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How One Provider is Saving Millions on Imaging Equipment

December 16, 2013

By adopting a data-driven strategy to determine its equipment needs, Milwaukee-based Aurora Health Care has reduced capital spending on CT scanners by 9%, nuclear medicine by 25%, mammography by 3%, and X-ray by 10% since early 2012.

As provider organizations prepare for the financial realities they will face in 2014—weakening reimbursements, declining inpatient volumes, mounting pressure to make substantial IT investments, just to name a few—many are digging deep to find new ways to reduce costs and increase efficiencies.

Milwaukee-based Aurora Health Care is no exception. With 15 hospitals, 1,500 employed physicians, 159 clinics, 70 retail pharmacies, and a large homecare service, Aurora needs system-wide strategies to unearth meaningful, sustainable savings beyond the usual cost-cutting measures, says Brad Hahn, the system's executive vice president of finance.

"We were pushing a lot of traditional levers like supply chain and labor, but we needed to look for more areas for transformation within the system," Hahn says.

When Aurora executives turned their attention to diagnostic imaging equipment during a brainstorming session on cost-reduction opportunities, the idea struck a chord with Hahn.

"It's one of our largest spends every year in terms of capital dollars… but I didn't have a good feeling that all of that spend was being utilized in the most efficient manner," he says.

Working with an outside group of asset management and financial consultants, Aurora began in early 2012 to reassess its investments in diagnostic imaging equipment. Using data analytics to determine equipment age, repair history, and utilization by department, the system's executive leadership began making more educated decisions about its capital spending.

For example, the team studied utilization patterns of Aurora's 56 CT scanners and found significant activity variation among sites. "As a result, we chose to concentrate machines in the most high-demand, high-volume locations throughout the system to better align use with patient needs and to eliminate duplicate services offered at sites in close proximity to each other," Hahn says.

Prior to this initiative, "decisions often were made without sufficient background information on the state of the existing equipment throughout the system and whether the device utilization rates or market needs warranted total replacement at a specific site," he adds.

The data-driven strategy has paid off. Aurora has achieved $12.5 million in capital avoidance costs and saved $4.4 million in operating and equipment service costs through analyzing diagnostic imaging equipment utilization, maintenance, and condition.

"Since the start of the project in early 2012, the system has reduced capital spending on CT scanners by 9%, nuclear medicine by 25%, mammography by 3%, X-ray by 10%, and ultrasound by 4%," Hahn says.

Before deciding which machines to remove, Aurora surveyed a few thousand patients and learned that they are typically willing to travel 20 minutes or 10 miles for diagnostic imaging and less for general X-ray, Hahn says. "We made a cut off line where we felt attrition could occur, and we might lose too much volume if patients were asked to travel too far."

In addition to obtaining patient input, Aurora also included its physicians in the decision-making process. "[This] wasn't something that was being done to them. They have to play an active role," Hahn says.

Using a consistent set of standards around technology life cycles, patient convenience, and utilization patterns has also helped Aurora achieve physician and staff buy-in because they are fair concepts that everyone can comprehend, Hahn adds. "We tried to be disciplined in using the same criteria so we didn't keep changing the rules and so that we had a process that people understood."

By reworking its diagnostic spending priorities, Aurora has created a process that is much more focused on the big picture—something Hahn sees as a major advantage moving forward.

"As far as the shift in how we approach capital spending, we were very much market-focused before," he says. "We are doing a lot more capital planning at the system level now. We go through and evaluate all of our diagnostic equipment according to age, technology, utilization, and we prioritize now as a system. We make system-level decisions on how much we are going to spend on diagnostic equipment in any given year. We feel better that the money is being spent in the best possible way… We have become much more disciplined as far as how we are managing our current assets."

And perhaps the best part is that Aurora will continue to experience significant savings as a result of its new capital spending strategy, Hahn believes. "This is the gift that keeps on giving. As we look at our capital spending going forward, we will have future savings… It has also given us a nice guideline to evaluate future needs."

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