Abby Burns (00:16): From Advisory Board, we are bringing you Radio Advisory, your weekly download on how to untangle health care's most pressing challenges. I'm Abby Burns. In Advisory Board's 2025 strategic planner survey, health system strategy leaders told us that improving clinical operating efficiency is their number one priority for the year, and the urgency here has only gotten higher as hospitals and health systems anticipate an onslaught of added margin pressures. Here's the thing, a lot of the best practices around operational efficiency really haven't changed all that much in recent years. Despite the advent of new technologies, the principles, tactics, and even roadblocks remain pretty much the same. (00:57): But just because the tactics haven't changed doesn't mean systems have exhausted all of the opportunity they have at their disposal. They haven't. What we found in our research is that a lot of the bread and butter ways to reduce avoidable cost and improve efficiency, even in clinical operations, especially in clinical operations actually, they still offer a lot of untapped savings potential. Care variation reduction is just one example and it's the one we're going to talk about today. And for the record, it's a biggie. Our researchers estimate there's $100 billion in cost savings potential nationally associated with providers doing CVR at scale. So today I've invited Advisory Board Provider Operations expert, Isis Monteiro, back on Radio Advisory to talk about what's getting in our collective way of realizing that $100 billion and how leaders can start to move the needle. Hey, Isis, welcome back to Radio Advisory. Isis Monteiro (01:51): Hi, happy to be back. Abby Burns (01:54): Isis, care variation reduction is something we've been talking about and researching for years at this point. I think Advisory Board's flagship research on CVR came out in 2018, if I'm not mistaken. Of all of the many, many, many things your team could have studied in 2025, CVR came out on top. Why did this rise to the top of the research agenda this year? Isis Monteiro (02:19): At the risk of oversimplifying things, unwarranted care variation produces a lot of inefficiency and waste, and inefficiency and waste equals a lot of unnecessary excess costs, and minimizing unnecessary costs has become an even bigger imperative for health systems in the face of all of these policies that are impacting provider revenue and costs. I'm talking here specifically about Medicaid, ACA, federal grant funding cuts, and then tariffs of course that are going to continue to increase costs. And of course, all of this is not happening in a vacuum. It's happening at a time when it's already getting more expensive to deliver hospital care because the cost of labor, drugs, and supplies were already increasing and patients are older and sicker, more expensive to care for and require longer hospital stays. Abby Burns (03:10): Yeah, to your point, when we're dealing with health system operating margins that are hovering around, I think 0.9% was the last number that I saw, having excess waste in the system really is not an option. So the conversation we're having today is all about reducing unwarranted care variation, and I know the word unwarranted is really important there. Can you lay out for me what we mean when we use these terms? Isis Monteiro (03:35): So unwarranted care variation describes any deviation from a known standard of care that's not based on evidence or patient need. So when we're talking about care variation reduction, we're talking about the process of designing, embedding, and scaling care standards across the system with the goal of delivering consistent quality, cost, experience, and outcomes. Abby Burns (04:01): I feel like you just spoke to both of the clinical leaders and the administrative or the business leaders in that answer at the front. You were really front-loading. Where does the evidence point us in terms of delivering the best care and why does this make sense for our business? So given the fact that this is a topic we've been talking about for so long, it's really easy to think, "Hey, this must be something that everyone's good at by now." We know that provider organizations care about operational efficiency. We know that this is a known opportunity. Presumably, everyone does this and everyone does this well. Am I right about that? Isis Monteiro (04:35): Not exactly. I think even some of the organizations that we talked to for this research that were making progress on this before the pandemic ended up getting derailed. So most organizations currently don't have buy-in from executives to pursue care variation reduction across the system. And so a lot of efforts end up being isolated to specific departments or units or facilities. Abby Burns (04:59): Yeah. When you were talking about the definition of CVR, you said at scale actually, and it seems like that's a really important part of the equation. So if you had to paint the landscape for us around what CVR looks like at provider organizations coming out of your research this year, how would you break down the market for us? Isis Monteiro (05:18): I would say that most people are doing something, but it's not quite sophisticated or at the system level quite yet. So it's