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1 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

3<br />

7/26/12 1:38 PM


CONTENTS<br />

EXECUTIVE INSIGHT ı volume 3 ı no. 7-8<br />

Hit Your Mark<br />

Cost containment is a constant area of discussion but most providers,<br />

especially not <strong>for</strong> profits, struggle with identifying and following through on<br />

cost savings initiatives. Provider cost savings opportunities are often overlooked<br />

and create per<strong>for</strong>mance gaps that are avoidable in an organization.<br />

By Phil Robinson<br />

17 CEO: Hiring a Consultant to<br />

Maximize Efficiency<br />

While most hospitals probably have the knowledge and insight<br />

to handle problems internally, they often don’t have the staff<br />

needed to deal with the situation.<br />

By Richard A. Gianello & Kathy Omachi<br />

21 COO: Facility Redesign to<br />

Improve Operational Efficiency<br />

In many markets, healthcare construction has come to a<br />

standstill. The still teetering economy, the uncertainty of<br />

healthcare re<strong>for</strong>m and problems accessing capital are among<br />

many reasons. See how one health system is staying<br />

competitive through strengthening its building assets.<br />

By Pamela Stoyanoff, MBA, CPA<br />

24 CFO: Productivity Improvements<br />

and Your Bottom Line<br />

In times of reimbursement uncertainty, an increased appetite<br />

<strong>for</strong> capital dollars and added government compliance reporting<br />

criteria means that executive jobs are not going to get any<br />

easier. Hospital leaders need to use technology in concert with<br />

human capital <strong>for</strong> long-term success.<br />

By Tim C. Lessing<br />

Features<br />

32 Error Reduction<br />

Strategies<br />

Lean processes, automation<br />

reduce errors and drive<br />

efficiencies in the clinical<br />

laboratory.<br />

By Ralph Dadoun, PhD<br />

36 The Pharmacist’s<br />

Expanding Role<br />

One CPO explains how the<br />

pharmacy is gaining greater<br />

influence at the hospital<br />

executive table.<br />

By Jill Hoffman<br />

38 The Not-So-Soft<br />

‘Soft’ Impacts<br />

of ICD-10<br />

Loss of productivity <strong>for</strong><br />

virtually everyone engaged<br />

in using the new code sets<br />

is viewed as one of the<br />

“soft” impacts that may be<br />

difficult to measure empirically,<br />

but will undoubtedly<br />

translate into significant<br />

financial shortfalls <strong>for</strong> many<br />

organizations. How can you<br />

minimize both?<br />

By Patrick McNeese<br />

Peer-reviewed article<br />

40 Diabetes: Client &<br />

Clinician Collaboration<br />

Diabetes management is a<br />

complex process, requiring<br />

collaboration between<br />

clients and healthcare<br />

professionals. A recent<br />

Adult Day Health Council<br />

(ADHC) Research Collaborative<br />

Diabetes Management<br />

38<br />

Study, <strong>for</strong> example, focused<br />

on intensive interdisciplinary<br />

care led by nurse case managers<br />

made a difference in<br />

the lives of clients.<br />

By Sandy Keefe, MSN, RN<br />

44 The Cloud Contract<br />

When moving to a cloud<br />

computing environment, the<br />

first step is to select a vendor.<br />

The next step is to negotiate<br />

the contract. Contract<br />

negotiation is like sausagemaking:<br />

You want the final<br />

product but you don’t want to<br />

see how it is made.<br />

By Chris Witt<br />

28 CIO: Can IT Yield Clinical Efficiencies?<br />

Clinical system implementations are complex and rushing<br />

through them can result in negative impacts. Ensure that the<br />

efficiency measures are clear and translate directly to the<br />

desired benefits.<br />

By Indranil (Neal) Ganguly, CHCIO, FHIMSS, FCHIME 32<br />

4 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

5


contents continued EXECUTIVE INSIGHT ı volume 3 ı no. 7-8<br />

Features<br />

48 Hospitals Utilize<br />

Just-In-Time”<br />

“<br />

Approach to Improve<br />

Supply Chain<br />

Two organizations utilized the JIT approach<br />

— not carrying extra inventory<br />

beyond what is needed to function over<br />

a specified period of time — and reduced<br />

costs while improving patient care.<br />

By Marc Hafer & Paula Lillard<br />

48<br />

Departments<br />

8 Editorial:<br />

Among Rocky Fiscal Outlooks,<br />

Solutions <strong>for</strong> Growth<br />

12 Healthcare IT:<br />

Choosing a Hosted Email Solution<br />

1 ExEcutivE insight: When July disaster 2012 | strikes www.advanceweb.com/e xecutivei nsight<br />

Online Content<br />

www.advanceweb.com/executiveinsight<br />

Features<br />

Mobile Apps<br />

<strong>for</strong> IT Savvy<br />

Healthcare<br />

Looking to stay connected while on the move?<br />

Now you have mobile healthcare apps that can<br />

help you stay on top of healthcare IT.<br />

Columns<br />

3 Healthcare’s Growing<br />

Demand <strong>for</strong> Flexible<br />

Mobile Apps<br />

5 Mobile Imaging<br />

7 mHealth Landscape<br />

www.advanceweb.com/executiveinsight<br />

n ASQ’s Eye on Quality<br />

n CHIME’s Healthcare IT<br />

n MGMA’s Directions in<br />

Group Practice Management<br />

n Dollars & Sense, sponsored<br />

by Soyring Consulting<br />

n <strong>Executive</strong> Perspectives <strong>for</strong> the<br />

Continuum of Care, sponsored<br />

by Status Solutions<br />

n Next Level of Leadership<br />

sponsored by Caliper<br />

A New<br />

of Healt<br />

Apps<br />

Here are devices and<br />

the cusp of becoming<br />

➤ Webcast: Strategies <strong>for</strong> healthcare sector. By M<br />

Improving Patient Safety<br />

University of Cali<strong>for</strong>nia San Francisco<br />

Medical Center implements<br />

since 2006, we’ve bee<br />

health online. of course<br />

key changes to make patient<br />

but the ehealth frenzy o<br />

safety a top priority. CMO Josh<br />

left webmd standing. F<br />

Adler, MD, explains.<br />

manage their health. mo<br />

it. that’s all changed. w<br />

➤ E-Edition: Mobile Apps <strong>for</strong><br />

the cloud, ubiquitous sm<br />

IT Savvy Healthcare<br />

all coming together to be<br />

Mobile apps are fast becoming<br />

<strong>for</strong>ms” <strong>for</strong> “apps” and th<br />

a must-have in the healthcare<br />

them. that health data is<br />

profession, changing how<br />

shared between them in<br />

healthcare providers operate. Our<br />

compilation of mobile app articles<br />

what this all means is<br />

will keep you up-to-date on ber new of devices and app<br />

technologies and changing used trends. by all types of play<br />

tor. and that use is sta<br />

three areas that are on<br />

➤ ACO Acumen: Accountable<br />

everyday big deal in he<br />

Care Organization Progress<br />

See why ACOs are no longer the<br />

“unicorns” in healthcare. Personal Data Tracki<br />

back in 2007, a new k<br />

was born in cali<strong>for</strong>nia<br />

➤ Elevating Supply Chain<br />

Value Analysis<br />

Make it an essential part of Matthew your Holt is the co-cha<br />

the health care blog, and h<br />

financial strategy.<br />

searcher, general <strong>for</strong>ecaster<br />

is a reporter <strong>for</strong> health 2.0 n<br />

health care blog.<br />

n Political Pulse<br />

sign up to become an insider<br />

n Finance & Investment<br />

n ACO Acumen,<br />

sponsored by AT&T<br />

n The Efficient Emergency<br />

Department, sponsored<br />

by Wellsoft Corp.<br />

Blogs<br />

n Politics of Healthcare<br />

n Boardroom Buzz<br />

Check back daily <strong>for</strong> news updates, blog discussions and product in<strong>for</strong>mation.<br />

12<br />

On the Web<br />

Looking <strong>for</strong> a new job? Now you can<br />

get job postings on Facebook and<br />

Twitter! Follow us at www.twitter.<br />

com/AdvanceHCAJobs and www.facebook.com/<strong>Executive</strong><strong>Insight</strong><br />

to search<br />

<strong>for</strong> healthcare administration jobs.<br />

Copyright 2010 by<br />

Merion Matters. All<br />

rights reserved. Reproduction in any <strong>for</strong>m is <strong>for</strong>bidden<br />

without written permission of publisher. <strong>Executive</strong> <strong>Insight</strong> is<br />

published quarterly by Merion Matters, 2900 Horizon Drive,<br />

Box 61556, King of Prussia, PA 19406-0956.<br />

Postmaster: send address changes to: <strong>Executive</strong> <strong>Insight</strong><br />

Circulation Department, Merion Publications, Inc., 2900<br />

Horizon Drive, Box 61556, King of Prussia, PA 19406-0956.<br />

<strong>Executive</strong> <strong>Insight</strong> delivers innovative strategies and solutions<br />

by and <strong>for</strong> healthcare executives to help them lead and succeed.<br />

This national print and 24/7 online resource offers our<br />

community educational opportunities, in<strong>for</strong>mation on cuttingedge<br />

products and services, multimedia, exclusive webinars<br />

and training, enabling these leaders to respond quickly to<br />

industry changes and trends. Produced by Merion Matters, a<br />

leading publisher in the healthcare industry, <strong>Executive</strong> <strong>Insight</strong><br />

provides <strong>for</strong>ward-thinking analysis to help executives address<br />

daily issues and prepare <strong>for</strong> the challenges ahead.<br />

Advertising Policy<br />

All advertisements sent to Merion Matters <strong>for</strong> publication<br />

must c omply with all applicable laws and regulations.<br />

Recruitment ads that discriminate against applicants<br />

based on sex, age, race, religion, marital status or<br />

any other protected class will not be accepted <strong>for</strong><br />

publication. The appearance of advertisements in<br />

<strong>ADVANCE</strong> Newsmagazines is not an endorsement of the<br />

advertiser or its products or services. Merion Matters does<br />

not investigate the claims made by advertisers and is not<br />

responsible <strong>for</strong> their claims.<br />

6 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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editorial<br />

