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Analysis

How Yale-New Haven Health System Cut Spending by Millions

By Christopher Cheney  
   October 06, 2016

The health system was able to exceed its cost-savings projections in three areas: human resources, labor and non-labor. The total cost savings targeted in those areas was $64.2 million, with $116 million in actual cost savings achieved.

Allegretto told me the $150 million in spending cuts were modest when calculated on an annual basis—he estimates the annual impact on YNHHS's total budget at less than 1%—but meaningful for the health system, nonetheless. "For us, it sounds like a lot of money, but we are a $3.2 billion organization," he said.

Furthermore, the spending reductions, combined with the Saint Raphael acquisition and other positive impacts on the health system's bottom line associated with value-based initiatives, has enabled YNHHS to eliminate 250 open positions and avoid laying off as many as 250 employees over the past four years, Allegretto said.

"It's going to get increasingly more difficult to avoid laying people off as [reimbursement] cuts continue; so when you look at that $150 million dollars, I look at it as an incredible achievement. And we've kept it out of the system, and that's the most important thing."

Although several initiatives have helped YNHHS get closer to achieving success in the health system's quest to provide unparalleled value for its patients, he told me a handful of factors made the launch of the effort four years ago possible, including the adoption of a Quality Variation Indicators methodology.

The QVIs feature 27 summary categories of negative clinical outcomes such as implant complication, transfusion reaction, air embolism, drug poisoning, shock, infection, and obstetric trauma. "We had this external urgency [from declining reimbursement]. We had EPIC going in, so we would have the capacity to standardize care. We had just come up with the QVI methodology. And then we were at a place where people started trusting the cost-accounting data… Those four things came up at the same time, and because the leadership saw the future, we started our cost-value initiative."

'Change is Going to be Difficult for Healthcare'
As is the case with any Herculean quest, YNHHS has faced several challenges implementing value-based initiatives over the past four years.

Convincing the health system's clinical staff about the importance of cost accounting to help secure the organization's ability to serve patients well into the future has been among the hurdles, Allegretto told me.

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.

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