very much delegated down to facility or unit level or service line leaders, and that's not going to get you the scale that you need in order to see the kind of cost savings or length of state reduction that you need to see in order to have this be part of your organizational efficiency improvements. Abby Burns (05:44): And my understanding is the opportunity here is actually pretty big. For the systems that are maybe on the bleeding edge or systems that have been able to realize CVR at scale, what kind of opportunity are we talking about? Isis Monteiro (05:56): At the national level, our estimate is that there's $100 billion annual cost savings opportunity. Abby Burns (06:05): A $100 billion cost savings opportunity? Isis Monteiro (06:09): Yes. Abby Burns (06:10): To put this in context, the Rural Health Transformation Fund that the administration announced is $50 billion to support the health of all rural healthcare in the United States. And you're saying there's $100 billion dollars on the table here? Isis Monteiro (06:25): Yes. And we know that this number is so big that it's hard to know what to do with it, so to help organizations create more meaningful benchmarks that are more actionable, our brilliant colleagues on the QI team actually developed a care variation reduction assessment. Abby Burns (06:41): And QI is our Quantitative Insights team? Isis Monteiro (06:44): Yes. Shout out to Sebastian who's been on this pod many a time before. So this tool lets organizations benchmark their excess cost and excess length of state performance against national averages or against a custom cohort of hospitals. So you can select multiple facilities across your system, for instance, to see where there might be overlapping opportunities. Abby Burns (07:08): To the point of it's hard to conceptualize $100 billion of savings nationally, what's the sort of leveling that individual organizations would be able to understand within a tool like this? Isis Monteiro (07:19): So organizations can see their total excess costs and total excess length of stay at the facility, the service line, the sub-service line, the MS-DRG, and even down to the individual physician level, so you can get pretty granular. Abby Burns (07:33): Yeah, I have to imagine that makes it easier to prioritize across all of the things you could do, what's going to get us at the biggest bang for our buck? Isis Monteiro (07:42): Absolutely. Abby Burns (07:43): So this is a huge dollar figure opportunity. Obviously, it's a lot smaller at an individual organization level, but I don't know any health systems really that are in a position to turn down a savings opportunity like this. (07:57): At the same time, you just told me that most systems haven't actually made the kind of progress that we might have expected on scaling their CVR strategies. Help me square these two things because I know we're getting a lot of questions about, "Hey, how can I improve my operating efficiency given these margin pressures you talked about?" It seems like this would be something that would have a lot of momentum behind it. Isis Monteiro (08:19): Yeah, it is hard to do and it gets harder to do the bigger that a system gets and the more and more diverse facilities and settings and people that you have to coordinate across, so there's always going to be a reason to deprioritize it. Some of the most common reasons that we've heard are this fear that it's going to disengage clinicians, concerns about patients being too complex, this trust of the data that they have to make decisions about where to get started and what to prioritize. And then this idea that CVR can only help with cost and quality, but can't really do much beyond that. Abby Burns (08:55): I mean, there's untapped opportunity that systems aren't thinking about. Isis Monteiro (08:58): Absolutely. Abby Burns (08:59): I think the first point you made also about it's hard to do, it's hard to do the bigger you get is really important in a moment where even if we just look over the last five years, a lot of systems have gotten a lot bigger. Isis Monteiro (09:14): Yes. We actually talked to one organization that began this work in 2018 when they had one hospital and now they've grown to have 19 hospitals. And so it's a vastly different problem than they were dealing with prior when they first started. Abby Burns (09:31): Yeah, absolutely. It speaks to the challenges of doing this at scale. Isis, I would love to spend a few minutes and talk about the misconceptions that you just laid out because clearly, if there are organizations that have figured out how to do this at scale and move beyond doing CVR just at the facility level or just at the pilot level, it's possible to overcome these misconceptions. Not to say that they aren't very real. For example, one of the challenges you mentioned is this very understandable fear that care variation reduction is going to be disengaging to clinicians. This is something that we actually talked about back in February when we had leaders from UNC Health's care redesign program on the podcast. Isis Monteiro (10:14): No, and that's very real, but I would argue that CVR can actually be an engagement tool if systems involve clinicians in the process of designing care standards, and we have some guidance on