GE Healthcare Camden Group Insights Blog

Battling Extreme Drug Price Increases

Posted by Matthew Smith on Aug 31, 2017 4:04:03 PM

By Scott Drugan, Pharm. D., Senior Manager, GE Healthcare Camden Group

Top of mind for nearly every hospital or health system CFO is the roughly 10% annual increase in the cost of pharmaceuticals. Many of these healthcare executives might be surprised to learn that the main reason isn’t due to new novel therapeutics, but rather to older medicines with extraordinary price increases. These drug manufacturers are not trying to recoup the research and development cost of bringing a drug to market. Instead, as discussed in many news articles including this one by Consumer Reports, they are simply capitalizing on little to no competition for drugs that have an entrenched use in the healthcare environment. Therefore, CFOs and Pharmacy executives must explore every effort to limit the use of these drugs to those cases with no viable alternatives and to compound, dispense and administer in dosage forms developed to minimize the waste.

Limiting the use of these older drugs with the new costly price tags will require the assistance and cooperation of the affected clinical departments. Often the clinicians ordering these agents have no idea that these commonplace drugs are now today’s pharmacy budget-busters. Educating them on this new reality will probably lead to engaged clinical champions. The following two strategies, which we originally shared with Becker’s Hospital Review readers as a Supply Chain Tip of the Week, should significantly lower the overall cost of these expensive medicines:

  1. Develop and implement guidelines that limit the use of these pharmaceuticals to cases in which a less costly alternative is not clinically appropriate.
  2. Develop a means to dispense the optimal amount of drug that minimizes waste upon administration.

Case Study: Multi-Pronged Approach Reduces Drug Costs

These price increases for older injectable drugs with little competition greatly affected one of our clients, a multi-hospital system. This negatively impacted the inpatient pharmacy expense budget more than all the new or novel therapeutic medicines combined. To drive down these costs, we partnered with the Pharmacy Director to identify the fact that many of these drugs had a very high usage rate in the procedural areas, such as the operating suites and EPS Lab.

We worked closely with the key clinical stakeholders in these procedural areas to educate them about these tremendous price increases. This motivated the team to identify less costly therapeutically equivalent alternatives for some of the existing use. Although this did provide savings, the remaining usage still resulted in a substantial expense budget challenge due to the high cost of these drugs.

To continue to drive down savings, the project team reviewed the doses dispensed versus the actual doses administered for these identified drugs. Our goal: to understand if there was an opportunity to reduce the amount of waste. We identified many drug administrations that had a dose substantially less than the dose dispensed, resulting in considerable waste. For example, one drug was dispensed in a 1 mg vial when the dose administered rarely exceeded one-tenth of that dose. This created the opportunity for the pharmacy to compound doses in smaller increments to minimize waste. Importantly, the pharmacy leaders did not try to address these changes in a silo; rather, they partnered with clinical and technical staff to implement the compounding of these drugs in smaller doses, enabling the team to achieve additional savings.

The compounding of these smaller, unique dosages by the pharmacy, while providing savings, started from the same injectable drug with the very high price. Was there a way to produce these same new dosage sizes without using the high-cost injectable drug? The pursuit of this answer ultimately led to the addition of a 503B manufacturer who could produce several of these drugs for a considerably lower cost.

By battling extreme drug price increases in a variety of ways, we helped our client save more than $3.3 million annually. Our client is able to use these very expensive drugs in a cost-effective manner while maintaining exceptional patient care.

ScottDrugan_headshot.jpgMr. Drugan is a senior manager with GE Healthcare Camden Group with more than 30 years’ experience. He helps clients across the country improve their pharmacy costs, profitability, and operating efficiency. His background in pharmacy leadership enables him to bring deep understanding and subject-matter expertise to every project. Mr. Drugan possesses an outstanding record of accomplishment as a pharmacy leader and healthcare executive. His engaging, collaborative leadership style makes him an ideal partner for clients seeking to improve their pharmacy operations, ensure regulatory compliance, implement a complex 340B program, optimize their employee pharmacy benefits, or establish a retail pharmacy.He may be reached at scott.drugan@ge.com.

Topics: Pharmacy, Non-Labor Expense Reduction, 340B, Scott Drugan

Control and Maintain Costs Through Non-Labor Expense Reduction

Posted by Matthew Smith on Aug 30, 2017 9:11:08 AM

By Tom Fox, Vice President, GE Healthcare Camden Group

Healthcare organizations must constantly keep an eye on Non-Labor expenses, which typically represent approximately 40% of their total operating expenses. This is an ongoing battle with frequent periods of regression and sometimes a lack of focused oversight leading to missed budgets. Most organizations rely on their Group Purchasing Organizations (“GPO”s) to access competitive price points for supplies and services while using departmental leadership and processes, such as value analysis, to manage existing expenses as well as expenses associated with the various new technologies entering the organization daily.

Non-labor expenses are often not managed with the same rigor dedicated to managing labor expenses. Because of this, many “typical” strategies for managing Non-Labor expenses only address bits and pieces of the total Non-Labor cost equation, resulting in a huge opportunity cost associated with overlooking the full picture. The equation for total expense of a supply or service is PRICE x USAGE, and there are several items that should be investigated in each part of that calculation, such as:

  • Is the product or service truly needed in the first place?
  • Is there an equivalent product or service that could be evaluated that might provide efficiencies?
  • Are you using the supply or service in an appropriate manner, and is the way you are using it based on sound evidence, business case analysis, and/or clinical necessity?
  • Are you delivering the product or service in the most efficient way possible?
  • Are you engaging the right people in the decision-making process?
  • How does the price and utilization of the product or service support your reimbursement model, patient care needs and/or the needs or your internal/external customers?
  • Are you getting the best value out of the product or service you selected?

Simply relying on your GPO to manage these challenges is an incomplete solution. The GPO is focused on maximizing purchasing volume to drive better pricing, and they often encourage the use of contracts they have negotiated, when the contract or solution may not be the best available to you. The fact is, GPOs frequently do not manage a significant portion of Non-Labor spend as they are focused mostly on supplies and select contract services, with more of an emphasis on pricing than utilization.

