The Premier healthcare alliance continues to identify potential savings opportunities for hospitals. Based on feedback from nearly 350 members participating in Premier’s QUEST collaborative, five areas with the largest opportunity for average annual savings at a typical 200- to 300-bed community hospital are listed below (See also www.premierinc.com/quest). Based on CFA’s cardiovascular experience, a number of CV-specific examples of these opportunities are also listed under each of the five opportunities.
- Unnecessary Labor Costs – Including inefficient processes that take too long or require too many employees to complete. $6.18M per hospital per year, and up to 5.1% of a hospital’s total labor budget.
- CFA’s Take B This includes aligning staffing with schedules, particularly in testing and procedural areas such as the cath/EP lab and noninvasive testing departments. Opportunities can include addressing hours of operation, eliminating/controlling overtime and premium labor staffing, reducing excess capacity, tightening management controls and consolidating off-campus sites. Re-engineering care processes and implementing efficient and effective CVIS solutions supports the need to continually address issues of labor costs, work/skill matching and work distribution.
- Excess Readmission – $3.83M per hospital per year, and up to 9.6% of a hospital’s budget.
- CFA’s Take B Well known to all CV administrators, readmission for CHF and AMI are major problems. Approximately 30-40% of patients with CHF are re-admitted within six months of hospitalization. Studies report that readmission can be prevented in at least 40% of cases. As of October 1, 2012, Medicare started penalizing hospitals by withholding a percentage of their total Medicare payments to hospitals whose readmission rates forCHF,MIand pneumonia exceed the national average. Virtually all hospitals must successfully address readmission issues through strategies including protocols/discharge practices, care process improvement, continuum linkages, scheduled follow-ups, use of care navigators/coaches and the like.
- Inappropriate Length of Stay – $2.63M per hospital per year, and up to 5.4% of a hospital’s budget.
- CFA’s Take B Factors contributing to length of stay in hospitals, particularly in critical care units, have been studied extensively. A multitude of issues – patient severity variations, palliative care issues, moral/ethical issues, and institutional goals, contribute to the issue. The ALOS of cardiac patients has steadily decreased over the years (for example, CHF has decreased from an average of 8.4 days in 1990 to 5.3 days in 2012 and heart attack from 8.4 days to 4.8 days average), partially aided by the substitution of outpatient procedures for the less acutely ill, increasing use of hospitalists and the general advance in CV diagnosis and treatment. Yet, LOS remains a critical issue that demands aggressive, multidisciplinary decision-making and management.
- Skill Mix Pay Variance – Occurring when higher paid employees do work that less expensive or less experienced staff could do equally well. $2.38M per hospital per year, and up to 6.2% of a hospital’s total labor budget.
- CFA’s Take B An example of skill mix issues that are being aggressively tackled by some hospitals and medical groups is the addition of mid-level staff such as nurse practitioners and physicians’ assistants as supplements for expensive physicians. As more physicians come into alignment with health systems, their practices need to be efficient and cost effective. Expanding their ability to see more patients through use of mid-levels is one approach to achieving these goals.
- Unnecessary Lab Testing – Including blood, urine or hemoglobin tests. $2.23M per hospital per year, and up to 1.6% of a hospital’s total lab budget.
- CFA’s Take – While this is a challenging area due to medical/legal issues, there are approaches that can produce results. As one example, some hospitals are developing protocols and decision support tools that stratify patients (for example PCI patients) into high, medium, and low risk to best match care processes (and thus testing requirements) with the patient, for the fewest complications and best outcomes at the lowest price.
These identified general opportunities for hospital savings, and specific CV examples cited herein, should give CV managers insight into approaches to begin to aggressively manage their costs in an effort to maximize efficiency and revenue in this era of increasing pay-for-value.
As always, CFA invites your comments, suggestions and questions.