Research by Haydn Bush

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H&HN has created this exclusive yearlong series called Fiscal Fitness with the support of the VHA. Finding ways to rein in expenses without sacrificing quality and safety is imperative for hospitals as they struggle to maintain financial viability in a shifting payment system even as their operational costs continue to climb. Over the next several months, we'll look at everything from the supply chain to pharmacy, IT and more. Follow the Fiscal Fitness series in our magazine and in our e-newletter H&HN Daily.

In an era when hospitals increasingly are expected to perform better while using fewer resources, how can leaders leverage their technology investments to improve patient care and bottom lines? The view from the field suggests that competing in a transformed delivery system requires hospitals to invest not just in traditional areas like electronic medical records and telemedicine, but also increasingly in analytics capabilities tied to population health, even as their overall financial outlook is uncertain.

A recent report from PricewaterhouseCoopers estimates that academic medical centers stand to lose up to 10 percent of revenue from reform pressures and other reimbursement shifts in coming years. Despite those shortfalls, the report found that 90 percent of AMCs surveyed plan to hire more IT staff to manage data and systems, and 54 percent plan to collaborate with other research centers or medical centers to share EMRs over the next five years.

The benefits of early technology investments can be sizable. A 2011 report from Fitch Ratings, which analyzed 291 hospitals in its highest portfolio class, found that the 24 providers deemed Stage 6 or Stage 7 meaningful use-ready by Healthcare Information and Management Systems Society standards reported 46 percent higher revenue on average than the group as a whole. The IT-savvy providers also performed somewhat better on quality outcomes, experiencing a 1 percent decrease in length of stay in 2010.

What do you do when your hospital is fighting for financial survival, but you've got a long IT to-do list full of projects that could make or break your institution's future? A public hospital in Birmingham, Ala., finds a creative solution and aims for meaningful use. Running time: 4:39.

"Those organizations that have been stronger have been able to make the investment in IT, and have seen a return that's allowed them to outpace the performance of the rest of the market," James LeBuhn, an analyst with Fitch Ratings, says. "Clearly, the organizations that have had the financial wherewithal to do so have improved performance."

LeBuhn noted that early adopters also benefited from capital investments in EMRs and other capabilities years before federal incentives for those systems existed, and didn't need to spend as much money or staff time complying with meaningful use standards.

For hospitals on the other end of the adoption curve, who may be looking to implement EMRs in time to receive meaningful use payments, there are considerable hurdles. A recent survey of chief information officers by the Optum Institute for Sustainable Health found that 87 percent of hospitals surveyed have implemented an EMR, and 70 percent have attested successfully for Stage 1 meaningful use. However, the CIOs complained of unexpected costs in areas including interoperability, licensing agreements, system modifications, vendor support, upgrades and the purchasing of new systems.

Providers looking to partner with other health care institutions on patient data also face stumbling blocks; the PwC report found that only a fifth of health care organizations sharing data externally have a process for managing patient consent for data sharing.

Nevertheless, many observers believe that in the years to come providers that invest early in technology that supports greater analysis of patient data and population health infrastructure will be amply rewarded.

"[Early adopters] are able to track clinical trends and see what's resulting in readmissions," Fitch Analyst Adam Kates says. "It's nice to see management ahead of the curve."


Cooper Green Mercy Hospital | Birmingham, ALA.

While many hospitals currently are torn between daunting balance sheets and long IT to-do lists, few are fighting those dueling pressures as acutely as Cooper Green Mercy Hospital in Birmingham, Ala. The safety-net hospital, with an emergency department that's Birmingham's busiest with 36,000 visits a year, launched a new electronic medical record May 1, with plans to start the 90-day attestation period for federal meaningful use funding by the start of June.

All told, the system has 16 ongoing IT projects, including the implementation of physician archiving and communication systems, computerized provider order entry, a new revenue cycle system and a new data center.

Cooper Green is operated publicly via indigent care funds provided by Jefferson County, Ala. The county declared bankruptcy in November 2011, and in April, the hospital announced $6.7 million in across-the-board cuts, including 89 layoffs. "Getting capital funds is next to impossible," says Srikanth Karra, director of information services at Cooper Green. Instead, the hospital is tapping into its monthly operational funds to pay for the improvements.

Cooper Green also is taking an extremely cost-conscious approach to its EMR rollout. The system, developed by Medsphere, uses open source software originally developed by the Veterans Administration, saving the hospital money on software rights. All told, Karra expects to implement the EMR for roughly $2.3 million to $2.7 million. "All we had to pay for were implementation services," he says. The hospital also worked closely with county officials, Karra said, to explain the EMR's expected return on investment from meaningful use funding, ultimately getting permission from the county's attorney to expedite every contract. Hospital leaders also worked to assure vendors that the project was going forward regardless of the county's financial situation.

The payoff? If the hospital is able to attest successfully for meaningful use this year, the first payment will be for $2 million. Future payments will be based on discharges.


Northwestern Memorial Healthcare | Chicago

Five years ago, Northwestern Memorial Healthcare in Chicago first implemented a systemwide electronic medical record. But it wasn't until fairly recently that the hospital began seeing meaningful quality and financial outcomes from its EMR, Northwestern Chief Information Officer Tim Zoph says.

"The value piece is not in the initial implementation and adoption," Zoph says. "It really comes later on in what I would call an optimization phase. Once you actually have the technology in place and people get comfortable with it, it really allows you to analyze your organization."

At Northwestern, supporting the system's focus on continuous improvement has been a key end goal of IT investments: in 2011, the system launched 23 improvement projects involving more than 400,000 patients, which ultimately led to savings of roughly $24.9 million.

Beyond the cost savings, Northwestern is focused on fostering an overall culture of improvement and safety. One key area of focus is readmissions: last year, the hospital launched a major overhaul of care coordination processes for several key conditions, with a goal of reducing readmission rates for myocardial infarctions, heart failure and pneumonia. From a technology standpoint, the initiative included analytics to monitor the discharge status of patients, dashboards to track monthly readmission performance and new built-in appointment orders to keep in touch with patients post-discharge.

Ultimately, the program led to a 13 percent drop in readmissions. Zoph partially credits the ability to track patients closely after discharge. "We had the analytics to really study what was going on, and it gave us visibility into those areas that were most ripe for improvement," he says.


6 Strategies for Managing Technology Change

Over the last several decades, providers have had to adapt to several major changes requiring new technology infrastructure — from the introduction of DRGs in the 1980s through Y2K preparation, HIPAA compliance and now the requirements of the Affordable Care Act, notes Walter Reid, a vice president of product strategy with McKesson. But the pace of change is quickening. "Twenty-five years ago, there was a major [technology] initiative every seven to eight years, Reid says. "Now, what we used to consider major change is happening every two years." Reid recommends several strategies for keeping your organization ahead of technology trends and needs:

  1. Be "brutally honest" about your institution's ability to keep up with change.
  2. Informally network with other local providers on technology solutions and challenges, instead of relying on costly outside consulting expertise.
  3. Consider a "big bang" implementation of several new systems at once instead of phased projects, creating a greater sense of urgency in your organization.
  4. Move beyond project management and into program management, with a strategic focus on long-term value and adoption.
  5. Encourage your staff to get certified in new software and support their professional growth as IT champions, saving on downstream implementation and support costs.
  6. Reinvigorate cost accounting, benchmarking and service-line management systems to get a clearer sense of return on investment for technology spends.

Content by Health Forum, Sponsored by: VHA.