPP IT).

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