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September 2007
Achieving Higher Value in Health Care
By Casey Jacobus

     Why are some companies able to sustain excellence over decades while comparable organizations decline over time? What distinguishes those organizations labeled “visionary”?

     According to researchers, successful businesses share some defining characteristics, including a strong sense of purpose and values, a clearly defined long-term goal, and the capacity to visualize what can be accomplished and to act to ensure that image is realized.

     These are the characteristics that the Premier, Inc. health care alliance brings to the current national debate on what should be done about America’s health care system. Politicians and movie-makers alike talk about the “failure” of the current system, while Premier is already working towards transforming the system to improve the quality of health care for the consumer and to lower the costs for health care providers.

     “I believe health care can be improved and that it has to be improved from the inside out,” says Susan DeVore, chief operating officer at Premier. “I would love to see the health care delivery system reformed and the payment system working more effectively.”

The leaders of the hospital and health systems in the Premier alliance envision a future in which the health care industry will be considered the best managed and most innovative of all the economic sectors in the United States.

     In 1996 they endorsed the mission and foundation statements that underline the Premier alliance: “Across the nation, our owners, physicians and other allies will lead the local transformations that are the building blocks of a reshaped health care system…By the year 2020, we will have changed the world’s view of U.S. health care to ‘the best and most cost effective’ at sustaining the good health of populations.”

 

Forming Alliances

     Premier is the largest health care alliance in the United States dedicated to improving patient outcomes while safely reducing the cost of care. Premier operates the nation’s largest health care purchasing network, the most comprehensive repository of hospital clinical and financial information, and one of the largest policy-holder owned, hospital professional liability risk-retention groups in health care.

     Premier was founded in 1996 through a merger of three predecessor companies—Sun Health, Premier and AMHS. With headquarters in San Diego, Premier also has offices in Washington, D.C., and in Philadelphia. The company’s two main divisions which handle purchasing management and data analysis, are based in Charlotte, and manned with more than 600 employees. Premier’s chief operating officer Susan DeVore is also located in Charlotte and is a Charlotte native as well.

     As a member of a military family, DeVore moved to Charlotte when she was fourteen and attended Quail Hollow Junior High and South Mecklenburg High School. After graduating from UNCC with a business degree in 1981, she traveled internationally before returning to Charlotte to work with Cap Gemini Ernst & Young (CGEY) as a senior health care industry management practice leader and member of the executive committee for the North American consulting organization. She also led high tech, manufacturing and other business units of CGEY. She brought these experiences, along with four years in hospital finance at Mercy Hospital, to Premier in 2003.

     DeVore has been named to Modern Healthcare’s list of the 100 Most Powerful People in Healthcare and to the magazine’s list of the Top 25 Women in Healthcare. She was a recipient of the 2007 Top 25 Women in Business by the Charlotte Business Journal. She is also a member of the board of HGPII (Healthcare Group Purchasing Industry Initiative), of which Premier is a member. And she serves on the board of Global Healthcare Exchange (GHX), of which Premier is an owner. GHX provides an open and neutral electronic trading exchange to improve the procurement-to-payment process in the health care supply chain.

     DeVore has seen a transition take place at Premier in the four years she has been at the helm of the Charlotte office. Needing to consolidate to provide greater efficiency and company-wide integration, Premier closed its office in Chicago in 2006 and moved those operations to Charlotte.

     “The business climate in Charlotte and the cost of living made Charlotte the logical choice,” says DeVore. “The challenge is that our customers are all over the country. Charlotte is part of a larger community.”

     In October 2006, Premier purchased Cereplex, a Maryland-based company that creates Web-based tools for the detection of health care-associated infections and, last April, it purchased CareScience. Based in Philadelphia, CareScience assists hospitals in translating organizational vision and goals into quality improvement plans that optimize patient outcomes and operational performance, increase staff efficiency and reduce costs.

     “These acquisitions will help us acquire and share the knowledge that will help the industry improve safety and the quality of health care in this country,” explains DeVore.

It is projected that Premier will do $31 billion of business this year and will return $660 million in savings to its members. It has an over 98 percent customer retention base and a 6.5 percent pricing advantage compared with the industry norm. So, how does it do it?

     As an alliance of health care providers, Premier makes use of group contracting for hospital products and services for its members. Using the buying clout of the entire group of hospitals, Premier staff negotiate contracts. Premier’s field force then works with the hospitals to implement the contracts. This collaborative action reduces the hospitals’ staffing needs, improves productivity, and delivers hundreds of millions of dollars in savings to member hospitals.

     Premier also enables hospitals to share insurance claims experience and risk. Hospitals pool money through Premier to cover the professional liability risks they face. They also share knowledge on ways to improve patient safety and reduce risks. As a result, participants gain control over insurance costs.