Traditional non-labor expense reduction efforts end up being a temporary fix if sustainable governance models are not employed to create accountability. Any reset or launch of a sustainable Non-Labor expense management process must be supported by the appropriate structures and effective, repeatable methodology and tools, including:

  • A steering committee, led by a C-Suite sponsor, and focused on total Non-Labor expense management
  • Advisory councils for nursing and physician leadership to effectively engage the right stakeholders in the decision-making process
  • Effective project management workplans that highlight progress and barriers along with tracking documents to summarize overall status of efforts
  • Visibility to real-time impact to the bottom line

The GE Healthcare Camden Group Advantage

Our experience working alongside our clients proves we can generate a reduction of approximately 5-7% on total Non-Labor expenses, and sometimes as much as 8-10%--even with clients actively working with their GPO partners.

Non-Labor Expense Reduction from GE Healthcare Camden Group offers the advantages of:

  • Appropriate oversight of the full non-labor expense management process
  • Proven methodology supported by boots-on-the-ground subject matter experts who promote sustainable process changes that become embedded into your culture and daily work activities
  • Accelerated financial impact that delivers significantly more value than currently experienced with current GPO relationships and existing internal processes

Health System Case Study

The blue button, below, offers an immediate link to a 1-page case study that highlights our recent work with a Southeastern health system which resulted in the identification of more than 150 savings initiatives and $35 million in Non-Labor savings. Please take a moment to review the case study, visit the Non-Labor Expense Reduction area on our website, and contact us to determine the next steps we can take to start you on your expense-saving path.

Non-Labor Expense Reduction


Mr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at thomas.fox@ge.com.


Topics: Non-Labor Expense Reduction, Tom Fox

Leveraging Data Analytics To Optimize Supply Availability In The Operating Room

Posted by Matthew Smith on Aug 29, 2017 6:12:44 PM

By Don Martin, Senior Manager, GE Healthcare Camden Group

Imagine you are the OR nurse or surgical technician setting up the sterile field for a procedure when you discover that a critical supply or instrument is missing from the case cart. You scan the physician procedure card and see the item is listed but for some reason has not been picked. The patient is lying on the table and the surgeon will be walking into the room at any time – and she will not be happy to learn that the case will be delayed or possibly postponed while you and others scramble to locate the missing piece. Most of you don’t have to imagine this scenario because unfortunately we’ve all had this experience more times than we’d care to admit.

We all know that the apparently simple task of having the right supply or instrument available when and where it is needed for a surgical procedure is in fact not simple at all. It often involves many tasks performed by multiple staff across several departments, including vendors, materials management, central sterile services and the OR staff itself. We also know that without the ability to forecast the demand for these resources and match that demand against availability, we are leaving it largely to chance that the resource will be available when needed in the operating room. Leveraging data analytics enables hospitals to optimize scheduling and resources in the operating room.

Case Study: Addressing Gaps In Perioperative Automated Supply Inventory Management

Recently, we partnered with a multi-hospital, integrated delivery system to implement a point-of-use automated supply inventory management in the surgery suites of three of its facilities. This project was one element of an overall management initiative to improve supply service delivery to Perioperative Services, with these key objectives:

  • Ensure supply items are available to the operating room staff when and where they were needed
  • Streamline supply throughput processes in the operating room
  • Reassign day-to-day supply chain management responsibilities in the OR from clinicians to supply chain staff, enabling the OR staff to focus exclusively on their clinical responsibilities

While the implementation project was successful from a technical standpoint, end-users soon learned that simply having procedure scheduling and supply inventory data readily available from their respective systems was not particularly useful unless that information was somehow integrated to provide forecasting data, enabling the OR and Materials Management staff to anticipate and act upon identified inventory shortfalls and changes in scheduling volumes. Consequently, the OR staff continued to rely on tribal knowledge to forecast supply demand, often with poor results.

Seeing this, management organized a workgroup composed of managers and key staff from the OR, Central Sterile Services and Materials Management departments to further understand this information need and design a platform to provide the desired forecasting data. The group learned that neither the surgery or point-of-use inventory management systems were capable of communicating directly with each other to produce the required forecasting reporting. They decided to focus their efforts to develop a tool that would assimilate and organize scheduling and inventory data from their respective systems to produce and distribute daily supply forecasting information to the operating room staff.

The team selected the Microsoft Access database application as the platform for generating the inventory data analytics. Extracts were created to source scheduling and inventory updates from the surgery information and point-of-use supply inventory management systems and import them into the Access database. Queries and reports were designed and built and, following a period of application testing and validation with an end-user pilot group, the application was installed on departmental workstations and distributed for use by the operating room and materials management staff. An image of the application’s menu directory is shown in the graphic below.


Data Analytics Improves Inventory Accuracy And Availability

Data analytics generated from this tool fulfilled two highly desired and critical reporting requirements:

  • Daily reporting of anticipated inventory shortfalls impacting cases the following day enabled the Materials Management staff to notify and work with the OR staff to secure supplies from alternate sources or identify appropriate product substitutes
  • Analytics of supply demand trending data compiled over time enabled the materials management staff to adjust Periodic Automatic Replenishment (PAR) and inventory refill points to achieve more stable and reliable inventory levels, reducing the spikes in inventory levels prevalent before the availability of this information.

As the OR staff began to gain confidence in the data analytics, they relied less on tribal knowledge and increasingly on the information provided by the analytic tool. With that, we also saw a reduction in behaviors such as supply hoarding, which have a negative impact on supply availability and inventory level accuracy. The graph below represents the OR supply fill rate following implementation of the analytic tool. The results from Day 1 through Day 10 reflect the general volatility of supply availability levels prior to the use of the tool. As the OR and Materials Management staffs gained proficiency with the tool and use of the forecasting data, fill rates were improved and stabilized in Days 13 through 28, with one exception. Please note that the fill rate measures shown below were taken over a three-month period.


