Startups Taking on Challenges of Counting Costs

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As incentives change in healthcare, providers need a far more accurate accounting of the costs of items, both large and small, to better manage declining reimbursements. Several startup companies are rising to meet these challenges for tracking elusive costs figures in healthcare.

While some critics question whether new firms have the ability to handle the intricacies of enterprise-wide cost analysis, the raw data is already there – EHR platforms, said Chilmark Research analyst Rob Tholemeier. Information in EHR systems not only gather clinical data, but also collect time logs and other essential elements for detailed cost and variance analysis.

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"All the MRI machines, all the instruments and scopes, any piece of machinery around the hospital, is capturing tremendous amounts of information about what's being done, and who it’s being done to," Tholemeier said. "All activities that have either a material or labor expenditure on the patient are being tracked.”

Collecting the information is only one part of the challenge, he acknowledged. “Granted, it's not in one system; it's in multiple systems. Outside of healthcare, this would be considered a fairly modest data integration problem. It's not huge. It's not like installing a major ERP system for a big oil company or doing an airline maintenance facility analytics installation at a major hub. It's not trivial, but it's not something experienced people couldn't do over a relatively short period of time."

On an enterprise scale, tools that incorporate every piece of data imaginable are emerging. The Value Driven Outcomes (VDO) tool created by the University of Utah Health Care system is one example that has received national attention.

On the other end of the spectrum, true startups tackling discrete problems are also finding quick acceptance by health system customers. One such example is Washington-based Kit Check, which developed an RFID-cloud based medication inventory management system that saves users from $4.20 to $9.30 per medication and speeds processing time between 72 and 90 percent, according to a peer-reviewed study by University of Minnesota researchers. The company's customer base has grown from two in 2012 to almost 200 today, said Bret Kinsella, its chief marketing officer.

In addition, he said, customers are realizing "ancillary" benefits in the areas of knowing which drug lots are nearing expiration, enabling them to be used more efficiently, and also which drug lots may be subject to recall.

"In the past, if a recall drug notice came through and they knew the affected drug was in stock, they would have to pull every single kit because they didn’t know what lot numbers were out there," he said. "Today, they can do a lot number search and grab just the kits affected.”

Kinsella said the platform's analytics capabilities also enable formulary committees to analyze usage of specific medications very accurately. "Because it's cloud-based, we can aggregate data and analyze it across multiple hospitals; we can provide benchmarks so hospitals can see not only their own data but also what their patterns are in comparison to peer hospitals," he added.

The company's second product, Anesthesia Check, was launched at the request of several customers. Kinsella said they needed a solution that accommodated the time pressure anesthesiologists face, while building visibility and compliance into the process of tracking anesthetics.

Anesthesia Check can be integrated into electronic health records. "It helps drive the data-driven pharmacy from an operational perspective," he said. "It's really much more about supply than patient data."

The enterprise-scale University of Utah Health Care system's VDO costing tool, which was developed in 2012, leverages very large data sets. The system's costing data set includes approximately 135 million rows of data, with each row as wide as a football field, VDO executives said.

The health system said itemized expenses for goods and services across the entire academic medical center – from the cost of gauze tape to individual chemotherapy treatments to minutes of nursing labor – were created for more than 1,200 operating units. To account for variations in clinical activity, filters were created that enabled users to adjust for a variety of situations, including the severity of a case, different types of patients, and the length of a patient visit.

The tool is delivering results for the system. For instance, when the tool alerted physicians that a $15 bronchodilator could deliver the same outcomes for most patients as the $200 bronchodilator they traditionally prescribed, it was easy to switch, system executives said.

It is currently anticipated the VDO offering will be made available to other organizations via a subscription format, said Kathy Wilets, the system's interim director of public affairs.

Approaches that measure healthcare costs face multiple challenges, not the least of which is determining what the word "cost" actually means, Chilmark's Tholemeier said. "One of the big problems in healthcare is, people say 'we are going to reduce costs,' and 99.9 percent of the time they are talking about reducing cost to the patient or payer, but reducing revenue to the provider."

At some point, he said, as large purchasing groups begin to insist even more on rewarding cost-efficient "centers of excellence," there may emerge some sort of symmetry in the definition of cost and the tools around it. In that event, health systems will be forced to perform much more granular cost analysis. You can't manage this stuff based upon averages," Tholemeier said. "You have to look at every MRI and see the variance among the costs and try to understand them."

Others startups to watch:

*Healthsparq: The consumer-facing platform was spun off from Cambia Health Solutions in 2012 to give health plans and employers leverage in directing members to cost-effective provider organizations. The company said users get individualized cost, patient review, quality reports, and provider locations, plus more, and that its HealthSparqOne platform lets them "see their procedure on a timeline, understand the total time for each phase, and understand what to expect in the evaluation, procedure and post-procedure phases and have access to true, individualized cost information through-out."

*Gausssoft: The Redwood City, Calif.-based company says its GaussHealth platform digs deeper than "simple DRG level cost averages and aggregates" with its trademarked Natural Flow Costing NFC technology, including "graphical cost models that can in minutes analyze the millions of patient’s episode-of-care costs to replicate the natural flow of costs in a hospital, over multiple years."


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