is published by Merion Matters<br />

Publishers of leading healthcare magazines since 1985<br />

Gearing Up &<br />

Saving Up <strong>for</strong> EHR<br />

PRESIDENT<br />

General MANAGER<br />

Publisher<br />

Editorial<br />

EDITOR<br />

MANAGING EDITOR<br />

WEB MANAGER<br />

Ann Wiest Kielinski<br />

W.M. “Woody” Kielinski<br />

Lynn Nace<br />

Adrianne O’Brien<br />

Jill Hoffman<br />

Jennifer Montone<br />

Does your organization have a mobility<br />

access strategy that provides its<br />

clinicians and patients with access to<br />

electronic medical records? In a May poll<br />

conducted by KPMG LLP on electronic<br />

health record (EHR) deployment by hospitals<br />

and health systems, about half the<br />

leaders surveyed said that they didn’t know.<br />

That surprised me a bit, but the good<br />

news is that 49 percent of business administrators<br />

at hospitals or health systems say<br />

they are more than halfway to completing<br />

full electronic health record (EHR) system<br />

deployment.<br />

Seesawing again, though, many hospital<br />

leaders have doubts about the level of<br />

funding their organizations have planned<br />

to support it, according to the KPMG poll.<br />

The survey found that 48 percent of<br />

health system business leaders said they<br />

are only somewhat com<strong>for</strong>table with the<br />

level of budgeting their organization has<br />

planned <strong>for</strong> EHR deployment. Nine percent<br />

said they weren’t com<strong>for</strong>table at all<br />

while 18 percent said they were unsure.<br />

Only 25 percent said they were very com<strong>for</strong>table.<br />

“There is a level of uneasiness as to<br />

whether there is adequate funding to complete<br />

these projects,” said Gary Anthony,<br />

principal with KPMG Healthcare. “In<br />

most organizations, EHR deployment will<br />

most likely be one of the most trans<strong>for</strong>mational<br />

projects that they’ve ever undertaken,<br />

as well as one of the largest investments<br />

outside of the construction of a new hospital<br />

they’ve ever made. Yet, many organizations<br />

view EHR as just an IT project and<br />

that may be why we are seeing multiple<br />

extensions to scope, timeline and budget.”<br />

In terms of resource strategies used to<br />

complete EHR deployment, 46 percent of<br />

hospital leaders indicated that they are using<br />

a multiple resource strategy. This was<br />

followed by leveraging existing staff (16<br />

percent), hiring new or additional staff<br />

(13 percent) and securing third party assistance<br />

(10 percent). If you’re unsure what<br />

resources your organization will use <strong>for</strong> deploying<br />

an EHR system, you’re note alone.<br />

Fifteen percent said they didn’t know.<br />

The issues surrounding implementing<br />

an EHR system are vast and complex, but<br />

Cheryl Parker, PhD, RN-BC, FHIMSS,<br />

gets back to basics in a web article titled<br />

“Avoiding the Domino Effect: Evaluating<br />

Workflows Be<strong>for</strong>e Adopting New Technology.”<br />

She writes that new healthcare<br />

technology implementations should never<br />

be made within the vacuum of a single department.<br />

The key is to remember that any<br />

process change has the potential to impact<br />

everyone from admitting staff to physicians<br />

and nurses to pharmacists, which is<br />

why every significant technology implementation<br />

must begin with enterprisewide<br />

planning and impact analyses.<br />

Sounds like a good place to start.<br />

Design<br />

V.P., DIRECTOR of<br />

CREATIVE SERVICES<br />

DESIGN DIRECTOR<br />

ASSOCIATE ART DIRECTOR<br />

MuLTIMEDIA Director<br />

Advertising<br />

DIRECTOR of<br />

MarkETING Services<br />

ART DIRECTOR<br />

Events<br />

PuBLIC RELATIONS DIRECTOR<br />

JOB FAIR MANAGER<br />

EVENTS PRODuCT MANAGER<br />

Susan Basile<br />

Walt Saylor<br />

Scott Frymoyer<br />

Todd Gerber<br />

Christina Allmer<br />

Chris Wof<strong>for</strong>d<br />

Maria Senior<br />

Laura Smith<br />

Mike Connor<br />

Administration<br />

V.P., DIRECTOR of HuMAN RESOuRCES Jaci Nicely<br />

VICE PRESIDENT of BuSINESS<br />

CHIEF in<strong>for</strong>mation officer Khader Mohammed<br />

Technology OPERATIONS<br />

Joe Romello<br />

INFORMATION & BuSINESS Systems DIRECTOR<br />

Ken Nicely<br />

DIGITAL MEDIA SALES DIRECTOR Kim Noble<br />

CIRCuLATION MANAGER Maryann Kurkowski<br />

BILLING MANAGER<br />

Christine Marvel<br />

Subscriber SERVICES<br />

MANAGER<br />

Vikram Khambatta<br />

Media & Marketing Opportunities<br />

Display Advertising<br />

SALES director<br />

Amy Turnquist<br />

MANAGER of CuSTOM COMMuNICATIONS<br />

AND MARkETING SERVICES Shannon Reiss<br />

CORPORATE SALES MANAGER Kevin Miller<br />

ACCOuNT ExecuTIVES<br />

Andrea O’Brien,<br />

Clark Celmayster, Hilary Druker, Tom Neely<br />

SALES ASSOCIATE<br />

Jackie George<br />

Education Opportunities<br />

SALES MANAGER<br />

SALES ASSOCIATES<br />

Ed Zeto<br />

Christine Hudak<br />

Brock Bamber<br />

Custom Promotions<br />

SENIOR ACCOuNT ExecuTIVES Noel Lopez<br />

Sue Borjeson-Romano<br />

SALES ASSOCIATES<br />

Kristen Erskine,<br />

Aarika Hoffner, Desirae Slaugh, Leah Stashko,<br />

Chris Wanner, Gina Willett<br />

2900 Horizon Drive, Box 61556<br />

King of Prussia, PA 19406-0956<br />

(610) 278-1400 • www.advanceweb.com<br />

On the Web<br />

To check out Cheryl Parker’s article, visit www.advanceweb.com/<br />

executiveinsight and enter “Domino Effect” in the keyword box.<br />

EDITOR’s phone (800) 355-5627, ext. 1447<br />

EDITOR’s e-MAIL aobrien@advanceweb.com<br />

FOR PRODuCT in<strong>for</strong>mation (800) 355-6504<br />

To order reprints (800) 355-5627, Ext. 1446<br />

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THE EDITORIAL department (800) 355-5627<br />

8 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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Craneware www.craneware.com/takebacks 11<br />

DaVita www.davita.com/costsavings 13<br />

Fifth Third Bank www.53.com/BusinessIdeas 9<br />

Hitachi Medical Systems America Inc. www.hitachimed.com 3<br />

InterSystems Corporation www.InterSystems.com/Key3EIN 51<br />

LHP Hospital Group Inc. www.SMCHHStory.com 47<br />

McKesson In<strong>for</strong>mation Solutions www.mynewHIS.com 31<br />

MedeAnalytics www.medeanalytics.com/pai-rci 25<br />

Quest Diagnostics Hospital Services www.questdiagnostics.com/hospitalservices 19<br />

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Team Health www.teamhealth.com 2<br />

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Editorial Advisory Board<br />

JOSHua ADLER, MD<br />

CMO, UCSF Medical Center<br />

San Francisco, CA<br />

ALLEN Butcher<br />

CFO, Camden Clark Memorial Hospital<br />

Parkersburg, WV<br />

EDMuND E. COLLINS, MBA, CPHIMS<br />

Vice President and CIO<br />

Martin Memorial Health Systems<br />

Stuart, FL<br />

FRANk CORVINO<br />

President and CEO<br />

Greenwich Hospital<br />

Greenwich, CT<br />

SuSAN L. DAVIS, EdD, RN<br />

President and CEO, St. Vincent’s Medical Center/St.<br />

Vincent’s Health Services<br />

Bridgeport, CT<br />

COLE EDMONSON, MS, RN, CHE, CNAA,BC<br />

Vice President of Patient Care Services and CNO<br />

Texas Health Presbyterian Hospital<br />

Dallas, TX<br />

NEAL GANGuly, CHCIO, FHIMSS<br />

Vice President and CIO<br />

CentraState Healthcare System<br />

Freehold, NJ<br />

Johnny Kuo<br />

COO, Gracie Square Hospital<br />

New York, NY<br />

Ed MARx<br />

Senior Vice President and CIO<br />

Texas Health Resources<br />

Arlington, TX<br />

Dan Morissette<br />

CFO, Stan<strong>for</strong>d Hospital & Clinics<br />

Palo Alto, CA<br />

Lynne MyERS<br />

COO, Meriter Health Systems<br />

Madison, WI<br />

LISA ROWEN, DNSc, RN, FAAN<br />

CNO and Senior Vice President of Patient Care<br />

Services, University of Maryland Medical Center<br />

Baltimore, MD<br />

AMIR DAN RuBIN<br />

President and CEO, Stan<strong>for</strong>d Hospitals and Clinics<br />

Stan<strong>for</strong>d, CA<br />

Sue SCHADE, FCHIME, FHIMSS<br />

Vice President and CIO<br />

Brigham and Women's/Faulkner Hospital<br />

Boston, MA<br />

CHRISTINE SchuSTER, MBA, RN<br />

President and CEO, Emerson Health System<br />

Concord, MA<br />

NANCy TEMPLIN, CPA<br />

CFO, All Children's Hospital,<br />

St. Petersburg, FL<br />

DEBORAH ZASTOCki,<br />

EdM, DNP, CNAA, NEA-BC, FACHE<br />

President and CEO, Chilton Memorial Hospital<br />

Pompton Plains, NJ<br />

Industry advisory board members<br />

Ken Perez<br />

Senior Vice President of Marketing<br />

and Director of Healthcare Policy<br />

MedeAnalytics<br />

Emeryville, CA<br />

www.medeanalytics.com<br />

Amy JEFFS<br />

Chief Operating Officer<br />

Status Solutions<br />

Charlottesville, VA<br />

www.statussolutions.com<br />

CASEy CRAM, MA<br />

Director of Marketing<br />

Talyst<br />

Bellevue, WA<br />

www.talyst.com<br />

10 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

11


healthcare IT<br />

By Robert “Bob” Latz, PT, DPT, CHCIO<br />

Choosing the Right Vendor<br />

<strong>for</strong> a Hosted Email Solution<br />

One CIO shares his insights into selecting a cloud-based<br />

email vendor <strong>for</strong> your organization.<br />

In a recent survey of 97<br />

CHIME members, just shy<br />

of 10% are using a hosted<br />

Microsoft Exchange environment<br />

to meet their organizations’<br />

email needs. However,<br />

another 26 individuals (24%)<br />

share that they are considering<br />

moving to a hosted email<br />

environment <strong>for</strong> two reasons:<br />

1) the time spent on internal<br />

administration and maintenance; and 2) the cost<br />

of hardware and licensing <strong>for</strong> their environment.<br />

Our company, Select Rehabilitation, has nearly<br />

500 post-acute care locations in 32 states. For<br />

many of the same reasons as the survey responders,<br />

we are in the final stages of choosing a vendor<br />

<strong>for</strong> a hosted email solution. Above and beyond the<br />

cost and time considerations, we have two unique<br />

drivers <strong>for</strong> this change: 1) We have gone through<br />

several recent acquisitions and need to consolidate<br />

our email in one solution; and 2) We need to be<br />

flexible enough to incorporate near-future growth.<br />

Known Quantity<br />

Email is one of the low-hanging fruits in the<br />

cloud when looking at annual cost savings.<br />

We can remove unknown hardware costs <strong>for</strong> a<br />

known vendor cost, and we can remove or restructure<br />

network management costs <strong>for</strong> employee,<br />

licenses, patches and maintenance updates,<br />

to name a few. By moving to a cloud-based<br />

email environment, we trade unknowable management<br />

costs <strong>for</strong> a relatively<br />

known monthly cost.<br />

Email is also critical <strong>for</strong><br />

communication, so reliability<br />

and uptime is necessary.<br />

A cloud solution is a perfect<br />

answer. But which one is right<br />

<strong>for</strong> us?<br />

The Risks<br />

In follow-up discussions with<br />

some healthcare CIOs, we learned of several<br />

risks present in a hosted email environment:<br />

n Security concerns, including hosting of email<br />

offshore<br />

n Migration of existing data<br />

n Maintaining control of our data<br />

As we drew together all of our needs <strong>for</strong> this<br />

service, we paid particular attention to these<br />

risks. We asked each vendor to clarify their operating<br />

structure as well as their data migration<br />

and maintenance tools.<br />

RFP<br />

In order to understand the ROI <strong>for</strong> our situation,<br />

we put together an RFP and sent it out to seven<br />

vendors — including Google and Office 365. Two<br />

could not meet our time frame <strong>for</strong> going live or<br />

returning the RFP. Of the remaining five, we received<br />

pricing quotes ranging from roughly $100<br />

to $220 per user, per year. In most cases this in-<br />

Robert “Bob” Latz is corporate director of technology integration at Select Rehabilitation Inc. He is a member<br />

of CHIME, completed the CIO Boot Camp, and became a Certified HealthCare CIO. He is the Secretary of the<br />

Technology Special Interest Group of the American Physical Therapy Association and has presented on technology<br />

related topics at APTA conferences. He is a member of the NASL (National Association <strong>for</strong> Support of<br />

Long Term Care) Technology Committee.<br />

Email is one of the<br />

low-hanging fruits<br />

in the cloud when<br />

looking at annual<br />

cost savings. We<br />

can remove unknown<br />

hardware<br />

costs <strong>for</strong> a known<br />

vendor cost, and<br />

we can remove or<br />

restructure network<br />

management<br />

costs <strong>for</strong> employee,<br />

licenses,<br />

patches and maintenance<br />

updates.<br />

Healthcare IT is sponsored by<br />

the College of Health In<strong>for</strong>mation<br />

Management <strong>Executive</strong>s<br />

(CHIME). Contact CHIME at<br />

www.cio-chime.org.<br />

12 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


healthcare it<br />

cluded hot disaster recovery (DR)-type capability. Most vendors<br />

allow <strong>for</strong> pricing that is dependent upon the needs of various user<br />

groups. These various solutions can be mixed, creating a kind of hybrid<br />

solution that can drive down costs. For us, this means our end<br />

users — primarily clinicians with little time in front of the computer<br />

<strong>for</strong> emailing — have a lower-cost hosting solution than our senior<br />

management team, who are in front of the computer and on email<br />

several hours each day, even though both have encryption, eDiscovery<br />

and DR capabilities.<br />

Anyone considering this path quickly learns that the options boil<br />

down to this: Use Google, Office 365, or a vendor that hosts Exchange<br />

on their servers — or a combination of more than one host.<br />

Choices<br />

We learned that Google will not sign a business associate agreement<br />

(BAA). According to Google, like Verizon, they fall under a<br />

clause in the legislation that excludes them. We must consult our<br />

legal team, who is reviewing their explanation to see if we can safely<br />

proceed with this option without a BAA.<br />

We also discovered that Microsoft Office 365 is willing to sign a<br />

BAA, and their pricing is comparable to Google’s. They host only<br />

on servers in the U.S., and many of our users are very familiar with<br />

Exchange. Like Google, this is a multi-tenant environment.<br />

At least one vendor can host the exchange on dedicated servers,<br />

with the DR and backup on virtual servers. In the past, DR and<br />

backup resulted in a cost of 100% of production. Now this option is<br />

roughly 30-40% of production cost.<br />

At least two vendors said they could host email overseas, but only<br />

on servers in the European Union (EU) because the EU has security<br />

policies as high as or higher than the U.S. We are in the process of<br />

deciding if this is a risk we can tolerate, and at what cost saving, if any.<br />

Forging Ahead<br />

We have more to learn, and are still communicating with several vendors<br />

to clarify their services. Although it’s the middle of July and we<br />

haven’t even chosen a vendor, we expect to have a decision made and<br />

have our solution in production by the middle of August — by the time<br />

most of us are reading this article. That’s the power of the cloud.<br />

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1<br />

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<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