Lessons Learned

As with any system implementation project, our team came away with several lessons learned:

  • Before embarking on this type of project, it’s important to assess the availability and status of clinical and operational requirements within the organization; we’ve consolidated these requirements into a Data Modeling Checklist to help other hospitals and systems
  • A multi-disciplinary project steering committee was essential to the success of the project in establishing analytic data priorities and maintaining the development team’s focus
  • Begin with small, focused initiatives to shorten the development and product delivery cycles and build rapid team competency
  • Early operational successes resulting from the use of the analytic data fosters staff confidence and reduces reliance on group tribal knowledge
  • As with the inventory forecasting data, future data analytic development initiatives must demonstrate clear quality, operational and/or financial value to gain approval for development

Non-Labor Expense Reduction

MartinD.jpgMr. Martin is a senior manager with GE Healthcare Camden Group with more than 20 years of financial and clinical experience with operational responsibilities for patient care delivery, fiscal management, staff development and government, and regulatory compliance. His collaborative approach guides clients through the complex process of optimizing existing technology to meet healthcare’s Triple Aim: increase operational efficiency, improve the quality of patient care, and decrease the costs of care.


Topics: Data Analytics, Perioperative Services, Supply Chain Management, Operating Room

Taking Cost Out Of Supply Chain: Make Versus Buy

Posted by Matthew Smith on Aug 29, 2017 4:16:52 PM

By Janice Davis, RN, Senior Consultant, GE Healthcare Camden Group

As the healthcare industry transitions from volume to value-based care, controlling supply chain costs becomes increasingly important. Supply chain executives must continually seek to reduce cost while operating efficiently in this increasingly demanding environment.

For many organizations, this leads to the question of whether self-distribution would be a viable alternative to a vendor-provided distribution system. Commonly, supply chain experts refer to this as “make versus buy” for the distribution channel. In other words, should the hospital continue to “buy” the distribution service from a vendor or should they “make” their own supply chain distribution channel? The answer very much depends on which supply chain distribution system will best support the hospital’s core patient care business.

The Case For Self-Distribution

In a self-distribution model, the organization assumes the responsibility to obtain supplies and clinical products from the manufacturers and deliver them in correct quantities to the point of consumption (POC). These responsibilities include procurement, warehouse management, inventory control, order completion, transportation, and any other functions that are associated with a distributor. Supply chain leaders must design a self-distribution model robust enough to handle all the services and issues currently handled by the distributor, such as stock outs, back orders, satisfactory fill rates, and customer satisfaction.

However, designing and implementing a self-distribution option is expensive and carries financial and operational risks. All decisions impact the overall actual product expense and the organization must carefully evaluate each decision point to ensure the model meets the overall organizational objective. This requires detailed analysis to evaluate the feasibility of establishing a self-distribution network and determine the characteristics of the network that will meet the strategic goals of both the hospital and supply chain.

To begin the process, the supply chain leader should identify motivational forces driving the suggestion, examine potential supply chain approaches, and assess whether self-distribution would successfully address those issues while supporting the hospital goals and direction. Some situations make self-distribution more feasible. In our experience working with hospitals, healthcare systems and IDNs across the country, we find these situations often make the case for self-distribution:

  • If the organization owns a warehouse, it might make financial sense to use that warehouse as a part of a self-distribution model.
  • IDNs comprising many hospitals with different item files and supply chain processes might adopt self-distribution to standardize products and exert more control over the supply chain.
  • Dissatisfaction with the current operations of a distributor supply chain might encourage the organization to explore the opportunity to “make versus buy”.

The supply chain leader also needs to assess whether key success factors are in place, or whether they need to be developed. In our experience of guiding clients through this process, we recommend various key success factors, including:

  • Executive sponsors: Strong executive sponsors provide leadership and facilitate the decision-making throughout the evaluation, design and decision process
  • Operational knowledge: In-depth supply chain knowledge facilitates the creation of a product management system that minimizes product touchpoints and inventory locations while maximizing efficiency and customer service
  • Robust information systems: A self-distribution system relies upon comprehensive information systems and materials management software support that can electronically manage the information and establish records of transactions and payments, maximize use of Electronic Data Interface, and establish records of transactions and payments

The Alternative: Reducing Supply Costs Through Fee Management

Methodically implementing thoughtful strategies will significantly reduce product expense, effectively reducing the fees associated with product purchases from the usual 7% to 13% overall rate to less than 3%, as illustrated below.

Make vs. Buy

In our experience, this strategy often provides the same or even more savings than building a self-distribution model – with much less risk involved. When implemented in a thoughtful manner, this approach will standardize products and reduce the overall costs. Managing these fees and creating a “blended” fee approach may be the key to reducing expense and improving your bottom line without embarking upon a self-distribution journey.

Supply chain leaders can reduce product fees by meticulously examining product contracts and the fees allocated to individual products within the contract, then increasing products in the product groups with lower fees. For distributed medical-surgical products, for instance, this is accomplished by moving from national-branded items with a fee structure of 3% to distributor-branded items at a zero-based fee structure with increased rebates. When there is no corresponding distributor-branded product, hospitals can renegotiate distribution terms for national branded items. This reduces fees to 1% or less. For distributed non-contracted products, contracts can be secured reducing the distribution fees or the products can be ordered direct from the manufacturer. This reduces fees from between 8% to 12% down to 5% or less.

In addition, some medical-surgical products are eligible to move through the pharmaceutical distributor, where the fee structure is a “cost minus,” thus eliminating any distribution fees and reducing the product acquisition cost. Vendor negotiation to reduce product costs also benefits other product groups, such as Environmental Services and Food; optimizing Group Purchasing Organization agreements will further add to organization-wide savings.

Through partnering with vendors, distributors and customers, supply chain leaders can optimize the blend of distributed products, use distributor-branded products where clinically acceptable, maximize the Group Purchasing Organization contracts, and minimize non-contract products. The result: incremental fee reductions that lower overall supply costs while maintaining quality care.


