Utah health system saves by tracking costs--and major providers take notice

A Utah health system is trying to identify savings opportunities through a simple solution: keeping track of the costs of all its goods and services.

While most industries track all operational costs, healthcare keeps track of payer reimbursements, which often bears little relationship to actual costs, according to The New York Times.

Years ago, Vivian Lee, M.D., Ph.D., CEO of University of Utah Health Care in Salt Lake City, surveyed her staff on the cost of a minute in an MRI machine or an hour in the operating room. When none of them could tell her, she launched a project to track those costs, and since then the system's expenses are down 0.5 percent a year even as other teaching hospitals' increase their spending an average of nearly 3 percent annually. 

To pinpoint costs, the system created a computer program to track the cost of goods and services from drugs to medical devices to staff's time, according to the article. It also tracks outcomes, including readmissions and days in the hospital, and the program includes a pulldown menu so hospital leaders can compare doctors in the department by costs and outcomes.

The software is a work in progress, but it is precise enough to identify the cost of one minute in the emergency room (82 cents) or in the surgical intensive care unit ($1.43), according to the publication. Now Lee and her team's progress is catching the eye of major healthcare players such as the Mayo Clinic, Harvard, and Health and Human Services Secretary Sylvia Mathews Burwell, who personally visited the health system in August to view the results, The Times reported. 

Although University of Utah is one of the only health systems currently tracking costs, experts say emphasis on cost-tracking will be a growing trend in healthcare in coming years. "When I first started working in healthcare, like everybody I thought: 'Oh, my God. It's such a tough problem,' " Michael Porter, Ph.D., an economist and professor at Harvard Business School, told the Times, but now "I have no doubt we can solve it … we know exactly what we have to do."

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