how to do that, and we've heard time and time again throughout this research that standardization can actually improve satisfaction and engagement among members of the care team because it makes workflows more predictable, it allows for better collaboration with other members of the care team, and it provides a clearer sense of what their role is within the team, all of which alleviate cognitive burden on clinicians. Abby Burns (10:50): Cognitive burden is the exact word that came to mind for me. There's already so many variables that clinicians need to be juggling in their heads. If you can remove some of those variables safely in an evidence-based way, etc., I could see how that could actually be an engagement driver. Isis Monteiro (11:04): Yeah. And to just reiterate, one of the brilliant points that I think was made on that UNC podcast is that when you alleviate that cognitive burden and you free up clinicians' mental bandwidth and time, they can now spend that time tailoring the elements of care that actually do need to be modified from more complex patients. Abby Burns (11:23): Another source of pushback that you mentioned, Isis, is that patients are more complex than ever when we look at patients coming into hospitals in 2025, and so standardizing care might not make sense when you have so many patients that might be the exception to the rule. What did your research find there? Isis Monteiro (11:41): I think there are a few points that I want to make with this question. The first is that standardizing care for complex patients is in fact possible, and you can look at the NICU as an example for this instance. Abby Burns (11:54): The NICU? Isis Monteiro (11:54): That's one of the most complex high-risk patients that hospitals see, and they're treated in one of the most highly protocolized environments within a health system. The second is that standardization improves outcomes even for complex or high-risk patients. Abby Burns (12:10): Explain that for me. Isis Monteiro (12:11): So one example here is implementing enhanced recovery after surgery protocols. Again, we have tools on how to do this on the website, but these protocols reduce length of stay and post-operative complications for geriatric patients in high-risk patients, for instance. (12:29): And the last point that I want to make is that the goal of standardization is not getting clinicians to abide by the standard 100% of the time for each standard. You do want to allow some room for flexibility, and the sweet spot here is somewhere between 70% to 90% adherence to any standard. Abby Burns (12:49): Which is a pretty high number. Isis Monteiro (12:51): Yeah, but there are some organizations that actually create standard exceptions and then exceptional exceptions, so standardized care even for those patients for whom the standard of care does not apply. Abby Burns (13:03): What I really like about this is having some sort of benchmark that is below 100%, I think can help alleviate the concern, the fear, the discomfort that clinicians feel that this is trying to impose cookie-cutter medicine, and instead it's allowing for some principled variation. (13:22): Isis, another one of the misconceptions that you mentioned was this idea that you have to have the perfect data to identify the right opportunities or the best opportunities to reduce variation in order to get started. How should leaders think about it instead? Isis Monteiro (13:38): Your approach to prioritizing those opportunities is actually more important than what those priorities are because organizations are going to end up working through the same list of top opportunities which fall within the same group of usual suspects. Abby Burns (13:54): What are some of those? Isis Monteiro (13:55): Sepsis, AMI, stroke, etc. Abby Burns (13:59): Those are pretty complex clinical conditions, events, etc. I mean, you mentioned AMI, acute myocardial infarction. These are very serious medical events. Isis Monteiro (14:08): Yes. And side note, we actually have toolkits up on our website and case studies as well of how different organizations standardized components of care across each of these conditions. Abby Burns (14:18): So in the patient management aspects, that might look similar or even the same across these different conditions, how can we standardize those care pathways to minimize burden even more? Isis Monteiro (14:29): Yeah. Another point that I wanted to make around prioritizing opportunities is that you also want to take feasibility and ease of execution into consideration, so start where you already have the buy-in from your clinicians and the expertise that's required to design standards. Abby Burns (14:46): So beyond looking at pure cost opportunity, doing things like looking at buy-in of leadership and frontline clinicians within, maybe it's a given service line or even a clinical program, that allows an organization to identify more specifically, which of these opportunities should we start with, which is ripe for intervention now. (16:36): Another thing that I think is important here is an organization will identify a number of opportunities and you can sort work systematically through them, but this is not a one-and-done type of exercise. This is something that came through really clearly from