How Patient Safety is Evolving as a Strategic and Financial Priority

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Highlights of this episode include:

• How patient safety moved from a primarily clinical concern to a to a strategic and financial priority
• How investments in safety can generate ROI
• How technology, compliance, culture, and analytics come together to drive measurable improvements
• “Safety at scale”
• Trends in healthcare safety

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome Dr. Larry Van Horn. Larry currently serves as the Chief AI and Analytics Officer at Sentact. An entrepreneur, board member, and leading expert and researcher on healthcare management and economics, he holds the title of Professor of Economics and Strategy, Emeritus, at Vanderbilt University. He has extensive board experience, serving on both public and private boards, and has advised the state of Tennessee on health policy, as well as the White House on issues related to price transparency in healthcare markets. Larry holds a PhD in Managerial Economics and Decision Sciences from the Wharton School, and degrees from the University of Rochester, including an MBA in economics, Master of Public Health, and BA in Philosophy. In this episode, we’re discussing how patient safety is evolving as a strategic and financial priority. Welcome, and thank you for joining us, Larry.

Dr. Larry Van Horn: It’s great to be here, Kelly. Thanks for having me on.

Kelly: Yeah. Well, let’s go ahead and jump in. So how has patient safety moved from, what some may say, a primarily clinical concern, to a strategic and financial priority for hospital and health system leadership? And what has led to this shift?

Larry: Well, Kelly, we’ve known for a long time that we have outcome of safety and complication issues in U.S. healthcare. Going back to the Institute of Medicine study of 1999, To Err is Human, where we identified in excess of 100,000 patients a year who have unexpected outcomes that are associated with death, we also have research from our current FDA Commissioner, Marty Makary, in the British Medical Journal, suggesting healthcare is maybe the third leading cause of death in the United States. And so we know for a long time that we have this gap between where we want to be and the care that we’re delivering. And now, in today’s environment, it’s become increasingly costly to have that performance gap. We have pay-for-performance. We have Medicare pay-for-performance incentives. We have significantly increasing severity of malpractice verdicts. The average of the top 50 malpractice verdicts this year has doubled to almost $56 million a case, and malpractice expenses are running $12-20,000 per bed in the United States. So, by doing the right thing, by improving safety, something that our patients already assume is happening, we can generate significant ROI by avoiding these expensive losses due to malpractice and the reduced payment associated with our pay-for-performance incentives in value-based care contracts and with CMS.

Kelly: Wow, that’s very interesting. Thank you for sharing that perspective. How do preventable harm events translate into measurable financial implications for hospitals and health systems? And how can investments in safety generate ROI?

Larry: Well, I would submit to you, Kelly, that physicians, medical providers, hospitals in the United States, they all want to do the right thing. They want to deliver safe, high-quality care to their patients. But we’ve been living in an information vacuum for the last 20 or 30 years, and we don’t know where the opportunity is. Where do we have these performance gaps on a service line-by-service line basis? Which providers are having a higher rate of complications and misadventures in clinical care, if you will? And so by putting in place a platform that allows us to continuously evaluate the performance of our system and track where we have these performance gaps in safety, we are in a better position to then craft interventions that will mitigate those and generate the ROI through these foregone malpractice events, these performance gaps in our pay-for-performance contracts. And it really is about surfacing the information at the right point, at the right time, to empower the organization to engage in change.

Kelly: Information is certainly key here, yes. So, what does safety at scale really look like in practice? How do technology, compliance, culture, and analytics come together to drive measurable improvements?

Larry: So, what is safety at scale? Well, it is an organizational commitment to leverage the information across their healthcare ecosystem to identify patterns and identify opportunities for improving safety. And if you think about it, we generate tremendous amounts of billing data derived from the electronic health record. We have incident reports. We have event reports that are going through our patient safety organization. We have bedside rounding that’s taking place in our hospitals and safety huddles every day, where we are surfacing information on the process of care and how our patients are receiving care. So, what we want to do here is we want to take all of this data and focus our efforts so we don’t boil the ocean. The old 80/20 rule probably holds in that the 20% of the care that’s delivered is really probably an opportunity for us to make material improvements in safety. And so, it’s identifying where those opportunities are. And a lot of it relies on establishing benchmarks to compare the observed performance from all of these data sources – the billing data, the incident reports, the bedside rounding – to put that in context to identify where do we need to intervene? What conversations do we need to have? Which providers need to modify their behavior? And it’s all about putting in place a platform that pulls this information together, analyzes it relative to benchmarks, and then surfaces those insights to the provider, individual physician, to the department chair, or to the CMO, in such a way that the organization can take action on improving safety.

