University of Pittsburgh Medical Center wants to commercialize its cost management technology that measures the true costs of healthcare delivery, and is teaming with analytics vendor Health Catalyst to do it.

As the industry transitions to value-based payment, providers must be able to better understand the costs of delivering care and how to price services if they are to be financially viable. However, the problem—according to UPMC and Health Catalyst executives—is that healthcare has struggled to accurately calculate the cost of its activities and services due to the complexities of disease and inability to systematically share, store and analyze data.

The solution, they say, is an activity-based cost management system developed by UPMC and matched with Health Catalyst’s enterprise data warehouse infrastructure, analytics expertise, and professional services.

“Our foundational reason for existence as a company is to enable measurable outcome improvements to help solve the problem of inefficiency in healthcare,” says Dan Burton, CEO of Health Catalyst. “It’s a trillion dollar problem—30 cents out of every dollar is wasteful—but in order to reduce that you have to have a precise view of your cost structure.”

Health Catalyst is licensing technology, content and analytics developed by UPMC with the intention of commercializing these innovations to further enhance UPMC’s cost management programs. The goal is to ultimately enable other health systems to precisely measure and analyze the true costs of healthcare delivery for each of their patients.

Also See: Automation Critical to Determining Cost, Price for Value-Based Care

Robert DeMichiei, executive vice president and CFO at UPMC, calls the ability to compare outcomes and costs across a patient’s entire care experience—and to then in turn adopt best practices that enhance quality while reducing spending—the “holy grail” of healthcare. “We’re putting together both the financial and the clinical activities into one database, so that we’re able to now assign the costs through the clinical drivers,” he says. “We now know what costs have been incurred for the benefit of a specific patient, specific surgery, specific procedure, as well as the work that specific physicians are doing.”

According to DeMichiei, UPMC first implemented its cost management tool in 2014—leveraging quality data with physician- and patient-specific cost data—and in the process was able to change clinician behavior resulting in improved care at lower costs.

“The partnership with Health Catalyst gives us the opportunity to commercialize this technology and provides a platform to take it nationally with a highly respected healthcare IT company,” explains DeMichiei. “This is a homegrown system and that’s not something years from now that I wanted to be worrying about in terms of upkeep and maintenance.”

As part of the agreement, UPMC staff that worked on the cost management technology over the past four years are now Health Catalyst employees.

“They have outsourced cost management to us from a team perspective as well as from a technology perspective,” says Health Catalyst’s Burton. “So, as we develop a commercial grade version of what we purchased from UPMC combined with what we’ve developed already, they’ll have an enterprise license to use that technology and the team that is in place to handle all their cost management needs.”

Health Catalyst will develop the first version of a commercialized software application that will be rolled out at UPMC this year, which will validate its effectiveness before becoming commercially available.     

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