White Paper
Health System Centralization
A Valuable Strategy for Driving Cost Savings and Elevating Healthcare Quality
Introduction
As labor costs and administrative expenses continue to rise, centralization is becoming an increasingly valuable strategy for healthcare leaders looking to save costs and improve operations. Defined as the process of streamlining operations and resources in a facility or health system, centralization benefits hospitals and health systems in several major ways, including lower costs, higher data integrity, and greater efficiencies. Despite this, some facilities have not yet taken steps toward this strategy, leaving them vulnerable to inefficiencies and redundancies.
To understand key drivers, challenges, and strategies associated with centralization, Q-Centrix conducted qualitative interviews with seven partner health system leaders who have implemented centralization strategies. Q-Centrix then surveyed hospital decision-makers to assess centralization perceptions and practices across a larger population. Findings were overwhelmingly positive: 100 percent of respondents who have implemented centralization strategies reported seeing positive returns.
This white paper presents findings from this research, offering insights into what drives healthcare leaders to centralize operations, the benefits they have seen, and the challenges they have faced. It also shares best practices and recommendations for how hospitals and health systems can centralize effectively and maximize the value of their centralization efforts.
Key Findings
100%
of healthcare facilities that engaged in some form of centralization experienced positive results.
- The most common trigger for centralization was experiencing growth in the number of a health system’s facilities. With healthcare merger and acquisition activity continuing to rise, centralization is likely to grow more crucial as leaders seek strategies to improve operations across facilities.
- The largest barrier to centralization is a hospital’s culture. Given the vital role culture plays in enabling change, this reinforces the importance of empowering employees at all levels to get involved in centralization efforts.
- Among hospital leaders who have implemented at least one centralization strategy, 100 percent have experienced positive results.
- Leading healthcare organizations have experienced at least 20 percent cost savings by incorporating centralization strategies.
- The key benefits of implementing centralization strategies include reduced administrative expenses and higher data integrity.
- Performance improvements stemming from increased data integrity occurred as early as three months post-centralization.
- Centralization outcomes are greater when implementing all three strategies: decision-making, talent, and technology—at once. However, just 16 percent of organizations that have implemented a centralization strategy have done this, suggesting that many have not gotten the maximum value from their efforts.
While the elements that comprise centralization may vary by hospital, research showed that the overall definition remains consistent: the process in which various practices and management of resources are streamlined in a facility or system to standardize best practice operations and drive positive outcomes.
Q-Centrix identified three key centralization strategies through its research: decision-making, technology, and talent.
- Centralized decision-making enables deliberate and aligned activities among quality departments.
- Centralized talent involves reducing redundancies in job roles.
- Centralized technology and data management offers an enterprise view of performance and greater quality insights, physician engagement, and outcomes.
In each instance studied, engaging in all three of the above strategies resulted in the greatest positive outcome.
Key Centralization Strategies
Centralization in Action: Enterprise Clinical Data Management
Q-Centrix’s Enterprise Clinical Data Management (eCDM) approach works to consolidate an otherwise fragmented system, making it easier for health systems to align activities across departments. This includes technology, data management, and decision-making across service lines.
Before Enterprise Clinical Data Management
Departments are scattered and not communicating or effectively managing their data.
After Enterprise Clinical Data Management
Departments work together to unlock the full value of their clinical data, improving efficiencies and patient outcomes.
Q-Centrix’s Enterprise Clinical Data Management (eCDM) approach works to consolidate an otherwise fragmented system.
Drivers and Barriers
Key Drivers
Merger and acquisition (M&A) activity. The most common centralization driver stems from M&A activity, which can pose strategic planning challenges, system redundancies, and inefficiencies. Centralization offsets this by eliminating these inefficiencies.
Changes in leadership. This was found to be the second most commonly cited centralization driver. New leaders typically identify opportunities for greater efficiencies upon their initial review of quality departments.
Rising costs. In recent years, hospitals and health systems have grappled with higher costs for labor, drugs, and supplies. Hospitals’ labor costs alone increased by more than $42.5 billion between 2021 and 2023, and Medicare and Medicaid reimbursements have not kept up with hospitals’ growing expenses. Amid these challenges, centralization is set to become an increasingly important strategy for reducing costs
Barriers to Centralization
Culture. Culture—or the lack of a quality culture—is the largest barrier to centralization. Organizations without a quality culture may resist centralizing data if staff feel that clinical data from individual hospitals or departments benefits only those respective teams. To combat this, leaders can foster a quality culture by actively championing quality initiatives and emphasizing the important role all departments play in ensuring quality systemwide.
Control. Another barrier concerns the desire to maintain local control, even at the cost of efficiency. Leading organizations address this challenge by developing and implementing a clinical data governance program either before or alongside their centralization strategy. A robust clinical data governance framework identifies the resources needed for an enterprise-wide approach to clinical data management that removes bias and improves performance.
