Zeroing in on cost-cutting: 100 Top Hospitals organizations use data, standardization to ferret out savings

Even as healthcare costs have been somewhat tamed in recent years, they remain a prominent target for patients, payers and regulators alike, prompting providers to continuously look for an edge in trimming expenses.

For top-performing hospitals and health systems, a sustained focus on strong quality metrics and efficiency initiatives has led to cost savings in multiple clinical service lines, according to a new study.

Initiatives focused on standardization and the use of robust data has led to lower costs for Truven Health Analytics' 100 Top Hospitals in four of six service lines: cardiology, gastroenterology, general medicine and pulmonary, according to an exclusive study conducted for Modern Healthcare by the Ann Arbor, Mich.-based research and data firm that is now owned by IBM Corp.

The analysis included 2,769 hospitals from Truven's annual 100 Top Hospitals study, which uses a variety of Medicare patient data to compare hospitals. Organizations are evaluated based on metrics such as mortality rates, 30-day readmissions and patient-satisfaction scores.

Truven evaluated costs from 2010 through 2014 by applying the CMS' ratio of cost to charges, which assesses the cost components of each patient's discharge from a hospital. The cost trends were then applied to the six service lines based on how facilities in the 100 Top Hospitals list performed compared with their peers.

According to Truven's analysis, facilities on the 100 Top Hospitals list spent $1,733 less per case in 2014 compared with their peers when considering combined cases in the cardiology, gastroenterology, general medicine and pulmonary service lines. Orthopedics and general surgery were the only two service lines studied where the 100 Top facilities didn't outperform other hospitals.

The study also found that for all patients in each service line, costs for routine services such as room charges and stays in intensive-care units were lower among the 100 Top facilities compared with their peers. By contrast, supply costs were consistently higher among the 100 Top, and drug costs were relatively equal and flat among both groups.

“It's surprising where the 100 Top are reducing cost and where they still remain pretty high,” said Jean Chenoweth, Truven's senior vice president of performance improvement and the 100 Top Hospitals program.

For the hospitals in Truven's 100 Top, the cost of drugs was the lowest cost factor per patient discharge expense, accounting for only $1,049 of a $12,497 average discharge total. Given the national concern surrounding soaring drug costs, the results were unexpected, said David Foster, lead scientist at Truven's Center for Healthcare Analytics. He concluded drugs were likely the lowest component because they are compared to more expensive charges such as those associated with ICU stays.

Many hospitals and systems have found ways to tackle rising drug costs by opting for generics over brand names, changing protocols for how often or which drugs are used, and partnering with pharmaceutical giants to negotiate discounts, said Kristopher Goetz, vice president of Kaufman Hall's strategic and financial planning practice.

Finding tactics to cut costs—such as holding the line on supply-chain spending and working to eliminate duplicative diagnostic testing—is a conversation hospital executives have been having for decades, said Goetz, who has expertise in hospital operations and finance. “Cost is nothing new, but what we are seeing these days are new ways to approach cost transformation.”

The emphasis on data has now provided hospitals with opportunities to find new ways to standardize care while also decreasing spending in particular service lines, Goetz added.

St. Joseph Mercy Ann Arbor (Mich.), which is on this year's 100 Top Hospitals roster, uses patient data to boost standardization of care in its internal medicine department, which has led to significant cost savings in that service line.

Since 2012, St. Joseph Mercy's 80 hospitalists have been meeting daily with nurse leaders, case managers, social workers and nutritionists for all of their patients. At the meetings, the team compares benchmark data to the patient's current condition. If a patient is being readmitted, the entire team will review the case, searching for quantifiable information to head off similar readmissions—for example, if medical issues arose or the patient lacked access to follow-up care. The team will also evaluate the patient's care plan after discharge.

The 537-bed teaching hospital has seen average length of stay for patients decrease in the past six years by 20%, from five days to an average of four days. Overall readmissions have also declined by 25% in the same period.

