On the home page of SwedishAmerican Health System’s website is the statement “Building a stronger, healthier community is what we’re all about.” Indeed, for more than a century, the Rockford, Ill.-based health system has maintained the goal of exceptional service that meets the healthcare needs of residents across northern Illinois and southern Wisconsin. SwedishAmerican is the only heart hospital in the region and the largest regional cancer center, and offers a wide range of other specialties and services.
To ensure its continued valued position in the community and its outstanding reputation for delivering high-quality care, two years ago, SwedishAmerican initiated a concerted focus on organizational health. Like many hospitals across the country that are wrestling with the movement away from the traditional inpatient care model, SwedishAmerican experienced both declining volumes and reimbursement.
Long-range financial planning work in 2016 identified a $15 million performance gap that was projected to grow to $40 million in five years without specific improvement interventions.Health system leaders engaged Kaufman Hall’s Performance Improvement team to help the organization close its performance gap and position SwedishAmerican as the leading provider in its market. A comprehensive assessment conducted by Kaufman Hall in August 2016 looked holistically at labor and non-labor expenses, the physician enterprise, issues related to unwarranted clinical variation, and service lines as potential areas of cost improvement.
The leadership team established improvement targets for every vice president by April of the following year, and Kaufman Hall trained the health system’s 200 managers on “cost intelligence” to ensure buy-in across the organization. A Results Management Office (RMO) was created in the summer of 2017 to manage the program internally, and by the fall, implementation began with the resources, processes, and tools in place to drive improvement.
Modest initial gains in fiscal year 2017 were followed by $13 million in margin improvement in fiscal year 2018 with another $16 million expected in 2019.
Several best practices have enabled SwedishAmerican to make rapid progress in realizing many identified savings opportunities. Confidence is high that the organization can sustain and build on its improvements over time.
BEST PRACTICE #1:
A Team Effort Between Finance and Operations
As discussed in its report 2018 State of Cost Transformation in U.S. Hospitals and Health Systems: Time for Big Steps, Kaufman Hall believes that being the high-value “provider of choice” in communities nationwide is a transformational undertaking. This undertaking requires hospital leadership teams to commit to structures and processes that will change the way they operate in order to dramatically improve their cost position.
With that in mind, Chief Financial Officer Patti DeWane and Chief Operating Officer Don Daniels agreed to co-lead the performance improvement program.
“I think having myself and Don as the co-chairs of this has really contributed to the success,” DeWane says. “We could do good cop/bad cop in a lot of ways. And surprisingly, Don was able to be the bad cop because Finance traditionally has taken the role of bad cop, and in a lot of organizations, that’s not received very well. I think having Operations centrally involved has been critical.”
Daniels echoes DeWane’s sentiment and takes it a step further.
“What we learned is that we are tremendously effective together,” he says. “To have the financial expertise sitting at the table, and also somebody with my personality who’s willing to challenge some of our operational processes. I think this combination has helped us achieve results that we expect to be long lasting.”
BEST PRACTICE #2:
An Informed and Engaged Physician Enterprise as Part of the Team
Finance and Operations are two legs of a three-legged performance improvement program stool at SwedishAmerican. The equally important third stakeholder group is physicians.
“The relationship that the executive team has with its physician team is much stronger and more robust than in many organizations,” says Kristopher Goetz, a Senior Vice President with Kaufman Hall’s Performance Improvement practice and one of the firm’s lead advisors to SwedishAmerican Health System. “The physician leadership and group was engaged from the very beginning and participated fully throughout.”
Ensuring physicians a real voice in the process has been a major point of emphasis.
“It wasn’t like improvement initiatives came from the ivory tower of the administration saying, ‘You must, thou shalt,” says DeWane. “Physician leadership has the ability to weigh in on decision making and determine how this is rolled out. That also was another critical part of getting buy-in. It wasn’t just, ‘Here’s how this is going to go.’ Physician leadership has a clearly defined role in decision making.”
