Hospitals' investment in data analytics company reaps benefits

When UPMC wanted to commercialize its cost-management system, it turned to Health Catalyst, a company known for data warehousing.

Not only would Health Catalyst create a commercial-grade version, but it would also be able to sell and market it, something UPMC couldn't easily do on its own.

“They had the technology and data warehousing to create something for our own use that was much better than what we created ourselves,” said Rob DeMichiei, chief financial officer at the UPMC health system, which also is an investor in the company.Not only would Health Catalyst create a commercial-grade version, but it would also be able to sell and market it, something UPMC couldn't easily do on its own.

Health Catalyst, which had estimated revenue of $66.7 million in 2016, has attracted more than 50 clients, including systems with more than 400 hospitals and 4,000 clinics. For those clients, the company uses data combined with professional services to improve healthcare outcomes.

To do that, it offers a data platform, applications for analyzing the data and pushing insights into workflow systems, and services for making recommended improvements based on that analysis. The company can work with and combine data from many sources. “Now we have what we believe is the most comprehensive data transformation capability,” Health Catalyst CEO Dan Burton said.

Health Catalyst applies machine learning and natural language processing to analyze that data. For a health system using Health Catalyst's care-management applications suite, Health Catalyst will identify and risk-stratify patients so the system includes the right patients in care management, basing some of the decisions on an algorithm that predicts which patients are most likely to respond well. Machine learning is inherently part of that risk stratification, allowing the company to make better and better predictions over time.

“So much of the data is unstructured, so having natural language processing is very important,” Burton said, as is machine learning.

North Carolina's Mission Health, for instance, wanted to lower readmissions, so it drew on Health Catalyst's data analytics to create a predictive model for readmission risk. Now, its readmission rate is 1.2 percentage points lower than that of peer institutions.

That's just one of many documented improvement outcomes Health Catalyst customers have achieved.

For some of its developments, Health Catalyst turns to its customers, 11 of which—including Partners HealthCare, Stanford Health and Cedars-Sinai Medical Center—are also investors, along with UPMC. “It helps to transition the mindset from 'You're the vendor, I'm the health system and maybe we're going to have an adversarial relationship' to working together,” Burton said.

“When you have an opportunity as a health system to be an owner, you think differently about the partnership. It's much longer term,” he said. To that end, Burton intends relationships with clients to last not just mere months or a few years but decades.

Allina Health, one of those client-investors, turned to Health Catalyst because of its data-analyzing capabilities and because their cultures meshed well. “We believe that data-driven improvement is our obligation,” said Dr. Tim Sielaff, Allina's chief medical officer. “It provides quality, safety and business differentiation that allows us to perform well.”

For instance, after Allina used predictive analytics to identify which patients were at risk and intervened in care, 30-day potentially preventable readmissions dropped 10.3%.

Like Allina, UPMC went to Health Catalyst in part because of the organization's culture, DeMichiei said. The health system considers Health Catalyst to be “a center for us to use for application development,” he said.

Given its investors and the work it's doing for clients, Health Catalyst is in a good position for future growth, said Jeff Sage, a healthcare adviser with PA Consulting.

What's more, Sage said, Health Catalyst has few—if any—competitors up to its level of services and technology.

“From a market dominance perspective, I don't see that changing anytime soon,” he said. “That's why you see their clients investing in them. Their track record is phenomenal.”