     The alliance also helps hospitals share clinical knowledge so that hospitals can learn from one another. Premier houses the nation’s largest detailed clinical and financial database, holding information on more than 130 million patient discharges. Web-based tools allow hospitals to compare their performance in specific areas to peers and best performers, to find opportunities for improvement, and to track the results of their efforts.

     “Our job is to make sure our hospitals utilize a knowledge base acquired from real data,” affirms DeVore.

 

Alliances Pay Off

     Two recent initiatives demonstrate Premier’s quest for quantifiable knowledge that can help improve health care. The Hospital Quality Incentive Demonstration (HQID) project was launched in October 2003. Initiated by the Center for Medicare & Medicaid Services (CMS) and executed by Premier’s Charlotte office, the project was designed to determine if economic incentives to hospitals are effective in improving the quality of in-patient care.

     As part of the project, more than 250 hospitals submit clinical quality data to Premier. CMS then uses the data to identify and reward top performers in five clinical areas—heart attack, heart failure, pneumonia, heart bypass surgery, and hip and knee replacement procedures. These areas involve both high cost and high volume for Medicare, but they are also areas for which an evidence-based measure of quality already exists.

     Nineteen hospitals from North Carolina, including Gaston Memorial, Stanley Regional Medical Center and Cleveland Regional Medical Center, as well as 12 hospitals in South Carolina are participating in HQID. The Carolina-area hospitals received more than $2.7 million of the $17 million in incentive payments Medicare paid out in the first two years of the project.

     Over the first two years, the project showed an overall 11.8 percent increase in quality. In the case of heart attack patients, improvements in mortality rate over the first two years of the project saved 1,284 lives. The HQID project showed such a steady improvement in the quality of health care in the five areas under study that it has been extended for another three years.

     “What we have found is that the reliability of care had little to do with the financial incentives Medicare offered and much more to do with getting agreement on what should be done in certain medical situations and measuring what was actually done,” says DeVore.

     This summer Premier launched “QUEST: High Performing Hospitals” based on many of the same principals used in the HQID project. The goal of QUEST, another three-year project, is to improve patient safety and quality in the nation’s hospitals while safely reducing health care costs. Participating hospitals will report data to Premier on a set of clearly defined performance measures encompassing aspects of quality, efficiency, safety and patient satisfaction. Premier will analyze the data, facilitate sharing of best practices, and provide incentives for top-performing hospitals.

    “We’ll learn a lot from this study,” points out DeVore. “By figuring out how hospitals can improve themselves and sharing that knowledge, we’re really going to be able to improve health care across the country. I get excited to think we’re going to make it better.”

     In March, Vice President Dick Cheney presented Premier with the 2006 Malcolm Baldrige National Quality Award, the nation’s highest Presidential honor for quality and organizational performance excellence. The award, referred to by experts as the Nobel Prize of business, is given to businesses that are judged to be outstanding in seven areas: leadership; strategic planning; customer and market focus; measurement, analysis and knowledge management; human resource focus; process management; and results. Premier was one of three companies nationwide to receive the award, which was established by Congress in 1987 to honor the former Secretary of Commerce.

     Premier also received recognition from the Charlotte chapter of the Society of Financial Services Professions when it was named a recipient of the 2007 Charlotte Ethics in Business Award. This award is presented annually to honor companies that demonstrate a commitment to ethical business practices in everyday operations, management philosophies, responses to challenges, treatment of employees and to involvement in civic and environmental concerns.

 

A Premier Purpose

     “We set our goals really high,” says DeVore. “Then, as a business, we are very aggressive in delivering on those goals and returning value to our members and clients.”

     DeVore stresses that Premier operates under a set of core values that are shared with the hospitals and health systems that founded the alliance. The first is Integrity, both of the individual and the enterprise. The second is Innovation, seeking breakthrough opportunities, taking risks, and initiating meaningful change. The third is Focus: focus on people: showing concern and respect for all, building collaborative relationships with the community, customers, co-workers, and business associates.

     Premier holds an annual three-day conference for employees across the country in Charlotte each year. Part of their shared experience at the annual meeting is a half -day of volunteer work at a Charlotte-area nonprofit organization. Last September, 700 employees from Premier took part in 37 volunteer projects throughout the city organized by Hands On Charlotte. The community service included sorting donations at Crisis Assistance Ministry, Second Harvest Food Bank and Classroom Central and maintaining nature trails at Little Sugar Creek Greenway, Camp TreeTops and the Carolina Raptor Center.

     “Our people love it,” says DeVore, who helped sort donations at the Second Harvest Food Bank. “It’s our opportunity to give something back to the community. It’s also a way to focus attention on Premier’s core purpose: to improve the health of our communities.”

Casey Jacobus is a Lake Norman-based freelance writer.
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