Provider network Allina Health, Minneapolis, is outsourcing its IT data warehousing, analytics and performance improvement areas to Health Catalyst, Salt Lake City, in a deal designed to foster cost-cutting and quality improvements.
The 10-year deal, which includes gain-sharing and an equity investment, carries a potential price tag of about $108 million, the organizations have announced.
Only 80% of the contract cost is fixed, said Health Catalyst CEO Dan Burton. The remaining 20%, roughly $20 million, “is at risk, tied to specified outcomes and improvement goals that we develop jointly,” Burton said.
Both Allina and Health Catalyst will use data analytics to identify potential improvement targets. A committee of executives from both organizations will set goals for the risk-sharing, quality and cost-improvement portions of the contract.
“It's a little intimidating, because it requires you to put your money where your mouth is,” Burton said. “We do believe one of the gaps over the decade with healthcare technology is we've spent tens of billions of dollars on healthcare technology without the accountability to make sure we move the needle. This is the kind of structure that keeps everybody focused on meaningful outcomes improvement.”
Sixty Allina employees have accepted employment at Health Catalyst as part of the deal. The Health Catalyst newcomers will receive an ownership interest in the company, which ranked 17th on Modern Healthcare's 100 Best Places to Work in Healthcare in 2014. Also, while not specifying the equity share, Burton acknowledged that Allina has become “a meaningful owner in Health Catalyst.”
Allina, a 12-hospital, 90-clinic provider network, is not alone in taking an ownership stake in Health Catalyst. In 2013, Health Catalyst scored a series of cash and prestige coups when the investment arms of other well-known provider organizations—Partners HealthCare, Boston; Kaiser Permanente, Oakland, Calif.; and Indiana University, Bloomington—invested $8 million and took equity in the company.
Allina was the first customer of Health Catalyst when the data warehouse developer formed in 2007, Burton said.
But Allina also had developed data-mining and analytics capabilities in-house that other healthcare organizations might be able to use, said Allina President and CEO Dr. Penny Wheeler. As the two organizations kept in touch, Allina learned that Health Catalyst was developing data analytics tools that Allina hadn't, “and we couldn't necessarily do that internally,” Wheeler said. Without the new tools, “We might not be able to invest in the services we wanted to.”
Health Catalyst could benefit from Allina's expertise in how to best implement and use new data analytics tools, she said. Allina is one of the original 32 Pioneer accountable care organizations, for example, and one of about a dozen that produced gross savings in 2012 and 2013.
Providers have been bulking up on data analytics contracts since the advent of ACOs and other performance-based payment mechanisms promoted under the Affordable Care Act.
“As we evolved independently, we realized they had the knowing part and we could do the doing part,” Wheeler said. “At this part of the evolution, the one plus one could be three.”
With the agreement, “They get some very smart people from our organization that have developed predictive models,” Wheeler said, while Allina will benefit as those former employees work in other organizations and learn from them.
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