13


14 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


cover story<br />

Finance alone can no longer be solely<br />

accountable <strong>for</strong> cost containment. In<br />

the last few decades, the complexity of<br />

healthcare has increased dramatically<br />

while the approach to cost management<br />

has continued to follow old rules<br />

with outdated attitudes about who is<br />

ultimately responsible.<br />

scott frymoyer/john ciuppa<br />

Hit<br />

Your<br />

Mark<br />

Three cost-containment<br />

factors will usher in better<br />

healthcare delivery.<br />

By Phil Robinson<br />

Corporate leadership teams are highly focused on several dynamics<br />

that are changing the healthcare landscape across<br />

the United States — the potential impacts of insurance and<br />

care delivery re<strong>for</strong>m, increasingly stringent clinical per<strong>for</strong>mance<br />

requirements, rapidly evolving physician/hospital partnering strategies<br />

and changing payment models, to name a few. For financial<br />

leaders, add to this list the pressure to maintain bond ratings, borrowing<br />

capacity and adequate cash flow to fund the seemingly unending<br />

demand <strong>for</strong> capital, as well as heightened emphasis on cost<br />

containment.<br />

Cost containment — and its accompaniment, productivity improvement<br />

— have been a continual battle, but many providers,<br />

especially not-<strong>for</strong>-profits, struggle with identifying and following<br />

through on cost-saving initiatives. Healthcare in the U.S. has<br />

grown increasingly complex but approaches to cost containment<br />

have not kept pace. Periodic cost reviews and reactive restructurings<br />

are common approaches, but they have been relied on much<br />

too often and are painful and disruptive to healthcare organizations.<br />

Given that legislative ef<strong>for</strong>ts are not focused on this, it is up<br />

to the industry to aggressively manage care delivery expense. As<br />

a healthcare provider faced with this challenge, how can you approach<br />

containing costs? Three important factors <strong>for</strong> better cost<br />

management should be considered.<br />

ACCOUNTABILITY<br />

Perhaps the most important point is that cost containment ef<strong>for</strong>ts<br />

will only succeed if embraced by all departments in a<br />

healthcare organization. Finance alone can no longer be solely<br />

accountable <strong>for</strong> cost containment. In the last few decades, the<br />

complexity of healthcare has increased dramatically while the<br />

approach to cost management has continued to follow old rules<br />

with outdated attitudes about who is ultimately responsible. No<br />

doubt, finance must provide the tools and systems to project,<br />

measure and report costs and cost savings, but clinical and administrative<br />

personnel are instrumental to this process. They<br />

know firsthand where waste and inefficiencies have developed,<br />

but in many cases, they have not been asked to play a role in<br />

weeding it out. Start by incentivizing and holding these employees<br />

accountable <strong>for</strong> identifying and achieving cost savings and<br />

productivity enhancements.<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

15


cover STORY<br />

Hospitals and other providers need to quantify and<br />

understand the way costs are incurred <strong>for</strong> patient<br />

care and be aware of alternatives.<br />

COST TRANSPARENCY<br />

Much of the rapid escalation in healthcare costs<br />

can be attributed to providers’ lack of awareness<br />

as to the real costs of delivering patient care. To<br />

stay competitive, healthcare organizations need<br />

to streamline inefficient processes and fully understand<br />

resource requirements. Ultimately,<br />

the value proposition should maximize patient<br />

outcomes at the least cost. This goes way beyond<br />

having an accurate cost accounting system,<br />

although that is important. Cost transparency<br />

can be improved through proven techniques, including<br />

Activity Based Management (ABM) and<br />

Comparative Cost Effectiveness (CCE).<br />

Activity Based Management (ABM)<br />

ABM is an approach to cost management used<br />

across industries that aims to maximize valueadd<br />

activities while minimizing or eliminating<br />

non value-add activities. For healthcare, this<br />

means analyzing activities and related costs to<br />

ensure they contribute to quality patient care<br />

while eliminating or reducing non-supportive,<br />

unproductive costs. Instead of focusing on broad<br />

expense categories (i.e., what is spent), the focus<br />

is on activities that take place (i.e., what is done).<br />

ABM can be deployed in both administrative<br />

and clinical departments to identify where costs<br />

are excessive, ineffective or not well understood.<br />

Adoption of ABM in healthcare has been<br />

hindered by a general lack of understanding of<br />

the benefits along with misperceptions that it<br />

is more expensive and complex to deploy. Certainly<br />

it is more difficult to apply in the healthcare<br />

world, where patient care considerations<br />

generally trump cost considerations. However,<br />

the value of being able to better manage financial<br />

results far outweighs the ef<strong>for</strong>t of deployment.<br />

Comparative Cost Effectiveness (CCE)<br />

CCE is a cost evaluation technique that focuses<br />

on existing alternatives <strong>for</strong> care delivery. CCE<br />

is often used with episode of care costing, particularly<br />

with regard to the choice of clinical<br />

treatment plans <strong>for</strong> the more costly diagnoses/<br />

treatments/procedures. This approach fully considers<br />

the combined cost of care (including pharmaceuticals,<br />

devices, technology, physicians and<br />

hospital costs), and compares it to the outcomes<br />

achieved during the entire episode of patient<br />

care. As we face a future with bundled payments<br />

that will <strong>for</strong>ce us to look more deeply at costs as<br />

a function of cross-continuum care coordination,<br />

this kind of approach is becoming critical.<br />

Hospitals and other providers need to quantify<br />

and understand the way costs are incurred <strong>for</strong><br />

patient care and be aware of alternatives. CCE<br />

is a complex process requiring systems to generate<br />

the right analytical data as well as qualified<br />

personnel who can consolidate and interpret the<br />

data. Most healthcare providers are not set up<br />

to gather this data and manufacturers have been<br />

reluctant to provide such in<strong>for</strong>mation.<br />

Studies have shown that the most expensive<br />

alternatives do not necessarily provide the best<br />

clinical outcomes. Managed care companies are<br />

very focused on this reality. Interestingly, parts of<br />

Europe have been incorporating this analysis into<br />

their healthcare organizations <strong>for</strong> many years and<br />

consider it a major component of limiting healthcare<br />

spending; it has been accepted and embraced<br />

as a necessity. That contrasts to the U.S.,<br />

where the medical community here has not been<br />

as supportive of including cost considerations in<br />

clinical decisions. Certainly medical device and<br />

pharmaceutical manufacturers are not wholly<br />

supportive — much of their focus is on preserving<br />

their own income. CCE focusing on episodes<br />

of care is needed to balance improved bottom<br />

line per<strong>for</strong>mance with the best clinical outcomes.<br />

LABOR MANAGEMENT<br />

Any discussion of cost containment in healthcare<br />

has to include the cost of labor. Labor costs<br />

are over 50% of revenues in most not-<strong>for</strong>-profit<br />

hospitals and are regularly over 80% of medical<br />

practice costs. Yet, <strong>for</strong>-profit hospital systems<br />

report labor cost averages of as low as 40% of<br />

revenues. Simple math reveals that a provider<br />

with $100 million of revenue would experience<br />

bottom line improvement of $1 million <strong>for</strong> every<br />

1% improvement in this ratio. As described earlier,<br />

accountability and activity-based management<br />

are key components of controlling labor<br />

costs. How is this done on a tactical level? Here<br />

16 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


are some practical things to consider:<br />

n Apply discipline and techniques that reduce labor costs and<br />

improve productivity.<br />

n Establish staffing metrics that align variable staffing with anticipated<br />

patient volume, then manage to them.<br />

n Benchmark both internally and externally.<br />

n Employ lower-cost clinical professionals without sacrificing quality.<br />

n Minimize the use of expensive contract labor and overtime.<br />

n Properly manage PTO, recognizing that it can easily represent 10%<br />

to 12% of labor costs.<br />

n Ensure that employee benefit plans are cost effective.<br />

n Take a service center approach <strong>for</strong> multi-location healthcare systems<br />

to avoid labor overhead redundancy and achieve consistent<br />

best practice across locations.<br />

n Hold managers accountable <strong>for</strong> labor cost control.<br />

n Invest in an effective electronic time and attendance system linked<br />

with labor management software, maximizing control of labor cost.<br />

Value-Driven System<br />

The healthcare industry must take the lead in addressing the cost<br />

escalation challenge. Fortunately, attitudes are changing. Tools<br />

are being developed to better manage and control costs. Innovation<br />

is happening in healthcare finance; physicians, medical<br />

device manufacturers and pharmaceutical companies are partnering<br />

to find new, cost-effective care alternatives. These new<br />

developments will allow organizations to systematically reduce<br />

costs while still being able to continually improve patient outcomes.<br />

A focus on these three keys to success in cost containment —<br />

cross-functional accountability, systematic cost management and<br />

cost transparency — will help the industry emerge from the current<br />

transition from a fee-<strong>for</strong>-service, volume-driven care delivery<br />

system to a value-driven, population health management system<br />

and will position it to usher in a better future <strong>for</strong> healthcare delivery<br />

and economics.<br />

Phil Robinson is a partner in Tatum’s Healthcare Practice. With over 30<br />

years of finance and accounting experience, Phil has served as CFO of<br />

several hospital and health systems. He has also worked in healthcare<br />

consulting, focusing on strategic planning, turnarounds and interim<br />

financial management.<br />

CEO Perspective<br />

Hiring a Consultant to<br />

Maximize Efficiency<br />

While most hospitals probably have the knowledge and insight to handle problems<br />

internally, they often don’t have the staff needed to deal with the situation.<br />

By Richard A. Gianello & Kathy Omachi<br />

Richard A. Gianello is president,<br />

HFS Consultants. Kathy<br />

Omachi is the board chair,<br />

Sierra Kings District Hospital.<br />

When a hospital is ailing financially, facing<br />

a sudden change in its chief executive<br />

leadership, or finds itself in<br />

a critical situation in areas such as reorganization,<br />

market share decline, management oversight,<br />

poor financial operational per<strong>for</strong>mance or<br />

financial reporting, hiring a consultant is often<br />

the answer to solve the problem efficiently and<br />

correctly.<br />

While most hospitals probably have the<br />

knowledge and insight to handle the problem<br />

internally, they often don’t have the staff needed<br />

to deal with the situation since most employees<br />

already have a full time job. Also, it might not<br />

be a good political move to handle the problem<br />

internally, because it may result in negative feedback<br />

from the community. An outside consultant<br />

can help to identify and address potential<br />

roadblocks, focus on the problem, bring an independent<br />

viewpoint and move <strong>for</strong>ward more<br />

quickly than if handled internally.<br />

In some cases, the situation is so dire that<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

17


Match Needs with<br />

Consultant’s Expertise<br />

Talk to hospital CEOs and board chairs in the<br />

industry to obtain referrals <strong>for</strong> consulting companies<br />

to contact. Look <strong>for</strong> consultants with experience<br />

with similar organizations and issues.<br />

Avoid hiring generalists. Speak with comparable-size<br />

hospitals or facilities about their experiences<br />

with consultants. Be specific about your<br />

situation and the specific problems you need<br />

help with. Review the consultant’s backcEO<br />

Perspective<br />

Try to ascertain<br />

whether a candidate<br />

will remain<br />

with the position<br />

and see it through<br />

to completion.<br />

It will be a serious<br />

setback if you<br />

have to begin the<br />

search process all<br />

over again.<br />

a hospital would probably not survive without<br />

outside help. That was the scenario in 2009 when<br />

Sierra Kings District Hospital, a 49-bed district<br />

hospital outside Fresno, CA, which included<br />

five rural health clinics and growing emergency<br />

room services, was <strong>for</strong>ced to file <strong>for</strong> bankruptcy<br />

because of poor financial per<strong>for</strong>mance and<br />

mismanagement. The hospital’s finances had<br />

reached a point that they could not purchase<br />

bandages or other basic supplies.<br />

When the Board realized that their debt covenants<br />

were not being met, they were required<br />

to hire an outside consultant to assist with an<br />

operational assessment and improvement plan<br />

to get the hospital back in compliance with their<br />

debt covenants. However, it quickly became<br />

apparent that the existing CEO and CFO were<br />

not moving <strong>for</strong>ward quickly enough with implementing<br />

the improvement plan. For Sierra Kings<br />

District Hospital, an outside consultant was required<br />

who could bring in an inter-disciplinary<br />

team that included an interim CEO and CFO,<br />

specialists in revenue cycle, patient accounting,<br />

coding, reimbursement, labor and non-labor<br />

per<strong>for</strong>mance and rural health clinic operations.<br />

Over a 2-year period, this team successfully<br />

worked with the Sierra Kings District Hospital<br />

Board, physicians and staff to improve financial<br />

per<strong>for</strong>mance of the hospital and assisted the hospital’s<br />

bankruptcy attorney to achieve approval<br />

of the hospital’s bankruptcy plan. As a result, the<br />

team also assisted the Board in finding a longterm<br />

partner to manage the hospital and ensure<br />

that the hospital would be able to repay all debts<br />

at 100 cents on the dollar owed to its creditors.<br />

From the Sierra Kings situation, insight was<br />

gained by the Board regarding best practices <strong>for</strong><br />

hiring a healthcare consultant.<br />

Thinkstock/iStockphoto<br />

18 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


Choosing us <strong>for</strong> your<br />

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Visit www.questdiagnostics.com/hospitalservices or contact a Quest Diagnostics representative<br />

to discover more.<br />

Quest, Quest Diagnostics, the associated logo and all associated Quest Diagnostics marks are the trademarks of Quest Diagnostics.<br />

© 2012 Quest Diagnostics Incorporated All rights reserved.<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

