Quashing health-care costs: consolidating data marts into enterprise data warehouses is helping contain rising health-care costs. (Technology Insight).

Health-care costs continue to rise at double-digit rates, particularly in hospital charges and insurance premiums.Two major components of healthcare spending involve the cost of providing care and associated administrative costs.

One way insurers have tried to contain administrative costs and achieve considerable cost savings is by consolidating data marts into an enterprise data warehouse.

Data-mart consolidation involves integrating data from departments, divisions or agencies into a single location that is better able to answer all of an organization's needs, rather than just a subset's. Those working on the consolidation use a shared-data model that merges the data in a way so that it can be used by everyone. Consolidation eliminates redundancy because data is stored in only one place and therefore delivers a single version of the truth. The data thus becomes a more valuable resource to the company.

Giga Information Group, a global information technology advisory firm, suggests that most data marts are silos--islands of information. Companies saddled with these physically dispersed data marts have the most to gain from a data-mart-consolidation initiative. They will also have more to do and spend more to do it.

Organizations that have implemented data marts with a consistent design are still likely to achieve better operational efficiency if they upgrade to an enterprise data warehouse. In addition, the job should be much less expensive.

The advantages of consolidating data marts are numerous. Organizations will reduce their number of systems and disk arrays. Maintenance will be less burdensome due to fewer processes and systems to support. Database software licensing fees will be lower. There will be less need for database administrators, training, business intelligence tools and unplanned system downtime. Companies won't suffer the lag time that comes with loading data into multiple locations, but rather eliminate data inconsistencies. Users will also enjoy direct access to all the high-quality data they need.

Data mart consolidation brings operational efficiencies that directly improve the bottom line. Even more important is the impact on overall business success. Many of today's leading organizations credit their success to the consolidation of their data marts into integrated, enterprise-level data warehouses.

Nearly 60% of companies currently maintain up to 30 data marts, while some report having as many as 100. With the average annual data-mart support budget alone costing from $1.5 million to $2 million, it's easy to see why many executives are taking a close look at data-mart consolidation. A few examples of companies that are beginning to explore or have already consolidated data marts include the following:

* A leading U.S. health-care payor that has 50 data marts with an annual support cost of $1.5 million each, or $75 million per year. After a data-mart consolidation, it will achieve a 50% reduction in costs--or $37.5 million annually--over two years. It will also enjoy all the benefits of not having to chase information around the entire organization and play "corporate intramurals" to get the coveted 360-degree view of the customer. In addition, significantly reduced administrative costs will allow this company to offer lower premiums.

* A leading manufacturer that consolidated more than 100 data marts and operational data stores. It achieved a cost savings of more than $20 million annually.

* A leading grocery chain that consolidated 22 of its 76 data marts over an eight-month period, resulting in cost savings of more than $6 million per quarter.

"With news of such success spreading quickly, consolidation has become a major trend in data warehousing," said Allen Messerli, principal of Allen Messerli Enterprise Systems and former chief information officer of 3M Corp. Messerli, who has spoken with more than 100 companies about their data-mart successes, directed a massive consolidation project at 3M.

A consistently interesting aspect of data-mart consolidation and the creation of an enterprise data warehouse is the creativity of users in suggesting new and sometimes previously unimagined correlations between subject areas. Often these links form the basis for some of the greatest return on investment that a data warehouse can provide.

A health-care company that consolidates data marts will also gain an advantage in meeting privacy and security requirements of the Health Insurance Portability and Accountability Act. The enterprise data warehouse can be the gatekeeper for all transactions in and out of the legacy systems and for those data marts that won't be consolidated.

Jeri Ostling is senior health-care consultant at Teradata, a division of NCR Corp., in Guilford, Conn. She can be reached at [e-mail].