How to Drive ROI from Your Healthcare Projects: Practical Tools, Templates, and How Tos

1. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.comProprietary and Confidential Bobbi Brown (Vice President Financial Engagement) Leslie Hough Falk (RN, MBA, PMP) How to Drive ROI in Your Health Care Improvement Projects

2. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Agenda • Why IT ROI is increasingly important in Health Care improvement projects • ROI in Health Care versus other industries • Health Catalyst 4- step approach for driving ROI 2

3. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Poll Question #1 What is your primary area of focus?  Physician/Provider  Nursing  Finance  Information System  Other 3

4. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential © 2013 Health Catalyst www.healthcatalyst.comProprietary and Confidential The Increasing Importance of ROI in Health Care Improvement Projects 4

5. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Stagnating Margins 5 Source: Medpac report March 2013 -20% -15% -10% -5% 0% 5% 10% 15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Medicare Margins for Hospitals IP OP Overall

6. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Competing Trends 6 Accountable Care Organizations Shared savings for groups of doctors and hospitals, and other providers who deliver quality care and spend wisely. Bundled Payments Payment arrangements that include financial and performance accountability for episodes of care. Health Care Organizations Improve Quality Reduce Costs Increase Value Value Based Purchasing Links payment more directly to the quality of care. Population Health Balancing the need for individuals and populations while caring for a larger number of patients. Reduced Readmissions Becoming more efficient at preventing services that once contributed to the bottom line. Eliminate Waste Improving quality and reducing costs while meeting expanded regulatory data collection and surveillance requirements.

8. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential ROI Measurements and Complexity of Environment 8 Source: Journal of Healthcare Information Management — Vol. 17, No. 4 Phase 1 Investments with Direct Cost Savings or Revenue Increases (e.g. financial systems) Phase 2 Investments to improve Productivity and Reporting (e.g. department systems) Phase 3 Investments to improve Quality of Product or Service (e.g. clinical systems) More Hard Complexity of the Environment into which IT Investment is Made Easy Measurement of Return on Investment Less

9. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Unique Health Care Governance and Payment Model 9 Source: Journal of Healthcare Information Management — Vol. 17, No. 4 Physicians Patient Other Caregivers Facility Payer PaysPays Enrolls Provides care to

11. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Use Case Example Scenario: Clinical Improvement project Project Goals: Shift clinical resources from surveillance to interventions, and reduce Catheter-Associated Urinary Tract Infections by XX % Team: Providers, nursing, patient safety and quality, information systems Missing results: Financial impact of reduced CAUTIs such as length of stay and improved productivity related to decreased surveillance activities Team feedback: “Yes, we should consider LOS and productivity gains. However, we don’t track that. I’m sure someone else in the hospital does but we are clinicians.” 11

12. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Poll Question #2 Do you currently measure ROI in your Health Care IT improvement projects?  Always  Sometimes  Not usually  No  Unsure 12

14. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Step 4: Evaluate Costs, Revenue & Direct Benefits Step 3: Recruit, Train, Plan and Implement Step 2: Begin to Quantify ROI Four Step Approach 14 Step 1: Define the Project and Business Need • State proposal • Justify business need

15. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Project Proposal: Heart Failure Readmission Analytics Proposal Expand capabilities of the enterprise data warehouse and purchase an advanced heart failure application with a total cost of $400,000. Focus will be readmission rate. Business Need Cardiovascular clinical program is our largest program. Heart failure readmit rate has been climbing over the past three years and is now above the national average at 26%. Due to the readmit rate in 2014, Sample Medical Center received a penalty of 0.4% from CMS. Sample Proposal 15 • State the proposal succinctly in one to two sentences • The business need is a justification for the proposal that ties into the overall organization strategy

16. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Four Step Approach 16 • Identify all costs • Estimate benefits • Identify direct benefits • Identify indirect or intangible benefits and set improvement targets • Identify all revenue opportunities • Document assumptions • Perform a sensitivity analysis • Identify risks and alternatives Step 4: Evaluate Costs, Revenue & Direct Benefits Step 3: Recruit, Train, Plan and Implement Step 2: Begin to Quantify ROI Step 1: Define the Project and Business Need

17. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Step Two: Direct Benefit Categories 17 General categories – I. Enhanced efficiency and productivity • Examples: reductions in FTEs or less overtime; business process improvement; supply chain standardization allowing lower supply costs; increased departmental capacity; and reductions in capital expense

18. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Customer Example Enhanced Efficiency and Productivity 18 “Our clinicians thought that the EHR would be a silver bullet to get the data they needed for quality improvement and operational reporting and they blamed IT when the information wasn’t forthcoming. …Implementing an EDW should really be an appendix to the implementation of an EHR because the surge of data is just unbelievable and the appetite for it is huge.” – Myra Davis, M.E., VP of Information Services. Objective • Meet the increasing demands by clinicians and operations for EHR data and reports • Reduce reporting costs and free IT resources to focus on analysis versus report writing • Reduce turnaround time on remaining EHR report requests Health Catalyst Solution • Late-Binding™ Data Warehouse • Foundational Applications • Discovery Applications • Advanced Applications • Installation Services • Improvement Services Results to date • 67% average savings on labor costs • Average time to build reports declined from 97 hours to under 30 hours • 1 EDW report = 10 EHR reports • 25% faster turnaround on remaining EHR reports

19. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Step Two: Direct Benefit Categories General categories – I. Enhanced efficiency and productivity • Examples: reductions in FTEs or less overtime; business process improvement; supply chain standardization allowing lower supply costs; increased departmental capacity; and reductions in capital expense II. Clinical improvement and waste reduction • Examples: lowering LOS; reductions in uncompensated hospital readmissions; lower medication cost per case or per capita; fewer ICU days; and patient safety improvements leading to fewer complications or medical errors 19

20. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Ordering Waste Workflow Waste Defect Waste Ordering of tests that are neither diagnostic nor contributory Variation in OR room turnover (cycle time) or Emergency Care wait time ADEs, transfusion reactions, pressure ulcers, HAIs, VTE, falls, wrong surgery 20 Types of Waste Variation in OR room turnover (cycle time) or Emergency Care wait times ADEs, transfusion reactions, pressure ulcers, HAIs, VTE, falls, wrong surgery

21. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Customer Example Clinical Improvement 21 21 Objective • Define Heart Failure (HF) baseline measures for 30 and 90-day readmissions rates • Implement evidence- based practice interventions to drive HF readmission rate reductions • Establish balance metrics including ED visits, observation days and patient satisfaction • Develop sustaining processes for evaluating readmission rates to ensure continuous process improvement Health Catalyst Solution • Late-Binding TM data warehouse that enables faster time-to-value • Integration of clinical, patient satisfaction and financial data to establish baseline, ongoing and balance measures • Discovery, Foundational and Advanced HF applications including cohort finder, registry and evidence- based clinical content • Healthcare analytic visualization including gauges and trend lines for at-a-glance view Results to date • Seasonally adjusted rate reduction of 21% in 30-day and 14% in 90-day HF readmissions • 2X increase in the number of phone calls made to patients within 48 hours of discharge • Average of 63 % increase in physician medication reconciliation within 48 hours of discharge • Follow-up appointment intervention baseline and balance measures established

22. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Customer Example Ordering Waste 22 “We knew we couldn’t completely create predictor models, as science isn’t that refined. But we have reduced the number of chest X-rays to a very respectable level. We have been able to minimize quite a bit of waste in other areas too, so overall, this approach in using the analytics has really helped us to manage our disease processes”. Dr. Charles Macias, TCH Attending Physician and Director Evidence Based Outcome Center. Objective • Improve clinical outcome for asthma patients across the care continue • Better manage populations in a new Valued Based Purchasing environment • Measure and ensure sustained clinical quality improvements Health Catalyst Solution • Late-Binding™ Data Warehouse • Key Process Analysis (KPA) Application • Population Analytics Advanced Application- Asthma Module • Installation Services • Clinical Improvement Services Results to date • Decreased average LOS by 11 hours • Achieved and sustained a 49% decrease in unnecessary Chest X-rays over 16 months • 80% order set utilization …67% sustained increase over 8 months • 90% usage of asthma action plan by providers

23. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Step Two: Indirect Benefits and Revenue Opportunities • Can be more difficult to measure • Longer-term benefits • Example: an improved medical outcome such as a reduction in future hospitalizations associated with neonatal respiratory distress syndrome (RDS), which will require long-term analysis to reveal an impact on costs 23

24. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Customer Example Indirect Benefits: Opportunity Cost 24 Objective • Define CLABSI and CA- UTI baseline and on-going CLABSI and CA-UTI rate measures • Implement evidence- based practice interventions to drive CLABSI and CA-UTI rate reductions • Leverage National Healthcare Safety Network (NHSN) definitions and calculation algorithms • Shift clinical resources from surveillance and chart abstraction to interventions Health Catalyst Solution • Late-Binding TM data warehouse that enables faster time-to-value • Discovery, Foundational and Advanced ID applications including cohort finder, registry and evidence- based clinical content • IDEA platform that tracked intervention compliance within days versus months • Visualization and Gantt charts for clinicians that provide data behind NHSN algorithm results in one consolidated view Results to date • Surveillance requirements reduced by 90% • Increased clinical resources on the floor to drive interventions • Opportunity costs savings exceeding an estimated $1M in year 1 and $100K annually as a result of not purchasing, maintaining and supporting a one-off measurement and tracking system • 164% increase in CLABSI maintenance bundle compliance

25. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Customer Example Shared Savings • 75 percent reduction in rate of elective deliveries occurring prior to 39 weeks of gestation in the first six months • 6-figure bonus payment from payer for exceeding target reduction rate 25

26. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Sensitivity and Risk Analysis Examples Sensitivity Analysis- modeling various assumptions • What if we can lower the readmit rate by 20%? • What if we make two follow-up calls? • What if we use a nurse for all follow-up calls? Risk Analysis- describing concerns and tactics • Physician lead is new in position • Finance will provide education • Nurse manager respected in position and can assist in orientation 26

27. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Health Catalyst Clinical Improvement Financial Tool • Financial framework to help clinicians work with their finance team member(s) to estimate quantitative and qualitative costs and benefits • Download the ROI Executive Brief and Tool at: www.healthcatalyst.com/driveroi 27

28. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Four Step Approach 28 • Establish multi-disciplinary outcomes-improvement teams • Agree on business objectives and an Aim statement • Agree on ROI measures • Provide timely executive updates Step 4: Evaluate Costs, Revenue & Direct Benefits Step 3: Recruit, Train, Plan and Implement Step 2: Begin to Quantify ROI Step 1: Define the Project and Business Need

29. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Accomplishments Next Steps Issues / Help needed Cardiovascular: Heart Failure Date: [complete] Overall Status Risks and Uncertainties Recruit /Train Kickoff AIM Intervention Rollout plan Results Month Year Month Year Month Year Month Year Month Year Month/Year Leadership team Mission, charter, roles confirmed Review draft cohort and data Finalize cohort Define rollout plan Review initial results Content and Analytics Leader Review AIM options Data quality issues identified Identify intervention(s) Guidance team validation Implementation plan adjusted Guidance team Best practice gathering Direct observation Direct observation Solicit front-line plan input Review lessons learned Workgroup team Profile prelim. data and cohort Prioritize, select AIM Solicit front line input Finalize rollout plan Create AIM statement #2 Training workshop 2-3 AIM candidates Additional cohort criteria Analytics dev & test Guidance team validation Repeat process Guidance team validation Guidance team validation Project Progress Key Not started In process Done well Some concerns Strong concerns Sample Long Term AIM Goal To achieve and sustain a 30% reduction in the 30-day and a 15% reduction in 90-day all cause readmission rates for patients with heart failure by November 2014, and sustained reduction in readmission rates through 2015. Short Term Project Goal Define and rollout 30-day and 90-day baseline measures and three process interventions: medication reconciliation; post discharge appointment; and, follow-up phone call by January 1, 2014 - track compliance toward long-term heart failures readmission rate reductions. Launch/Rolloutdate:XX Key Success and Financial Measures Target Actuals Readmission rates: 30-day and 90-day % Balance measures: ED visits and observation stays # Intervention compliance rates % Project costs (e.g., resources, travel, healthcare care analytic apps …) $ Opportunity costs (e.g., not purchasing a Point Solution, no reduction in Medicare reimbursements …) $ Direct benefits: productivity (e.g., previous manual data pulls…); waste reduction (e.g., length of stay….) $ Indirect benefits (e.g., patient satisfaction…) $ Long term project ROI %

30. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Four Step Approach 30 • Identify all project costs • Ensure nothing else has changed • Perform Financial ROI calculations • Review ROI calculations with the team • Make adjustments • Monitor and ensure sustained results Step 4: Evaluate Costs, Revenue & Direct Benefits Step 3: Recruit, Train, Plan and Implement Step 2: Begin to Quantify ROI Step 1: Define the Project and Business Need

31. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential31 31 Clinical Improvement Financial Tool: Heart Failure Financial Analysis Project Cost Components Initial Year 1 Year 2 Year 3 Year 4 Clinical specialist - 173,056 178,248 183,595 189,103 Materials - 5,000 5,150 5,305 5,464 Other - Specify - - - - - Total Non IT Project Costs -$ 178,056$ 183,398$ 188,900$ 194,567$ IT Cost Components EDW Core 40,000$ -$ -$ -$ -$ Analytical Applications Advanced Healthcare Apps - 400,000 - - - Annual Maintenance and Support - 65,000 65,000 65,000 Total IT 40,000$ 400,000$ 65,000$ 65,000$ 65,000$ Total Costs 40,000$ 578,056$ 248,398$ 253,900$ 259,567$ Opportunity or Indirect Benefits/Savings Indirect Benefits Cost avoidance-software purchase - 500,000 - - - Other-maintenance - 85,000 85,000 85,000 Other-ongoing - - - - - Total Indirect Benefits -$ 500,000$ 85,000$ 85,000$ 85,000$ Direct Benefits/Savings Initial Year 1 Year 2 Year 3 Year 4 Efficiency Nurse redeployment -$ 346,112$ 356,495$ 367,190$ 378,206$ Clinical Improvement/Waste Reduction Reduction in readmits - 408,000 420,240 432,847 445,833 Reduction in LOS - - - - - Total Direct Benefits -$ 754,112$ 776,735$ 800,037$ 824,039$ Total Benefits -$ 1,254,112$ 861,735$ 885,037$ 909,039$ Total Direct Benefits -$ 754,112$ 776,735$ 800,037$ 824,039$ (Less) Total Project Costs (40,000) (578,056) (248,398) (253,900) (259,567) Improvement due to Direct Benefits (40,000)$ 176,056$ 528,338$ 546,138$ 564,472$ Total Benefits -$ 1,254,112$ 861,735$ 885,037$ 909,039$ (Less) Total Project Costs (40,000) (578,056) (248,398) (253,900) (259,567) Improvement due to Total Benefits (40,000)$ 676,056$ 613,338$ 631,138$ 649,472$ Financial Return Calculations Direct Benefits All Benefits ROI 108% 168% IRR 568% 1681% NPV $1,753,242 $2,288,383 Benefit to Cost 2.0 2.6 Payback Timing 9.8 months 5.9 months

32. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential The Opportunity for Change Taking the next step… • Download the Health Catalyst ROI Executive Brief www.healthcatalyst.com/driveroi • Contact us to learn more about our solutions, ROI modeling and communication tools www.healthcatalyst.com/company/contact-us 32

34. © 2013 Health Catalyst www.healthcatalyst.com Proprietary and Confidential Presenters Bobbi Brown, Vice President of Financial Engagement, Health Catalyst. Ms. Brown started her healthcare career with software sales and service at McKesson in the Technology Solutions Group. She worked at Intermountain Healthcare before moving to Sutter Health and, later, Kaiser Permanente, where she served as Vice President of Financial Planning and Performance. At Intermountain Health Care, she partnered with clinical teams to analyze and measure financial impact of the clinical programs. She holds an MBA from the Thunderbird School of Global Management as well as a BA in Spanish and Education from Misericordia University. Leslie Hough Falk, RN, MBA, PMP, Health Catalyst. Prior to joining Health Catalyst, Leslie held positions as a Nurse Informaticist, Director of Biomedical Engineering, Clinical Engineer for Kaiser Permanente-Northern Region and Pediatric ICU RN. Ms. Falk also worked with Hewlett-Packard in several clinical, marketing, sales and support leadership roles. She holds a Master of Science degree in Community Counseling from Seattle Pacific University as well as an MBA and Bachelor of Science in Engineering from the University of Nevada, Las Vegas. She is also a certified Project Management Professional (PMP), Lean Green Belt and Information Privacy Professional (CIPP/CIPP IT).