19


CEO Perspective<br />

If, as in the case of Sierra Kings District<br />

Hospital, finances are in a critical state,<br />

don’t abandon the idea of hiring a consultant<br />

because funding is tight.<br />

ground with similar work and references.<br />

Listen During Interview<br />

After explaining the problem and your expectations, listen and<br />

pay special attention to what candidates say during the interview<br />

process. Make sure they understand your situation and are able<br />

to explain solutions in ways you understand. Develop questions<br />

that will give you concrete in<strong>for</strong>mation on how the consultant<br />

will approach problems. Ask <strong>for</strong> details regarding their experience,<br />

how they’ve handled difficult situations and how what<br />

made them successful. Try to ascertain whether a candidate will<br />

remain with the position and see it through to completion. It will<br />

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with Exclusive<br />

Online Access<br />

Snap this tag with your<br />

smartphone or visit<br />

www.advanceweb.com/<br />

executiveinsight to set up your<br />

free <strong>Executive</strong> Insider account!<br />

be a serious setback if you have to begin the search process all<br />

over again.<br />

Payment Terms<br />

If, as in the case of Sierra Kings District Hospital, finances are in a<br />

critical state, don’t abandon the idea of hiring a consultant because<br />

funding is tight. Even if it seems that the cost of a consultant might<br />

be out of reach, explain what the hospital can handle financially<br />

and in what areas the consultant is needed. Ask the consulting<br />

company if it’s possible to negotiate payment terms, such as a payment<br />

plan or other financial arrangement that defers a portion of<br />

the payments until operating per<strong>for</strong>mance is improved.<br />

Communicate with Staff<br />

View the hospital as a community that needs to be communicated<br />

with. Continually provide in<strong>for</strong>mation about the process.<br />

Have the board chair explain to the entire hospital staff, from<br />

those who work in housekeeping to doctors to the top administrators,<br />

why a consultant is needed. With staff that is going to<br />

be directly involved with the consultant, consider meeting oneon-one<br />

with them. In addition to talking to the staff, listen to its<br />

input. The goal is <strong>for</strong> the entire organization to be committed to<br />

the goals and objectives.<br />

Once the consultant is brought on board, have him or her meet<br />

very early on, if not immediately, with the entire hospital internal<br />

and external community, explain the situation, their vision <strong>for</strong><br />

improving operations and how they will have open and honest<br />

community future communication. This will help to offset any resistance<br />

from the staff or local community. A consultant who has<br />

direct contact with hospital community will be more successful<br />

than one who is out of sight and unavailable.<br />

Avoid Setting Consultant up For Failure<br />

Once you have consultants on board, be sure to understand their<br />

exact capabilities, set realistic goals and ask them to do only what is<br />

within their expertise. Clearly define the difficulties that your organization<br />

is facing and do not hide any in<strong>for</strong>mation. Make sure you<br />

provide sufficient time, resources and data to allow the consultant<br />

to be successful.<br />

Hiring a consultant can be a time-consuming and daunting task.<br />

Put as much time as needed into the selection process. Ultimately,<br />

your consultant needs to be someone who, along with his or her<br />

good references and expertise, is a person you can trust and will be<br />

able to work well with.<br />

EXECUTIVE INSIDERS GET EXCLUSIVE ACCESS TO:<br />

Convenient digital compendiums<br />

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Weekly e-newsletters ■ And much more<br />

20 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


CoO Perspective<br />

Facility<br />

Redesign<br />

to Improve<br />

Operational<br />

Efficiency<br />

See how one health system<br />

is staying competitive through<br />

strengthening its building assets.<br />

By Pamela Stoyanoff, MBA, CPA<br />

In many markets, healthcare construction has<br />

come to a standstill. The still teetering economy,<br />

the uncertainty of healthcare re<strong>for</strong>m,<br />

problems accessing capital are among many reasons.<br />

But some health systems are moving <strong>for</strong>ward<br />

with the firm belief that core assets must<br />

not only be maintained, but strengthened, in<br />

order to compete effectively on whichever landscape<br />

is eventually painted. Methodist Health<br />

System is one such system.<br />

Methodist Health System is comprised of seven<br />

hospitals, with its corporate offices in Dallas.<br />

Just under $1 billion in net revenues, Methodist<br />

has a great deal of competition in its marketplace,<br />

and from several competitors who are significantly<br />

larger (Baylor, Texas Health Resources,<br />

HCA, Tenet, to name a few).<br />

kyle kielinski<br />

Pamela Stoyanoff, MBA,<br />

CPA, is executive vice<br />

president and chief operating<br />

officer, Methodist<br />

Health System in Dallas.<br />

Major Undertaking<br />

Four major projects are underway <strong>for</strong> the system,<br />

one at each of its four primary campuses.<br />

Its flagship facility has just begun construction<br />

on a new critical care and trauma tower.<br />

The new tower will be eight floors tall. As of<br />

this writing, four floors are completed, with the<br />

remaining shelled. The tower will house a new,<br />

larger ED, a new critical care unit and new<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

21


CoO Perspective<br />

The theory of<br />

“build it and<br />

they will come”<br />

does not apply to<br />

healthcare construction.<br />

surgical suites. It will sit where a current medical<br />

office building resides, which will be demolished<br />

later this summer. The primary goal <strong>for</strong> this tower<br />

is to provide state-of-the-art facilities <strong>for</strong> the<br />

care of patients, especially those that are critical.<br />

By consolidating services related to critical care<br />

in one tower, efficiencies will be gained. Capacity<br />

will also be added to a facility that is struggling<br />

with lack of both ED and critical care beds.<br />

Design Considerations<br />

The flagship facility sits in a residential neighborhood,<br />

so maintaining positive community<br />

relations was key. We also wanted the overall<br />

design to focus on infection control/wellness,<br />

lighting and even stair locations in order to gain<br />

an edge against other local area competitors.<br />

Volatile organic compounds (VOC) and other<br />

hazardous compounds are contained in many<br />

construction materials and furnishings, posing a<br />

risk. But <strong>for</strong> infection control purposes, we prohibited<br />

all VOC-containing materials (e.g., lead,<br />

copper, cadmium-based materials). A number<br />

of VOC-free materials are available, including<br />

less-polluting paints, wood products, carpets,<br />

solvents, etc. Additionally, we are minimizing<br />

horizontal services and opting <strong>for</strong> antimicrobial<br />

surfaces wherever possible. And stairwells are<br />

being equipped with windows to encourage use<br />

and promote wellness.<br />

Maintaining positive community relations is<br />

a necessity <strong>for</strong> a hospital, especially in an ef<strong>for</strong>t<br />

to keep local admissions…local. Construction<br />

vehicles, noise levels, debris control are all challenges<br />

in a construction project and can create<br />

neighborhood dissention. In order to combat this<br />

throughout this project it was important to:<br />

1. Establish a written communication plan that<br />

will continuously update the local Chamber of<br />

Commerce as well as neighbors. Letters are sent to<br />

neighbors homes routinely to in<strong>for</strong>m them of what is<br />

next in the process, what issues that might pose etc.<br />

2. Participate in “green” ef<strong>for</strong>ts where possible. This<br />

design incorporates bike racks, inviting landscaping,<br />

special lighting designs, etc. to “decommercialize”<br />

the building and pose it as urban-friendly.<br />

Within the buildings themselves, innovation<br />

was key in order to improve patient access and<br />

overall care.<br />

Bullet Points<br />

The following are some items implemented during<br />

the planning process <strong>for</strong> each area of focus in<br />

order to improve throughput, efficiency, quality<br />

and patient satisfaction:<br />

Emergency Department<br />

n Ambulance flow completely separate<br />

from other traffic<br />

n Entire waiting room visible by receptionist<br />

n Utilization of a Team Triage methodology and<br />

one-way glass between triage and reception<br />

station to facilitate staff coverage<br />

n Positioning of access points so that staff can<br />

monitor without relying on cameras or leaving<br />

work area<br />

n Remote locking/unlocking capability <strong>for</strong> entry points<br />

n Universal rooms — triage rooms can function as<br />

ED rooms<br />

n Minimal built-in cabinetry <strong>for</strong> lower maintenance<br />

n Overall patient flow is clearly defined to place<br />

less reliance on signage<br />

Surgery (OR)<br />

n 750-square-feet minimum in all ORs<br />

n Power-operated OR doors<br />

n 10-feet ceilings to accommodate future<br />

equipment needs<br />

n Pre- and post-operative rooms are interchangeable<br />

n Direct access to central sterile right below ORs<br />

Critical Care Unit<br />

n Public elevator immediately adjacent to unit<br />

n Handwashing sink at entry to unit<br />

n Unit clerk space directly at entrance to unit <strong>for</strong><br />

immediate family greeting<br />

n Significant use of glass <strong>for</strong> greater daylight effects<br />

n Procedure room on the unit<br />

Changing with the Times<br />

The theory of “build it and they will come” does<br />

not apply to healthcare construction. Building<br />

an ineffective tower could discourage patients. A<br />

tower that promotes efficiency and a “soft” environment<br />

<strong>for</strong> patient care can make all the difference.<br />

Construction is expensive, and building decisions<br />

must be carefully considered and planned<br />

well. With hospitals now concerned about Valuebased<br />

purchasing, Medicare break-even plans,<br />

readmission strategies, etc., you cannot af<strong>for</strong>d to<br />

make a mistake by building ineffectively.<br />

To<br />

van<br />

in t<br />

22 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


Choosing us to help you<br />

manage lab costs<br />

It’s academic<br />

In today’s do-more-with-less landscape, managing costs is vital. We can help you achieve your<br />

objectives with solutions tailored to your needs while making your lab’s test menu more competitive.<br />

We offer resource-optimizing lab management, Six Sigma tools and programs that help you maximize<br />

employee retention. And, we bring the logistics efficiencies of the nation’s leading lab. To manage<br />

costs, improve patient care and build loyalties, put Quest Diagnostics to the test.<br />

watch a video on green hospital design, go to www.adceweb.com/executiveinsight<br />

and enter “green design”<br />

he keyword box.<br />

Quest Diagnostics Hospital Services Specialized services <strong>for</strong> your complex challenges<br />

Visit www.questdiagnostics.com/hospitalservices or contact a Quest Diagnostics representative<br />

to discover more.<br />

Quest, Quest Diagnostics, the associated logo and all associated Quest Diagnostics marks are the trademarks of Quest<br />

Diagnostics. © 2012 Quest Diagnostics Incorporated All rights reserved.<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

23


CFO Perspective<br />

Productivity Improvements<br />

and Your Bottom Line<br />

Read how one hospital is catapulting itself into the future while<br />

maintaining a healthy financial picture. By Tim C. Lessing<br />

Tim C. Lessing is senior vice<br />

president and CFO of St.<br />

Tammany Parish Hospital,<br />

Covington, LA.<br />

As a 220-bed, not-<strong>for</strong>-profit community<br />

hospital with 1,600 associates providing<br />

the broadest range of inpatient and outpatient<br />

services in the region, St. Tammany Parish<br />

Hospital (STPH) maintains the balance between<br />

quality, cost and customer satisfaction, and remains<br />

one the most profitable hospitals in the<br />

region. Our success can be directly attributed to<br />

leadership strategies to improve productivity of<br />

physicians, staff and systems while improving<br />

the bottom line.<br />

Profitable Results<br />

The year 2011 was one of the most financially<br />

successful years in STPH history. STPH ended<br />

the year with a 10.8% Earnings Be<strong>for</strong>e Interest,<br />

Depreciation And Amortization (EBIDA), improved<br />

days in Accounts Receivable (AR) to 50<br />

and Days Cash on Hand (DCOH) at 201 days.<br />

STPH also had a very successful refunding of<br />

bonds and indebtedness, resulting in a $6.3M net<br />

savings in interest expense. And supply expense<br />

decreased by a net of 3.5%, while overall ex-<br />

thinkstock/stockbyte/ Wendy Hope<br />

24 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

25


CoO CFO Perspective<br />

Cash may be “king” but quality is “queen.” Every hospital administrator should<br />

have quality and satisfaction in the 97th percentile, but the challenge is to achieve<br />

this level of per<strong>for</strong>mance while maintaining a healthy bottom line.<br />

pense as a percent of net patient revenue remained consistent with<br />

the prior year’s per<strong>for</strong>mance.<br />

Technology<br />

STPH has embraced technology throughout the patient care delivery<br />

model and the entire revenue cycle, resulting in improved<br />

productivity and a stronger bottom line. Some highlights include<br />

2010 redesign of the pre-registration process, implementation of<br />

benefit verification and copay estimator software, elimination of<br />

duplication through autofill functions (asking the patient the same<br />

question multiple times) and automatic physician order <strong>for</strong>ward/<br />

verification.<br />

These gains are continued with concurrent coding process on<br />

the floor, single sign-on <strong>for</strong> physicians and staff, and an electronic<br />

health record storage device enabling remote access <strong>for</strong> physician<br />

