UPMC inks deal with Utah firm to calculate health costs
January 11, 2016 12:12 AM
Darrell Sapp / Post-Gazette
UPMC is partnering with a Utah company to develop tools that will allow health systems to analyze the true cost of a patient's care.
By Kris B. Mamula / Pittsburgh Post-Gazette
Hospital giant UPMC is partnering with a Utah company to calculate the exact cost of providing health care services, with the aim to reduce unnecessary variation in how care is provided and improve how well a patient recovers.
Under terms of the agreement, Salt Lake City-based Health Catalyst will build a commercial grade version of cost management technology and analytics that were developed at UPMC, which will then be marketed to other health care providers.
Financial details of the deal were not disclosed.
The deal is unusual because cost assessment tools that have been used in manufacturing and other industries for years are largely absent in medicine at a time when hospital reimbursement has been shrinking and the need to know precise service costs has never been greater.
“It’s critically important that doctors understand their costs,” said Robert DeMichiei, UPMC’s chief financial officer. “We’re providing an absolute insight into every activity of a health system.”
The Health Catalyst deal is the latest effort by UPMC’s commercialization arm, UPMC Enterprises, to create new sources of revenue as payments flatline for its core business of medical care. Supply chain management company Prodigo Solutions and revenue cycle services company Ovations are two other examples of how UPMC has commercialized its know-how.
The shift has been picking up at universities and academic medical centers nationwide, with Purdue University the latest to announce a $250 million investment to hot-wire the state’s life sciences business sector.
Under the agreement, Health Catalyst will license technology and analytics developed at UPMC and scale up these tools for commercialization, helping other health care networks cut costs and improve quality. Standardization of the best medical practices reduces costs while improving patient outcomes.
“Our electronic warehouse brings scale to cost models that UPMC has developed,” said Kyle Salyers, senior vice president at Health Catalyst. “There’s an alignment of values in how we bring technologies to bear in improving health care.”
UPMC began piloting its activity cost management tool at its Mercy Hospital in 2013, then in all of its other hospitals in Allegheny County starting in December 2014.
Here’s one benefit: Blending best practice metrics with physician and patient-specific cost data resulted in the number of so-called open operations to remove the uterus dropping 30 percent across the UPMC system, saving money and reducing the patient’s length of hospital stay and number of complications.
In the past, doctors in the same medical specialty often had different ways of performing the same procedure, some of which drove up costs without improving care. Now, specific cost data for each doctor and patient can be available within 10 days, allowing hospital administrators to tweak steps in treatment and eliminate unnecessary variability in care.
“We have created this treasure chest of information,” Mr. DeMichiei said. “ It’s all about cost and how we’re utilizing resources.”
Kris B. Mamula: email@example.com or 412-263-1699.
To report inappropriate comments, abuse and/or repeat offenders, please send an email to
firstname.lastname@example.org and include a link to the article and a copy of the comment. Your report will be reviewed in a timely manner.