Selecting the right healthcare analytics partner is indeed a challenge for hospitals and health systems. Faced with a growing demand for analytics and declining budgets, it’s difficult to find a workable solution that meets the organization’s needs and generates a reasonable ROI.
In light of this, it is both prudent and strategic for organizations to look beyond the surface numbers in a quote or proposal, and evaluate a prospective healthcare analytics partner’s underlying billing model. This is necessary because, perhaps surprisingly, the type of billing model will directly impact the effectiveness, efficiency and value of the relationship — and ultimately determine whether the spend is an investment or an expense.
The type of billing model will ultimately determine whether the spend is an investment or an expense.
Basically, there are two types of billing models: a conventional hourly billing model, and a much more innovative and client-focused inclusive billing model.
The conventional hourly billing model is the one that most organizations are familiar with. As the term suggests, this approach involves paying a healthcare analytics partner on an hourly basis for services rendered. Typically, there are several hourly rates on the menu (i.e. premium rates for urgent situations, etc.). Regardless of whether invoicing is done in advance or in arrears, this is fundamentally a pay-as-you-go process. Yet therein lies the inescapable paradox of this model: although the healthcare analytics partner is the expert, the burden is on the organization to decide when they should avail themselves of services, and when they should not. This puts organizations in a weaker and more vulnerable position, and invariably results in getting less value for money.
To be fair, this is (usually) not deliberate on the part of a healthcare analytics partner. Regardless of whether the price in the quote or proposal is reasonable and fair, the relationship cannot achieve optimal efficiency. And since the root cause is the billing model itself, the only way to eliminate this problem is to choose a partner that takes a different and far more client-centric billing approach.
This alternative approach is an inclusive billing model. Service delivery under such an arrangement is not billed hourly. Rather, there is a transparent, single flat-fee that covers all work. And while the hourly billing model is appropriate for typical consulting engagements, an effective healthcare analytics partnership benefits dramatically from the inclusive billing model. There are five clear advantages of this approach to healthcare analytics that not only make the hourly billing version by comparison outdated and old fashioned, but essentially renders it obsolete:
With an hourly billing model, organizations must guestimate how much they need to earmark in their quarterly and annual budgets. Coming up short means they are stuck with “dead money” that could have been allocated to other priorities. And dealing with a cost overrun means they must convince CEOs, CFOs and other executives to loosen the purse strings — which may not be politically practical or financially feasible.
An inclusive billing model gives organizations cost certainty from day one of the relationship. Organizations know exactly how much to earmark in their budgets, and can make informed spending decisions accordingly. Instead of relying on guestimates they have hard data, and there are no unwelcome billing surprises that destabilize or damage the relationship down the road.
As noted above, the hourly billing model puts the burden on organizations to know when they need assistance — and when they do not. Yet it is precisely this insight and advice from their healthcare analytics provider that organizations need! It is an inescapable “Catch-22.”
An inclusive billing model eliminates all cost concerns that would otherwise prevent organizations from getting help and support; especially if the request is to identify what they need to solve in the first place. In other words, when they have any question – even if the question is “what question should I be asking? – they are incentivized to reach out and get the expertise they need. This is especially important when organizations want to identify and resolve small issues, in order to prevent them from erupting into large, complex and costly problems.
An hourly billing model puts the focus on time. As such, when asked to justify or explain why a task, activity or project resulted in higher than expected billing, healthcare analytics partners point to the time spent. Whether this time — and by extension, the cost — represents value is irrelevant. The discussion is basically about “doing the math.” If the math adds up (i.e. if the hours spent x agreed upon hourly rate = the amount on the invoice), the matter is closed.
An inclusive billing model takes the focus away from time, and shifts it to where it matters most for organizations: value. As such, instead of pulling out a calculator to explain a line item on an invoice, the healthcare analytics partner is always accountable and must clearly explain what they’ve done, how it fits into the agreed upon scope of work, and why it represents value for money.
Hospitals and health networks have standardized processes in place that govern how budgets are allocated, and also the speed at which spending decisions are made. There is nothing wrong with these processes and controls; in fact, they are necessary and sensible, and part of good fiscal governance.
Yet with this being said, an hourly billing model compels organizations to submit expense requests to CFOs and other decision-makers not once, but on an ongoing basis. And even if these requests are often approved, the aforementioned good fiscal governance means that it will not happen quickly. Several days or weeks can pass before an expense request is approved, which means that the healthcare analytics partner must remain in a holding pattern vs. solving problems and delivering value.
An inclusive cost model is not subject to any of these delays, because there is no requirement to submit an ongoing series of expense requests. The healthcare analytics remains focused, takes advantage of momentum, and pivots rapidly to serve the organization’s best interests. This is valuable when things are stable and predictable, and invaluable when the unexpected happens!
With an hourly billing model, a healthcare analytics partner generally takes a passive role in the relationship. This is because every touchpoint — whether over the phone, through email, via web conferencing, or in-person — adds to their time investment, and as such will show up on an invoice.
With an inclusive cost model, a healthcare analytics partner is incentivized to establish a close relationship and stay actively engaged. This can include talking (or at least emailing) various members of the team on a daily basis, and investing quality time to learn about the organization’s unique culture, challenges and, of course, their reports and data. Aside from a much more dynamic and enjoyable relationship, this enables the partner to get a head start on every request, and to deliver more value and results in less time.
Obviously, the billing model is not the only factor that organizations must consider before they choose a healthcare analytics partner. However, as illustrated above, this aspect is by no means a small detail. It fundamentally shapes and influences how the relationship will unfold.
An hourly cost model diminishes value, drives up costs, and forces organizations to assume an excessive amount of risk.
Simply put, for healthcare analytics, an hourly cost model diminishes value, drives up costs, and forces organizations to assume an excessive amount of risk. Alternatively, an inclusive cost model changes the paradigm, and positions a healthcare analytics firm to consistently, clearly and measurably earn the right to be called a true partner.
At Polaris, we’ve pioneered an inclusive billing model that empowers our clients with all of the advantages described above. We pride ourselves on being a true partner that shines a light healthcare analytics – but without losing sight of the ongoing need to be efficient and cost-effective. To learn more, contact us today and discover why our clients view our solutions as a smart investment, rather than an additional expense.