Can for-profit organizations prosper in a value-driven healthcare environment? Of course they can. After all, competing on value and service demands efficiency and effectiveness, assumed private sector strong suits in a competitive marketplace. The only question is, are for-profit healthcare organizations willing and able to adapt and change the way they do business and realign their incentives and pay structure to fit the new industry model? With their survival at stake, the likely answer is yes, and big data and analytics are ready to help.

But isn’t the healthcare industry different from, say, manufacturing? You’re talking about healing human beings, not making widgets, and you can’t just apply systems and global optimization techniques in the traditional, industrial engineering sense to the healthcare industry, can you?

“Health is something that is very difficult to quantify,” says Ryan Leslie, Ph.D., vice president of analytics at Seton Family of Hospitals, a network of 31 healthcare facilities throughout Central Texas. Seton is one of the 32 Pioneer Accountable Care Organizations announced by the Centers for Medicare & Medicaid Services in December 2011.

“As emotional human beings, it’s hard for us to be objective when talking about health,” Leslie continues. “By its nature, healthcare has complexities that you don’t necessarily see in other industries. The outcome of a healthcare work process isn’t a widget. You’re doing something with the intent of helping a patient, but the patient is looking subjectively at the whole experience. You may properly treat an illness, but the patient may not like your bedside manner. You may be incapable of treating an illness, but the patient may still be satisfied with the way that you have delivered care. It’s the peculiar nature of the products and services that come out of healthcare.”

Leslie points out that the economics of healthcare also differentiate it from other industries. For example, healthcare predominantly uses a third-party payer system, and supply-and-demand and market and competitive forces do not necessarily work the same way in healthcare as they do in other industries.

“If you look at the high-tech industry, you see innovation right and left because if you’re not constantly transforming and innovating, you’re out of a job tomorrow. With healthcare it’s a little different because there are so many legal barriers to competition. The decision to consume healthcare products and services and the payment for those products and services are so disconnected that you just don’t have the same economic forces that you do in other industries.”

Leslie’s colleague, Conti, offers a different perspective. “What has led us to where we are in healthcare today – rising and unsustainable costs and the resistance to change – is this philosophy that healthcare is different, that it’s unique,” Conti says. “Obviously, caring for people is very different, but if you look at just the process that is involved in moving individuals in, through and out of a hospital or a clinic, it’s very similar to the hospitality industry – a hotel or a restaurant, for example. … The logistics involved in coordinating all the moving parts required for delivering care to an individual are complex and not dissimilar to air traffic control moving airplanes around airports and around the world.

“At ICC,” Conti continues, “we’re trying to create a system that provides whatever care is needed wherever that care is needed across the entire spectrum of delivery venues and throughout the patient’s lifespan. That’s a fundamentally different way of thinking than what would be required in a hospital-only organization.”

Payers vs. Providers

To some extent, insurers/payers are caught in the middle between patients and providers in the healthcare economic tug-of-war. Providers (and economic factors beyond their control) tend to drive healthcare costs up, while patients and employers obviously want to keep their insurance premiums down. Kaiser Permanente is both a provider and a payer that offers healthcare and health insurance under one big roof, which gives Dr. Yan Chow, director of KP’s Innovation and Advanced Technology Group, a unique 360-degree view of the “pay-for-performance” trend in healthcare. Chow also holds an MBA as well as an MD, further cementing his feet in both the business and medical sides of the industry.

So what’s Chow’s take on the changing healthcare landscape and how will analytics shape KP and the industry going forward?

“Over time, payers will push more and more for the collection of data,” he says. “We need data to know what’s going on. We need shared data to integrate a very fractured healthcare system. We need data to better inform physicians and empower consumers.”

Much of that data will come from electronic health records (EHR). In 2003, Kaiser Permanente became one of the first healthcare organizations to install an enterprise-wide EHR system; today the system holds information on nearly nine million patients and continues to gather information at an astonishing rate.

“We have the largest clinical data repository in the world,” Chow says. “It contains more information than the Library of Congress.” Now the trick is to analyze all of that information and turn it into something useful, Chow says, starting with a couple of applications in its integrated care delivery system.

“Even though we are an integrated system, revenue capture remains a big issue for us and for most healthcare providers,” he says. “We want to make sure when we bill Medicare, for example, we receive the reimbursement that is due based on the data collected during a patient’s visit. Beyond that, from both the payer and the provider side, we’re very concerned about the quality of healthcare, so we look very carefully at data for care quality outcomes and plan to use predictive analytics to find out what kind of treatments or courses of treatment work best for different individuals. It’s a highly personalized analysis and it’s all driven by analytics.