http://www.forbes.com/sites/neilversel/2015/01/06/108m-analytics-outsourcing-deal-puts-health-catalyst-at-risk-for-allina-health-outcomes/
$108M Analytics Outsourcing Deal Puts Health Catalyst At Risk For Allina Health Outcomes
A major Minnesota health system is outsourcing its entire analytics operation in a 10-year, $108 million deal with a twist: The technology vendor has a financial incentive to assure that Minneapolis-based Allina Health actually improves patient outcomes and reduces the cost of care.
Under the terms of the contract, announced Tuesday, Allina is sending its data warehousing, analytics, performance improvement technology, clinical knowledge and all of its related employees to privately held healthcare analytics company Health Catalyst.
In return, Allina receives full subscription rights to Health Catalyst’s technology, as well as an unspecified equity stake in Health Catalyst, which grew out of clinical improvement efforts at Intermountain Healthcare in Salt Lake City.
About 20 percent of the contract value is dependent on Allina showing better outcomes and lower costs. A committee that will govern the Health Catalyst-Allina partnership will annually make a list of clinical improvement projects, setting measurable outcomes goals, the vendor says.
“It’s really a shared-risk contract,” Health Catalyst CEO Dan Burton tells Forbes.com. “It’s the first example that we’re aware of in healthcare” in which the analytics vendor’s payments are dependent on the client’s performance, Burton adds.
Health Catalyst envisions Allina Health’s 12 hospitals and nearly 100 outpatient clinics becoming a “living laboratory” for healthcare improvement. “We expect that this process of using analytics to prioritize projects, in combination with risk-sharing economics, will encourage far more focus and alignment than is found in traditional health system-vendor relationships,” Allina CFO Duncan Gallagher says in a press release.
“We hope that this becomes a trend in the industry,” Burton says.
Providers themselves have had to become accountable to insurance companies, including the federal Medicare program. The Patient Protection and Affordable Care Act offers incentives for healthcare entities to form “accountable care organizations,” and private payers as well as state governments have followed suit.
This deal, with its performance-based component, brings accountability to a vendor, according to Burton. “The healthcare industry has invested tens of billions of dollars in upgrading their technology without holding their technology vendors accountable.”
Allina actually was Health Catalyst’s first customer in 2008, but ran out of projects for the vendor two years later. The two reconnected in 2013, having discussions that led to this 10-year contract.