Hospitals Waste A Lot of Money. Areas To Improve Reviewed.

Hospitals waste a lot of money.   At least that's what the Premier healthcare alliance asserts in their recently titled publication:  The cost of healthcare:  Does more care=better care?  I think anyone that reads The Happy Hospitalist with any regularity knows the answer is a resounding no.  More care does not equal better care. More care often increases complications with a  negligible chance for improvement.  These folks have created a new efficiency dashboard to help hospitals pinpoint and quantify opportunities for their institutions to save money.  What did they discover?  For typical 200-300 bed hospitals, they identified 5 high impact areas and a few other additional cost centers that can be explored to reduce the cost of delivering care.  In other words, they are showing hospitals how to stop wasting their money.

We spend a lot of time focusing on reduced payments to doctors and hospitals.  The other side of the equation (hospital expenses) is a beast that must be tamed in order to  survive decelerating third party public and private insurance payments as risk  shifts from payers to doctors and hospitals in a slash and burn effort to reduce spending by all means possible.  While the political rhetoric and posturing  is intense, the end game will still be the same:  reduced benefits for beneficiaries and reduced payments for doctors and hospitals.  If we don't prepare for the inevitable by either creating a practice environment that can survive without Medicare or one that can survive in this new reality, we will not survive the business side of medicine.

We already know that hospital profit margins from Medicare have been mostly negative for almost a decade.  That trend will only get worse as America's addiction to debt continues to wreak havoc on our ability to maintain the status quo of entitlement spending.  What did this group identify as the 5 areas with the biggest bang for the buck in annual hospital savings in this typical sized hospital?  The following figures are potential savings per hospital per year:
  1. 6.18 million dollars in unnecessary labor expense (inefficient processes that require too much time or too many bodies to complete)
  2. 3.83 million dollars from excess hospital readmissions.
  3. 2.63 million dollars from inappropriate length of stay.
  4. 2.38 million dollars for skill mix dollar variance (work being done by over qualified personnel that can be down equally well by less expensive staff.
  5. 2.23 million dollars for unnecessary lab testing.
Their research suggested even the highest performing hospitals had significant room for improving efficiency and reducing expenses.  In addition to these five listed high impact cost savings centers, their research also calculated millions of dollars in other potential annual savings (dollars per hospital per year).
  1. Unnecessary diagnostic imaging:  $1.52 million
  2. Unnecessary respiratory therapies:  $1.5 million
  3. Blood utilization:  $1.06 million
  4. Unnecessary overtime pay:  $709,000
  5. Unnecessary patient safety events (infections, medication errors):  $564,000
  6. Overuse of anti-infectives:  $408,000
  7. Overuse of intensive care units:  $595,000
  8. Excessive length of stay in the ICU:   $339,000
That's nearly 25 million dollars a year in potential savings for a typical 200-300 bed hospital by simply changing the way health care is delivered, with the help of hospitalists.   You can see how the  hospitalist subsidy offers the best return on investment in health care finance.  It's no wonder the hospitalist salary continues to expand by leaps and bounds.    Hospitals that are able to establish or contract with great stable hospitalist programs  will be winners when the flames of economic destruction start burning all the competition around them.    

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