Kelly: No, I love that. And I do like the term “safety at scale” and how it kind of does bring everybody together. So how can hospitals leverage data and analytics to identify risks before they result in harm? And how does this proactive approach translate into better financial and operational outcomes?

Larry: So how can we practically leverage data and analytics to improve safety and generate a financial ROI for our health systems? I think it’s useful to talk about this within the context of obstetrics. Bad baby cases are probably one of the most concerning things for US hospital systems today. It’s frequently the case that these verdicts for malpractice cases associated with misadventures in deliveries can lead to verdicts in the tens of millions of dollars. So, we actually have an understanding and know, from data, which outcomes and complications in baby deliveries are associated with increased malpractice frequency. And we can use that information to benchmark the providers who are delivering babies in our organization and identify the subset for whom their rates of complications – whether it’s maternal birth trauma, operative vaginal delivery, postpartum hemorrhage – is significantly higher than the population of obstetricians in the United States controlling for the case mix. So, then we can say, instead of 100 OBs delivering babies that we need to worry about, it’s really just these 20. And if we look at those 20, we can have a conversation about modifiable risk behavior in their practice that will improve the safety of care for their mothers that they’re delivering babies, and at the same time, reduce the likelihood of these bad outcomes translating into malpractice events. So, it’s about intentionally, proactively understanding and benchmarking the delivery of care, comparing it to relative performance standards in the specialty, and then surfacing that information specifically to the physician so that they can understand the performance gaps and the opportunities for improvement.

Kelly: That’s a great example. Thank you for sharing that information about obstetrics. It’s quite enlightening. So Sentact recently acquired a top safety event reporting software and a large PSO. How do these moves reflect broader trends in healthcare safety?

Larry: Sure. We’re very excited about the acquisitions that we’ve done and the ability to create the safety platform that we’ve envisioned here. Incident reports, event reports are replete with valuable information to understand the performance of organizations. And by combining the incident reporting platform from PHP with the event reporting from a PSO, the Vizient PSO, along with our analytics and our rounding and our peer review solutions, we’re able to put together a much more holistic picture of the performance, the processes, the workflow, and the performance gaps within a health system, as well as target interventions to improve and mitigate those performance gaps.

Kelly: Yeah, it does sound like an interesting time for you all. So, looking ahead, what trends or strategies do you see driving the next wave of patient safety improvements across the healthcare ecosystem?

Larry: Sure. These are very exciting times. You can’t turn on the TV without seeing the implications of AI on businesses, industries. And healthcare is certainly not immune from that. I think what’s going to happen here is that the advances in our computing horsepower, the availability of data at scale, and the advances in AI are going to support concurrent continual evaluation of performance within an organization. It’s not going to be– it’s going to be less around retrospective analysis around what happened in the past, and much more around what is happening now, what’s trending, and what’s likely to happen next period so we can get out in front of mitigating those bad outcomes and minimizing those bad outcomes. So I think you get clinical decision support actually in real time, monitoring and understanding performance gaps in real time, and having vectors of intervention that are operating such that we’re not looking in our rearview mirror, but we’re looking down the road with guardrails around what we should expect and knowing when we’re going to be bumping up against those guardrails from a safety and a performance standpoint, such that we can make the necessary modifications and bring our performance back within the guardrails.

Kelly: No, that makes a lot of sense. I know AI is truly everywhere. Well, thank you, Larry, for sharing your insights with us on how patient safety is evolving as a strategic and financial priority. If a listener wants to learn more or contact you to discuss this topic further, how best can they do that?

Larry: They can reach out to any of us at sentact.com. We’ve got tremendous resources and a lot of subject matter experts who have depth of experience to be able to help organizations navigate what the path is that leverages the available technology we have at our disposal today and improve the ROI around patient safety.

Kelly: Thank you for providing that. And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…

If you have a topic that you’d like us to discuss on The Hospital Finance Podcast or if you’d like to be a guest, drop us a line at update@besler.com.

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