As inflation persists and interest rates and labor costs continue to rise, U.S. hospitals face increasing financial challenges. Meanwhile, reimbursement levels from public and private payers have yet to catch up with inflation, and payment delays and denials are growing, putting additional pressure on hospital revenue. Consequently, many hospitals are hampered in their commitment to provide equitable, high-quality care for patients facing social and financial barriers to care.
Savings Opportunities in Surgeries
In this challenging landscape, surgeries and associated perioperative care can provide immediate savings opportunities for hospitals. Surgeries account for over 50 percent of revenue for most hospitals, and four of the five specialties that contribute most to hospital revenue are surgical specialties. However, surgeries also consume about 60 percent of hospital resources. Research suggests an abundance of opportunities to improve efficiencies to generate savings.
Four Proven Ways to Generate Savings
Often considered the gold standard in health care cost management, time-driven activity-based costing (TDABC) measures the use of staff time and materials at each step of delivering medical services. Benchmark comparisons with the best-performing hospitals can identify the most significant sources of inefficiencies and most impactful savings opportunities. A report by corporate affiliate member Avant-garde Health details four proven ways TDABC and benchmarking can improve hospital operating efficiency.
1. Reduce Surgical Procedure Cost
With granular visibility into surgical supply costs, an organization can compare its purchasing prices and utilization volume with national top performers. Hospital managers then can reduce supply costs by renegotiating purchasing prices with vendors or encouraging surgeons to adopt a more cost-effective option.
Using TDABC and internal benchmark comparisons, Penn State Health identified an 18 percent cost variance among surgeons performing total knee replacements. Health system leaders discovered some surgeons consistently used a standard cement while others used an antibiotic-infused cement that cost five times more than the standard. Analyzing patient-reported outcomes, the health system determined that both types of cement resulted in virtually identical low infection rates and reduced use of the costly antibiotic-infused cement by 80 percent.
2. Decrease Hospital Length of Stay
Leveraging knowledge of trends and variations in hospital length of stay across different organizations, hospital managers can pinpoint underperforming surgical areas.
A hospital OR manager sought to identify the source(s) of delays in patient discharge. Industry benchmark data revealed their patients were less likely than patients at other organizations to be discharged by noon. The manager worked with the physical therapy team to increase the number of physical therapy sessions in the morning after surgery so more patients could be discharged before noon. As a result, the length of stay decreased by 31 percent, saving the hospital $650,000 per year.
3. Shorten Operating Room (OR) Time
TDABC data and analytics can quantify the amount of staff time spent at each phase of a surgical procedure in an OR and identify the most impactful areas for improvement.
Using TDABC data, a hospital director of perioperative services realized that two key metrics — the wheels-in-to-incision-time and closure to-wheels-out time — were longer at their organization than at the top performers. Working with anesthesiologists, the OR management team reduced total OR time by 11 percent, saving $389,000 per year and increasing capacity for additional surgeries.
4. Optimize Post-Acute Care Facility Treatment
Optimizing the use of post-acute care and reducing spending can improve perioperative efficiency. Hospital managers can compare their patient discharge status and post-acute care facility usage rates to those of other organizations and target improvement areas.
Using benchmark data, one hospital identified an above-average use of skilled nursing facilities among its joint arthroplasty patients. The OR manager developed a discharge protocol to facilitate discharge planning and reduce skilled nursing utilization by 11 percent, resulting in annual savings of $1.2 million.
Additional Requirements for Digital Solutions
Capturing the savings opportunities discussed above can require a tremendous amount of manual work to collect and analyze detailed clinical and financial data, and the current hospital data infrastructure is far from sufficient in most cases. Fortunately, digital solutions, including Avant-garde Health, can help hospitals automate the data collection and analysis process.
Despite challenges ahead, hospitals can explore potential savings opportunities, especially in surgical specialties, through four proven ways to generate savings: reducing surgical supply costs, shortening OR time, decreasing hospital length of stay, and optimizing post-acute care facility care. With the right digital solutions to automate data collection and analysis, and the right assistance in navigating the organization, hospitals can quickly improve their profitability to help sustain their mission.