St. Joseph has reported relatively steady inpatient expenses per patient over the past five years. In 2010, inpatient expenses per discharge were $5,985 and rose to only $6,004 in 2014.

Dr. David Vandenberg, vice chair of internal medicine, said the initiative has saved approximately $10 million annually for the hospital, which sees approximately 21,000 to 22,000 inpatients a year.

“When you standardize around a best practice approach you're taking out wasted steps and resources, and that by design lowers cost but doesn't lower quality,” said David Brooks, president of St. Joseph Mercy. He said it's ingrained in the hospital's culture to find approaches that standardize care and lead to the best outcomes for patients. St. Joseph Mercy Ann Arbor has been on Truven's 100 Top Hospitals list eight times.

Christiana Care Health System, a two-hospital system in Wilmington, Del., has touted millions in cost savings with its infection-prevention program. Reduced rates of central line-associated blood stream infections and catheter-associated urinary tract infections in the intensive-care units, emergency departments and operating rooms have led to $10 million in cost savings, said Dr. Janice Nevin, CEO of Christiana Care. Christiana Care Health System has made Truven's 100 Top roster four times.

The ICU at Christiana Care's Wilmington (Del.) Hospital went nearly four years, from September 2011 to June 2015, without a central line-associated blood stream infection by implementing and emphasizing protocols such as increased monitoring and reinforcing proper hand hygiene.

Christiana also has improved patient data collection by service line. Quality metrics for every line is easily accessible and transparent to physicians, motivating them to improve, Nevin said. “We are driven around performance.”

Meanwhile, Advocate Lutheran General Hospital in Park Ridge, Ill., opened its Advocate Heart Institute clinic in 2015 to tackle cardiology costs. The clinic includes treatment for heart failure and chest pain patients. In a process integrated with the hospital, patients who come to the emergency department complaining of chest pain will be directed to the clinic if they don't require emergent care. This helps prevent unnecessary trips to the ED, said Dr. Leo Kelly, vice president of medical management for the hospital.

The readmission rate for heart failure patients at Lutheran General is 17.9%, which is lower than the 18.9% heart failure readmission rate for the highest-rated hospitals in the Crimson database, an Advisory Board Co. service used by Lutheran General that includes data from 800 hospitals. According to Truven's analysis, cardiology costs per patient discharge were $11,295 among the 100 Top facilities in 2014 compared with $11,725 among the peer group.

“We're making sure patients have the right resources at the right places at the right time,” said Barbara Weber, the hospital's chief operating officer. The 638-bed hospital has been on Truven's 100 Top Hospitals list 17 times.

Advocate Health Care, Lutheran's parent system, has also cut drug costs systemwide by developing a central service center for pharmaceuticals. Instead of buying prepackaged drugs, Advocate packages their meds—which they buy in bulk—at the centralized facility. The efforts have saved $2.1 million this year, Weber said.

Pharmaceutical spending was also the target of a cost-cutting initiative taken up by four-hospital Tanner Health System in Carrollton, Ga. The system set out to decrease drug spending in service lines that use medications the most, such as cardiology, infectious disease, oncology and surgery. Clinicians implemented evidence-based solutions to cut drug spending, such as opting for less expensive medications when appropriate or placing restrictions on ordering. The efforts have saved Tanner about $700,000 annually, said Carol Crews, Tanner's chief financial officer. Truven has recognized the health system four times in its annual 15 Top Health Systems list.

At Chesterfield, Mo.-based Mercy—which made Truven's 15 Top Health Systems list for the first time this year—physicians in the same service line meet to discuss specific initiatives, aiming to improve quality and also pare costs, said Shannon Sock, CFO of the 45-hospital system. For example, cardiologists teamed up on strategies to cut spending on preference items such as stents and pacemakers.

“To achieve the level of performance that is required, you really need all key stakeholders working in the same direction,” Sock said. “We need our physicians focused on the same objectives around quality and cost.”