StartU: Avant-garde Health Discovers What Healthcare Really Costs by Kush Sharma

Originally published in StartU on March 26, 2018

The problem

Healthcare has become increasingly expensive in America – with little to show in better health for these rising costs. Of course, many strategies have been developed to address the rising cost of healthcare, but very few of these strategies have substantially reduced costs while maintaining quality of care.

Most of these strategies do not address one of the most fundamental problems on the patient-hospital side of the care-continuum, which is that hospitals simply do not know what they are paying for patient care. This seems almost unbelievable to someone outside of the healthcare industry. However, the reality is that hospitals may be aware of what they are spending on personnel or in other large categories in aggregate, but they typically have little insight into the relationship between patient treatments and costs incurred. In addition, there is no standardization for providers to measure cost, and recent decades have seen little innovation in this area. Cue Avant-garde Health, a startup that builds on research from Harvard Business School to create software that helps healthcare providers track and analyze costs.

The story

Derek Haas, founder and CEO of Avant-garde Health, had been hearing the frustrations of his parents and siblings, who are all doctors, about the challenges of “delivering high-quality care in an increasingly resource-constrained environment.” Then, as a student at Harvard Business School, Derek witnessed the passage of the Affordable Care Act, which made him think more deeply about ways to address healthcare costs. After business school, Haas became increasingly involved in healthcare entrepreneurship, launching and running a program to help small businesses pool together to purchase health insurance.

In 2013, Haas began working with Michael Porter and Robert Kaplan, professors at Harvard Business School. Both Porter and Kaplan are considered leaders in the field of value-based healthcare; specifically, they focus on Time-Driven Activity-Based Costing. That sounds like a mouthful, but Haas explains it concisely as “understand[ing] for each patient what care is delivered, who is involved in delivering that care, how much time are they spending, and the cost of each care provider’s time.” This data is used to calculate the total cost to deliver specific care to a patient.

He saw that there was huge interest in these concepts from hospitals, but that the hospitals needed software to help them implement these ideas in an ongoing, repeatable way. This was the guiding force behind the launch of Avant-garde in fall 2014, with the goal of helping care providers understand the full costs and outcomes of care, both inside the hospital and following discharge.

The product

Haas’ aim was to build the product in a clinically-informed manner, moving methodically through clinical areas. Avant-garde initially launched with hip and knee replacements and has since expanded into a number of clinical areas. Their product complements existing analytics systems a hospital may have, giving healthcare professionals insight into the effectiveness and efficiency of their work. Avant-garde’s software is unique among healthcare analytics solutions in that the analytics are consumed directly by the individuals they are relevant to, whether that be supply chain professionals or orthopedic surgeons, on an interactive online portal.

Individuals are then able to iterate on their treatment and work techniques by examining the continuously generated analytics provided through the web portal. Haas notes that “much of healthcare is naturally defined by what physicians find useful.” By using Avant-garde’s software, physicians can see how their actions and treatments affect outcomes on a larger basis, allowing for improvement in care delivery.

All of this is done through a data pipeline that gathers cost and treatment data from the hospital’s databases, cleans and scrubs the data, and then performs various analytics on the data in the backend, before finally delivering clean, actionable analytics to the end-user.

Healthcare providers have seen significant improvements in both costs incurred and effectiveness of care delivered, as Avant-garde’s software has been able to zero in on the specific improvements that a particular hospital can make. Changes have been implemented across the spectrum of care, in areas including pain management approaches during operation, staffing of cases, and timing of physical therapy. Outcomes such as length of stay and number of 90-day readmissions have improved in tandem with the decrease in costs, which Avant-garde is particularly proud of.

The future

As Avant-garde looks to expand its client base and clinical areas, its main priority is simply hiring high-quality talent that will help it maintain the high degree of value it is currently offering care providers, both in terms of of outcomes and costs. As more and more hospitals face pressure on the financial front, caused by stagnant insurer payments and increasing costs of care, they will be forced to better understand and reduce costs while continuing to improve patient outcomes. Avant-garde Health has a robust opportunity to affect change in healthcare delivery, and hopefully it can help make a dent in healthcare costs for all of us.

Tom De SantesComment