— all serving to decrease Discharged Not Final Billed (DNFB) by<br />

2.1 days in 2011.<br />

Standardized Plat<strong>for</strong>m<br />

Physician integration comes in many shapes and sizes, but at<br />

STPH we believe that one size may not fit the requirements of all<br />

the physicians (staff and contracted). Nonetheless, a standardized<br />

system plat<strong>for</strong>m means physicians no longer have to access multiple<br />

applications, resulting in greater physician satisfaction and<br />

increased productive time.<br />

A standardized plat<strong>for</strong>m also eliminates multiple interfaces and<br />

the need <strong>for</strong> additional IT staffing support, since individual applications<br />

require upgrades that cause unexpected “Bolt On” applications<br />

to be upgraded as well. CPOE<br />

The potential benefits of Computerized Physician Order Entry<br />

(CPOE) include a reduction in medication errors, decreased time<br />

frame <strong>for</strong> order completion, improved adherence to core measures,<br />

patient-centered decision support systems at the point of<br />

care, error checking to prevent duplicated orders and an overall<br />

reduction in pharmacy cost.<br />

The implementation of CPOE systems is not without pitfalls resulting<br />

from changes in physician workflow and the need <strong>for</strong> careful<br />

integration and implementation by all of the members of the<br />

hospital system. A successful CPOE implementation necessitates<br />

physician involvement in all phases of the design and implementation<br />

process.<br />

The STPH medical staff is designing and building a customized<br />

CPOE system using the Siemens Soarian plat<strong>for</strong>m, which has the<br />

added benefit that our physicians are already all familiar with it. We<br />

have in place a physician order set design and development team<br />

using “Zynx” order sets to create evidence-based admission order<br />

content. Our physician order set content and validation team of<br />

representatives from across the STPH medical staff creates standardized<br />

orders sets that improve physician workflow efficiency<br />

and prevent problems associated with handwritten orders.<br />

Staffing <strong>for</strong> PATIENT Improvements<br />

Hospital operations depend on technology to improve staff utilization,<br />

resource consumption and improve patient satisfaction<br />

to contribute to the success of the hospital’s bottom line. Acuitybased<br />

staffing models have been around <strong>for</strong> a number of years,<br />

but the subjectivity of the patient’s severity has always been in<br />

question.<br />

Today, staffing models are driven by multiple matrices that allow<br />

staffing flexibility tied to patient acuity, patient risk factors and<br />

staff skill mix. Knowing how to manage these matrices can reduce<br />

hours per patient day (HPPD), improve staff satisfaction and make<br />

<strong>for</strong> a com<strong>for</strong>table, cost-effective patient stay. Cash may be “king”<br />

but quality is “queen.” Every hospital administrator should have<br />

quality and satisfaction in the 97th percentile, but the challenge is<br />

to achieve this level of per<strong>for</strong>mance while maintaining a healthy<br />

bottom line. At STPH we have been successful in maintaining that<br />

critical balance between cost and outcomes.<br />

Embracing Change<br />

As STPH looks ahead in times of reimbursement uncertainty, an<br />

increased appetite <strong>for</strong> capital dollars, and added government compliance<br />

reporting criteria means executive jobs are not going to get<br />

any easier. Doing more with less has always been the buzz phrase in<br />

our industry, but we need to use technology in concert with human<br />

capital to their fullest potential to continue our success long-term.<br />

Our commitment to embrace changes and improvements<br />

may make it harder <strong>for</strong> the grandmother who was born here to<br />

recognize us as the same hospital, but those advances are the<br />

reason her grandchildren will be proud to choose St. Tammany<br />

Parish Hospital as their community health system into the next<br />

generation.<br />

26 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


esults.<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

27


CIO Perspective<br />

Can IT Yield Clinical Efficiencies?<br />

Clinical system implementations are complex and rushing through them can result in<br />

negative impacts. Ensure that the efficiency measures are clear and translate directly to<br />

the desired benefits. By Indranil (Neal) Ganguly, CHCIO, FHIMSS, FCHIME<br />

Neal Ganguly is vice president<br />

& CIO, CentraState<br />

Healthcare System, Freehold,<br />

NJ, and an <strong>Executive</strong><br />

<strong>Insight</strong> editorial advisory<br />

board member.<br />

The passing of the American Recovery and<br />

Reinvestment Act (ARRA) legislation<br />

created a major focus on the clinical application<br />

side of in<strong>for</strong>mation technology. From<br />

Medicare and Medicaid incentives <strong>for</strong> electronic<br />

health record deployment to the explosion of<br />

health in<strong>for</strong>mation exchanges (HIEs), clinical in<strong>for</strong>mation<br />

technology projects have dominated<br />

the HIT landscape over the last few years.<br />

Clearly, the rush to implement applications<br />

in order to qualify <strong>for</strong> federal incentive funds<br />

has been great <strong>for</strong> the vendor and consulting<br />

communities. Providers, however, face potential<br />

risks in terms of lost productivity and more,<br />

from rushed implementations. Extensive planning<br />

and frontline engagement in the selection<br />

and implementation of IT projects can result in<br />

measurable benefits, but organizations must stay<br />

focused on true drivers <strong>for</strong> technology implementation<br />

in order to avoid “paper benefits.” The<br />

following are brief examples of clinical in<strong>for</strong>mation<br />

technology projects that were put in place to<br />

realize certain goals.<br />

Online nursing documentation templates<br />

and workflows implemented to reduce the<br />

time required to complete an admis-<br />

thinkstock/ iStockphoto<br />

28 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


delivered.<br />

Speed. Scalability. Reliability. Standardization. Connectivity. ROI.<br />

introducing the AU5800<br />

www.beckmancoulter.com/CLE2012<br />

© Copyright 2012 Beckman Coulter, Inc. Beckman Coulter, the stylized logo and AU are trademarks of Beckman Coulter, Inc. and are registered with the USPTO.<br />

B2011-12757-10 2012 CLE Print Ad_June_<strong>ADVANCE</strong>.indd 2<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong> 6/15/12 1:4629<br />

PM


CIO Perspective<br />

Extensive planning in the selection and implementation<br />

of IT projects can result in measurable benefits,<br />

but organizations must stay focused on true<br />

drivers <strong>for</strong> technology implementation in order to<br />

avoid ‘paper benefits.’<br />

sion assessment. At the onset of a new clinical<br />

system implementation, the nursing staff identified<br />

issues with the time required to document<br />

an admission assessment. Time studies<br />

conducted to validate anecdotal observations<br />

showed that the average admission assessment<br />

took 45 minutes. Nursing leadership felt that<br />

improved technology should reduce this timeframe<br />

and established that objective as a project<br />

success metric.<br />

After working with IT staff and the vendor,<br />

the nursing team felt that the documentation<br />

time could be reduced by 15 minutes using<br />

the new system. A multidisciplinary team including<br />

IT, nursing, ancillary clinical areas and<br />

others met to review the assessment process.<br />

Problem lists were consolidated and streamlined.<br />

Documentation tools were revised and<br />

mobile carts were introduced to permit bedside<br />

documentation.<br />

The result of this work was a reduction in the<br />

average time to document an admission assessment<br />

from 45 minutes to 27 minutes. Certainly,<br />

the outcome was positive and the goal was attained,<br />

but did the hospital see value from this<br />

increased efficiency? The math shows us that<br />

if the hospital admits 100 patients per day on<br />

average, the annual time savings amounts to almost<br />

11,000 hours or nearly 5 full time equivalent<br />

positions.<br />

Un<strong>for</strong>tunately, this is ‘marketing math’ and<br />

often does not translate to the ability to reduce<br />

staffing levels since small time savings may be<br />

difficult to aggregate effectively. The lesson<br />

learned was to ensure that the true intended<br />

value of any measureable benefit is understood<br />

and that metrics are set appropriately.<br />

To be sure, the time savings had benefits in improved<br />

documentation and enhanced nursing<br />

satisfaction, but those are difficult to translate<br />

to hard value.<br />

Barcoded med administration implemented<br />

to improve patient safety and reduce<br />

documentation time. The introduction of barcoding<br />

to the medication administration process<br />

has clear benefits in terms of the reduction<br />

in avoidable medication errors. Additionally,<br />

vendors also made claims that their systems<br />

would improve nursing workflow and enhance<br />

medication charge capture.<br />

While the rationale <strong>for</strong> implementing this<br />

technology is grounded firmly in patient safety,<br />

the organization conducted audits of medication<br />

charges and found that nurses were often<br />

double documenting medications. Rather than<br />

doing all documentation online, some RNs were<br />

documenting on paper in real-time and going<br />

back later in the shift to document electronically.<br />

The audits found that the nurses documented<br />

100 percent on paper, but failed to complete<br />

the electronic documentation 3.7 percent of the<br />

time. Since the medication charges flow from the<br />

electronic documentation, the resulting gap was<br />

an obvious improvement opportunity.<br />

A new process was streamlined in that documentation<br />

would take place in real-time at the<br />

bedside. Mobile carts with computers and lockable<br />

medication drawers were introduced to<br />

enable nurses to bring the medication and documentation<br />

system to the bedside. Documentation<br />

at the bedside was a significant disruption to<br />

nursing workflow and initially slowed down the<br />

nursing staff. However, by working closely with<br />

nursing leadership, the use of barcoding was<br />

standardized and the result was better charge<br />

capture without loss of nursing productivity.<br />

Evaluating Workflows<br />

Incentives are an excellent inducement to implement<br />

or upgrade clinical systems. However,<br />

clinical system implementations are complex<br />

and rushing through them can ultimately result<br />

in negative impacts. Carefully consider what<br />

efficiencies your organization is attempting to<br />

achieve by implementing new technology. Ensure<br />

that the measures are clear and translate directly<br />

to the desired benefits as in the case of time<br />

savings and FTE reductions. Evaluate workflows<br />

and processes carefully to make changes that are<br />

aligned with the flow of the new system. Proper<br />

planning will provide strong and lasting benefits<br />

to the organization.<br />

30 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


“ Rapid clinical adoption of the Paragon HIS<br />

has led to better quality of care and helped<br />

us achieve Stage 1 meaningful use.”<br />

“ We made the right choice<br />

by going with Paragon.”<br />

To succeed and thrive in today’s healthcare<br />

marketplace, you need an in<strong>for</strong>mation system<br />

that can help you improve care and run more<br />

efficiently. The Paragon ® HIS has been named<br />

Best in KLAS <strong>for</strong> the community hospital <strong>for</strong><br />

6 years running. Fully integrated, user friendly,<br />

and with an average “go-live” of 14 months,<br />

it’s no wonder more and more institutions are<br />

selecting the Paragon HIS on their path to<br />

Stage 1 meaningful use and beyond.<br />

To learn why Sue and others have selected the<br />

Paragon HIS, visit www.mynewHIS.com<br />

Sue McCarty, RN, VP Administrator<br />

Chief Nurse <strong>Executive</strong><br />

OakBend Medical Center<br />

1 Source: 2006-2011 ‘Best in KLAS Awards: Software & Professional Services’, www.KLASresearch.com.<br />

© 2011 KLAS Enterprises, LLC. All rights reserved.<br />

© 2012 McKesson Corporation and/or one of its subsidiaries. All rights reserved. Paragon is a trademark of McKesson Corporation<br />

and/or one of its subsidiaries.<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

