High-quality hospitals provide lower cost care for 82% of diagnoses, analysis reveals

Reviewed by Kate Anderton, B.Sc. (Editor)Oct 3 2018

High-quality hospitals deliver lower-cost care for 82% of diagnoses, according to a new analysis that Advisory Board released today on variations in care that do not improve care costs or patient outcomes.

The data from Advisory Board's analysis of 468 hospitals indicate a typical facility could save up to $29 million annually by delivering care in line with cost benchmarks for high-quality hospitals. "Achieving a realistic chunk of this savings opportunity, however, will require most health systems to rethink how they prioritize, set and embed care standards," said Steven Berkow, Executive Director, Research at Advisory Board, an Optum, Inc. business.

Clinical leaders have long sought to improve care quality by reducing unwarranted care variation. Health system CEOs and CFOs are now counting on this clinical strategy to help bend the healthcare cost curve as well. System savings goals from care variation reduction (CVR) increasingly range from $50 to $150 million. In the latest Annual Health Care CEO Survey, C-level health system executives told Advisory Board that their No. 1 concern for 2018 is preparing the enterprise for sustainable cost control and No. 2 is innovative approaches to expense reduction. According to Mr. Berkow, "CVR is one of the few avenues for generating the level of savings needed to withstand downward pressures on hospital revenues without negatively impacting care, and hopefully improving it."

Safely Bending the Healthcare Cost Curve

Many health systems have sought evidence that the potential savings from CVR can be large enough to help bend the healthcare cost curve—and achievable without compromising care quality and outcomes. At their request, Advisory Board analyzed recent cost and quality data from more than 20 million deidentified patients across 468 hospitals. The resulting research shows that meaningful CVR is both attainable and more effective than traditional cost-cutting.

"Our high-performer benchmark is based on high-quality care, not low cost," explained Veena Lanka, MD, Senior Director, Research at Advisory Board. More specifically, Advisory Board defined a separate top-quality cohort using four well-established patient outcome indicators, like complication rate, and found that these high-quality hospitals typically delivered lower-cost care for comparable patients.

A typical hospital spends up to 30% more to deliver care with comparable or lower-quality outcomes than the top-performing cohort. Dr. Lanka underscored that "Eliminating this cost gap entirely is not realistic due to underlying clinical, demographic, and operational differences between organizations that are difficult to fully control for within study design." But multimillion dollar savings are achievable by reducing unwarranted variation. "Closing just a quarter of the cost gap for less than 10% of the conditions we analyzed could net over $4 million in annual savings for a typical hospital and over $40 million for 10-hospital system—without compromising quality."

Methodist Le Bonheur Healthcare's CVR Journey

"Embarking on a journey to reduce care variation can be challenging, but our success is due to dedicated teams of physicians, nurses and administrators, all working toward the common goal of improving every life touched at Methodist Le Bonheur Healthcare," said Arthur Townsend IV, MD, MBA, Chief Clinical Transformation Officer for Methodist Le Bonheur Healthcare.

Methodist Le Bonheur Healthcare (MLH) is an integrated, not-for-profit healthcare delivery system based in Memphis, Tennessee serving the greater metropolitan area including portions of eastern Arkansas and northern Mississippi.

Methodist began its CVR journey in 2014, supported by data and analytics tools from Advisory Board Technology, which is now part of Optum. The initial projects addressed unwarranted variation in utilization of laboratory tests, and packed red blood cell transfusions. These initiatives exceeded expectations for success, and in March 2017 the scope was expanded to address clinical conditions.

Clinical Consensus Groups (CCGs) including subject matter experts, physicians, nurses, and administrative champions were formed to develop care standards. The first two CCGs addressed variation in care and clinical documentation for stroke and sepsis. Both projects resulted in care standardization that greatly benefitted patients. By Q2 2018, they yielded more than $800,000 in cost savings and revenue in a quarter for the Methodist Le Bonheur Healthcare system.

"We see care variation initiative as the next frontier in improving overall quality and significant cost reduction across the system through physician leadership," said Michael Ugwueke, president for Methodist Le Bonheur Healthcare.

The next project Methodist is undertaking started in August. It addresses variation in treatment of atrial fibrillation.

The Advisory Board's data set for this analysis includes cost and quality data spanning April 2014 to March 2017 for a national cohort of 468 individual hospitals. The sample set includes more than 20 million deidentified patients (from discharge data) across 13 service lines and 983 diagnosis subgroups. High performers were determined solely by care quality indicators, specifically patient mortality rate, complication rate, readmission rate, and length of stay.