Ms. Davis is a senior consultant with GE Healthcare Camden Group and brings more than 30 years of clinical experience, specializing in acute care surgical services, while supporting clients on their road to improving efficiency and optimizing their resources while delivering safe and cost-effective care. With a solid nursing foundation, Ms. Davis has developed an array of subject matter expertise that includes a strong focus in perioperative services and a wealth of knowledge in Truven Action OI. 


Topics: Non-Labor Expense Reduction, Janice Davis, Group Purchasing Organizations, Supply Chain

5 Tips To Cut Supply Chain Costs

Posted by Matthew Smith on Aug 29, 2017 11:27:57 AM

By Tom Fox, Vice President, GE Healthcare Camden Group

Has your hospital or health system struggled to reduce your Non-Labor expenses to meet budget demands? Is your organization finding it difficult to sustain previous expense reduction and find new opportunities? Here are 5 tips to help get your Non-Labor expenses and your supply chain back on budget – and keep it there.

1. Preparation Is Key To Engaging Physicians

If your hospital requires a value-analysis of products and medications used by physicians and other clinicians, it is essential that you engage with them to gain support for supply chain change initiatives. Before meeting with physicians, it is important to be prepared and do your homework. This includes performing a thorough review of relevant literature, researching product information and examining evidence about the impact of new supplies and treatments on the patient. Furthermore, it is essential to engage physicians in discussion to determine the quality of the clinical evidence with a focus on the clinical outcomes. By preparing for your physician meetings and having a plan for an open dialogue, you can make the most of your time with them and in turn, they will be more likely to consider and support initiatives to reduce supply chain inefficiencies and costs.

2. Effectively Communicate Supply Chain Changes

When considering supply chain changes, remember to include all stakeholders in the process. Consider all departments impacted by the potential change and include representation in meetings where changes are proposed. All communication should include information that describes the proposed or effective changes in sufficient detail to ensure clarity. It is also advisable that you include:

1. “before” and “after” scenarios for either product or process changes;

2. a reason for the change;

3. the expected implementation date; and

4. the contact person to call if there is a question.

Taking these steps will support a smooth transition to new products or processes.

Furthermore, it is critical to communicate to users when a product is on “back order” or “out of stock” for any reason. This communication should provide information about the plans to provide an interim substitute as well as expected date for re-stocking of the regular item. By doing so, you can ensure users will be able to accommodate the interim products during the time of a “stock out.”

3. Don’t Assume Supply Chain Parity

With respect to large integrated delivery networks (IDNs), there is a general expectation that standardized supply contract prices are loaded into materials management information systems and followed properly for all locations within a multi-hospital healthcare system. However, a review of these prices across the enterprise will very often identify fairly significant differences in pricing that contractually should not occur. This is particularly prevalent in large IDNs that have gone through recent mergers and acquisitions that required the consolidation of multiple items masters. Identifying these opportunities requires a review of not only prices for each item number at each location across an enterprise, but also conducting a review of the item master to identify duplicate item numbers for the same product. By identifying and resolving these price discrepancies, health systems can gain considerable savings.

4. Battling Extreme Drug Pricing Increases

Hospitals and health systems are experiencing an unprecedented escalation in the cost of older, commonplace drugs with new price increases. In these instances, drug manufacturers are not recouping the research and development cost of bringing a drug to market, but rather capitalizing on drugs that have entrenched use with little or no competition. Therefore, it is important to not accept these price-gouging practices without first exploring every effort to limit the use of these agents only to cases with no viable alternatives and to compound, dispense and administer in dosage forms designed to minimize waste.

Limiting the utilization of these old drugs with the new costly price tags will require the assistance and cooperation of the affected clinical departments. Often the clinicians ordering these agents have no idea that these commonplace drugs are now today’s pharmacy budget busters and educating them on this new reality will likely align them with the goal to seek alternatives when appropriate.

5. Monitor Medication Dosage Guidelines

Hospitals can limit the financial impact of drug price increases by closely monitoring and, when needed, adjusting medication dosage guidelines. In addition to limiting the utilization of medications when possible, the pharmacy department should review the actual dose utilized per case and determine if there is an opportunity to dispense in an amount that will minimize waste. This can be accomplished through internal pharmacy department compounding or through partnerships with custom IV compounding companies or 503B manufacturers.

Non-Labor Expense Reduction

TomFox_headshot.jpgMr. Fox is a Vice President with GE Healthcare Camden Group with more than twenty years of experience developing strategic vision with C-Suite executives, physicians, and department leaders to transform how healthcare organizations utilize their non-labor dollars. Mr. Fox works closely with clients across the country reduce non-labor costs and sustain those savings over the long-term. He works closely with clients to identify savings opportunities, obtain stakeholder support, and educate staff on utilization to maximize and sustain the savings. He may be reached at thomas.fox@ge.com.

Topics: Non-Labor Expense Reduction, Supply Chain Management, Tom Fox

Population Health Support Organizations Serve as New Infrastructures for Today's Population Health Needs

Posted by Matthew Smith on Aug 21, 2017 11:43:35 AM

By Graham Brown, MPH, CRC, Vice President, GE Healthcare Camden Group

With the transition to value-based payment, medical practices are aligning with accountable care organizations (ACOs) and clinically integrated networks (CINs) as a way for providers to remain in independent practice, while joining with like-minded clinicians to improve the experience, clinical and cost outcomes for their patients.

CINs and ACOs as enabling business structures to bring large groups of providers together to address the healthcare needs of a particular population in a given geography—usually via patients’ common health insurance coverage. As a CIN or ACO enters into a contractual relationship with a payer, such as the Centers for Medicare and Medicaid Services (CMS), a managed care plan or even directly with an employer, its providers seek to understand the collective disease burden, access issues and care needs of that population. Core competencies must be developed if these providers are going to be successful in managing the cost, quality and their patient’s experience of care.

A true population health support organization (PHSO) is an ideal fit in this dynamically evolving delivery landscape. It can serve as the operations backbone through which providers might develop and deploy new program resources meeting the needs of its patient population with scale and greater impact than working alone on such efforts.

