Stewarding precious resources is something that David Higginson takes very seriously, and he was blunt and to the point about that on April 14, when he spoke at the Health IT Summit in San Jose, held at the Westin San Jose April 13-14.
The key point, Higginson, who is executive vice president, chief administrative officer, and chief information officer, at Children’s Hospital of Phoenix, told his audience, is that, in the context of pediatric hospital operations in the current operating environment, children’s hospital CIOs have no choice but to think very carefully about the financial resources they have available to them, and to strategize rigorously in order to make ends meet. That was the theme of his keynote presentation on Friday, entitled “How Phoenix Children’s Hospital’s LEAN IT Initiative Has Empowered and Engaged Patients, While Saving Millions Annually.” Indeed, Higginson shared with his audience, Phoenix Children’s has saved $4.5 million through changing vendors and through renegotiating vendor contracts, as well as executing a workflow redesign that has resulted in an additional $2 million in savings.
The context of those successes is a stark one: as Higginson noted, 60 percent of the patients whom Phoenix Children’s treats either are Medicaid recipients or are uninsured; meanwhile, he emphasized, “Medicaid pays about 85 percent of cost. And that guarantees a $60 million annual shortfall.” What’s more, compared to other markets, the metro market adjustment is extremely low for Phoenix. So even with the most skillful administration, Phoenix Children’s is perpetually in a financially vulnerable situation.
To add to the complexity of all that, “The payment model is changing,” Higginson told his audience. “We’re moving to at-risk contracts; we are not fee-for-service.” What’s more, the Phoenix pediatric care market has layers to it. “There’s rapid consolidation taking place now in the Phoenix metro market, and there’s vigorous competition in the market, with several different health systems in town. It’s not like it was when I was in Arkansas, where our children’s hospital essentially had no direct competition.”
It’s within that context that Higginson told his audience he came to understand an important frame for what faced him as CAO and CIO when he arrived at Phoenix Children’s. “When I first came to Phoenix Children’s,” he said, “I saw that we were in the bottom quartile in terms of our budget as an IT department. And at first, I said, we need to spend more money.” But then, he said, he carefully studied the broader context of that budget, and changed his mind. “Every state is on a different reimbursement rate for Medicaid,” he notes. “And we plotted the y axis of our reimbursement framework against the x axis of what we’re spending. We’re spending way below our reimbursement rate,” when it comes to IT department budget compared to reimbursement, he said. “There are children’s hospitals in the upper-right quadrant; they’re in danger. And while I wish I had the 400 people in IT and lots of budget, this is a better situation for us.”
All of this has meant an open policy of economizing wherever possible, Higginson told his audience. “Take, for example, the choice of Cisco versus Juniper,” he said. “We made the conscious decision to go with Juniper, because it was a lot cheaper, at half the price, and 90 percent as good. Meanwhile, EMC wanted to forklift a SAN out every three months. So instead, we went with Dell, which I got at a lower price. And now, Dell has bought EMC,” he noted, smiling.
As for the organization’s electronic health record, Higginson said that while he and his colleagues were impressed by Epic’s EHR, his physicians approached him saying that they would rather take the savings from the difference between Epic’s EHR and Allscripts’, and use that savings to fund the build-out of the hospital’s emergency department, which had been designed to support 15,000 ED visits a year, but was actually providing 90,000. At the same time, he reported, “I’m running the help desk software for $5,000, based on software bought six years ago—and it’s fine.”
Of course, what he and his colleagues at Phoenix Children’s Hospital are doing, Higginson said, reflects a broader trend in U.S. healthcare, driven by payment and industry changes. “Lean IT is working its way up,” he said. “And it’s moving its way up in the industry for a reason.” Among the key points he made:
> C-suite business leaders in patient care organizations aren’t inclined to spend money on IT.
> Community hospitals have had to work with that reality for a long time.
> The same financial-operating challenges are now hitting larger hospitals and health systems, in the wake of the meaningful use program.
> It usually takes five to seven years operating with one EHR to justify its replacement with a new EHR.
> “Like for like” upgrades can cost more than a half-million dollars each.
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