31


clinical lab efficiency<br />

Error Reduction<br />

Strategies<br />

Lean processes, automation reduce errors and drive<br />

efficiencies in the clinical laboratory. By Ralph Dadoun, PhD<br />

Dr. Dadoun is vice president and<br />

chief financial officer, St. Mary’s<br />

Hospital, Montreal, Canada.<br />

Clinical laboratory medicine provides critical<br />

data that enable effective prevention,<br />

diagnosis, treatment and management of<br />

diseases. Laboratory medicine also can play an essential<br />

role in risk management, providing data to<br />

help prevent or mitigate avoidable adverse events,<br />

such as medication and dosing errors.<br />

Yet the clinical laboratory’s contributions<br />

remain largely unheralded by hospital administrators.<br />

Although lab data are responsible <strong>for</strong><br />

directly influencing 70% of diagnoses, 1 clinical<br />

laboratory operations remain a “best-kept secret,”<br />

averaging just 6-8% of a typical hospital<br />

total budget.<br />

<strong>Executive</strong>-level administrators would be wellserved<br />

to understand how strategic investments<br />

can help critical laboratory functions drive even<br />

greater levels of productivity, quality and efficiency,<br />

delivering favorable returns on investment<br />

(ROI) and service level improvements,<br />

while simultaneously reducing potential operational<br />

and patient care errors.<br />

The Total Testing Process<br />

To best appreciate the potential of the laboratory,<br />

it helps to refer to the three-phase framework<br />

that defines clinical lab operations, known as the<br />

Total Testing Process (TTP): 2<br />

The pre-analytic phase, where most of the<br />

process is conducted outside of the clinical lab,<br />

includes test selection and ordering, patient<br />

identification, specimen collection and transport<br />

to the lab, and specimen processing (the<br />

only step per<strong>for</strong>med in the lab) such as logging<br />

into computer, screening, centrifuging, etc.—all<br />

the necessary steps required to bring the specimen<br />

to the analyzer <strong>for</strong> the testing process.<br />

The analytic phase encompasses the actual<br />

specimen testing process, result review and verification,<br />

and quality control (QC) checks.<br />

In the post-analytic phase, general results and<br />

critical values are reported; interpretive consultative<br />

services are provided to clinicians and<br />

specimens are stored.<br />

Because most medical errors are attributed to<br />

faulty systems, processes or conditions that lead<br />

people to make mistakes or fail to prevent them, 3<br />

ef<strong>for</strong>ts to improve clinical lab operations typically<br />

prioritize optimizing the analytic phase first.<br />

At my hospital, the 316-bed St. Mary’s Hospital<br />

in Montreal, part of McGill University, we<br />

jeffrey leeser<br />

32 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


clinical lab efficiency<br />

<strong>Executive</strong>-level<br />

administrators<br />

would be wellserved<br />

to understand<br />

how strategic<br />

investments<br />

can help critical<br />

laboratory functions<br />

drive even<br />

greater levels of<br />

productivity, quality<br />

and efficiency,<br />

delivering favorable<br />

returns on<br />

investment (ROI)<br />

and service level<br />

improvements,<br />

while simultaneously<br />

reducing<br />

potential operational<br />

and patient<br />

care errors.<br />

FIG. 1 - EVOLUTION of productivity: PRIOR to lean and after automation<br />

Test Volume: Reported Results<br />

2,600,000<br />

2,200,000<br />

1,800,000<br />

1,400,000<br />

1,000,000<br />

Test Volume:<br />

Reported Results per<br />

Workload Hour<br />

began a Lean evaluation in the mid-1990s to<br />

streamline workflow and accommodate a dramatic<br />

volume increase resulting from the closure<br />

of several nearby hospitals.<br />

A workflow assessment mapped each step,<br />

identifying best practices and possible process<br />

changes. Only 12% of tests were conducted<br />

manually, while 88% ran on analyzers. We embraced<br />

the then-nascent “core lab” philosophy,<br />

reorganizing operations according to technological<br />

plat<strong>for</strong>m—automated or manual tests—<br />

rather than according to scientific discipline,<br />

such as biochemistry, hematology and immunology.<br />

The core lab approach helped eliminate<br />

testing redundancies and corresponding errors<br />

and set the stage <strong>for</strong> implementing an automated<br />

system.<br />

Reducing Errors,<br />

Enhancing Per<strong>for</strong>mance<br />

Working from a blueprint of modular systems<br />

from a manufacturer (Beckman Coulter), we began<br />

in 1997 to implement a completely integrated,<br />

robotic conveyor track system, ultimately becoming<br />

the first hospital in Canada to operate in<br />

a “total lab automation,” or TLA, environment.<br />

The U.S. CDC notes that high levels of lab<br />

automation successfully minimize errors, enabling<br />

lab clinicians to concentrate more directly<br />

on quality assurance and results interpretation.<br />

This is because most automated systems’ targeted<br />

accuracy and precision parameters during<br />

LEAN Only Stand-Alone Automation Connect to Chem. TLA<br />

74,661<br />

Whrs<br />

1,287,878RR<br />

47,027<br />

Whrs<br />

2,565,338RR<br />

Year 1 Year 2 Year 4 Year 6 Year 8 Year 9<br />

Worked<br />

Hours<br />

70,000<br />

60,000<br />

50,000<br />

40,000<br />

30,000<br />

17 LEAN 26 automation<br />

55 >200%<br />

specimen analysis significantly reduce both risks<br />

and rates of testing errors. 4<br />

In our experience, automation directly impacted<br />

error rates, reducing the number of manipulations—manual<br />

interactions with a given<br />

specimen—by 75% and documenting increases<br />

in catching and reporting previously undetected<br />

errors.<br />

After introducing Lean principles and automation,<br />

clinical lab productivity, which we measured<br />

as reportable results per worked hour,<br />

more than doubled. These improvements were<br />

accomplished through a 99% increase in volume<br />

and a 27% decrease in worked hours.<br />

Virtually all hospital systems in North America<br />

face shortages of trained laboratory technologists,<br />

which can hamper a clinical lab’s ability<br />

to deliver timely data and increases the risk of<br />

errors. Yet, our post-Lean, post-TLA environment<br />

showed increased per<strong>for</strong>mance levels despite<br />

losing 35% of our full-time employee (FTE)<br />

work<strong>for</strong>ce by attrition over time. We compared<br />

our laboratory to others in the 2010 CAP Q<br />

Probe, and the results show that we are in the<br />

top 5% in productivity (Reported results/Non<br />

Management staffing).<br />

Middleware Offers<br />

Additional Advantages<br />

Key to our successful TLA environment has<br />

been our Lab In<strong>for</strong>mation System (LIS) and particularly<br />

our “middleware” capability, which<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

33


clinical lab efficiency<br />

FIG. 2 - OUTREACH program: volume of tests & revenue<br />

Test Volume: Reported Results<br />

3400<br />

3200<br />

3000<br />

2800<br />

2600<br />

2400<br />

2200<br />

2000<br />

1800<br />

1600<br />

1400<br />

1200<br />

1000<br />

$2,642,724<br />

$4,468,418<br />

Year 5 Year 6 Year 7 Year 8<br />

Based on Medicare Fee Schedule<br />

per<strong>for</strong>ms centralized, real-time monitoring of all instruments operating<br />

in the lab. The middleware system also per<strong>for</strong>ms autovalidation,<br />

eliminating the need <strong>for</strong> manual processes and the errors<br />

associated with it, by insuring that all test results pass through the<br />

same vigorous algorithmic process be<strong>for</strong>e being released.<br />

Among the most important features is the critical values notification,<br />

which alerts lab operators to outliers. Critical values are an<br />

important patient safety indicator, as they represent a potentially<br />

life-threatening pathophysiologic state that requires immediate<br />

intervention. If the sample needs to be rerun, this happens automatically<br />

as middleware rules trigger the test order and TLA<br />

carries out the processing. The lab operator can then notify the<br />

physician.<br />

In 2010, St. Mary’s laboratories enrolled in a CAP Q-track survey<br />

(Quality Assurance Benchmarking by CAP) on critical values<br />

reporting and we were rated on the top 5% with a reporting rate<br />

of 100%. 5 This means that all critical values were transmitted to<br />

the physicians within one hour <strong>for</strong> inpatients and outpatients. The<br />

study was carried over one year and 96 hospitals participated.<br />

TAT Improvements Also Improve Care<br />

In the post-analytic phase, we’ve focused on improving turnaround<br />

times (TATs) and enhancing communication, particularly with the<br />

emergency department, where prompt, predictable data reporting<br />

is especially critical. In 2008, the cost of avoidable medical errors<br />

to the U.S. healthcare system was estimated at nearly $20 billion, 6<br />

and diagnostic errors were cited in as many as one-half of all malpractice<br />

claims involving emergency room care. 7<br />

At St. Mary’s, the clinical lab has actively worked with ER and<br />

oncology clinicians to better understand their requirements. As<br />

a result of our automation system and ongoing communication<br />

through regular meetings, lab turnaround times (TATs) have improved<br />

by more than 50%, and delivery time variability has been<br />

drastically reduced. We measured TAT <strong>for</strong> stat chemistry tests,<br />

and results were delivered 90% of the time in 33 minutes or less.<br />

Better processing efficiency improved physician satisfaction levels,<br />

and greater collaboration with the lab in patient care delivery.<br />

Sustained Returns <strong>for</strong> Modest Investments<br />

Financially, investments to create St. Marys’ TLA environment<br />

have been very modest, and with very favorable ROI. Over a sixyear<br />

period, NPV was $1.54 million and IRR was 35%, with a payback<br />

period of approximately three years. The useful life of the<br />

automation system was estimated at 10+ years; St. Marys’ automation<br />

system is in its 14th year. There has also been a 60% growth in<br />

our lab outreach business, which generates additional revenues by<br />

providing laboratory services beyond our hospital.<br />

Implementing TLA and Lean processes have eliminated the<br />

vast majority of errors associated with the analytical phase of lab<br />

operations, enabling us to now focus on the pre-analytic phase,<br />

where the highest incidence of errors have been well documented<br />

to occur. 8 To date, a thorough process review (Lean approach) of<br />

blood collection has been completed, and an ongoing training program<br />

<strong>for</strong> phlebotomists and nurses is already in place. We are now<br />

looking at the feasibility to implement, hospitalwide, a barcoded<br />

wrist band <strong>for</strong> patients coupled with hand-held devices <strong>for</strong> patient<br />

identification. Conserving a small portion of the returns realized<br />

from our TLA investment and reinvesting it to reduce pre-analytic<br />

errors is a sound move that will yield considerable returns over the<br />

longer term in improved patient care, reduction of medical errors,<br />

and decreased cost care.<br />

As a hospital CFO as well as <strong>for</strong>mer lab director, I have seen the<br />

operational, financial and patient care benefits realized from investing<br />

in clinical lab operations. The advantages of implementing<br />

Lean processes and a TLA environment have quickly paid <strong>for</strong> the<br />

system and yielded even greater longer-term returns, and I believe<br />

other hospitals can experience similar favorable outcomes when<br />

executives give this sometimes small but always critical department<br />

the attention and investment support to accomplish these<br />

goals. These results may not be typical, as laboratory requirements<br />

differ.<br />

References<br />

1. Boowe J. 2003<br />

2. Lewin Group 2008<br />

3. US Institutes of Medicine, To Err is Human <strong>Executive</strong> Brief, Nov 1999<br />

4. Lewin Group 2008<br />

5. CAP – QPROBES - 2010<br />

6. Hospital Finance News, Aug. 9, 2010<br />

7. Dark Daily Newsletter, Sept. 7, 2011<br />

8. Plebani – 2006<br />

34 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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35


pharmacy<br />

The Pharmacist’s<br />

Expanding Role<br />

One CPO explains how the pharmacy is gaining greater<br />

influence at the hospital executive table. By Jill Hoffman<br />

Jill Hoffman is managing editor<br />

at <strong>Executive</strong> <strong>Insight</strong>.<br />

When Gary Johnson, chief pharmacy<br />

officer, University of Kentucky Medical<br />

Center, headed to Atlanta’s Mercer<br />

University School of Pharmacy in the mid-1990s,<br />

he planned to return to his hometown and open<br />

a small pharmacy. But interning at Emory University<br />

hospital opened his eyes to the world of<br />

hospital pharmacy management — a place he<br />

wanted to be.<br />

After obtaining his master’s degree in business<br />

administration and completing a general<br />

practice residency and a specialty in pharmacy<br />

administration, he took a position as assistant<br />

director of pharmacy at the University of Kansas<br />

Medical Center. There, Johnson worked with an<br />

individual who had been pharmacy director <strong>for</strong><br />

about 30 years, whom he describes as “an icon<br />

in hospital pharmacy administration.” Johnson<br />

eventually left to become corporate director of<br />

pharmacy in Fort Wayne, IN, where he oversaw<br />

pharmacy operations <strong>for</strong> Parkview Health<br />

System’s seven hospitals. But preferring the university<br />

setting, he moved on to be pharmacy director<br />

at the University of Virginia. And he took<br />

the helm as chief pharmacy officer (CPO) at the<br />

University of Kentucky in September 2011.<br />

Increasing Influence<br />

Over the years, the hospital pharmacy department<br />

has increasingly made its way to the executive<br />

table, Johnson says, thanks to a shift in<br />

perceptions about the pharmacy’s role in healthcare.<br />

No longer does the pharmacy just dole out<br />

Jeffrey Leeser<br />

36 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


kyle kielinski<br />

drugs, it manages, at the University of Kentucky,<br />

50 percent of the organization’s expense budget,<br />

$100 million in supplies and labor costs and<br />

some 300,000 medication drug doses a month.<br />

It was in the mid-2000s when Johnson noticed<br />

more CPO positions emerging at institutions<br />

such as The Cleveland Clinic and UPMC. At the<br />

time, he was serving as pharmacy director at the<br />

University of Virginia, and reporting to a vice<br />

president responsible <strong>for</strong> the pharmacy, laboratory<br />

and radiology.<br />

“The problem was Pharmacy was two levels<br />

away from the senior executive table,” Johnson<br />

says. “That VP to whom I reported then reported<br />

to the chief operating officer, who reported to the<br />

CEO. Politically, it’s difficult to secure resources,<br />

it’s difficult to move your agenda <strong>for</strong>ward when<br />

you are that far removed from the CEO.” But now,<br />

at the University of Kentucky, Johnson has a direct<br />

report to the CEO: “It allows me to be part of<br />

the strategic planning of the organization.”<br />

One way the hospital<br />

pharmacy<br />

can play a pivotal<br />

role in a healthcare<br />

organization’s<br />

operations<br />

is by saving money<br />

<strong>for</strong> the health<br />

system by working<br />

with senior<br />

leadership to craft<br />

a business model<br />

that optimizes<br />

its expenses and<br />

maximizes safety<br />

<strong>for</strong> patients, Johnson<br />

says.<br />

Technology and Safety<br />

One way the hospital pharmacy can play a pivotal<br />

role in a healthcare organization’s operations<br />

is by saving money <strong>for</strong> the health system<br />

by working with senior leadership to craft a<br />

business model that optimizes its expenses and<br />

maximizes safety <strong>for</strong> patients, Johnson says.<br />

“Pharmacy is in the greatest position to control<br />

costs because we can affect physicians and the<br />

drugs they choose to prescribe, which is the largest<br />

expense <strong>for</strong> hospitals,” he says.<br />

The pharmacy can streamline operations, increase<br />

safety and reduce medication errors with<br />

the help of technology. For Johnson, this is where<br />

Talyst Inc. comes in. He says the company’s<br />

hardware/software inventory management solutions,<br />

in particular bar coding, make the pharmacy<br />

safer. “We use technology to put bar codes<br />

on all of our drugs,” Johnson explains. “When we<br />

process a physician order, the electronic order<br />

creates a pending action that requires pharmacy<br />

staff to remove the drug from inventory, located<br />

on the shelves or in the carousel [automated dispensing<br />

machine], and then we use a handheld<br />

scanner. When we scan that drug, assuming it<br />

matches that pending electronic order, the drug<br />

is released and we dispense it to the floor. If it<br />

isn’t the correct drug, an error code will not allow<br />

us to proceed.”<br />

The process extends beyond the pharmacy<br />

and to the patient bedside. An example: A papharmacy<br />

tient is prescribed several medications to take at<br />

9 a.m. The nurse comes into the patient hospital<br />

room with separately packaged medications in<br />

small containers with bar codes on them. “So not<br />

only in the pharmacy are we scanning that drug<br />

to ensure that we’re giving the right drug to the<br />

nurse, the nurse also scans that drug, and then<br />

she reaches over and scans a wristband on the<br />

patient to make sure the patient is receiving the<br />

drug that was ordered.”<br />

Future<br />

Johnson believes the hospital pharmacy holds<br />

the keys to a health system’s success — from a<br />

safety and a financial perspective. Solutions such<br />

as Talyst are making this a reality. The University<br />

of Virginia has seen fewer medication errors<br />

since the system was installed, and pharmacists<br />

are rounding with physicians in specialized areas<br />

such as oncology to make recommendations as<br />

to the best drugs to use.<br />

“The CEOs and the senior leaders are under<br />

incredible pressure to get control of costs, and<br />

the one place where they can do that is with<br />

Pharmacy,” Johnson says. “We can leverage this<br />

technology to control the inventory. We can leverage<br />

the technology to decrease medication<br />

errors, and we can use the pharmacists to help<br />

the physicians select cost-effective drugs and<br />

drugs that have the best outcomes.”<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

