Finance: Quality Returns
Features
Written by Mike Sharkey   
Thursday, 31 January 2008
Finance: Quality Returns
Is there an ROI on quality? According to Thomson Healthcare and Premier Healthcare, there is, if quality is done right.
An investment in quality is good for your patients and your organization’s reputation. But healthcare executives now have even more reason to focus on improving the quality of care: the bottom line.

There has long been speculation about the ROI on quality, but according to leaders at Thomson Healthcare and Premier Healthcare, two of the nation’s leading consultancies, there is no longer any doubt.

“In the past, and I’ve been in healthcare more than 20 years, it’s been extremely difficult to measure that,” said Stephanie Alexander, senior vice president of informatics at Premier Healthcare. “But in the last six years, our members have worked hard to produce lots of real data to support that there is a return on investment for quality.”

Jean Chenoweth, senior vice president of performance improvement at Thomson Healthcare, agreed, stating that all of the nation’s top performing hospitals share a key characteristic: quality and cost efficiency are viewed together.

However, both women were also quick to point out the return on a quality investment happens only when organizations strive to make long-term, systematic change. Quality is not a program of the month, and if it is viewed that way, ROI is far from guaranteed.

Top performers
The results of the 2007 Thomson 100 Top Hospitals Cardiovascular Study demonstrate how quality, when done right, can produce a significant ROI.

In examining the performance of nearly 1,000 US hospitals by analyzing their outcomes for eight measures related to congestive heart failure, heart attacks, coronary artery bypass grafts, and percutaneous coronary interventions, Thomson made a startling discovery: If all cardiovascular hospitals achieved the same results as the 100 best performers, more than 7,000 lives would be saved and 750 medical complications avoided annually.

The study also found that those 100 top quality performers had costs that averaged 13% less (roughly $2,000) per case than peer hospitals. That wasn’t the only demonstration of quality ROI. The study also found the top hospitals experienced far greater volumes, suggesting the ROI for quality isn’t just lower costs, but improved marketshare.

“For 15 years we’ve been studying the characteristics of healthcare’s top performers,” Chenoweth said. “We’ve found that they’re early adopters of technology, business techniques, and process improvement. All of those things and more. But the one thing we know about the top performers is that, above all else, they view quality of care as integrally tied to cost efficiency.”

A major study conducted by CMS and Premier, the Hospital Quality Incentive Demonstration (HQID), is also proving how a quality-focused organization can improve the bottom line. More than 260 hospitals participated in the three-year study, and the results from its second year are eye opening (results from the final third year of the study were released after Health Executive went to press).

Based on their delivery of 30 nationally standardized and widely accepted care measures to patients in five clinical areas, participating hospitals raised overall quality by 11.8%. Dig deeper into that statistic, and you’ll find that improvements in care saved an estimated 1,284 heart attack patients. Improved quality resulted in significantly lower costs for participating hospitals—but that wasn’t the only financial kickback. CMS awarded $8.7 million in incentive payments to the top hospitals in the study in an effort to demonstrate how incentives can drive quality improvement.

“The Premier hospital alliance is showing that even limited additional payments, focused on supporting evidence-based quality measures, can drive across-the-board improvements in quality, fewer complications, and reduced costs,” Leslie Norwalk, former CMS administrator, said in a statement.

The top performing HQID hospitals all shared a critical characteristic, Premier’s Alexander said: they all made quality a part of their culture. “Quality has to be embedded,” she said. “It can’t be a program of the month. There is no way it can work otherwise.”

Follow the path
For those organizations just starting down the quality path, Chenoweth and Alexander said following the footprints of the nation’s top performing healthcare providers can produce ROI.

As Alexander stated, quality is built into the culture of all top-performing hospitals, and to do that, the focus on quality must start at the very top of the organization. Chenoweth agreed, recommending that hospitals not only get their executives behind quality initiatives, but also their boards of trustees.

Thomson and Premier also recommend organizations follow a proven process improvement philosophy. There are any number to choose from, from Quint Studer’s hardwiring excellence philosophy to Edward Deming’s plan, do check, act, to lean or Six Sigma. They are all good, Chenoweth and Alexander agreed. The point is to pick one, or a combination of philosophies that suits your organization, and stick with it for the long haul.

“You’ve got to have one, you’ve got to believe in it, and the leadership has got to push it,” Chenoweth said. “It is necessary to have a method.”

By selecting a method, many organizations will begin measuring performance like never before. It’s a progression that should be embraced, Chenoweth and Alexander said; change can and should be data driven. “When you begin measuring performance and setting benchmarks to see how you compare to your peers, you can really drive change,” Alexander said.

Make quality part of the culture, implement a process improvement methodology, and manage what you measure, and you will see a return on your quality investment, Chenoweth and Alexander agreed. And they’ve got the data to prove it.

“There is still skepticism on what the ROI on quality really is. I’m very excited about the fact that, as long as I’ve been in healthcare, it’s been extremely hard to show in a large scale way that hospitals that really focus on quality can really reduce their costs,” Alexander said. “But we now have data that shows this is possible, and it is happening.”
 
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