Moneyball in Healthcare: A New Approach to Asset Management

By Warren E. Beck and Andrew F. Suhy
4/15/2020
Moneyball in Healthcare: A New Approach to Asset Management

In 2002, the third-lowest-salaried team in Major League Baseball1 emerged from a bumpy season start to achieve a historic 20-game winning streak that ultimately led to the American League West title. The Oakland Athletics achieved extraordinary success that year not only through the efforts of its talented players but through the notably innovative and unconventional strategies of its general manager, Billy Beane. Some might say, however, that another hero emerged in baseball that year – data analytics.

The 2011 film “Moneyball,” inspired by the Michael Lewis book of the same name, brings to life Oakland’s Cinderella 2002 season, following Beane’s quest to rebuild the team on a shoestring budget (a $40 million salary budget that year compared to the Yankees’ $125.9 million2) after a disappointing ending to the previous season, which saw some of the team’s best players hired away by much richer teams. In the movie, Beane works with an Ivy League graduate and statistician savant to come up with player-level performance analytics. The information ultimately allows them to manage the team more successfully by acquiring unheralded free agents that complement existing players.

In his review of the movie, the late Roger Ebert declared it to be not “so much about sports as about the war between intuition and statistics.”3 Beane’s use of statistics – of objective, actionable data about players’ performance – is, in fact, very much the stuff of business. Just as Beane sought performance-level data to better manage the Oakland team, today’s health systems and hospitals are seeking a more data-driven approach to asset management. Assets such as medical equipment provide clinical value and service revenue for healthcare organizations, but they also consume a tremendous amount of cash flow and resources (people, space, IT), making their improved management so important.

While data analytics has come a long way since the earlier part of this century, healthcare as a business still lags behind other industries in adopting it efficiently. Healthcare organizations of all sizes – from small, rural hospitals to large, integrated, urban systems – need a new approach to cost management in order to adapt to a changing, more economically challenging healthcare environment. Similar to Beane’s baseball epiphany in Oakland in which he optimized the strengths of his team’s assets – the players – healthcare leaders need a fresh approach to rooting out excess costs and optimizing their own organizational assets.

To do this, healthcare organizations first need to overcome several cultural barriers that can get in the way of achieving success with this or any other important initiative.

1 “2002 Payrolls by Team,” The Baseball Cube, http://www.thebaseballcube.com/topics/payrolls/byYear.asp?Y=2002
2 Ibid.
3 Roger Ebert, “Moneyball,” RogerEbert.com, Sept. 21, 2011, https://www.rogerebert.com/reviews/moneyball-2011

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Overcoming cultural barriers

In the movie “Moneyball,” Billy Beane is locked in a continuous struggle to persuade the team’s scouts and managers – many of them longtime industry veterans – to throw more than a century’s worth of conventional wisdom about baseball out the window and have faith in his new approach. Healthcare leaders face similar hindrances that need to be overcome before they can employ bold approaches to improving asset optimization. Some major barriers in healthcare organizations today include:

  • Uninspiring leadership. It takes a unique leader to bring together stakeholders from across a healthcare organization to overcome skepticism and sentiments such as “that’s the way we’ve always done things,” and to drive the adoption of new approaches such as asset optimization. Without committed, courageous leadership, these types of initiatives cannot succeed.
  • An outdated approach to financial governance. Often in healthcare organizations, financial considerations such as margin growth and improved operating performance can seem like competing interests to clinical performance. There is a deep-rooted cultural belief that purchasing clinical assets, for example, can be done without regard for cost because it is in the best interests of patient care. In reality, overspending at the asset level – such as through the purchase of big-ticket items like surgical robots, CT scanners, and MRI machines – can have adverse effects on an organization’s profits and losses for years to come, affecting numerous areas such as staffing needs, maintenance and IT costs, and more. Effective governance in today’s forward-looking organizations needs to consider how to meet clinical care needs by spending less without sacrificing quality – by identifying the right equipment, with the right technology level, at the right time, and for the right price.
  • Lack of internal support for data mining. In general, healthcare organizations today lack executive understanding about data and its capabilities. They also lack support for making resources and tools available that will allow staff to do the data mining necessary to match assets to utilization – valuable insight that can help shape capital decision-making.

A path to asset optimization

Organizations can overcome some of these barriers to achieving improved asset management through use of asset-level performance analytics.

Applying independent, objective performance analytics to assets when making capital decisions can unite stakeholders from both the clinical and financial sides of healthcare organizations. Having such data helps create consensus between clinical and financial leaders, helping to illuminate the smart asset choices that should allow the organization to deliver safe, quality care while positively contributing to the organization’s long-term financial health.

Trying to make important capital decisions in healthcare organizations without having asset-level performance analytics is tantamount to trying to manage a baseball team without having access to statistics about the players on the field. By deploying asset-level performance analytics, healthcare leaders can manage costs more effectively and improve margins without sacrificing access to or quality of care.

Billy Beane knew that in order for the business of baseball to evolve into the future, “the way things have always been done” needed to change. Healthcare is facing a similar moment. Deploying data and asset-level performance analytics is essential to help healthcare organizations move forward in an evolving healthcare landscape.

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Warren Beck
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Andy Suhy
Principal