Over 100 years ago, healing professionals and healthcare itself went through a massive transformation that led us to the models of care delivery that we use today. Dr. Brent James argues that we are now, again, at a once-in-a-century inflection point to change the course of healthcare. Change takes real effort, but provides massive opportunity. Those changes include a move away from the highly-profitable fee-for-service payment to fee-for-value. An IOM report, published in 2010, substantiated that more than a third of healthcare spending is waste. Pay-for-value aligns financial returns for those who invest in waste elimination. It also requires that clinicians move away from the craft of medicine to the science of medicine, using data and evidence to drive better clinical care. As the vice president and chief quality officer at Intermountain Healthcare, Dr. James led much of the change that produced Intermountain’s recognized operational and clinical excellence. In this webinar Dr. James educates and inspires all of us to do great work by sharing practical stories of how data has become the critical tool to help healthcare shift from revenue enhancement to clinical quality, which produces the most affordable care. Learn how to: - Use data to find variations in both cost and quality of care. - Standardize care without demotivating underperforming outliers. - Build a culture of data-driven care providers. - Develop an improvement strategy that you can start today. Sought the world over, Dr. James is a recognized expert in this outcomes improvements area. He has championed the standardization of clinical care through data collection and analysis on a wide variety of treatment protocols and complex care processes for more than 20 years.

1. Why Clinical Quality Should Be
Your Core Business Strategy
December 19, 2018
Brent C. James
MD, MStat

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Catalyst
I receive a monthly retainer as a part-time (3 days/month) senior advisor
for Health Catalyst.
Other than that, neither I nor any family members have any relevant
financial relationships to be directly or indirectly discussed, referred to or
illustrated within the presentation, with or without recognition.
Disclosures
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Six clinical areas studied over two years:
• Transurethral prostatectomy (TURP)
• Open cholecystectomy
• Total hip arthroplasty
• Coronary artery bypass graft surgery (CABG)
• Permanent pacemaker implantation
• Community-acquired pneumonia
Pulled all patients treated over a defined time period
• Across all Intermountain inpatient facilities – typically one year
Identified and staged (relative to changes in expected utilization)
• Severity of presenting primary condition
• All comorbidities on admission
• Every complication
• Measures of long-term outcomes
Compared physicians with meaningful number of cases
• Low volume physicians included in parallel analysis, as a group
Quality, Utilization, and Efficiency (QUE)
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James, B.C. What is a TURP? Controlling variation in the performance of clinical processes. Improving Clinical Practice: Total Quality Management & the Physician (ed: D.B. Blumenthal and A.C. Scheck). San Francisco, CA:
Jossey-Bass Publishers, 1995 (Chapter 7).

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Intermountain TURP QUE Study
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Median Surgery Minutes vs Median Grams Tissue
M L K J P B C O N A I D H E G F
0
20
40
60
80
100
0
20
40
60
80
100
Attending Physician
Median surgical time Median grams tissue removed
Gramstissue/Surgeryminutes
James, B.C. What is a TURP? Controlling variation in the performance of clinical processes. Improving Clinical Practice: Total Quality Management & the Physician (ed: D.B. Blumenthal and A.C. Scheck). San Francisco, CA:
Jossey-Bass Publishers, 1995 (Chapter 7).

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Intermountain TURP QUE Study
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James, B.C. What is a TURP? Controlling variation in the performance of clinical processes. Improving Clinical Practice: Total Quality Management & the Physician (ed: D.B. Blumenthal and A.C. Scheck). San Francisco, CA:
Jossey-Bass Publishers, 1995 (Chapter 7).

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The Opportunity
1. Massive variation in clinical practice
• Beyond even the remote possibility that all patients receive good care
2. High rates of inappropriate care
• Where the risk of harm inherent in the treatment outweighs any potential benefit
3. Unacceptable rates of preventable care-associated patient injury and death
4. Striking inability to “do what we know works”
5. Huge amounts of waste, leading to spiraling prices that limit access to care
Care falls short of its theoretic potential
6 James, B.C. Testimony to the U.S. Senate Finance Committee, February 2009.

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30-50% of all health care resource expenditures are
quality-associated waste:
• Recovering from preventable foul-ups
• Building unusable products
• Providing unnecessary treatments
• Simple inefficiency
The Waste Opportunity is HUGE
7
Institute of Medicine Roundtable on Value and Science-Driven Healthcare. The Healthcare Imperative: Lowering Costs and Improving Outcomes. Yong, Pierre L., Saunders, Robert S., and Olsen, LeighAnne, editors. Washington,
DC: National Academy Press, 2010.

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MUCH higher financial leverage from waste
elimination than revenue growth
Revenue growth:
5 to 9% contribution
for each case added
Net
Operating
Margin
(and return on
investment)
Waste elimination:
50 to >100% contribution
for each case avoided

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Examples of Removing Waste
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Waste Class
% of all
Waste
Waste Subclasses
3. Case-rate
utilization
(# of cases per population)
45% • Inappropriate cases (risk outweighs benefit)
(e.g., many cath lab procedures; CTPA)
• Preference-sensitive cases (when given a fair choice, many patients opt out)
(e.g., elective hips, knees; end-of-life care)
• Avoidable cases (hot spotting; move upstream)
(e.g., team-based care)
2. Within-case
utilization
(# and type of units per
case)
40% • Clinical variation
(e.g., QUE studies; surgical equipment)
• Avoidable patient injury
(e.g., serious safety event systems, CLABSI)
1. Efficiency
(cost per unit of care)
15% • Supply chain
• Administrative inefficiencies
- Regulatory burden - Billing thrash
- TPS Lean observation - Current EMR function

