Healthcare Waste Is a Problem that Helped Health Catalyst Earn a $1B Valuation

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For Health Catalyst, innovation is about bringing together agile partners who can make change with industry giants. I spoke with Tom Burton, co-founder of the health data, analytics and decision support company, shortly after receiving a billion-dollar valuation. This “unicorn” status is a huge accomplishment in health IT, and I wanted to hear what problems the leader of the company was most excited about solving.

I was thrilled to hear that Health Catalyst had a data product that helped improve the efficiency of activity-based costing in healthcare. Last year, I wrote about how transitioning to value-based care is limited by our data infrastructure. But this year, HIMSS had an answer to that question, and I found it in my meeting.

This interview has been lightly edited for clarity and style.

Janae Sharp: What do you think we need to do next to improve healthcare IT?

Tom Burton: I think we’ve done a lot of heavy lifting to make the open tab, open APIs, be really friendly to others who are building on our infrastructure. We don’t think any one vendor can solve all of healthcare’s problems. In fact, we think the lack of collaborative effort is part of the problem and part of the reason we have a lot of physician burnout.

We have these electronic health records (EHRs) that are built on older technology, and they weren’t designed with the physician in mind. They were designed to maximize fee-for-service billing. It’s the mentality of, “Do we have enough documentation to create a bill, so we can charge the payer and get paid?”

This doesn’t help physicians make better decisions. What we really need is lots of innovation so that the data becomes a strategic asset, and you can get the right data to the right clinician at the right time, so they can make a better decision. We don’t think one vendor can do that alone. We think it has to be an ecosystem, and that’s why we’ve created an open platform that we’re hoping will incorporate lots of start-ups and healthcare systems. One of the things I’m most excited about is shifting toward better understanding of waste within healthcare.

Tell me more about the problems you are excited about solving. Healthcare waste is a huge problem. What role do you see Health Catalyst playing in improving waste?

There are three places we improve healthcare waste, Inefficiency, Variation, and Utilization.

What does inefficiency look like?

There’s inefficiency, which is doing things slower. A lot of inefficiency technically, including how we move data around. How long it takes to get from raw data to inside

How about variation?

The second major category of waste is variation that’s unwarranted. One physician does it this way, another physician does it that way. These specific patterns are based on training, and some are regional. One unit does it this way, one hospital does it that way. The way we do things often doesn’t match the best-known medical knowledge. It could be that there’s been a study, or they’ve identified the best practice and we’re not following it. It takes 10 to 12 years for us to discover new knowledge and then to get it into practice for your frontline, everyday clinician. That’s way too long.

And utilization?

This is all about improving the health of the patient, not just treating the disease, and that comes from doing much more preventive care. Having the patient be more informed about the decisions. Cases where, for instance, if a patient has all the information, they may not even want a surgery. The would want to just manage the pain with physical therapy if they fully understood all the implications and potential risks of the surgery. Frequently we’re over- or under-utilizing a system to manage a disease versus really managing the health of a patient, without asking them to be involved in the decision making. Over- and under-utilizing the system is something that having great data helps solve.

I’ve heard you developed a data product for TDABC Value Based Cost. What need does that fit?

One other thing I’m very excited about is in understanding waste, having better tools to quantify where waste is happening. I’m really excited about a product we’ve been working on for a couple years. It’s an activity-based costing product for us, and this is what it does: Today, a lot of health systems use really old methods for measuring costs. They’ll end up taking averages of averages. We’ve leveraged our massive amount of data to do detailed activity-based costing. Then what we’ll do is, we’ll look at drivers in a department. Rather than just the average number of labor hours for a surgery department and then spreading it evenly across the number of surgeries they’ve done, we’ll actually take the actual minutes in the operating room and associate it with the actual dollars of the people who were in the OR — and their salaries — so we can tell you exactly, down to the penny, how much that surgery cost.

What does this help with?

This helps physicians and healthcare systems make informed decisions. Physicians don’t need more regulation without a reason. With this tool, they could quantify it based on their specific needs, their specific hospital. As an example, we did this for one hospital: It looked like all the doctors were the same on a particular surgery unit before they had our system. Once they put our system in, they found that one doctor’s costs were actually 20 percent higher, and it was because he had an extra tech in every one of his surgeries. Now, we could complain about that with clinical data and show that his clinical outcomes weren’t any better. His readmission rates and his complications rates were all the same. We asked him, “Do you really need that extra tech?” And he said, “Well, I guess I don’t.” So, boom, there’s 20 percent saved each time. He probably did 50 surgeries a year. That’s a huge saving just by having more accurate cost.

Physicians deserve the respect of showing data and outcomes. This way cost decisions make more sense to physicians.

Why do current cost measurement efforts fail?

Current methods are, “Let’s just cut 2 percent across the board,” or, “We’ve got to grow more, we’ve got to go build more hospitals.” That causes frustration for physicians and everyone involved. We don’t need more hospitals. We need to use the resources we already have more efficiently. Understanding cost is really the first step to be more responsible in eliminating waste in healthcare.

Innovation Can Reduce Health Waste

The problem of understanding cost and best practice will be well served by innovators who can use data to enable physicians to improve. For me, this was an exciting potential solution to our healthcare IT hindering improvement by failing to make cost transparent. But it’s just an early step on a long path to better, value-driven outcomes.

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