Squeezing out costs with data analytics

Bryan Clements, Director of Decision Support

When large hospitals and health systems buy or affiliate with smaller facilities, the deals can benefit both parties.

The larger facility gets more beds and an increase in patient revenue. The smaller facility gains access to more resources to help it stay afloat when health plans and government agencies cut payment rates.

But these deals may not work well if costs are out of control, said Bryan Clements, director of hospital finance and decision support at the University of Mississippi Medical Center in Jackson.

Since last fall, UMMC began managing the 156-bed Grenada Lake Medical Center, about 100 miles north of Jackson, last fall. At the beginning of this year, UMMC agreed to pay Grenada County, which owns the hospital, $1.8 million annually to lease the facility and to retire the hospital’s $37.4 million in debt. In February, Grenada Lake Medical Center became UMMC Grenada. As UMMC assimilates Grenada into its system, decision support is playing a key role in identifying areas for cost control.

Clements’ department is analyzing spending and operations throughout the main medical center and in Grenada as well. The first step is to find departments that can be consolidated. It’s likely that payroll, accounting, information systems and legal, among others, could be done at the larger academic medical center, Clements said.

Essentially, large medical centers operate hub-and-spoke systems. Smaller hospitals continue to serve their communities and can compete more effectively against rivals, because their costs are lower, Clements said.

“A lot of that work is moved out to help improve the margin at the smaller facility,” he explained.

When larger organizations take smaller hospitals on, the next option is often to start shifting some of the other ancillary services, such as the clinical lab and imaging departments, out of the smaller hospitals, Clements said.

“You might strip down your lab, for example, so that you’ll have just a bare bones staff that can do stat testing. But all other tests are done in a central lab,” he said. Imaging can be handled in a similar manner.  

Clinician collaboration

The next step in limiting expense involves having decision support work with clinicians to identify more advanced cost control, he said.

“After the consolidation, you start looking at resource consumption, and that will likely be where the next level of cost control will be done,” Clements said. “For that, you have systems and analytics to identify whether the procedures being done or the tests being ordered are those that are most cost effective.”

In some hospitals, clinical laboratories are collaborating with pharmacists to identify the most appropriate antibiotics for patients with bacterial infections, and decision support may be advising the clinicians as well, he noted. If the wrong antibiotics are used, for example, infections may linger, causing patients to stay longer, driving up costs.

“If I’ve got capitated payments and case rates have been reduced, you have to make sure every department is managing care efficiently,” Clements said. “That’s where decision support is critical because we can use it to isolate a patient population under a specific contract. Then you can calculate what your costs need to be over that period of time. We have enough data now so that we can do three-to-five-year projections where we can identify the margins we’ve got to work with. That’s critical to any hospital when reimbursement is declining.”