the UNC leaders. Instead, it's really a way of operating as a system. Isis Monteiro (16:58): Yeah. The most advanced organizations that we've taught to have really built this into their ethos such as it's become a part of the culture or identity of the organization. And to your point, this is not something that happens overnight. This is really a process that happens over years and has to continue indefinitely, which is one of the reasons why this is so hard to do and why so few organizations have done this well. Abby Burns (17:23): Yeah, especially at times where executive bandwidth or even service line leader bandwidth is low, it can feel hard to take that step to invest the time and resources into this. Isis Monteiro (17:33): Absolutely, but the thing that I wanted to call out is that the benefits of doing this also compound over time the longer you do it. And the long-term benefits that I'm talking about include things like resilience during climate disasters. We talked to one organization that, because they had standardized IV fluid use prior to Hurricane Helene, they were actually able to continue operations and weren't impacted by shortages when the Baxter plan shut down. Abby Burns (17:58): Wow. Isis Monteiro (18:00): Other long-term benefits, or the downstream consequences of CVR, are delivering better outcomes at lower cost consistently is going to make you a more attractive partner. Improved organizational reputation is going to make you a more attractive employer and improve recruitment and retention. Better quality is going to make you a more attractive provider and attract more patients and improve patient loyalty and retention down the line. Abby Burns (18:25): What I love about that is you're tying back to all of these things that if you look at health systems list of strategic priorities, yes, improving clinical operating efficiency is number one for 2025, but these things all fall certainly in the top 10 list. Isis Monteiro (18:39): Absolutely. Yeah. While they might not be the initial motivating drivers for pursuing CVR, they are some of the long-term benefits that executives might not be thinking about. Abby Burns (18:52): So we've named the misconceptions that are maybe holding leaders back from investing time, resources into CVR, and we've also painted the opportunity of what doing this very hard work can buy health systems in the short term as well as in the long term. How should leaders think about getting started with this work or restarting it if maybe they visited this in the past and need to get it going again? Isis Monteiro (19:17): The way we see it, systems have three avenues to pursue CVR. So if you're a system that's been struggling to get this work out of pilot phase or struggling with clinician buy-in, you can absolutely partner with an external firm who can provide more at-the-hip support. Abby Burns (19:33): Yeah, more of the consultative model. Isis Monteiro (19:34): Absolutely. The second is to build it yourself so you can build a centralized system-level governance structure. The UNC team that we've been talking about, and that's been featured in the podcast before, is a really good example of this. We have other case studies on the website of how other organizations have been able to achieve this themselves. And the third is to delegate to service line or facility-level leaders, which again, while it might be a good starting point, is not going to yield you the return that these other two approaches promise. Abby Burns (20:03): Right. So that's more about building up the muscles internally as well as the institutional knowledge of how to do this work so that you then create the champions and the leaders that can take it to scale. Isis Monteiro (20:13): Absolutely. Abby Burns (20:15): Isis, as we close out our time, what can we expect next from your team? Isis Monteiro (20:19): We'll be broadcasting a webinar on this topic on October 30th. We'll also be publishing a maturity model to help organizations identify gaps in critical capabilities to achieve CVR at scale. And again, our tool is now live on the website and we have experts who can help you navigate that and even pull custom reports for organizations across your system. Abby Burns (20:42): We'll put all of that in the show notes. Well, Isis, thanks for coming on Radio Advisory. Isis Monteiro (20:47): Thank you so much for having me. Abby Burns (20:53): I know we've been talking about CVR for a long time. The level of opportunity on the table tells me this work is still worthwhile, and the status quo of the market tells me it is not easy to do. This is an area where Advisory Board can help. I'll put the links to the resources Isis just mentioned in the show notes. And if you want more hands-on support, just reach out to podcasts@advisory.com with the subject line, "Help with CVR," and we can help connect you with the right people because remember, as always, we're here to help. (21:35): New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts, and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Abby Burns, as well as Rae Woods, Chloe Bakst, and Atticus Raasch. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Leanne Elston and Erin Collins. Special thanks to Mahaya Walker and Paul Trigonoplos. We'll see you next week.