In an age of tighter hospital budgets and policy pressures, the Charlotte, N.C.-based Premier healthcare alliance has created an efficiency dashboard and reporting mechanism to identify 15 different categories of potential savings opportunities in hospitals.
“The goal here was really to create a roadmap so that health systems could identify first the opportunities for savings and then go after them,” said Susan DeVore, Premier president and CEO, in a telephonic press briefing on April 10. “We think this is a first of a kind, focused efficiency and waste dashboard.”
The dashboard analyzes hospitals with opportunities for savings improvement. Of those, Premier has calculated the average amount of savings that could be generated each year by a typical 200- to 300-bed community hospital. Through this process, the dashboard has identified the following five areas with the biggest opportunity for average annual savings per hospital:
- 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, and up to 5.1 percent of a hospital’s total labor budget;
- Excess readmissions: $3.83 million per hospital, per year, and up to 9.6 percent of a hospital’s budget;
- Inappropriate length of stay: $2.63 million per hospital per year, and up to 5.4 percent of the hospital’s budget;
- 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
- 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.
Devore described the dashboard as pulling “from a labor productivity database, a supply chain database, and a clinical database [to] identify 15 areas that we thought going in, based on the mining of our data, were the usual suspects for opportunities to improve efficiencies.” The system then creates a report and buckets efficiencies into four buckets: quality indicators, including length of stay and readmissions; supply chain indicators, like contracts compliance and drug expenses; utilization indicators like blood levels and amounts of diagnostic exams and labs; and labor indicators, including levels of staffing and overtime.
Focusing on Readmissions
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 have 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.
The efficiency dashboard is customized by hospital to give the most information possible. Using hospital data pulled from Premier’s comparative clinical, operations and purchasing database, a benchmark is set based on top quartile performance. The hospitals receive quarterly reports showing areas where their organization falls below the benchmark, and the magnitude of potential savings. Measures are tracked over time to show where progress has been made quarter to quarter. The measures are being continually assessed and expanded to help zero in on further opportunities for savings.
In addition to the top five categories of average annual savings, the dashboard measures 10 additional areas. For these categories, the average annual savings, per hospital are:
- Unnecessary diagnostic imaging: $1.52 million per hospital, per year;
- Unnecessary respiratory therapies $1.50 million per hospital, per year;
- Blood utilization: $1.06 million per hospital, per year;
- Unnecessary overtime pay: $708,922 per hospital, per year;
- Unnecessary patient safety events, such as infections, medication errors: $564,126 per hospital, per year;
- Overuse of anti-infectives: $419,008 per hospital, per year;
- Overuse of intensive care services: $595,222 per hospital, per year;
- Excessive length of stay in the intensive care unit: $339,083 per hospital, per year;
- Anesthetic and sedation drug expense per operating room case: $68,089 per hospital, per year; and
- Non-automated purchase orders: $51,700 per hospital, per year.
Devore said this project stemmed from the QUEST High Performing Hospitals collaborative working on an outcome measure for the total cost of inpatient discharge. “What they found was it was really hard to move a total cost metric,” she said. “In order to move the total cost metric, you actually have to focus in on some of the drivers of that cost metric.” She said that to find out how QUEST hospitals drove down the cost of care, Premier drilled down into readmission rates to identify the 25 clinical conditions and diagnoses that had highest-level of readmissions, which are listed in the white paper, “The cost of healthcare: Does more care = better care?”.
Dennis Dahlen, CFO, Banner Health, a 23-hospital nonprofit healthcare system based in Phoenix, Ariz., said that the Premier alliance has helped his system identify key areas of financial savings and areas to reduce operating costs. Seven years ago his system started implementing standardized order sets and electronic charting across all their hospitals. “As a part of that foundation, our community physicians, as well as our chief medical officers at our hospitals, formed what we refer to as clinical consensus groups to really drive the adoption and use of electronic medical records, and also create forums for the use of the data that comes from the use of electronic medical records to refine medical practice and create higher value protocols and eliminate the variation of practice across the organization,” he said.
Through this standardization, Banner Health has been able to eliminate the use of a surgical adhesion barrier for C-sections. From the dashboard, the system was able to see that no other institution in the country was using this adhesion barrier, and it made no difference in patient outcomes. Banner Health eliminated that practice and ended up saving $1 million in annual expenses. Dahlen said that single success has triggered other successes, like reductions in CT scans for community-acquired pneumonia.