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Financial incentive alignment under different
payment mechanisms
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Waste Removal
Level
% of all
Waste
FFS Per Case Provider at Risk
3. Case-rate
utilization
(# of cases per population)
45%
2. Within-case
utilization
(# and type of units per case)
50%
1. Efficiency
(cost per unit of care)
5%
Payment Method
James Brent C and Poulsen Gregory P. The case for capitation: It’s the only way to cut waste while improving quality. Harvard Business Review 2016; 94(7-8):102-11, 134 (Jul-Aug).
Note: For green arrows, savings from waste elimination accrue to the care delivery organization; for red arrows, savings go to payer
organizations.

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Poll Question
Do you know – does your organization track – how much of your care
delivery is financed through “provider at risk” mechanisms (including
federal programs like CPC+, or the like)? Remember, spending on
health insurance for employees and their families, charitable care, and
care delivered at a loss (like Medicaid or Medicare), all represent all or
some degree of “at risk.”
1. Yes — 35%
2. No — 65%
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Poll Question
If you do know, what proportion of your care delivery is financed through
an “at risk” mechanism (informed guesses are OK)?
1. <10% — 22%
2. 10-20% — 27%
3. 21-35% — 25%
4. 36-50% — 16%
5. >50% — 9%
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To be “business viable,” waste elimination requires financial
alignment.
• Waste elimination always requires investment
• The group that makes the investment must harvest sufficient waste savings to
ensure financial survival
– Plus, hopefully, a contribution to operating margins
• Key questions:
– Who makes the investment?
– Who gets the savings?
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Team-Based Care
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Reiss-Brennan B, Brunisholz KD, Dredge C, Briot P, Grazier K, Wilcox A, Savitz L, and James B. Association of integrated team-based care with health care quality, utilization, and cost. JAMA 2016; 316(8):826-34 (Aug 23/30).
3rd generation coordinated medical home
-11%
-22% -21%
+4%
+13%
-11%
Emergency
Room
Visits
Hospital
Admits
PCP Visits Urgent
Care
Visits
Radiology
Tests
Other
Avoidable
Visits and
Admissions
An investment of $22 per-member-per-
year (PMPY) decreased medical
expenses by $115 PMPY

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Total Hip Arthroplasty - Cost
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James, B.C. Quality Management for Health Care Delivery (monograph). Chicago, IL: Hospital Research and Educational Trust (American Hospital Association), 1989.

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Financial Impact of Clinical Quality Improvement
at Intermountain
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James Brent C and Poulsen Gregory P. The case for capitation: It’s the only way to cut waste while improving quality. Harvard Business Review 2016; 94(7-8):102-11, 134 (Jul-Aug).
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
$6,000
2011 2012 2013 2014 2015 2016
NetRevenue(inMillions)
Status Quo Net Rev 2011 5-Yr Plan Net Rev Actual Net Rev
$728MM
(~13%)
$688MM
(~13%)

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Lesson #1
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Within the healing professions,
we count our successes in lives.

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Lesson #2
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Nearly always, with proper clinical management
better care is cheaper care
through waste elimination.
The path to financial success leads through
clinical management.

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Lesson #3
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None of our successes came from
comparing ourselves to others.
• In every instance, we were already at or near top of class when we started.
• Instead, we tracked the gap arising from “best possible” care.
• This principle is especially true with regard to nationally-mandated reporting.
It came through solid analytics based on good
internal data.

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Lesson #4
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The long-term organizational viability of
clinical quality improvement strategies
requires aligned financial incentives.

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What does the future hold?
Walter Gretzky (Wayne Gretzky’s father):
“Skate to where the puck is going to be, not where it has been.”

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Forward looking indicators:
• Kaiser Permanente
• Continued rapid growth within existing geographic markets, mostly
• Medicare Advantage
• Continued rapid growth
• ACOs
• Leavitt Group; mostly commercial
• ERISA direct to provider contracting
• 11% of large employers, according to Modern Healthcare
• Provider-payer consolidation
• By ownership or partnership (e.g., United Healthcare)
“Pay for Value” Continues to Grow
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We will see:
• Increasing focus on waste elimination through “move upstream”
strategies
• Primary care-based population health; clinical variation control using clinical
decision support tools (a.k.a. clinical knowledge management = “learning
healthcare systems”
• Care delivery organizations will increasingly seek capitated risk
• Through ownership or partnership (a.k.a. “pay for value”); watch for
payer/care provider consolidation
• Standalone specialty care practices and hospitals will increasingly
become “price takers”
• Intense competition mainly around payment rates
Implications
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• EMR’s primary purpose will shift to clinical decision support
• Away from their current focus on maximizing fee-for-service billing
• The resulting systems will be much more clinically natural and
adaptable
• Massively improving productivity and eliminating the primary source of
burnout in clinical practice today
• Analytics, including AI and machine learning, will explode
• Quality reporting will be a direct extension of internal operational data, just
as happens today in financial systems (i.e., SEC, GAAP, GAAS, annual
independent financial audits)
Health IT Will Mature
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Better has no limit …
An old Yiddish proverb

26. Q&A

27. Thank You!