By Michelle Mader / Special to Healthcare Facilities Today

Like a ship’s pilot, healthcare leaders must use data to define, direct and structure strategies to guide operational and facility planning and capital investment.

Today, healthcare systems have more access to more data than ever before. The challenge is to translate it into successful business strategies. Most healthcare systems began implementation of the Electronic Health Record within the last three to five years, and they are still grappling with effective management of the tremendous volume of historical and current data.  As a result, few have begun to use predictive analysis of the data to develop successful business strategies. In an increasingly population-health-oriented healthcare environment, a health system’s profitability will depend on its use of data to predict and manage population health in its service area. To meet each of its business objectives, a health system will need to identify, collect and analyze the right data to define, direct and structure effective strategies to guide operational and facility planning and capital investment. An effective strategy is like a navigational beacon, which enables a pilot to keep a ship on course to its destination ... with the agility and flexibility to respond to changing conditions.

Define the Destination and Identify the Right Course 

In order to develop successful business strategies, a health system’s leaders must first define the desired outcome in specific, quantifiable terms; for example, the overall goal may be defined as managing the health care of 600,000 people in its service area at a margin of 1.5 percent over its costs. While there is always a degree of risk in the future, the health system must have a reasonable probability that any strategy that is designed to achieve that outcome is directionally correct based on monitoring and analysis of the relevant industry economic indicators. These range from trends in federal and state reimbursement policies to provider compensation for patient referrals. In the above example, leaders must have reasonable probability that healthcare is moving into a population-health environment and that the health system can be successful at a margin of 1.5 percent. Then various business strategies can be developed and applied to various problems in order to reach that outcome.

To apply this approach to the level of hospital operational and facility planning, take the objective of rightsizing the number of inpatient beds. National healthcare industry indicators point to a decrease in utilization of inpatient beds as lengths of stay and prevalence/use rates decrease. In order to achieve the overall desired outcome, i.e., reduce its costs and achieve its margin, a health system will need to use predictive analysis of local market utilization to identify the number of inpatient beds it will need and develop a strategy to maintain, build or reduce capacity accordingly.

That strategy must have a reasonable probability of success based on projected life-cycle capital and operational costs.

A key consideration for assuring a reasonable probability of success is understanding all of the variables that are impacting inpatient bed utilization. These variables include demographics, local disease prevalence rates, anticipated future market share, length of stay reductions, admission protocols, infection control algorithms and unit-specific bed utilization rates.

To gain the proper insight into the data crunching challenge, it is necessary to model or correlate these variables with one another; for example, the new Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) legislation will change the way providers are being paid over the next few years. In turn, this one variable would dramatically affect the number of hospital admissions because providers would be incentivized to treat more patients in an ambulatory care environment. Moreover, the U.S. is on the cusp of a significant bulge in the population bell curve, as the number of baby boomers over the age of 65 is growing by double digits year after year. With the growth of this population, healthcare will experience age-associated increases in acuity, demand and utilization in the short term. 

However, healthcare facilities are built to last for many decades, and if they become underutilized in the future and cannot be repurposed, then ongoing overhead will erode the health system’s margin. Based on the health system’s overall objective, market projections and existing bed inventory, there are likely a number of operational and facility strategies that are directionally correct and have a reasonable probability of success. For example, a health system might increase investment in new beds while decommissioning existing and/or older beds; or modernize existing beds while shifting service line distribution to leverage the Network’s overall bed capacity. Non-bed-related strategies include more actively managing medical care in the ambulatory environment, shifting ambulatory surgical patients to the outpatient environment, and increasing surge capacity. To make these alternatives work, leaders must also incentivize their providers to treat more patients in an ambulatory environment.

Timing is another consideration: some leaders prefer an incremental strategy, while others prefer a one-step solution.

Structure and Clarity ... with Agility and Flexibility

Once leaders have defined the most appropriate strategy, determined that is directionally correct, has a reasonable probability of leading to the desired outcome, and is supported by data, then it must be well-structured. Using the maritime analogy, leaders must plot the most efficient course and maintain it in order to pilot the ship to its destination by a certain time.

Clarity for the approach is provided by a limited number of well-defined, objective metrics that support the strategy. In the example of rightsizing the number of patient beds, leaders would need to analyze objective metrics in three specific areas: projections of incremental growth or reduction in market demand; a reasonable and market-accepted privatization ratio; and the appropriate ratio of departmental square footage per bed required for optimal care delivery. 

At the same time, leaders must be agile and flexible to respond to changing conditions, such as a change in the economy, healthcare reform or provider network. For example, if a new OB/GYN group joins its network, a health system might need to increase the number of labor and delivery beds to accommodate the increasing number of maternity patients; however, they can avoid building new incremental beds by repurposing existing med/surg beds to increase capacity for postpartum mothers.

 This requires leaders to consider in advance the “What if ...” scenarios and prepare alternative plans to adjust course as necessary. Dashboard-based interactive computer programs that use data and analytical models are valuable in helping healthcare decision-makers to examine hypothetical scenarios and identify solutions and strategies to reduce or repurpose facilities. 

Managing Change

If leaders run into challenges to implementing the strategy and the metrics are not providing immediate insight as to the cause, then it is necessary to look more deeply for a root cause — and to solve it before moving forward.

If it is not possible to solve the root cause — for example, care providers who will not adapt to change — then it becomes necessary to find a way to work with or around the issue to reach the goal.  As challenging as it may appear, the root cause is rarely insurmountable, and successful leaders always find a way. After all, most strategies are developed in order to solve a problem, such as reducing cost or increasing throughput. Obstacles should be expected.

In the final analysis, a successful strategy requires the rapid translation of data into wisdom, knowledge and action — the fundamental components of strategy that drive business forward. This requires that leaders take an objective, unbiased look at the challenge, or to engage a third party to provide that perspective and facilitate the change.

Michelle Mader, MBA, MHA, is the president of Catalyst, FreemanWhite, a healthcare design and consulting firm. Mader can be reached in Charlotte, N.C. at mmader@freemanwhite.com.