Strategically, a PHSO aims to integrate providers, hospitals, payers and services across a continuum of patient care. The interoperability between each of the entities reduces fragmented patient care and serves as a bridge between healthcare silos.

A PHSO is a key platform for helping providers transition into the new world of medicine by providing infrastructure for physicians to reshape and drive patient-centered care and engagement via efficient management of patient populations. It is a sound structure for those starting and maintaining a CIN, or simply for those managing medical practices that are evolving to meet the demands of a future delivery system. Much like management service organizations (MSOs) of the past, a well-designed PHSO may also support physicians who wish to remain and thrive in private practice but still collaborate with other providers across a continuum.

Setting the Performance Management Foundation

The key differences of a traditional MSO versus a new-era PHSO relate to the breadth of capabilities that are focused on managing clinical and cost needs of a defined population. Historically, a MSO would deliver common business services designed to help provider practices with administrative burden or provide scale effect for managing overhead costs. As a result, the scope of a MSO’s service offerings would be narrow and cover offerings such as group purchasing, credentialing, office management or centralized billing services.
The additional objectives of a PHSO are three-fold:

  1. Support physicians in quality improvement;
  2. Offer sound financial management; and
  3. Develop the infrastructure needed for population health.

These include moving the needle on quality measures and outcome performance, controlling total cost of care and providing improved patient access to medical care.

The goal is to improve patient loyalty and experience, ultimately keeping patients in an organized system of care. A PHSO also acts as an aggregator of key patient and administrative data so it might become the conduit for a transfer of knowledge critical to success in managing the health of populations.

Quality improvement initiatives must be grounded in a firm understanding of current performance by providers related to the key measures negotiated with managed care payers in a performance contract. Contracts that use shared savings, pay for performance, partial or capitated risk related to utilization and cost targets reward physicians and other providers only when specific measures can be calculated and action can be taken en-masse to have a positive impact on those measures.

Aggregating care delivery data across a network of participating providers is critical. A foundational capability of a PHSO must be deploying the information technology and analytics systems required to determine how care is currently delivered across a network. IT solutions that integrate claims-based data provide the first level of visibility regarding missing or over-utilized services. Such data could bring to light missing services and identify patients with complex or polychronic conditions who may benefit from additional care management.

Patient-centered care needs to augment this view of historical services with a forward-looking perspective to inform an individual plan of care. Care plans which truly engage patients will consolidate to the best extent possible, a whole-person view of the patient’s situation, integrating medical record data, diagnostic results, medications, procedures and clinical interventions into a longitudinal record. Each provider involved in caring for a patient needs to be able to see what other care is being provided to a patient in different care settings, and document the services they provided the patient, therefore, playing their role in furthering the objectives of a care plan.

Sound financial management of healthcare resources should be placed in the hands of clinicians; the historical adage regarding the power of the pen (i.e., a physician’s ability to prescribe, order services or procedures) is just as true and important today if healthcare costs are to be managed effectively.

The backbone of core services that a provider needs to manage healthcare costs must be informed by a holistic view of the cost associated with an individual’s care. In this context, the role of the PHSO is to present to the provider, at the point of care, key data elements to help ensure the best clinical decision is made for a patient, in the most cost-effective manner. A PHSO fills this role by pulling together data on care provided, aligning those elements to the patient’s care plan and then giving providers and patients relevant cost information to help support making the right decision.

Common examples of where integrating cost and clinical data points are essential if a provider hopes to serve the best interest of a patient and performance expectations of value-based contracting. They include forecasting an appropriate length of stay, understanding the appropriateness of prescribing a generic drug, preventing duplicative and expensiver diagnostic tests or directing a patient to a lower cost site of care, such as an ambulatory surgery or urgent care center.

The infrastructure developed through a PHSO should reflect current capability gaps of the providers to be served. The assessment of provider needs and existing methods to manage and report upon clinical and cost performance at network/ population and provider/patient levels serves as a baseline around which new common services should be developed.

In some organizations, understanding and providing visibility to the variability of how care is provided within a network now might be the most valuable information. For other organizations, the ability to stratify a population to identify those most in need of care management and care coordination might provide the best return. The unique needs of provider practices, hospitals and patients served by a network have to be the basis around which a PHSO’s infrastructure, staff, expertise, programs and technologies are scoped and designed over time.

The strategic vision for the infrastructure services should have a multi-year implementation and scalability plan to ensure financial investments are spread out and are prioritized based on goals of the network and its timing for moving into value-based payments for population health management.


The PHSO is a vehicle to connect all the dots for a transformation from the old fee-for-service to the new value-based payment models. There are many benefits to organizing and operating a PHSO to support this transition, including:

  • Integrating physicians with an organized delivery system of care, which supports ACO and CIN initiatives.
  • Creating a mechanism to aggregate a holistic view of care provided to a patient across a continuum of care and integrating that view for all providers involved in a patient’s care
  • Coordinating the care management services across a continuum and managing transitions of care between settings.
  • Providing a contracting vehicle that allows and supports providers to assume risk and manage it effectively.
  • Being the collaborative forum for clinicians to develop care pathways, protocols and patient-centered care management programs to bring role clarity and coordination to the many individuals who might be involved in a patient’s care.
  • Enhancing system interoperability to exchange and share data among providers to support care delivery,
  • Improving financial performance and managing the complexities of practice management.
  • Ensuring compliance with CMS programs, such as MACRA, and avoiding payment reductions.
  • Supporting consumerism by creating a unified brand focused on consumer experience and loyalty.
  •  Managing revenue cycle and coding processes (i.e., diagnosis coding, chronic care management requirements, hierarchical condition categories/risk adjustment factor to support value-based contracts.
  • Providing education to physicians—both employed and independent—on topics, such as industry trends, leadership and care redesign.

Whether physicians are employed or independent, a PHSO can support them equally while providing a vehicle for improved operational and financial performance.

Where to Begin

Systems should begin by assessing their employed medical groups and conducting outreach to independent, affiliated practices to determine needs, timing of a value-based transition and identification of gaps. An existing CIN, ACO or MSO could evolve to become a PHSO.

