U.S. hospital spending on management consultants has been creeping steadily upward for decades. In the last three years alone, hospitals increased their investment in consultants from $45 billion annually in 2017 to an estimated $63 billion in 2019, according to Consultants.us. Typical engagements for a mid-sized hospital run in the neighborhood of $1 million a month – a hefty cost for organizations struggling to maintain already slim margins.
Despite the price tag, it is increasingly common for health systems to engage consultants on an ongoing basis as they grapple with the demands of payment reform, new technology requirements, and increased competition. In most cases, consultants deliver enough value to justify their cost. They also come with their own well-known set of challenges. A recent survey of hospitals and health systems by the Healthcare Information Management Systems Society (HIMSS) surfaced several concerns about working with consultants, including scope creep, budget overruns, delays, and undelivered services.
Fortunately, for many improvement initiatives, hospitals and health systems are more capable than they might think of becoming their own consultants by making skilled use of their data and personnel.
The problem: prioritizing improvement initiatives
The urge to hire consultants is easy enough to understand. Organizations bracing for the shift to value-based care are laser focused on reducing costs and improving quality. The question they struggle with is, where to begin. The sheer number and variety of possible cost-reduction and quality-improvement initiatives can be overwhelming.
Consultants offer the tried and true path to an answer. It’s no coincidence that spending on healthcare consultants has skyrocketed over the last several years. Organizations struggling with the wind-shear of change in the industry are eager for someone to steer them through the turbulence. Hospital boards, conservative by nature, have been more inclined to spend on the consensus solution rather than risk a new approach.
At Care New England Health System, and Southern Illinois Healthcare, a new approach is exactly what got our organizations off the consultant merry-go-round and taught us to trust our own capacity for creative problem-solving.
How did we do it? In broad brush strokes, we followed a three-step process that continues to this day. First, we leverage our own data to uncover improvement opportunities rather than hand it off to a consultant to analyze. Second, we engage our teams in dialogue around the opportunities, guided by trust in each other and our shared values rather than by an outside organization. And third, we track every improvement project and the associated savings to be sure we stay on track.
It all starts with data
We had engaged seven of the top 10 healthcare management consulting firms over the span of several years at Care New England Health System. Each engagement was different, with varying outcomes. But after a recent leadership transition, the decision was made to stop using outside consultants in favor of building internal capacity for improvement.
At Southern Illinois Healthcare, after our last engagement with a management consultant, four years ago, we were handed 70 improvement opportunities focused on operational areas such as labor, benefits, and revenue cycle. While that experience was positive, today the organization is trying to do as much as we can using our own staff, largely to conserve resources.
To help, both of our organizations deployed the Continuous Improvement solution from Strata Decision Technology, software that helps to continuously identify variation in quality and resource utilization, as well as recommend staffing models to match historical patient demand. With this tool, we not only can do the work internally but have been able to take a leap forward in the sophistication of how we review opportunities and track the progress of improvement projects.
To start, Strata algorithms analyze data from a variety of sources: general ledger, cost accounting, line-item charges, DRG/CFP/ICD-10 codes, contracted rates and reimbursement, supply chain, payroll, time and attendance, and admit/discharge/transfer data. To identify variation in utilization, the software reviews cost drivers that account for spend in specific groupings of patient encounters: length of stay, OR time, laboratory, supplies, imaging, dialysis, etc. To spot quality variation, it calculates the cost of harm for 213 quality indicators such as sepsis, hematoma, CLABSI, falls and pressure ulcers.
Using this approach on an ongoing basis, we are able to identify when providers have unusual and costly approaches to care or surgical techniques and see the cost of those provider preferences both to the hospitals and, in some cases, to the patients. By knowing the realistic financial impact and the root cause of variances, we can prioritize savings initiatives with the highest likelihood of success.
In a marked change from our engagement with consultants, before deciding which projects to start with, we engage in a dialogue about preferences, costs and standardization from a place of trust, with all the participants in the room sharing the same mission, vision, and values. More often than not, we end up prioritizing improvement projects based on our teams’ own sense of what needs fixing. That has been critical as it empowers our front-line teams to identify issues that need fixing on their own, which in turn increases accountability.
Finally, we use the software to evaluate progress on the project and track savings. Performance on each project is reflected in performance indicators on dashboards that help keep front-line operational teams accountable for the results. They can easily see whether their specific areas of responsibility are tracking toward savings, or trending off-target, and take corrective action.
Before taking this approach, Southern Illinois Healthcare lacked a unified process to identify, track, and aggregate the impact of cost-reduction and quality-improvement initiatives. Care New England Health System previously had a robust governance process for traditional operations improvement that provided a solid foundation for the new clinical-focused variation work. Both organizations are now able to access data that drives conversations with providers in a way that no consultant was able to facilitate.
As a result, today our front-line staff are empowered to continuously identify new opportunities for improvement. Rather than wait for someone to tell them what to do, and perhaps resist a focus imposed by outside consultants, they are engaged in uncovering improvement opportunities on their own and playing a meaningful role in the process of making and tracking the improvements.
At Southern Illinois Healthcare, we have identified and are pursuing 110 cost-improvement initiatives in fiscal 2020 focused on:
- Reducing length of stay at the DRG level in pneumonia, congestive heart failure, sepsis, and chronic obstructive pulmonary disease (COPD)
- Tracking intravenous steroid utilization in COPD
- Tracking the utilization of drug lists in COPD, pneumonia, congestive heart failure, and sepsis
- Reducing the rate of quality events across service lines in respiratory failure with hypoxia/hypercapnia, drug-related adverse effects/conditions, and anesthesia/anesthetic-related adverse effect/complication
At Care New England, we evaluated over $5 million in potential improvement opportunities and ultimately decided to pursue initiatives focused on:
- Reducing length of stay at the DRG level for sepsis, C-sections, and vaginal delivery
- Site of service for varicose vein ablations
- Reduction of pregnancy/birth associated hemorrhage
- Reduction in adverse drug reactions to glucocorticoids, opioids, and diagnostic imaging agents
- Reduction in observation time
Both organizations are already beginning to see meaningful improvement from these initiatives.
There is no doubt that management consultants have a meaningful role to play in improving the efficiency and cost of healthcare delivery systems. Our organizations have both benefited from engaging with consultants. But reliance on consultants should not become a crutch. We are convinced that healthcare organizations have the internal resources and the drive to succeed at cost reduction and quality improvement on their own, when equipped with the right tools.
Erin D. Pelletier, MBA, PMP, is Vice President of Operational Excellence at Care New England Health System in Rhode Island.
Gregory Wright is Corporate Director of Finance at Southern Illinois Healthcare in Carbondale, Illinois.