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15 ways hospitals could save millions: GPO study

by Brendon Nafziger, DOTmed News Associate Editor | April 13, 2012
A group purchasing organization has released a study suggesting hospitals could shave millions of dollars off their operating budgets by developing strategies to curb readmissions and by better use of hospital staff.

Premier health alliance, a GPO, released the report Tuesday, less than a week after the Choosing Wisely campaign announced 45 common test and therapies patients and doctors should question in an effort to control overutilization and health care costs.

The report looked at high-performing hospitals participating in Premier's Quest system. And it found 15 areas where even these better-than-average hospitals could get rid of wasteful spending or efficiencies, from overuse of services to unneeded tests.

For instance, 200- to 300-bed community hospitals, the sort of facilities these results would apply to, could cut $1.5 million a year from their budget by getting rid of unnecessary diagnostic imaging scans, the GPO said.

But the biggest two areas of waste were around labor expenses and preventable patient readmissions, according to Susan DeVore, Premier's president and CEO.

For labor expenses, such as having workers spend too much time on a task or using more employees than necessary, "there were efficiency opportunities that average $6 million per hospital per year, about 5 percent of the labor budget," DeVore told reporters on a call Tuesday.

By improving skill mix dollar variance, where a higher paid employee does a job a lower paid employee could do, you could factor in another $2 million of savings a year, or 6 percent of the hospital's labor budget, she said.

Potentially preventable patient readmissions were the other big financial drain, she said. "Patients readmissions that were occurring within 30 days of discharge added an average of 15 percent to the total cost of care," she said. Overall, they found excess readmission could cost a hospital about $3.83 million per year.

Cutting costs is important, as some hospitals are dealing with more patients on public insurance, which provides a lower reimbursement for services, and many patients with insurance are saddled with larger co-pays.

For instance, the Banner Health system, a 23-hospital group, said it reached a "dubious milestone" last year. The hospital discovered it had as much Medicaid billing as commercial insurance billing at its Arizona hospitals, according to its chief financial officer Dennis Dahlen. And the hospital needed to come up with $150 million in savings in 12 months.

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