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A UPMC Collaborative Partnership Aims at Decoding Actual Hospital Costs

January 11, 2016
by Mark Hagland
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UPMC announces a strategic partnership with Health Catalyst to develop and commercialize a hospital-based costing analysis solution

A leading integrated health system that has already sustained a record of entrepreneurial innovation has made another new announcement in the software development area, teaming with a well-known healthcare IT vendor to further develop a home-grown solution for hospital-based costing analysis.

On Monday morning, Jan. 11, executives at the UPMC (University of Pittsburgh Medical Center) health system, the 20-plus-hospital system that encompasses not only hospitals but also physician groups and a health plan, announced that they had come together in a strategic partnership with executives of the Salt Lake City-based Health Catalyst, a data warehousing, analytics, and outcomes improvement vendor, “to combine technologies and front-line personnel in an unprecedented effort to help health systems solve one of their most vexing and urgent problems – how to measure and analyze the true cost of healthcare delivery for each patient,” according to a press release published early on Monday.

According to the press release, “Unlike other industries, healthcare has struggled to precisely calculate the cost of its activities and services because of the complexity of human illness, and a limited ability to systematically share, store and analyze data. The agreement between UPMC and Health Catalyst, the first of its kind, builds upon an activity-based cost management system developed by UPMC for commercial use and Health Catalyst’s proven Enterprise Data Warehouse (EDW) infrastructure, analytics expertise, and professional services.”

And the press release offered a statement from Robert DeMichiei, executive vice president and chief financial officer of UPMC, quoting Mr. DeMichiei as saying that, “Thanks to our ability to compare outcomes and costs across a patient’s entire care experience—and by service line, hospital and physician--UPMC is identifying and adopting best practices that enhance quality while reducing spending, a convergence that is the ‘Holy Grail’ of healthcare. T his strategic partnership with Health Catalyst will significantly accelerate that effort by leveraging the experience and know-how of both organizations to benefit UPMC’s patients and others across the country.”

C. Talbot “Tal” Heppenstall, Jr., president of UPMC Enterprises, the health system’s development arm, told Healthcare Informatics exclusively, “We’re excited about this ability to partner with health Catalyst. We developed this internally within our finance area. This actually tells us how much it costs to deliver care to our patients. Allowing us to take costs and put those together with outcomes, is the only way we’ll be able to reduce costs in healthcare. Health Catalyst is developing a platform with us, essentially. Health Catalyst will take what we’ve developed so far and work with us and commercialize it. We will be part of that development.” What’s more, Heppenstall said, “There’s been a lot of interest among our peers about what we’ve done—other health systems. So this will give us the opportunity to share what we’ve learned, with others.”

Tal Heppenstall

On the other side of the partnership, Kyle Salyers, senior vice president of business development at Health Catalyst, told HCI, “Our strategic objectives are to transform U.S healthcare—that’s Health Catalyst’s mission—by being the recognized leader in data warehousing and outcomes improvement. Both parties deeply share a commitment and a set of values around outcomes and cost improvement in healthcare. That cannot be overstated in my mind, that UPMC and Health Catalyst, from day one, found a common set of values around reducing the cost of and improving the value of, healthcare—and also that you can’t improve what you can’t measure. And you can’t improve cost without understanding cost. And the UPMC had been for years been developing some really interesting cost logarithms to manage their costs at UPMC.”

What’s more, Salyers told HCI, “A couple of things make this unique. First, we’ve got several pieces coming together. One is an outsourcing arrangement through which the cost management team members will be outsourced to Health Catalyst; we will insource some of those cost models and algorithms, and then provide these services. So it’s about people, technology, and platform and improvement services. And we will be innovating together, on an ongoing basis, to improve not only this cost model application, but potentially a number of others also, so we very much anticipate future development. We are not aware of this type of partnership anywhere else in the country in cost analytics,” he said, adding that “We will ultimately commercialize the UPMC models and technology inside our suite of products, and that suite of products will be commercially available on the market towards the latter half of 2016.”