In a session at the Becker's Hospital Review Annual Meeting in Chicago on May 18, Richard Kunnes, MD, managing principal and CEO of The Sevenex Group, discussed the importance of resource optimization for guaranteeing new savings and revenues in hospital operations.
Dr. Kunnes began his presentation by describing resource optimization as resource optimization = ROI – 7 Solutions. He explained that this definition works as an acronym:
Resource: Includes all operating and resource expenses other than those related to and for full time wages.
Optimization: Refers to maximizing savings from the resource expenses. There are two important questions to address. First, what are you using that you don't have to use? Secondly, of those expenses, which can be converted to revenue?
Infrastructure wide: This element targets the idea that resources can be optimized in every area of the hospital, including the elevators, the parking lot, the operating rooms and the food court. There are opportunities for savings everywhere.
7 to 1 ROI: This highlights that with resource optimization a hospital’s return on investment can be 7:1. "In some cases, we have seen ROI's of 30 or 40:1," said Dr. Kunnes.
Solutions: Solutions refers to the evidence-based, "tried and true" solutions that hospitals have implemented. According to Dr. Kunnes, Sevenex Group employs 350 solutions, and there are thousands available.
Beyond expense control, the benefits of resource optimization include:
1. Achieves savings and revenues "faster, better, bigger, cheaper and simpler."
2. Affordable, practical, implementable and 100 percent scalable for any sized hospital. 3. Cuts cost without layoffs, unless that is preferred.
4. Increases net revenues with no new staff.
5. Attains and sustains high return on investment.
6. Guarantees the return on investment and always exceeds it.
Mr. Kunnes offered a poignant cartoon to demonstrate the benefits and purpose of resource optimization. The cartoon showed a physician telling a patient, "In layman's terms, the cost of your procedure is high because of the really cool titanium instruments I like to use. " Mr. Kunnes believes the cartoon touches upon a key problem that resource optimization tries to eradicate. Physicians prefer to choose certain devices and implants, but many times, the physician choice is a more expensive choice. "When you are operating on orthopedic patients who are 80 to 95 years old, they do not need a hip implant that costs $12,000 when a implant for $8,000 can be just as effective and offer similar functions, " said Mr. Kunnes.
To close, Mr. Kunnes covered characteristics of hospitals with the greatest opportunities to use resource optimization. Those hospitals would be ones that have a disproportionate amount of the following elements.
• More focus on revenue vs. margin per case;
• Less focus on direct cost per case per DRG per physician
• Less focus on contracted services;
• Higher rate of resource to FT wage expenses;
• Any procedures having a single resource item greater than 35 percent of the reimbursement;
• Less resource use than discount management;
• More operating margin problems.
Dr. Kunnes began his presentation by describing resource optimization as resource optimization = ROI – 7 Solutions. He explained that this definition works as an acronym:
Resource: Includes all operating and resource expenses other than those related to and for full time wages.
Optimization: Refers to maximizing savings from the resource expenses. There are two important questions to address. First, what are you using that you don't have to use? Secondly, of those expenses, which can be converted to revenue?
Infrastructure wide: This element targets the idea that resources can be optimized in every area of the hospital, including the elevators, the parking lot, the operating rooms and the food court. There are opportunities for savings everywhere.
7 to 1 ROI: This highlights that with resource optimization a hospital’s return on investment can be 7:1. "In some cases, we have seen ROI's of 30 or 40:1," said Dr. Kunnes.
Solutions: Solutions refers to the evidence-based, "tried and true" solutions that hospitals have implemented. According to Dr. Kunnes, Sevenex Group employs 350 solutions, and there are thousands available.
Why ROI optimization?
After covering the definition of resource optimization, Mr. Kunnes moved on to why optimizing resources guarantees improved savings and revenues for hospitals. "Resources are often a highly untapped area for expense control, " said Mr. Kunnes.Beyond expense control, the benefits of resource optimization include:
1. Achieves savings and revenues "faster, better, bigger, cheaper and simpler."
2. Affordable, practical, implementable and 100 percent scalable for any sized hospital. 3. Cuts cost without layoffs, unless that is preferred.
4. Increases net revenues with no new staff.
5. Attains and sustains high return on investment.
6. Guarantees the return on investment and always exceeds it.
Mr. Kunnes offered a poignant cartoon to demonstrate the benefits and purpose of resource optimization. The cartoon showed a physician telling a patient, "In layman's terms, the cost of your procedure is high because of the really cool titanium instruments I like to use. " Mr. Kunnes believes the cartoon touches upon a key problem that resource optimization tries to eradicate. Physicians prefer to choose certain devices and implants, but many times, the physician choice is a more expensive choice. "When you are operating on orthopedic patients who are 80 to 95 years old, they do not need a hip implant that costs $12,000 when a implant for $8,000 can be just as effective and offer similar functions, " said Mr. Kunnes.
To close, Mr. Kunnes covered characteristics of hospitals with the greatest opportunities to use resource optimization. Those hospitals would be ones that have a disproportionate amount of the following elements.
• More focus on revenue vs. margin per case;
• Less focus on direct cost per case per DRG per physician
• Less focus on contracted services;
• Higher rate of resource to FT wage expenses;
• Any procedures having a single resource item greater than 35 percent of the reimbursement;
• Less resource use than discount management;
• More operating margin problems.
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