Many current healthcare initiatives seem to necessitate a generous capital outlay — electronic medical records, physician recruitment and retention and the development of new care models, to name a few. To keep up with the changing times, health system CEOs must invest in the right projects while identifying and reducing waste elsewhere. Barry Arbuckle, PhD, president and CEO of MemorialCare Health System, a Southern California integrated delivery system headquartered in Fountain Valley, discusses five ways his system has reduced cost while preparing for inevitable changes in healthcare.
1. Standardize labor measurements throughout the health system. You can't decrease costs effectively if every hospital in your health system measures labor differently, Mr. Arbuckle says. "In years past, if I compared OR productivity and costs among our own hospitals, some would lump in the nurse management and ancillary personnel, and when you begin to compare results, you end up saying, 'How can hospitals in the same system perform so differently?'" he says. In order to make sure your hospitals are comparing "apples to apples" in every aspect of productivity and labor management, he recommends complete standardization, followed by bringing together clinical departments to share data, processes and best practices.
When you bring together different departments, you may find that one has been measuring labor in a completely different way from another, skewing cost and productivity benchmarks and giving a false impression of success or failure. By standardizing best practices throughout the system, Mr. Arbuckle says MemorialCare saved almost $50 million and made sure underperforming departments could be identified as accurately and quickly as possible.
2. Set targets as new budgets. Once your hospital has achieved a certain financial target, don't rest on your laurels, Mr. Arbuckle says. Once a department at MemorialCare has achieved a financial target — for example, by using Lean systems and other measures to improve productivity while reducing a yearly budget by several thousands of dollars — the hospital administration makes that accomplishment the department's new budget. Once you demonstrate that costs can be reduced while maintaining the highest quality of care, you have to make sure your employees continue to maximize savings. If you aren't proactive, staff members may assume the effort was a one-time initiative and return to increased spending. Mr. Arbuckle says cutting costs in a smart way — by tracking data, encouraging employees to standardize practices based on that data and optimizing delivery of exceptional patient care — will prove more effective in the long run than simply cutting staff as a knee-jerk reaction.
3. Benchmark and work to decrease length of stay. Mr. Arbuckle's health system is located in California, a state with a fairly high penetration of managed Medicare. Mr. Arbuckle says his hospital system has worked to compare the actual length of stay of traditional Medicare patients with the geometric mean length of stay and the average length of stay for Medicare Advantage patients. "You will consistently see that managed Medicare actual length of stay almost mirrors the geometric mean, and on traditional Medicare, I've seen a gap from half to three quarters of day over to as high as two days," he says. "In a hospital that has any significant volume of Medicare, if you cut that excess by half, it represents significant contributions to the bottom line and, most importantly, encourages fundamentally better care." He says hospitals should track data on length of stay to determine the resources wasted by unnecessary care; with an advanced system, data can be broken down by hospital department, medical group and even individual physician to determine where the waste exists.
Mr. Arbuckle believes many factors come into play in increasing length of stay — not all of them financially motivated. "I think it's the way that many clinicians have practiced for decades, and it's tough to change," he says. "Patients and their families can be enamored with specialty care and want to make sure every conceivable test is done — and providers try to have their bases covered. Certainly there's defensive medicine, as well as the fact that Medicare is just not as well-managed." He says while traditional practices are hard to change, benchmarking and setting goals for reduced average length of stay and resource consumption in your hospital can cut significant costs and improve patient care.
4. Take data collection seriously. MemorialCare invested in decision support systems that are able to compile and analyze every single patient condition, diagnosis and procedure throughout the healthcare system, producing real data that give a clear and accurate picture of where waste and quality opportunities may exist. He says this system is a vast improvement on the traditional method of data collection, in which a statistician would take a sample of the patient population and use that to extrapolate data for the entire system.
He says the advanced system has helped to cut costs by identifying specific areas of waste as well as dramatically improving the health system's quality outcomes by engaging physicians in the work. Because physician leadership and involvement are critical to help hospitals reduce unnecessary costs by aligning objectives and involving providers in cost-cutting initiatives, the implementation of a respected system is essential. "We formed a physician society more than 15 years ago, and a doctor becomes a member by agreeing to practice evidence-based medicine and have their results shared with their peers," he says. "We agreed to capitalize it and committed to getting a very robust system and putting the physicians in control."
5. Set high standards for EMR use. Many hospitals and health systems have implemented EMR with the hope of future cost-savings — a benefit that seems promising in theory but questionable in practice for many. Mr. Arbuckle says installing and implementing an EMR may not be enough to realize these cost-savings. "There's a difference between implementing EMR and having people use it to a high degree," he says. "I know a lot of name-plate hospitals that may have a nice, robust EMR, but when you ask, 'What's your percent of CPOE?', they say, 'Thirty or forty percent,'" he says. If your hospital is going to save money through EMR, the vast majority of your physicians and staff have to use it and be comfortable with it. Otherwise, you will continue to spend money on paper charts and staff to work with them — never achieving the intended savings.
To help their employees and physicians adapt to EMR prior to the first installation, MemorialCare hired an expert in change management to work with staff members as they moved to the new system. They also deployed a team of well-trained and enthusiastic IT professionals to visit every single physician on each MemorialCare medical staff and assess their computer readiness. This assessment meant really understanding where the physician was in terms of computer understanding. If the trainer asked the physician to move the mouse and the physician responded, "What's that?", they knew there was a lot of work to be done. Today, MemorialCare is consistently over 85 percent CPOE with less than 1 percent written orders, saving millions of dollars a year in paper and duplicate work.
Learn more about MemorialCare Health System.