The key to success is either designing a new or adapting an existing organization to fill identified gaps of support services necessary for success under changing reimbursement and care delivery models.

Lastly, a PHSO can be used to gain new relationships while strengthening existing ones with physicians. These partnerships will allow organizations to ultimately improve the health of populations they manage through joint investment in common infrastructure, technologies and staff resources.

The healthcare delivery system and corresponding reimbursement models are undergoing significant change that is unlikely to slow down. The old ways to practice medicine will no longer work in the world of a value-based payment system. A transformation of current practice structure, business strategy and partnerships along a continuum of care will play key roles in achieving success in the new healthcare delivery model.

PHSO, Population Health

BrownG.jpgMr. Brown is a vice president with GE Healthcare Camden Group and has over 25 years of experience in the areas of payer negotiations, program administration, and change management with healthcare provider, payer, government, and human service clients. He is an experienced leader in business planning and implementation for clinical integration and accountable care organization development across the U.S. He may be reached at g.brown@ge.com.



Topics: Graham Brown, PHSO

Humber River Hospital in Toronto Turns to Advanced Analytics to Improve Patient Care

Posted by Matthew Smith on Jul 26, 2017 11:36:47 AM

As populations grow and age, many hospitals are being stretched past their limits. Rather than apply temporary or partial fixes to address the challenges that underlie this busy, acute care hospital, Toronto’s Humber River Hospital has chosen to implement a holistic, state-of-the-art hospital Command Center that will enable it to achieve radical gains in quality and efficiency.

The hospital partnered with GE Healthcare Partners to conceive, design, and build the new 4,500 square-foot Command Center, a cornerstone of which will be GE’s Wall of Analytics that processes real-time data from multiple source systems across the hospital. Using complex algorithms, predictive analytics and cutting-edge engineering, the hospital intends to do two seemingly contradictory things: improve quality of care and patient access while at the same time reducing costs.

That may sound like an out-sized ambition, but there’s a good precedent for such a radical increase in efficiency: airports. Air traffic control technology was a guiding inspiration as GE designed a better way to extend reliable healthcare to meet the needs of more patients.

Blue-Sky Thinking

The introduction of air traffic control technology in the 1960s allowed airports to swiftly transition from scheduling a few hundred flights a day to managing thousands. Whereas, the volumes of aircraft and flights have increased tenfold, they all vie for the same space. Many airports now see millions of passengers pass through every day.

Despite the vast complexity of such a logistical challenge, the airline industry became significantly safer and more efficient in the process. So it’s no surprise that when GE Healthcare began developing a comprehensive approach to enable hospitals to better manage congestion, they modelled their solution on air traffic control.

Adding a digital Command Center was a natural fit for Humber River Hospital, not only because it’s recognized as North America’s first fully digital hospital, but also because the busy facility must serve a region representing more than 850,000 people. 

The extremely high demand became quickly apparent. After construction of the new hospital was completed in 2015, the hospital was slated to reach full capacity in five years. Instead, they reached that point in just five months.

“We’re at full capacity and we’re only going to see more and more patients through our front door. How are we going to deal with that?” asks Peter Bak, the hospital’s CIO. “We can’t just say, Sorry, you’re going to wait longer. That’s not acceptable.”

Powered by Digital

Bak and his team have overseen the implementation of the many tools that earned the hospital its high-tech notoriety, from software that empowers patients to review their own health records, to fully automated robotic systems for delivering supplies and dispensing medication.

These digital systems offer incredible efficiency, quality and safety benefits. For example, a doctor at Humber River Hospital can expect the results from a lab test in under sixty minutes, guaranteed. In a traditional hospital, the same manual process can take up to four hours and is prone to labelling errors and other defects.

But even though Humber River Hospital’s digital approach has yielded great results, it has not yet been fully harnessed. What the Command Center will do is amplify the impact generated from digitized processes, work flow and information flow by offering a holistic real-time view of how the hospital is operating.

Seeing the Big Picture

“People work in their focus area, and so they don’t see the big picture,” Bak explains. “They’re not seeing what’s happening at the other end of the hospital, and how what they do might have a bearing on what’s happening somewhere else.”

The aim of the Command Center is to empower a team of co-located staff to monitor, prioritize and expedite activities with the goal of driving far greater efficiencies. At Humber River Hospital, those efficiencies are anticipated to enable the hospital to deliver care to more patients with the same number of beds its operates today, and avoid a projected shortfall of 40 or 50 medicine beds by the year 2021.

Increased capacity isn’t the only outcome that the hospital is anticipating from its new Command Center. Another is improved reliability. “We need to drive hospitals to a point where they don’t make errors,” says Bak. “The Command Center acts as a second set of eyes and allows us to reduce the potential for mistakes.” By integrating systems and applying analytics a small team can observe the “outliers” and intervene ensuring that delays will not go unidentified, resources will not go under-utilized and patient care actions are taken accordingly.

The Command Center will also enable much better integration across levels of care. “We want the hospital to be the hub of an ecosystem that drives health for the 850,000 people in our community,” Bak explains. “Instead of patients having to physically go to the hospital to access specialty services for diagnosing and monitoring a condition, in many instances the patient can remain in the community and be serviced remotely with the use of technology.” Someone in the Command Centre will be monitoring, intercepting risk and expediting action when it is required, using analytics powerful enough to monitor the status of thousands of people, and not just the ones in the physical building.

“There are plenty of digital tools to make healthcare better, but they’re less effective when they are working independently of one another,” explains Bak. “Humber River Hospital’s new Command Center provides the much-needed synthesis to make all those systems work together.” The outcome? Reliable, high-quality care for more people.

Topics: Command Center, Hospital Command Center, Wall of Analytics

GE Healthcare and Jefferson Health Launch Multi-Year Risk-Sharing Relationship

Posted by Matthew Smith on Jul 17, 2017 11:23:24 AM

PHILADELPHIA (July 17, 2017) — GE Healthcare and Jefferson Health have announced an eight-year, shared-risk relationship that will help Jefferson strategically transform healthcare delivery in the Philadelphia region for the benefit of patients and their families. The goal of this collaboration is to create a forward-looking, robust health system by removing redundancies and maximizing sourcing efficiencies. One of only five such long-term relationships in the U.S. and its largest, GE Healthcare and Jefferson have the potential to generate $500 million to $1 billion in efficiencies with Jefferson that can be directed toward services that best meet patient needs over the term of this relationship.