37


evenue cycle management<br />

The Not-So-Soft<br />

‘Soft’ Impacts<br />

of ICD-10<br />

The time to baseline processes is now.<br />

By Patrick McNeese<br />

Now that the decision on the ICD-10 compliance date has<br />

been announced, it’s a good time to take a step back from<br />

mapping, translating and evaluating codes and look at some<br />

of the so-called “soft” impacts associated with the ICD-10 trans<strong>for</strong>mation.<br />

Prepare <strong>for</strong> Productivity Loss<br />

Loss of productivity <strong>for</strong> virtually everyone engaged in using the<br />

new code sets is viewed as one of the “soft” impacts that may be<br />

difficult to measure empirically, but will undoubtedly translate into<br />

significant financial shortfalls <strong>for</strong> many organizations.<br />

In 1999, Australia transited to ICD-10 and experienced a<br />

productivity loss higher than 25 percent that did not return to<br />

pre-transition levels <strong>for</strong> more than a year. Canada experienced<br />

increased productivity losses following their transition in 2004<br />

and never returned to pre-transition levels. I am not a seer or<br />

an expert but the general consensus is that the U.S healthcare<br />

space will experience similar productivity losses exacerbated by<br />

being the first nation to incorporate ICD-10 into reimbursement<br />

methodologies.<br />

An overall loss of more than 25 percent that extends beyond a<br />

year does not sound “soft” to me at all; rather it appears as be a proverbial<br />

ICD-10 “elephant in the room” that needs to be addressed.<br />

Organizations should be baselining processes now. ICD-10 impacts<br />

may be completed and the productivity warnings issued.<br />

Understand the operational areas where productivity may be most<br />

impacted and measure current productivity levels. How long does<br />

it take <strong>for</strong> an experienced coder to complete a claim submission<br />

on a simple procedure? How long <strong>for</strong> an inpatient stay?<br />

Remember that the simplest claim submission under ICD-<br />

10 looks like a medium complexity submissions in ICD-9. As<br />

painful as it is to think about that, there will be<br />

more than 300 ways to code a diabetes claim.<br />

How long does it take <strong>for</strong> a talented claims examiner<br />

to evaluate a simple suspended claim?<br />

Patrick McNeese is business solution manager and<br />

ICD-10 practice lead, DST Health Solutions LLC.<br />

38 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


evenue cycle management<br />

Remember that the simplest claim submission<br />

under ICD-10 looks like a medium<br />

complexity submissions in ICD-<br />

9. As painful as it is to think about that,<br />

there will be more than 300 ways to<br />

code a diabetes claim.<br />

How about a complex one?<br />

Eliminate Bottlenecks<br />

What are the bottlenecks in the processes today? Is it technology?<br />

Is it workflow? Is it personnel? Look at everything that is happening<br />

today with the idea that it is going to take 25 percent more resource<br />

allocation to do it tomorrow. Can 25 percent be found in<br />

the process today? Can it be re-engineered to be more efficient?<br />

Could that technology purchase you postponed because Return on<br />

Investment was dubious now be more effectively deployed? Productivity<br />

losses under ICD-10 are assumed and they will be real.<br />

Talk to your vendors. They have been living in the ICD-10 world<br />

<strong>for</strong> quite a while and may have cost-effective products or services<br />

available to mitigate the losses.<br />

Don’t Forget Training<br />

It has been estimated that a coding professional will require more<br />

than 50 hours of ICD-10 training to be effective in the new world.<br />

Multiply that training by 50 percent if they will be doing inpatient<br />

services. Start awareness training now. Evaluate the benefits of<br />

training a core team of coders today and have them duplicate claim<br />

submission in ICD-10. This will obviously add to overhead but a<br />

productivity loss of 2-3 percent while employees become com<strong>for</strong>table<br />

in the new world will pay off once compliance is real.<br />

All the known costs associated with ICD-10 will pale under the<br />

productivity losses that will be incurred if organizations do not<br />

understand current processes and look at any possible avenues <strong>for</strong><br />

productivity increases today to soften the blow tomorrow.<br />

Your hospital may have been<br />

selected to take part in CDC’s<br />

new National Hospital<br />

Care Survey (NHCS).<br />

Participation in the survey will include completion of<br />

a short, self-administered facility questionnaire and<br />

electronic submission of Uni<strong>for</strong>m Bill (UB)-04 data<br />

(administrative claims) to a secure site on a recurring basis.<br />

Health In<strong>for</strong>mation Management professional staff<br />

members are eligible <strong>for</strong> free continuing education credits<br />

after completion of an on-line training about participating<br />

in NHCS.<br />

“The National Hospital Care Survey (NHCS) is a new<br />

survey that will gather critical in<strong>for</strong>mation on<br />

important issues facing our health care system from a<br />

wide variety of sources across hospital settings. Your<br />

participation in this survey is vital in order to gather<br />

the in<strong>for</strong>mation needed to make our health care system<br />

even better and more safe than it is now. Thank<br />

you in advance <strong>for</strong> your participation.”<br />

Thomas R. Frieden, MD, MPH<br />

Director, Centers <strong>for</strong> Disease Control and Prevention<br />

National Hospital<br />

Care Survey<br />

For more in<strong>for</strong>mation, visit<br />

www.cdc.gov/nchs/nhcs.htm<br />

National Hospital<br />

Care Survey<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong><br />

39


DIABETES<br />

Sandy Keefe is a frequent contributor<br />

to <strong>ADVANCE</strong> <strong>for</strong> Nurses.<br />

peer<br />

reviewed<br />

PR<br />

Diabetes:<br />

Client & Clinician<br />

Collaboration<br />

A structured care plan establishes the foundation <strong>for</strong><br />

diabetes management. By Sandy Keefe, MSN, RN<br />

Diabetes management is a complex process,<br />

requiring collaboration between clients<br />

and healthcare professionals. When<br />

those clients face significant obstacles in their<br />

lives, disease management becomes even more<br />

challenging.<br />

A recently Adult Day Health Council (ADHC)<br />

Research Collaborative Diabetes Management<br />

Study, <strong>for</strong> example, focused on intensive interdisciplinary<br />

care led by nurse case managers<br />

made a difference in the lives of clients from 10<br />

Adult Day Health Care Centers in New York<br />

City, upstate New York and Buffalo.<br />

The centers serve primarily low-income individuals<br />

with low health literacy and significantly<br />

restricted access to healthcare. The year-long<br />

study of 104 clients focused on the ABCs of diabetes<br />

management: A1c blood tests that identified<br />

blood glucose control, blood pressure control<br />

and cholesterol management.<br />

“These are complex clients with multiple<br />

comorbidities. Similar cohorts of Medicare recipients<br />

who have five or more chronic illnesses<br />

experience as many 10 hospitalizations per year.<br />

[But] clients who attend the ADHC medical<br />

model have a much lower rate of hospitalization,<br />

despite a large percent also being afflicted<br />

advance<br />

40 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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41


DIABETES<br />

The nursing case<br />

management approach<br />

has paid<br />

off handsomely.<br />

At each 3-month<br />

assessment, at<br />

least 60 percent of<br />

the clients demonstrated<br />

a statistically<br />

significant<br />

decrease in A1c<br />

levels, and only 25<br />

needed additional<br />

improvements.<br />

with cognitive impairment or depression,” explained<br />

Kathleen Falk, MSC, FNP, assistant professor<br />

at New York City College of Technology<br />

and chairperson of the ADHC study.<br />

“It’s important to identify how we can best use<br />

our nursing resources to help them stay in the<br />

community with support,” Falk emphasized. “To<br />

control their A1c levels is a very significant accomplishment.”<br />

Easy as A-B-C<br />

A structured care plan established the foundation<br />

<strong>for</strong> individualized diabetes management.<br />

“While a nurse could easily become sidetracked<br />

by a hypertensive crisis that requires immediate<br />

intervention, <strong>for</strong> example, the ABCs of<br />

the care plan cues the nurse to look at the whole<br />

picture after the crisis is resolved,” Falk said.<br />

“People don’t generally die of diabetes — they<br />

die from cardiovascular events. The care plan affirms<br />

the value of nursing care coordination in<br />

bringing together the diabetes team with a conference<br />

call.”<br />

Falk emphasized the importance of identifying<br />

barriers to treatment, rather than labeling clients<br />

as noncompliant. “We have an interdisciplinary<br />

team <strong>for</strong> a reason, and a client’s barriers to care<br />

can go unaddressed if the nurse doesn’t make<br />

appropriate referrals,” she said. “We were able to<br />

make headway by providing the nurses with education<br />

about identifying and managing depression,<br />

helping them understand that depression<br />

presents differently in the elderly, or that culture<br />

plays a role in how depression is expressed.<br />

“Once we suspect depression, we further assess<br />

with symptom rating scales and make referrals<br />

to team disciplines such as social workers,<br />

psychologists, and psychiatrists.”<br />

The nursing case management approach has<br />

paid off handsomely. At each 3-month assessment,<br />

at least 60 percent of the clients demonstrated<br />

a statistically significant decrease in A1c<br />

levels, and only 25 needed additional improvements.<br />

Data analysis demonstrated the effectiveness<br />

<strong>for</strong> the group as a whole.<br />

Population Management<br />

Lory Dahlhauser, RN, CDE, a diabetes case manager<br />

at Kaiser Permanente’s Stockton, CA medical<br />

offices, described the three-level population management<br />

model that her health maintenance organization<br />

has adopted <strong>for</strong> members with diabetes.<br />

“Level 1 members are newly diagnosed and attend<br />

classes while their primary doctor manages<br />

their diabetes,” she said. “Level 2 patients have<br />

high A1c levels (above 8.5 percent) and receive<br />

telephonic assistance from RN or RD care managers<br />

<strong>for</strong> 6 months to a year to lower their A1c<br />

levels, blood pressure and cholesterol.<br />

“All members with type 1 diabetes, members<br />

in renal failure and on dialysis, pregnant women,<br />

children with diabetes, and members on insulin<br />

pumps from our office are referred to me <strong>for</strong><br />

case management.”<br />

When she receives a new referral, Dahlhauser<br />

calls the member directly to set up an initial appointment.<br />

“I establish right away that we’re going to work<br />

together to keep them safe and their disease under<br />

good control,” she said. “I personalize the approach<br />

to target an A1c at a certain level, without<br />

incidents of hypoglycemia.<br />

“The rule of thumb is 7 percent, but members<br />

who are older, have complications or experience<br />

significant hypoglycemia, may be encouraged to<br />

keep their A1c target closer to 8 percent.”<br />

Dahlhauser makes good use of the Kaiser Permanente<br />

website and the Internet <strong>for</strong> two-way<br />

communication with members.<br />

“I have a lot of patients who e-mail me, and<br />

42 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


DIABETES<br />

that works well since I’m on the computer constantly,” she said.<br />

“Once I’m on their provider list, they can send me messages and<br />

ask questions.<br />

“A member may send me blood glucose results, <strong>for</strong> example, and<br />

I can review them and make an immediate change in insulin dosage.<br />

Insulin pump companies also sponsor a web-based computer<br />

program that allows me to use the member’s password, review<br />

blood glucose trends and then email instructions.”<br />

Telephonic Case Management<br />

Jody Pankow, BSN, RN, diabetes case manager at Physicians Plus<br />

Insurance Corporation, Madison, WI, recently transitioned to telephonic<br />

case management from her previous role as a diabetes<br />

educator in an ambulatory care center.<br />

“I’ve been reviewing the files on members who received diabetes<br />

case management over the past year, and found some real successes,”<br />

she said. “A lot of members started out with an A1c greater<br />

than 8.5 percent, 9 percent or even 10 percent but are now down<br />

in the 7 percent range.”<br />

Seasoned diabetes case managers understand the importance of<br />

identifying the knowledge level, learning readiness and self-efficacy<br />

beliefs that drive different individuals who have diabetes.<br />

“The first group is made up of people who need a little extra<br />

motivation from someone who isn’t their physician or healthcare<br />

provider,” Pankow said. “They need someone to say, ‘You can do<br />

this’ and then they will take the bull by the horns, institute healthy<br />

lifestyle changes, improve their blood glucose levels and sustain<br />

their goal A1c over time.”<br />

The second group needs more consistent follow-up from their<br />

case managers.<br />

“These are the members who start at 8 percent, go up to 9 or 10,<br />

drop down again and see-saw back and <strong>for</strong>th,” Pankow said. “They<br />

do well with constant reminders, rein<strong>for</strong>cement and someone to<br />

hold them accountable. As soon as you say, ‘OK, you’re doing good!<br />

Let’s touch base again in a month,’ they go off track.”<br />

The third group does best in a collaborative relationship with the<br />

diabetes case manager.<br />

“These members tell me, ‘I know what to do, I just need to do it!’”<br />

Pankow said. “I work with them to identify issues and barriers to<br />

effective glucose control. Together, we explore telephonically and<br />

come up with strategies that work <strong>for</strong> the individual.”<br />

Staff members at Physicians Plus are in the process of obtaining<br />

accreditation <strong>for</strong> the diabetes case management program from the<br />

