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How This Doctor’s MBA Helped Her Turn Around a Major Hospital

November 2, 2016, 11:43 PM UTC

After going through medical school and becoming a radiologist, Vivian Lee never expected to get an MBA. Yet that degree would change her life.

“One of the best things I ever did was to go back to business school,” Lee said at the Fortune Brainstorm Health conference in San Diego on Wednesday. Today, Lee is dean of the University of Utah medical school as well as CEO of its hospital system, where she has undertaken an experiment that has the potential to revolutionize the nation’s health care system at large.

All it took was thinking more like corporate America. “We’re the only industry in the country that we don’t really know the costs of running our business,” Lee said. “All of these business principles—improving operations, looking at continuous process improvement—those have been mostly foreign to us until very recently.”

For Lee, the biggest breakthrough was bringing her cost accounting training back to the hospital, something she says is “brand new” to healthcare. So nearly three years ago, she and her team took out their calculators and began tracking their costs down to the micro level, from every unit of supplies to every minute spent in the operating room or emergency room, including the labor expenses of every doctor, nurse and anesthesiologist on the case—”what it cost us to provide care for that patient,” Lee explained. She then displayed that information on a “dashboard” visible to the physicians and other caretakers, fostering healthy competition among the doctors to achieve optimal medical outcomes at the lowest costs.

That’s when she had some astonishing revelations. “It’s completely eye opening,” Lee said. “Everything surprised us because we’d never seen any of this before.” For example, she noticed that there was “enormous variability” in the costs of a hip replacement surgery depending on the surgeon who performed it—even though they worked for the same hospital. The culprit: The surgeons were using two different brands of prosthetic hips, and one was triple the cost of the other. Still, patients who received the cheaper hip did just as well post-surgery as those who got the more expensive prosthetic. “That was one really big ‘aha’ moment—we needed to really get on top of our supplies,” Lee said.

Further, they realized that about 25% of their hip and knee replacement patients were staying in the hospital longer than expected, and were recovering more slowly. Because Lee’s team was crunching so much of the hospital’s data, they could identify a common factor in the lagging group of patients: They were all operated on later in the afternoon. That meant that by the time those patients returned to the recovery room, it was after 5 p.m.; the physical therapist assigned to work with them had already gone home—meaning the patients were skipping a crucial step in their rehabilitation. “The cardinal rule for these patients is you have to get up and out of bed the day of the surgery,” Lee said. Now, she ensures those patients are up and walking after their operations no matter what, improving their recovery time. “We can start to make decisions informed by cost and quality and start to drive value,” she said.

Another breakthrough that she says could help them achieve those dual goals: telemedicine, by which doctors can check up on their patients via video chat or phone—though Lee notes that the current lack of insurance reimbursement for those services is holding back its potential. “If you apply our tool [and] measure your outcomes against your costs,” she said, “you can clearly make an argument for many of these new advances.”