“We have a unique opportunity to become the region’s leader in delivering even greater value to our patients — offering them high-quality care at a lower cost, wrapped around an exceptional patient care experience — every time,” said Stephen K. Klasko, MD, MBA, President and CEO of Thomas Jefferson University and Jefferson Health. “With the industry knowledge and global expertise of GE Healthcare, we will gain significant efficiencies that will enable us to reinvest in initiatives that improve the lives of those we care for.”

During the course of the relationship, Jefferson Health and GE staff will work side-by-side in areas throughout Abington, Aria, and Jefferson to acquire a deep understanding of operations and processes. The teams will focus on strategic growth, operations, integration, and performance improvement opportunities, while leveraging technology to deliver best-in class, seamless care that is convenient and affordable for the patient.

“With the healthcare industry facing unprecedented levels of patient demand and increasing cost pressures, it’s great to see health systems like Jefferson seek new and innovative ways to improve better outcomes for patients,” said John Flannery, incoming CEO and Chairman elect of GE. “This collaboration, which is financially tied to our shared success, demonstrates the confidence we have to jointly deliver world-class health care for the community.”

Through a shared-risk model that aligns the economic interests of Jefferson Health with GE Healthcare, both organizations have agreed to critical milestones that must be achieved throughout the eight-year relationship. A portion of GE Healthcare’s fees are contingent upon the level of success both organizations have in reaching certain integration goals.

“To prepare for the launch of this multi-year relationship, some of GE Healthcare’s senior- most leaders have been onsite, working closely with us to ensure we’re doing all we can up front to position all of us for long-term success,” said Kathleen Kinslow, Jefferson Health’s Chief Integration Officer and leader for this comprehensive initiative. “They have become valued members of our extended team and their level of engagement has been exceptional.”

Nationwide, academic medical centers are facing a growing gap between the cost of their clinical missions and the available funding that threatens the future of those missions. New approaches to optimize health system performance, including improving the patient experience and the health of populations at a lower cost, are essential to ensure sustainability. The unique relationship with GE Healthcare presents an opportunity to proactively address today’s healthcare challenges.

“Together, Jefferson and GE Healthcare are charting a new course by taking the necessary steps today that will help shift the healthcare paradigm,” said Klasko. “My message is simple. We need to transform our industry, continue to be optimistic about our future, and embrace disruption, such as consumerism, to effectively change the way we deliver health care in this country.”

Topics: Healthcare Transformation, Jefferson Health

GE Healthcare Acquires Novia Strategies to Expand Clinical Consulting Capabilities

Posted by Matthew Smith on Jul 10, 2017 3:28:41 PM

July 10, 2017 – GE Healthcare (NYSE:GE) announced today it is expanding its U.S. healthcare consulting business with the acquisition of Novia Strategies, a 22-year-old healthcare consulting firm founded and led by clinicians with deep experience helping organizations transform while delivering critical outcomes. The acquisition helps GE Healthcare deliver on its commitment to be the leading provider of outcomes-based solutions and to help healthcare organizations meet the demand for increased access, enhanced quality and more affordable healthcare for their patients.

Novia Strategies will become part of GE Healthcare Camden Group, which has advised more than 2,400 hospitals and health systems on such critical issues as redesigning care delivery, accelerating health system integration, succeeding with population health management, and maximizing the use of resources. Terms of the transaction are not being disclosed.

Novia Strategies’ skills and experience are a strategic complement to GE Healthcare Camden Group in several key areas: care management transformation, workforce management, non-labor cost reduction, and sustaining operating performance improvement. “Over the past two decades, we’ve saved hospitals hundreds of millions of dollars, improved patient outcomes and redesigned delivery so they can care for patients for generations to come,” said Nancy Lakier, CEO of Novia Strategies. “We share GE’s vision to deliver impactful solutions, and look forward to leveraging the broader portfolio and deep analytical and activation capabilities unique to GE to enable breakthrough, sustainable outcomes for more healthcare organizations.”

Novia Strategies’ consultants bring proven methodologies and first-hand experience in hospital operations. “Their hands-on clinical and operational expertise in areas like care management, productivity management, compensation and benefits, pharmacy, and non-labor cost reduction will broaden our ability to help clients tackle their most complex challenges,” said Laura Jacobs, President of GE Healthcare Camden Group.

The acquisition furthers GE Healthcare Camden Group’s vision to be a strategic transformation partner to leaders in healthcare and enable organizations to become best-in-class, high performing health systems. “Our two organizations are culturally aligned and share a passion for solving client challenges,” said Geoff Martin, COO of GE Healthcare Camden Group. “We both begin with the challenge, work side-by-side with clients to identify, shape, and activate solutions, and focus on measurable outcomes and return on investment.”

In particular, Novia Strategies’ capabilities will help accelerate the activation of large-scale health system transformations including implementing Command Centers and redesigning care across the continuum.

Topics: Acquisitions, Clinical Consulting, Novia

Clinical Strategies Not Producing Results? Take a Good Look at Your Operating Model

Posted by Matthew Smith on Jul 7, 2017 10:30:11 AM

By David DiLoreto, M.D., MBA, Senior Vice President, GE Healthcare Camden Group

Empowered consumers/patients; outcomes-based reimbursement; quality, safety, and cost concerns; unwarranted clinical variation; and new digital technologies have all created conditions in which health systems confront a need to re-evaluate their clinical strategies and execution skills. Successful organizations realize that effective responses include not only the creation of new strategies and the development of new execution skills but then need to challenge existing mind-sets as well.

Bridging the gaps between strategy, execution, and culture often require evolving the clinical operating model. Our experience at GE Healthcare Camden Group proves that addressing operating model structures may be one of the smartest investments that an organization can make to achieve success.

