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November 11, 2015 Readers Write No Comments

Supply Chain Data Meets Clinical Outcomes: The Holy Grail
By Andy Cole


The term “Holy Grail” has always been intertwined with stories of epic searches to find the Holy Chalice used at the Last Supper. From Dan Brown’s bestselling novel “The Da Vinci Code” to the always entertaining Spielberg/Lucas film “Indiana Jones and the Last Crusade,” fans have been drawn to the idea of finding something so elusive…so mysterious….so game-changing.

When I think about what it will take to dramatically change the cost, efficiency, and effectiveness of our healthcare system, the solutions too often seem as unattainable as the Grail itself. It dawned upon me that the “search for the Holy Grail” is a perfect metaphor for the ongoing efforts to deliver high-quality, medically-necessary and cost-effective healthcare across this country and beyond.

But as I think even deeper about the dilemma, I realize that the healthcare providers who are charged with solving this crisis already have the tools they need to do so. It’s at the tip of their fingertips. Literally.

For decades, healthcare providers had been in the dark about how much it cost to deliver their services. More importantly, thanks to inefficient reimbursement models, they really didn’t need to know. As long as payers (both private and public) paid them based on how much they charged, there was no incentive to truly understand those costs, and in turn, wrangle them in.

Soon, payers and policy makers realized this model was unsustainable and changes started to happen. Once they understood that reimbursement was driving care, they realized the only way to drive lower cost of care was to reduce reimbursement. With less money coming in the door for their services, healthcare providers had to undergo a paradigm shift. They had to cut costs wherever they could to meet the thin margins that were now in the marketplace. Efficiency was the name of the game, and classic cost-reduction strategies entered the arena.

Cut throat supply competition and Group Purchasing Organizations began playing a huge role in offering the lowest possible prices for supplies and bringing economies of scale to healthcare providers. CFOs began paying attention to how many supplies were being purchased and at what price. With a keen eye on the bottom line, cutting supply expense was usually low-hanging fruit that met their cost-saving objectives. With this need came slick analytic tools that aggregated supply and service spend data and clearly suggested areas for savings, whether that be utilizing a less-expensive vendor or taking advantage of a GPO contract.

We have fallen into our current state of “quality data” as an unintended consequence. Providers had historically focused on collecting data for every service they performed in order to receive maximum reimbursement from various payers. More services =  more money. As a result, claims data was serving only as an excellent vehicle to capture charges and little else was being done with it. As the environment shifted, and reimbursement focus shifted from fee-for-service to pay-for-value, the industry didn’t have to look very far to find the data they needed to analyze.

Since charge data provides a detailed representation of all of the services rendered in a healthcare facility, it was a logical next step to begin analyzing a patient’s data holistically, rather than just from an episode by episode basis. Payers and providers could now longitudinally piece together a patent’s entire health record and use it either increase reimbursement for positive outcomes or decrease it based on negative ones.

When the government bought in and incented providers to use certified EHRs, this only increased the amount of data that was collected. That’s where we find ourselves now — swimming in a sea of healthcare data. The objective now is to harness the power of data and take that next step to uncover new solutions to our cost problem.

With the right tools, we can now take a look at clinical outcomes and supply cost together, whether that’s for an individual patient stay, across many for the life of that patient, or all patients. For the moment, I’ll put myself in the shoes of the CFO of a multi-facility IDN.

Taking a deeper look at a cardiac rhythm management supply analytics reports may suggest that I could get a better deal on my pacemakers if I buy them from a vendor named Jolt instead of my current vendor, KickStart. In fact, with my agreement that I just signed with my GPO, I could save upwards of 20 percent this coming year if I convert to Jolt. A quick review online of Jolt products show no red flags. My chief cardiologist has heard good things and gives me the go ahead. I sign the deal and warm up my calculator to count my savings.

My argument is that there is a crucial step missing in that process, the one that takes into consideration the universal value of making that conversion. Having access to quality and outcomes-based data allows me to cross-analyze the cost of the new pacemakers with the outcomes of patients that use them across my facilities. Perhaps I would save 20 percent on them next year, but I see that patients who have them have higher readmission rates, which would result in Medicare penalties and reduce my reimbursement.

Additionally, I am now taking on risk for my patients because of the Accountable Care Organization arrangement we have negotiated with a major private payer. My goal is to deliver the highest quality care at the lowest cost. The payer gives me a set fee for each “covered life” I take on. If a patient utilizes an over-abundance of services in my network, I will most likely lose money on them. However, if I keep them healthy and can avoid expensive treatments and services, I keep anything left over from my payment. Since data is telling me that patients with Jolt pacemakers are twice as likely to take a costly trip to the ER than those with KickStart’s, I will take a much harder look to determine if that conversion truly makes sense.

With this “Eureka” moment fresh on the minds of healthcare CFOs around the country, they are now tasked with changing the paradigm of purchasing. Marrying clinical outcomes and supply chain costs takes new tools, a new culture, and a new vision. It is an essential shift that will help providers and payers stay financially solvent, and in the end, keep the patient healthier.

Our industry has the information we need to make smarter purchasing decisions. We just need to act on it. We actually have an advantage over Indiana Jones, who traveled the globe searching for his Holy Grail. We already have the Holy Grail we’ve been searching for at our fingertips. All we need is to look closely, smartly, and polish it to a glittering shine. This is a game changer.

Andy Cole is national director of PremierConnect Supply Chain solutions at Premier,Inc.

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