Read more about hospital cost-cutting measures:
-8 Out-of-the-Box Ways Hospitals Can Cut Costs
-Providence Hospital Eliminates 35 Jobs as Part of Cost-Cutting Plan
-Boston's Children's Hospital Drastically Cuts Healthcare Costs
1. Standardize labor measurements throughout the health system. You can't decrease costs effectively if every hospital in your health system measures labor differently, Mr. Arbuckle says. "In years past, if I compared OR productivity and costs among our own hospitals, some would lump in the nurse management and ancillary personnel, and when you begin to compare results, you end up saying, 'How can hospitals in the same system perform so differently?'" he says. In order to make sure your hospitals are comparing "apples to apples" in every aspect of productivity and labor management, he recommends complete standardization, followed by bringing together clinical departments to share data, processes and best practices.
When you bring together different departments, you may find that one has been measuring labor in a completely different way from another, skewing cost and productivity benchmarks and giving a false impression of success or failure. By standardizing best practices throughout the system, Mr. Arbuckle says MemorialCare saved almost $50 million and made sure underperforming departments could be identified as accurately and quickly as possible.
2. Set targets as new budgets. Once your hospital has achieved a certain financial target, don't rest on your laurels, Mr. Arbuckle says. Once a department at MemorialCare has achieved a financial target — for example, by using Lean systems and other measures to improve productivity while reducing a yearly budget by several thousands of dollars — the hospital administration makes that accomplishment the department's new budget. Once you demonstrate that costs can be reduced while maintaining the highest quality of care, you have to make sure your employees continue to maximize savings. If you aren't proactive, staff members may assume the effort was a one-time initiative and return to increased spending. Mr. Arbuckle says cutting costs in a smart way — by tracking data, encouraging employees to standardize practices based on that data and optimizing delivery of exceptional patient care — will prove more effective in the long run than simply cutting staff as a knee-jerk reaction.
3. Benchmark and work to decrease length of stay. Mr. Arbuckle's health system is located in California, a state with a fairly high penetration of managed Medicare. Mr. Arbuckle says his hospital system has worked to compare the actual length of stay of traditional Medicare patients with the geometric mean length of stay and the average length of stay for Medicare Advantage patients. "You will consistently see that managed Medicare actual length of stay almost mirrors the geometric mean, and on traditional Medicare, I've seen a gap from half to three quarters of day over to as high as two days," he says. "In a hospital that has any significant volume of Medicare, if you cut that excess by half, it represents significant contributions to the bottom line and, most importantly, encourages fundamentally better care." He says hospitals should track data on length of stay to determine the resources wasted by unnecessary care; with an advanced system, data can be broken down by hospital department, medical group and even individual physician to determine where the waste exists.
Mr. Arbuckle believes many factors come into play in increasing length of stay — not all of them financially motivated. "I think it's the way that many clinicians have practiced for decades, and it's tough to change," he says. "Patients and their families can be enamored with specialty care and want to make sure every conceivable test is done — and providers try to have their bases covered. Certainly there's defensive medicine, as well as the fact that Medicare is just not as well-managed." He says while traditional practices are hard to change, benchmarking and setting goals for reduced average length of stay and resource consumption in your hospital can cut significant costs and improve patient care.
4. Take data collection seriously. MemorialCare invested in decision support systems that are able to compile and analyze every single patient condition, diagnosis and procedure throughout the healthcare system, producing real data that give a clear and accurate picture of where waste and quality opportunities may exist. He says this system is a vast improvement on the traditional method of data collection, in which a statistician would take a sample of the patient population and use that to extrapolate data for the entire system.
He says the advanced system has helped to cut costs by identifying specific areas of waste as well as dramatically improving the health system's quality outcomes by engaging physicians in the work. Because physician leadership and involvement are critical to help hospitals reduce unnecessary costs by aligning objectives and involving providers in cost-cutting initiatives, the implementation of a respected system is essential. "We formed a physician society more than 15 years ago, and a doctor becomes a member by agreeing to practice evidence-based medicine and have their results shared with their peers," he says. "We agreed to capitalize it and committed to getting a very robust system and putting the physicians in control."
5. Set high standards for EMR use. Many hospitals and health systems have implemented EMR with the hope of future cost-savings — a benefit that seems promising in theory but questionable in practice for many. Mr. Arbuckle says installing and implementing an EMR may not be enough to realize these cost-savings. "There's a difference between implementing EMR and having people use it to a high degree," he says. "I know a lot of name-plate hospitals that may have a nice, robust EMR, but when you ask, 'What's your percent of CPOE?', they say, 'Thirty or forty percent,'" he says. If your hospital is going to save money through EMR, the vast majority of your physicians and staff have to use it and be comfortable with it. Otherwise, you will continue to spend money on paper charts and staff to work with them — never achieving the intended savings.
To help their employees and physicians adapt to EMR prior to the first installation, MemorialCare hired an expert in change management to work with staff members as they moved to the new system. They also deployed a team of well-trained and enthusiastic IT professionals to visit every single physician on each MemorialCare medical staff and assess their computer readiness. This assessment meant really understanding where the physician was in terms of computer understanding. If the trainer asked the physician to move the mouse and the physician responded, "What's that?", they knew there was a lot of work to be done. Today, MemorialCare is consistently over 85 percent CPOE with less than 1 percent written orders, saving millions of dollars a year in paper and duplicate work.
Learn more about MemorialCare Health System.
Read more about hospital cost-cutting measures:
-8 Out-of-the-Box Ways Hospitals Can Cut Costs
-Providence Hospital Eliminates 35 Jobs as Part of Cost-Cutting Plan
-Boston's Children's Hospital Drastically Cuts Healthcare Costs