Investing in new technology is high stakes. Here's how a Banner CEO tackles the challenge

Banner Health executives are taking a strategic approach to technology investments to find that balance between what is best and what is new, says Steve Narang, M.D., CEO of Banner-University Medical Center Phoenix. (Banner Health)

Like most hospital executives', the email inbox of Steve Narang, M.D., fills up nearly every day with vendor pitches for new medical technologies and devices.

In an industry where staying ahead of the pack is king, deciding it's time to invest or time to avoid the shiny new innovation can be a high-stakes proposition, said Narang, CEO of Banner-University Medical Center Phoenix.

So at Phoenix-based Banner Health—part of the Banner Health system—executive leaders have been working on a data analytics-driven initiative to improve how the organization evaluates new technology, supplies and drugs. 

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“We are working to find that balance between what is best and what is new,” Narang told FierceHealthcare.

When Banner Good Samaritan Medical Center affiliated with the University of Arizona College of Medicine-Phoenix back in 2015 and rebranded as Banner-University Medical Center Phoenix, executives saw an opportunity to take a new approach to technology investments.

The affiliation was part of the larger merger between the University of Arizona Health Network and Banner Health.

RELATED: Hospital leaders see clear ROI for supply chain analytics, but most use outdated processes: survey

As with many other hospital systems and academic medical centers, Banner Health has seen a significant increase in supply expense per admission, according to Narang.

“We determined that supplies in our medical center come to about $240 million annually, about 30% of all controllable expenses,” he said. “We’ve seen a double-digit increase in supply expense per admission. The biggest driver of that, almost exponentially year over year, are new therapies and new procedures, particularly in the cardiovascular non-surgical, non-therapeutic space.”

“We determined that we needed to figure out how to balance the iteration of new technologies into our space with whether it is the right thing for our patients using a value-based approach,” Narang said.

Every new technology or supply at the organization is now evaluated using a value analysis that combines clinical quality and cost data to identify the value for the customer experience, the impact on outcomes and potential complications.

As a result, the medical center is working to change its supply chain process and create standardization in purchasing new devices and technologies. The key to this effort, Narang said, has been collaborating with physicians.

“That’s the secret sauce—having physicians lead this in partnership with finance and operations,” he said.

Putting the strategy into place

While it sounds like a straightforward strategy, putting this approach into practice required operational and cultural changes at the organization. The medical center formed a team called Care Transformation comprised of physicians as well as finance and operational leaders. That team formed a committee that analyzed supply expense data for every supply used in the hospital, particularly in the operating room, CATH lab, interventional radiology and endoscopy, Narang said.

“If I take were to that cost data and go to the doctors and say, ‘I want you to help me reduce cost in order to reduce variation,’ they’d look at me like ‘What are you talking about? I’m here to take care of my patients,’” Narang said.

Leveraging data analytics, the team took a deep dive to look at each provider, their choice of technologies or supplies down to the diagnosis-related group and then graphed out the variation in care and also looked at patient outcomes, such as length of stay, mortality and readmission, and combined that with cost data.

Those data are then presented to hospital physicians to create more transparency around supply expenses and technology investments.

RELATED: Hospitals that streamline, optimize their supply chains see billions in cost savings, study finds

“One of the biggest opportunities we have is with spinal fusions. If you take a look at all our spinal fusions, there was significant variation in cost,” he noted. Wide variation exists in the cost of screws, plates, and cages for spinal implants, with surgeons often unaware of the costs.

One study found that interbody cages can vary in price from $938 to $7,200.

“We need to have that kind of dialogue between surgeons and the supply and operations team to understand why they are using one technology or equipment versus another and what has the best outcome. We want to do this in a standardized and transparent way,” he said, noting that outcomes data are key for physicians because they indicate which technology or device is producing the best results for patients.

Seeing financial and operational results

The result of this initiative, Narang said, has been a “remarkable” change in culture and a more strategic approach to investments in supplies and technologies.

A recent benchmarking study conducted by a consulting firm found that Banner-University Medical Center Phoenix was in the 15th percentile for supply and technology costs compared to similar-sized academic medical centers. “Eighty-five percent of facilities spend more on supply costs than we do. That tells me that we’re on the right path, but there is more work to do,” Narang said.

Often physicians want to implement a new technology more quickly, Narang admitted. “We partner with physicians to go through this value analysis to ensure that we do this right. We don’t want to create an overuse, misuse or even underuse of resources,” he said.

As an example, he cited a cardiologist who wanted to use a device as part of transcatheter aortic valve replacement procedures as the device was found in studies to reduce stroke risk. The device was used during a six-month trial and then the committee used the data analytics platform to evaluate it with regards to outcomes and cost. “When the physician was presented with the data, he decided to continue using the device but changed his approach to be more selective. He realized he didn’t have to use it as broadly as he initially thought. That decision wasn’t made by a finance person but based on the physician’s analysis of the data in partnership with the administration,” Narang said.

RELATED: U.S. hospitals wasting about $25.4B on supply chain every year

Given the cost of supplies and technology, having a systematic approach to evaluate best practices is critical to keep pace with innovation in a cost-effective way, Narang said. “If you don’t have a rigorous approach to that it’s ultimately going to lead to more variation in your practice and make it harder to measure outcomes,” he said.

The Association for Healthcare Resource & Materials Management predicts that supply costs will exceed labor as hospitals’ greatest expense by 2020, and these costs contribute to the escalating cost of healthcare overall.

“As an industry, we have not solved the one question of how do you reduce variation in healthcare and that’s something we need to tackle to make healthcare more affordable. Until we are able to apply some scientific approach to reduce variation in partnership with physicians, we’re going to struggle with reducing cost in America. We need to partner with physicians in sharing data and aligning incentives,” Narang said.

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