National Committee <strong>for</strong> Quality Assurance, NCQA. “We track<br />

HEDIS data about patient outcomes, including the A1c values,”<br />

Pankow said.<br />

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43


cloud contract<br />

The Cloud<br />

Contract<br />

Key elements <strong>for</strong> executing a<br />

move to the public cloud are<br />

outlined. By Chris Witt<br />

Similarities exist in a cloud contract as with<br />

other contracts you have negotiated; if you currently<br />

employ data center co-location or managed<br />

services, you will see many parallels with<br />

cloud services, <strong>for</strong> example. What follows are<br />

observations I have assembled while working<br />

with many clients. You should engage your corporate<br />

council early in the process, as they will<br />

prove to be invaluable.<br />

Key Areas of Consideration<br />

HIPAA – This might seem like an obvious area,<br />

but it requires some specific attention. Due to<br />

the nature of cloud computing, it can be difficult<br />

to know where your data is and who has access<br />

to it. Ultimately, you are on the hook to secure<br />

the data and be able to audit access. You want to<br />

ensure your vendor will facilitate this logging.<br />

Chris Witt is president and cofounder<br />

of WAKE TSI.<br />

There are clearly pros and cons of using<br />

public cloud computing in the delivery<br />

of healthcare computing services. Somewhere<br />

in the process you will select a vendor who<br />

best aligns with your strategy. The next step in<br />

this vendor relationship is to negotiate the contract.<br />

Contract negotiation is like sausage making:<br />

You want the final product but you don’t<br />

want to see how it is made.<br />

Force Majeure – Most standard contract language<br />

makes it far too easy <strong>for</strong> a vendor to declare<br />

Force Majeure. I would not recommend that a client<br />

go into anything less than a Tier 3 data center.<br />

It should take a catastrophic local event to bring<br />

down the data center. Also, your cloud instances<br />

are portable and should be replicated. A primary<br />

reason you move to the cloud is <strong>for</strong> the inherent<br />

resiliency. If you are not leveraging this, why not?<br />

Services – Make sure the contract clearly spells<br />

out the required services provided by the vendor<br />

and pre-negotiate the optional services. The<br />

contract should also cover implementation and<br />

the roles and responsibilities of each party. Do<br />

they include backup? Archiving? What happens<br />

if you need a restore?<br />

Service Level Agreement (SLA) – This is where<br />

you document your expectations. The SLA<br />

components should directly relate to the<br />

tom whalen<br />

44 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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46 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


equirements you put together earlier in<br />

the process. There should be no surprises;<br />

these are items you should have been discussing<br />

all along with your vendor. If the<br />

vendor cannot provide an SLA you are<br />

com<strong>for</strong>table with, find a new one.<br />

cloud contract<br />

in. Your ultimate goal is to protect the organization<br />

in case there is a problem. But remember,<br />

the contract is only a piece of paper<br />

and should be one component of your<br />

overall continuity strategy. Pay attention to<br />

the details and enjoy the sausage.<br />

Penalties – This is where it gets a little<br />

dicey. Generally, clients never think they<br />

are punitive enough and vendors think<br />

they are excessive. To be fair, penalties are<br />

not there to ensure reimbursement of any<br />

costs due to not meeting an SLA. They are<br />

a deterrent to encourage the vendor to do<br />

the right thing.<br />

Breach – You need to determine the<br />

situations you could potentially be put in<br />

where you would want to end the contract<br />

prior to the end of the term. This<br />

will include various egregious actions by<br />

the vendor but also should include the inability<br />

to maintain SLAs. Penalties are not<br />

going to cover all your losses. You should<br />

include language <strong>for</strong> breaking the contract<br />

if a vendor has a number of SLA failures<br />

during a period of time, such as three<br />

events in a single month.<br />

Termination – Just as you carefully plan<br />

how you are going to migrate your computing<br />

services to the cloud, you need to<br />

pay just as much attention to how you<br />

would get them back in case you part<br />

ways with the vendor. Chances are if you<br />

are parting ways, it is not amicable. The<br />

contract should be specific on what the<br />

vendor and client responsibilities are and<br />

specify timelines <strong>for</strong> critical activities. Another<br />

area you may want to consider is<br />

change of ownership or a bankruptcy. If<br />

the vendor is acquired or goes bankrupt,<br />

what are your rights? I address this by encouraging<br />

the vendor to give the client a<br />

termination option. This is especially important<br />

if you dislike the new ownership.<br />

Plan <strong>for</strong> Protection<br />

There are numerous items that make up a<br />

good contract, many of which are basic and<br />

not included here. While negotiating the<br />

contract, you need to keep visualizing the<br />

worst possible situations you could be put<br />

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47


supply chain improvements<br />

Hospitals Utilize “Just-In-Time”<br />

Approach to Improve Supply Chain<br />

Two organizations utilized the JIT approach — not carrying extra inventory beyond what is<br />

needed to function over a specified period of time — and reduced costs while improving<br />

patient care. By Marc Hafer & Paula Lillard<br />

Paula Lillard is a senior consultant<br />

at Simpler Consulting and<br />

brings more than 30 years of<br />

leadership experience in manufacturing,<br />

production control and<br />

human resource development.<br />

Her experience in Lean began<br />

with Toyota Motor Manufacturing.<br />

Paula has led executive-level<br />

per<strong>for</strong>mance appraisals, training<br />

and development assessments<br />

and succession planning, as well<br />

as new plant construction and<br />

improvements in manufacturing<br />

and materials management.<br />

Marc Hafer is chief executive<br />

officer of Simpler Consulting<br />

and brings years of leadership<br />

experience in sales, marketing,<br />

product development, strategic<br />

planning and general management<br />

with him. His experience<br />

in Lean Trans<strong>for</strong>mation ranges<br />

from manufacturing companies,<br />

public sector institutions, and<br />

healthcare systems both in the<br />

United States and internationally.<br />

As the state of healthcare in America continues<br />

to evolve, hospital leaders are faced<br />

with the challenge of balancing the budget<br />

without compromising — but rather consistently<br />

improving — the quality of care. Many hospitals<br />

are adopting a Lean culture with its innovative<br />

methodologies to not only improve the patient<br />

experience but also reduce costs.<br />

One such methodology is the Just-In-Time<br />

(JIT) Lean approach to materials management.<br />

JIT is a systematic supply chain management<br />

method to assist healthcare organizations with<br />

sourcing, sizing and replenishing supplies, including<br />

pharmaceuticals, resulting in reduced<br />

inventory by ordering — and utilizing — only<br />

what is needed when it’s needed.<br />

Lean management is an approach that changes<br />

the culture of an organization to enable the<br />

true per<strong>for</strong>mance potential of a business (like<br />

a hospital) or processes (like patient care pathways)<br />

to be realized. A Lean culture employs a<br />

way of thinking and a set of fundamental problem<br />

solving tools that help employees to see and<br />

eliminate waste.<br />

Any process, whether it is treating patients<br />

or materials management, is susceptible to<br />

the following eight common <strong>for</strong>ms of waste<br />

that are often roadblocks to delivering value<br />

to the patient:<br />

n overproducing,<br />

n waiting,<br />

n transportation,<br />

n inventory,<br />

n unnecessary motions,<br />

n processing waste,<br />

n defects<br />

n unused human potential.<br />

jeff leeser<br />

48 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


I need to improve care, efficiency and cost.<br />

Challenged with an inefficient and costly manual inventory management system, South Georgia Medical Center<br />

engaged CareFusion to implement Pyxis ® automated supply management systems in the OR. This move has helped<br />

the hospital trans<strong>for</strong>m workflow and improve adherence to select regulatory requirements, and continues to<br />

generate a positive ROI year after year. That’s the CareFusion difference.<br />

Join us at AHRMM, booth 701 to learn more, or visit us at carefusion.com/southgeorgiamc.<br />

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© 2012 CareFusion Corporation or one of its subsidiaries. All rights reserved. Pyxis, CareFusion and the CareFusion<br />

logo are trademarks or registered trademarks of CareFusion Corporation or one of its subsidiaries. DI402<br />

<strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong> 49


supply chain improvements<br />

Lean healthcare organizations empower their<br />

members (physicians, nurses, administrative<br />

staff, etc.) on the front lines by teaching them<br />

how to identify wasteful process steps, followed<br />

by problem solving in their routine daily work<br />

or on project teams to remove waste and create<br />

added value <strong>for</strong> their patients.<br />

It is important to explain that while the JIT<br />

supply chain is recognized as an effective Lean<br />

tool, it does not come without a serious commitment<br />

to process improvement and thoughtful,<br />

data-driven preparation. By definition, organizations<br />

utilizing the JIT approach do not carry extra<br />

inventory beyond what is needed to function<br />

over a specified, minimum period of time. Incorrect<br />

application of JIT may result in a hospital<br />

experiencing a materials shortage in the event of<br />

a surge in demand.<br />

To protect its patients, hospitals must consider<br />

external factors that could impact its ability to<br />

meet demand <strong>for</strong> critical inventory, such as vaccines.<br />

A proper analysis is needed to uncover external<br />

factors that might cause a spike in demand<br />

<strong>for</strong> materials or a break in the supply chain, thus<br />

compromising patient care. Examples include a<br />

natural disaster, passage of new legislation that<br />

hinders on-time delivery of imported goods, or<br />

other transportation interruptions. Based on the<br />

level of risk each situation presents, hospitals<br />

must determine how to adjust their stock levels,<br />

order quantities and replenishment cycles, while<br />

ensuring the supply chain is protected with a<br />

first, second, and sometimes third source should<br />

a supplier’s availability of materials change when<br />

the order is processed.<br />

How Hospitals Saved Money<br />

Some organizations, such as New York City<br />

Health and Hospitals Corporation and Denver<br />

Health, successfully implemented JIT materials<br />

management by properly weighing risks<br />

versus value. Both hospitals have experienced<br />

significant savings while increasing quality patient<br />

care.<br />

New York City Health and Hospitals Corporation<br />

(HHC), a $5.4 billion public health system<br />

and the largest municipal healthcare system in<br />

the U.S., had storage rooms holding more than<br />

$10.2 million in supplies. Typical of overstocks<br />

created by batch ordering in bulk quantities,<br />

some of these materials expired be<strong>for</strong>e use resulting<br />

in waste.<br />

As one example of how JIT was applied to<br />

HHC reduced the<br />

cost of gloves by<br />

almost $4 million<br />

per year. It cut<br />

down on the varieties<br />

stocked from<br />

20 varieties to<br />

just two, enabling<br />

HHC to negotiate<br />

the price of<br />

the 132,000 cases<br />

it used each year<br />

from $58 to $28<br />

per case.<br />

revamp its supply chain, HHC reduced the<br />

cost of gloves by almost $4 million per year.<br />

It cut down on the varieties stocked (different<br />

colors and thickness) from 20 varieties to just<br />

two, enabling HHC to negotiate the price of the<br />

132,000 cases it used each year from $58 to $28<br />

per case. Now supplies arrive, as needed — 5<br />

days a week — slashing gloves inventory by<br />

50 percent and providing an annual savings of<br />

nearly $4 million.<br />

Denver Health, a 500 bed hospital and Level<br />

1 trauma center, provides more than $2.1 billion<br />

in care <strong>for</strong> the uninsured even as government aid<br />

<strong>for</strong> public hospitals has dropped by $18 million.<br />

Be<strong>for</strong>e utilizing the JIT supply chain approach,<br />

Denver Health’s surgical patients who received<br />

tube feedings were automatically brought four to<br />

five cans of nutritional <strong>for</strong>mula into their room<br />

each day. When a patient was discharged, the<br />

unused <strong>for</strong>mula, which costs $1.22 per can, was<br />

thrown away, resulting in waste and expense to<br />

both hospital and patient.<br />

Denver Health used JIT principles to design<br />

a system to minimize costs of <strong>for</strong>mula: identifying<br />

a new area on the floor where cans were<br />

stored and designing a replenishment system to<br />

ensure availability and freshness. This allows the<br />

nurse to easily retrieve a can from the designated<br />

area and deliver it to the patient as needed versus<br />

wasting unused cans and ordering unnecessary<br />

can deliveries. Since adopting this new delivery<br />

system, approximately $10,000 of nutritional<br />

<strong>for</strong>mula has been saved. Through Lean supply<br />

chain management and other Lean applications<br />

system-wide, Denver Health has saved in excess<br />

of $150 million over the past 6 years — all while<br />

improving patient care.<br />

The JIT materials management approach has<br />

proven to assist Denver Health and HHC in realizing<br />

true cost savings while increasing efficient<br />

patient care. Both organizations have affected<br />

cultural change by valuing the critical importance<br />

of removing waste and trans<strong>for</strong>ming the<br />

entire supply chain — sourcing decisions, quality<br />

sourcing, order quantities, inventory levels, replenishment<br />

cycles, transportation methods and<br />

marketplace conditions — all driven by value in<br />

the eyes of their patients.<br />

By reflecting on how JIT and Lean can assist<br />

healthcare leaders in reducing waste, improving<br />

quality and lowering costs at their organizations,<br />

the bottom line has a better chance at receiving a<br />

clean bill of health.<br />

50 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>


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insights based on real-time active analytics.<br />

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How do you want to move <strong>for</strong>ward today?<br />

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of VHA advisors, you’ll make better, more in<strong>for</strong>med decisions to drastically<br />

reduce costs and significantly improve the overall supply chain per<strong>for</strong>mance<br />

of your hospital.<br />

Move <strong>for</strong>ward with VHA LYNX and discover essential cost reduction opportunities<br />

across your organization today. We’ve done it <strong>for</strong> others. We can do it <strong>for</strong> you.<br />

For more in<strong>for</strong>mation, contact us at VHALYNX@vha.com or 800.437.3293.<br />

Cost Reduction | Margin Improvement | Quality Improvement<br />

52 <strong>ADVANCE</strong> <strong>for</strong> <strong>Executive</strong> <strong>Insight</strong>

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