“We share information, good, bad, or in between,” Daniels adds. “While a lot of times physicians don’t really want to look at particular types of data, it’s very important that we include them in the review. We have a robust physician leadership structure, and we use that leadership structure in communicating our current situation, where the opportunities are, and the initiatives that could be helpful in achieving shared objectives. We want to ensure their agreement that the things we are planning make sense. The process has forced us to take a good hard look at some of the things we were doing, and make some changes for productivity gains for our organization.”
Working with the Kaufman Hall team, SwedishAmerican assessed trends in the utilization of services, supplies, and tests, compared them against industry benchmarks, and used that information to establish improvement targets.
DeWane notes that physician involvement in supply chain value analysis has been particularly beneficial as it has led to a deeper evaluation of clinical variation.
“As we work through the changes with value analysis and supply chain, it naturally evolves into, ‘Well, if we’re going to change supplies, maybe we will need to make a change in the way we function,’” she says. “But the big effort for us in the clinical variation work stream has been observation management
– trying to reduce the number of observation days. We’ve worked closely with physician leaders to analyze the data and determine if there are opportunities to be more efficient in this area.”
BEST PRACTICE #3:
A Structure for Driving Accountability and Managing Results
Kaufman Hall recommends that clients establish an RMO to provide a formal oversight structure that drives continuous progress within the performance improvement program. SwedishAmerican has followed that recommendation, and as DeWane notes, it’s proving to be a transformation booster for the organization.
“The Kaufman Hall team emphasized to us that transformative performance improvement isn’t an initiative; it has to be a culture change ingrained in the organization’s ongoing operations,” she says. “So we created the Results Management Office. We have it reporting to our controller, who reports to me. During regular leadership team meetings, we receive reports from the RMO. This structure is really hardwiring the change so that we continue to make improvements. As our CEO Dr. Born has said, it’s not a diet, it is a lifestyle change, and this just has to become the new norm.”
The RMO provides an enterprise-wide perspective that aligns projects and initiatives with SwedishAmerican’s strategic vision, cost transformation, and financial imperatives. It serves as the central point of contact for the ongoing monitoring of organizational change.
Six individuals comprise the RMO with responsibilities including process improvement, change management, financial management, communications, analytics, and outcomes tracking. As a former clinician and long-tenured SwedishAmerican employee, team leader Jess Hunley has a deep appreciation for how physicians and nurses regard performance improvement and a strong base of relationships upon which she can draw.
“When you begin to discuss finances, there is a difficult delineation between providing the best care possible and doing it at the lowest cost possible,” says Hunley who moved into her new role in the summer of 2017. “Clinicians typically get into healthcare to help people. We talk in terms of this program providing a foundation for them to continue to provide high-quality care.
“How can we standardize certain processes? What is optimal? How can we consistently demonstrate that we’re meeting our quality outcomes? In answering these questions, cost and quality issues intersect. Outcomes that are consistent typically reduce expenses.”
The RMO team also plays an important analytical role, helping the organization answer critical questions at a system level, such as:
- What are the services we’re using?
- Are we using them in an optimal way?
- How can we maximize the effectiveness of our spending in order to provide the level of service and product that are important to both patients and clinicians?
BEST PRACTICE #4
A Platform for Managing Program Implementation
Technology to enable reliable data flow and reporting is crucial to the success of any performance improvement program, and SwedishAmerican has made the necessary investments on this front as well.
Performance management software from Kaufman Hall enables SwedishAmerican to translate the hundreds of cost-saving initiatives developed during the planning phase into line item, budgetable entries. The software also contains planning templates that allow SwedishAmerican teams to plan for cost-improvement initiatives affecting multiple cost centers.
The system contains tools to help leaders plan initiatives in a thoughtful way, including requirements for identifying who is responsible for each initiative, and who is responsible for intermediate tasks of the initiative. Built into the system are standard monitoring reports, with various levels of details—a high level, as well as more detailed versions by department, vice president, or initiative category.
“It’s important that we are strategic in how we implement the program to avoid grey areas,” Hunley says. “We want the transition from current state to future state to be very clear. The technology and data help us stay focused on our objectives.”
For SwedishAmerican, it all comes back to becoming the strongest and healthiest organization it can be in order to continue fulfilling its mission of building a stronger and healthier community.