The Premier healthcare alliance has created a new efficiency dashboard that identifies 15 separate categories where there could likely be savings opportunities for hospitals, as announced by the company during a media call Tuesday.
According to Susan DeVore, president and CEO of Premier, the dashboard analyzed hospitals with opportunities for savings improvements. Premier then calculated the average amount of savings that could be generated each year by a typical 200- to 300-bed community hospital.
“Hospital budgets have never been tighter and they need to realize savings in order to maintain their financial health. About two years ago we started the concentrated work to build an efficiency and waste reporting capability so organizations could focus their efforts on improvement from the inside out,” said DeVore. “We looked for wide ranges of performance to look at what was working and what wasn’t. The goal was to create a roadmap so health systems can identify the opportunities for savings and then go after them. We came up with the top 15 challenges from an efficiency perspective.”
The top 5 of the 15 challenges are:
1. Unnecessary labor expense, such as inefficient processes that take too long or require too many employees to complete: $6.18 million per hospital per year in savings, and up to 5.1 percent of a hospital’s total labor budget;
2. Excess readmissions: $3.83 million per hospital per year, and up to 9.6 percent of a hospital’s budget. In fact, out of 5.8 million discharges, patient readmissions occurring within 30 days of discharge added an average of 16 percent to total cost of care;
3. Inappropriate length of stay: $2.63 million per hospital per year, and up to 5.4 percent of the hospital’s budget;
4. Skill mix dollar variance that occurs when higher paid employees do work that less expensive or less experienced staff could do equally well: $2.38 million per hospital per year, and up to 6.2 percent of a hospital’s total labor budget; and
5. Unnecessary lab testing such as blood, urine or hemoglobin tests: $2.23 million per hospital per year, and up to 1.6 percent of a hospital’s total lab budget.
According to DeVore, the Premier efficiency dashboard was developed by a cross-functional team of internal and external subject matter experts. Measures were then assessed by participants in the QUEST: High Performing Hospitals collaborative to ensure they were useful and able to achieve quantifiable cost reductions.
“All of these areas of opportunities were instrumental in helping our QUEST hospitals drive a reduction in overall cost per care. Even high-performance hospitals when given this kind of efficiency were able to prioritize to reduce costs,” said DeVore. “The measures are continually assessed and expanded so that we can really zero in on future savings opportunities.”
Guided by these findings, Premier conducted a follow-up analysis to determine certain drivers of spend. Focused first on readmissions, an analysis of 5.8 million discharges found that the following diagnoses had the highest average percent of readmitted cases and additional costs per case (July 2010- June 2011):
· Circulatory system (heart attack/heart failure) – 17 percent readmission rate, $15,517 additional cost per case;
· Respiratory system (pneumonia, asthma, chronic bronchitis) – 12 percent readmission rate, $12,146 additional cost per case;
· Musculoskeletal system (major joint replacement, spinal fusion) – 9 percent readmission rate, $17,730 additional cost per case.
“Everyone has a need to reduce spending. People can understand where the cost centers are and where are there opportunities for savings using this dashboard,” said Blair Childs, senior vice president of Public Affairs at Premier healthcare alliance.
Follow HFN Associate Editor Kelsey Brimmer on Twitter @kbrimmerhfn.