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How Yale-New Haven Health System Cut Spending by Millions

By Christopher Cheney  
   October 06, 2016

Teaming financial analysts with clinical staff has been an essential element in educating frontline caregivers about cost accounting, he said. At YNHHS, there are at least two financial analysts working in every service line, and they are paired with senior nursing staff. "It's a team approach to that education. There is not a sheet of paper that you give them, and say, 'Here are the concepts.' It's relationship-building. I can't point to three pieces of paper and say, 'Here are the educational materials that we gave to physicians.' "

From October 2015 to April 2017, YNHHS is hoping to generate as much as $3.5 million in cost savings from hip and knee replacement procedures in the federal Bundled Payments for Care Improvement program, Allegretto told me. But the anticipated spending reduction has come at the cost of lost volume because one orthopedic surgeon refused to give up his favorite implant when the health system reduced the number of device vendors from seven to two.

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The cost savings from standardizing hip and knee implants is estimated at a minimum of $2.3 million through April 2017, according to Keith Murphy, executive director of corporate supply chain at YNHHS.

As of Jan. 1, the surgeon who bucked implant standardization has taken 90% of his cases to a competing hospital, Allegretto said. "If we hadn't done that, we wouldn't have saved the $3.5 million across the system that we are going to save over the next couple of years."

Even the loss of one orthopedic surgeon to a competitor reflects the broader difficulty of adopting value-based initiatives in the healthcare industry, he said. "This kind of change is going to be difficult for healthcare, because where is he going to go? He is going to go to another organization and they're going to give him the implant that he wants."

Mary O'Connor, MD, director of the Musculoskeletal Center at the Yale School of Medicine and Yale-New Haven Hospital, told a symposium audience that the surgeon believed he was making the best decision for his patients, but the health system had indisputable data and value calculations in hand when negotiations reached an impasse. She recounted her pivotal remarks to the doctor: "Show me the data that shows your implant is better. You don't have it. I know you don't have it. So let's talk about cost, quality, and value."

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

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