Benefits and Outcomes
Cost Savings
Several health systems Q-Centrix spoke with experienced significant cost savings after centralizing. While the exact financial return on centralization strategies varies based on an organization’s structure, size, and makeup, Q-Centrix found that cost savings generally increased due to removing redundancies and standardizing within the system. Cost savings tended to grow as volumes increased or work varied.
Cutting costs by 23% via centralizing
staffing
A top health system with more than 75 hospitals concentrated throughout the South and Midwest had amassed 85 full-time employees dedicated to clinical data management at an estimated annual investment of $10 million. These employees were distributed across the facilities, leading to inefficiencies and redundancies. To address this, the health system centralized staffing, which led to cost savings of 23 percent.
Saving in costs 42% at a 100+
hospital health system
A top health system composed of more than 100 hospitals in the southern U.S. had a history of large M&As and sustained organic growth through innovation. The system embarked on a national centralization effort throughout each of its regions. The return on investment fluctuated based on region; however, increased volume consistently resulted in higher returns. Overall, centralizing staffing led the health system to save costs by 42 percent.
Achieving 61% cost savings by implementing three centralization strategies
Due to inorganic growth, a leading organization on the west coast became one of the nation’s 10 largest nonprofit health systems. One region within the system set out to centralize operations across core measures and more than 10 clinical registries. The region achieved 61 percent cost savings by implementing all three centralization strategies: decision making, staffing, and technology.
Data Integrity
Clinical data have many essential uses, informing everything from patient care to reimbursement—which is why the integrity of these data is paramount. As Q-Centrix’s survey found, improved data integrity was the top goal of healthcare leaders when centralizing. The examples below demonstrate the many data integrity benefits that leading healthcare organizations have achieved after centralizing.
Identifying and addressing errors in ICU protocols
A top academic health system comprising nearly 20 hospitals in the Midwest experienced data variation among its sites, particularly higher ICU mortality rates. This was largely due to a lack of data governance and disparate technologies. Implementing two centralization strategies—staffing and technology—enabled staff to identify and address errors in ICU admission protocols.
Improving CMS compliance by 33%
A top 10 U.S. health system concentrated throughout the South experienced more than a decade of inorganic and organic growth, amassing nearly 100 hospitals. Health system leadership noticed that the organization’s regulatory data varied from site to site. After implementing all three centralization strategies, the health system saw a 33 percent increase in CMS compliance.
Cutting outliers in half within six months
One of the largest faith-based healthcare systems in the country, with nearly 100 hospitals concentrated in the Midwest, experienced data integrity issues that initiated a staffing and technology centralization effort within a six-site division. Within six months of centralizing, the health system reduced outliers by half. Within a year, the health system’s data management was up to date, and the hospitals were within the 99th percentile for the metric staff sought to improve.
Improving CMS compliance by up to 42% at Sharp Healthcare
Sharp HealthCare is one of California’s largest non-profit hospital systems, with four acute-care and three specialty hospitals in San Diego, three affiliated medical groups, and a health plan. Data inconsistencies across different sites and a lack of visibility to system performance drove Sharp Healthcare leaders to centralize efforts and improve data integrity. To that end, the health system implemented all three centralization strategies and partnered with Q-Centrix to standardize workflow, teams, and quality assurance. As a result, the organization improved compliance for CMS by as much as 42 percent in two years.
Best Practices
Conduct an assessment to inform centralization needs.
The majority of healthcare organizations’ quality investments tend to be dispersed throughout the system, making it difficult for leaders to understand just how much they are spending on quality—or where redundancies may lie. By obtaining an enterprise assessment, healthcare leaders receive a comprehensive analysis of a health system’s technology, participating registries, data utilization, and more, pinpointing redundancies and highlighting areas where centralization is needed most.
Nurture a quality culture.
Having a strong quality culture creates an environment in which all teams are focused on improving quality performance. To foster a culture of quality, healthcare executives should include quality outcomes as organizational priorities and ensure that all departments understand their role in quality performance.
Develop a data governance program.
A data governance framework enables healthcare leaders to identify the talent, technology, and investment needed for centralizing clinical data management. Health systems without the expertise to develop this internally should partner with a third party. Partnerships offer an objective perspective and a wealth of experience to help hospitals and health systems succeed.
Communicate change.
As with any change management effort, communication is essential for an effective centralization process. Healthcare leaders should communicate the immediate and long-term benefits of centralization to key stakeholders and share progress updates regularly throughout the organization.
Conclusion
Centralization is associated with many key benefits, from significant cost savings to improved data integrity. Implementing centralization strategies also empowers healthcare leaders to streamline processes, standardize and improve operations, and obtain unparalleled access to their data systemwide. By prioritizing quality, communicating openly, implementing multiple centralization strategies, and seeking out the technologies or third-party partnerships that can help healthcare organizations centralize most effectively, hospitals and health systems will be better equipped to achieve efficiencies and unlock the value of their clinical data.