The competitive advantage created by effectively matching strategy and operating models is well-recognized in many industries.1 Operating model assessments and re-design are important during periods when greater organizational clarity is needed, i.e. after mergers and major acquisitions, when entering new market segments, when new revenue models are introduced or during major changes in operations like digital transformation. Healthcare organizations finding themselves in these circumstances may carefully evaluate and design new operating models for non-clinical functions such as Finance, HR, and IT, but are often less likely or slower to effectively address operating models for their clinical services and clinical support services.

Clinical Operating Model.png

Too often health systems make one of two missteps. Some fail to evolve their clinical operations quickly enough to match a strategy shift. Consider the health system that entered a new market with new ambulatory service offerings including retail, urgent care, and mobile health but stifled growth by keeping clinical services highly integrated with their existing core acute care business which starved it of the resources, management focus, and flexibility needed to launch effectively.

Another misstep is to move ahead with a new organizational design that does not match how the organization will create value. A newly merged health system too quickly moved from multiple ambulatory physician groups to a more integrated model to encourage cost reduction and centralized patient scheduling. Centralizing so quickly to realize a modest opportunity underestimated how much front-line staff accountability would be lost, added complexity, slowed decision making, increased patient complaints, and distracted the organization from major growth opportunities in the individual physician groups.

So how do health systems avoid these mistakes and create stronger linkages between clinical strategy and clinical operating models? We have found that the following six steps enable an organization to articulate clear and specific design principles to serve as guardrails for the senior team as it evaluates clinical operating model options.

  1. Define What is Most Important: The first design principle is whether to assess the entire organization, a specific business unit, or an individual function specifying which clinical strategies are most important for the operating model to support. Most likely, a combination of clinical and business priorities will be identified. Often previous strategies which address the same issues may have been implemented with mixed results. It is important to discuss ways in which the organization must adapt to win. Identifying key operating model principles, sequencing priorities, and pacing their implementation depend on more than just organizational structure. All elements of the operating model—structure, governance, decision rights, behaviors, processes, and technology—will need to be considered when selecting the appropriate clinical operating model.
  2. Decide How Value Will Be Created: A U.S. health system realized that the growth of Medicare Advantage plans in its largest markets was occurring at the same time commercial insurers had successfully resisted increases in hospital reimbursement rates. It established clinical operating model design principles to "focus on the delivery of clinically effective ambulatory care for seniors" and "reduce unwarranted clinical variation in acute care" to "achieve Medicare break-even margins." The operating model it designed integrated key clinical support services, many clinical services, and its clinical leadership into regions that effectively served multiple hospitals. Increasing the span of control and standardizing key processes produced annual operating savings of 12 percent while improving key measures of clinical quality, physician satisfaction, and patient loyalty.
  3. Streamline Decision Rights: Once the key clinical strategies are identified, the right operating model should catalyze faster and more effective decisions. The design principles should point to the types of decisions that will be needed. Engaging key stakeholders and front-line leaders to pro-actively assign responsibility and accountability for key decisions as well as identifying who will serve as collaborators and who needs to be informed creates role clarity and sets performance expectations. A health system that integrated outpatient care management for its clinically integrated network and accountable care companies established a principle that "Operation decisions regarding staffing ratios and promotion decisions should be regionalized." This led to the selection of an operating model for care management that clarified the roles and responsibilities of hospital care managers, transition care managers, and key service lines as well as fostering a more collaborative environment.
  4. Establish and Communicate Boundaries: Operating models should be designed so that customer-facing best practices and capabilities-sharing processes are widely and quickly disseminated across organizational boundaries. As health systems provide more services further from their acute-care hospital core such as retail, post-acute care, mobile health and telemedicine, they need to carefully determine how clinical support services such as quality improvement, risk management, infection control, and care management will be designed and integrated into new operating models.
  5. Assess and Bolster Necessary Capabilities: Achieving growth targets requires clinical operating models that are designed using principles that must balance customer requirements, available capital, and technical capabilities. Managing commercially insured individuals, low-income persons, and seniors under risk contracts require different patient engagement, care management, and medical management processes and expertise. Operating model design principles for a clinically integrated network such as "Contracting, claims, network development, legal, and risk management will be managed globally" while "Beneficiary engagement, customer insight, care management, and medical management will be managed along insurance product-lines" points to adopting an operating model in which the hurdle for centralizing clinical support services across product lines is high, but capital investments and specialized non-clinical expertise can be leveraged across multiple patient populations.
  6. Be Clear About What Will Be Preserved: Among the clinical operating model design principles expressed by a health system that was rapidly acquiring established physician practices was "How we go to market and acquire will make it easy for our physicians to do business with us." Strong physician relations were a hallmark and competitive differentiator for the health system, and they wanted to preserve it as they deployed the new strategy. This statement guided many key elements of the new clinical operating model.

Putting it All Together

Our experience proves that using these six design principles greatly facilitates the creation and adoption of effective and sustainable clinical operating models. They provide fact-based context and key observations that are important solvents in what can be a charged process. They are specific enough to allow leaders to recognize and make trade-offs between competing priorities and decisions such as what functions to centralize and what should remain local. Ultimately they serve as a beacon for clinicians and employees as to what choices leaders have made about implementing the strategic priorities that matter most to the organization.

1. Enterprise Architecture as Strategy: Creating a foundation for business execution. Jean W Ross, Peter Weil and David C. Robertson. 2006. Harvard University Press

DiLoreto.pngDavid DiLoreto, M.D., MBA Dr. DiLoreto, senior vice president at GE Healthcare Camden Group, is a physician-executive who is highly experienced in executive management, strategy and operations of healthcare delivery systems, and managed care companies. He has deep management expertise in community-based and academic health systems, large group medical practices, hospitals, and managed care organizations. His areas of specialty include clinical transformation, population health, business process improvement, leadership development, medical informatics, and data management and analytics. He may be reached at david.diloreto@ge.com.

Topics: David DiLoreto, Clinical Operating Model

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