Improving Resource Management for Hospital Profitability
5 Ways That Your Hospital Could be Wasting Money
Balancing Innovation and Financial Stability:
The balance between a hospital or health system’s financial stability and its ability to provide quality care is paramount. With challenges like budget constraints and staff shortages, hospitals struggle to maintain their desired level of care, and some even face the risk of closure. To navigate these difficulties, CFOs and other hospital executives must make tough decisions on spending. However, hospitals can reduce costs without compromising care through improved resource management processes and technology.
Resource management is not just a buzzword; it's a critical factor that directly impacts a hospital's efficiency, quality of care, and financial well-being. Let’s explore the crucial yet often overlooked aspects of effective resource management within hospital systems. We'll uncover hidden areas of financial waste and highlight the substantial benefits of addressing these issues. By re-evaluating their resource management, hospitals consequentially improve their financial health and provide higher quality, more accessible care at a greater capacity.
#1: Incorrect Patient Statusing
Proper up-front patient statusing is key to any hospital’s observation management process. Having the correct patient status ensures better use of valuable and expensive inpatient clinical resources as they are not tied up in providing inpatient-level care to patients in observation status.
Observation management refers to the use of coordinated processes, roles, and tools to properly identify patients who should be in observation status and progress them to a safe, timely, and appropriate admission or discharge decision. While virtually all hospitals provide observation care, many have significant gaps in their observation management practices.
Hospitals that are able to optimize their observation management could see an annual impact of up to $4,000 per case revenue improvement for inpatient admission vs observation, and cost reduction of $500 per avoidable day. Not only can you overspend on resources for improperly statused patients, but you can also lose out on reimbursement after the fact through medical necessity denials by insurance companies.
If you suspect that your hospital is suffering from the results of incorrect patient statusing, we can help. We can implement effective protocols to better manage the standardization of statusing using your existing staff and resources.
#2: Improper Utilization of Staff
A hospital's staff is one of its most valuable resources. Inefficient staff utilization affects the hospital's budget, strains the workforce, and impacts patient care. To optimize resource allocation, hospitals should focus on utilizing staff members at the top of their licenses and skill sets. This approach ensures that each healthcare team member is working to their full potential, delivering high-quality care while making the most of their expertise.
Operational solutions can play a vital role in improving staff utilization. Our company's innovative tools can help automate and eliminate unnecessary tasks, freeing up more time for healthcare professionals to focus on direct patient care. By investing in such solutions, hospitals can achieve a more productive and satisfied workforce, ultimately leading to better patient outcomes, improved patient satisfaction, and increased revenue generation.
The good news is that the healthcare industry is rapidly evolving and incorporating new solutions that can help. Another option your system might want to consider is virtual care. By implementing virtual care solutions, healthcare providers gain the ability to efficiently monitor and manage different aspects of care from remote locations. This approach alleviates the strain for on-site inpatient resources, allowing them to focus on critical tasks and expanding their capacity to provide care. Strategic solutions like virtual care enable hospitals to save significantly on operational costs while optimizing patient treatment capacity.
#3: Ignoring Diagnostic Stewardship
Diagnostic stewardship focuses on optimizing the use of diagnostic tests in a hospital setting. This practice ensures that the right tests are performed at the right time, with the right interpretation, to provide the right diagnosis and treatment. Ignoring diagnostic stewardship can lead to overspending on unnecessary tests and procedures and waste valuable diagnostic resources.
The financial impact of such overspending affects not only the hospital's budget but also the patient experience. Unnecessary inpatient testing can lengthen patient stays, increase bed occupancy, and overwhelm testing schedules. By implementing diagnostic stewardship practices, hospitals can strike a balance between responsible resource usage and maintaining high-quality care. This not only saves costs but also reduces the burden on service queues and improves the overall patient experience.
Operational solutions can encourage diagnostic stewardship by providing real-time data analytics and insights into diagnostic test utilization. By identifying patterns of overutilization, healthcare providers can implement strategies to optimize diagnostic testing, resulting in cost savings and improved patient care. Care Logistics’ operational solutions result in an average 13.9% increase in outpatient diagnostic volume, saving your system resources and ultimately, increasing profitability. Additionally, after the correct tests are determined, operational tools such as ours can assist with the prioritization and scheduling of the necessary components. This not only improves the experience of the individual patient, but also improves the efficiency of the entire area.
#4: Inefficient Patient Progression
Patient Progression is the advancement of the hospitalized patient through the required care events, actions and processes to achieve a health status where the patient can be safely and appropriately transitioned to a lower level of care. In the case of an inpatient, the transition typically occurs after multiple days and can result in a stepdown to a lower level of care within the hospital, a transfer to a skilled nursing or rehab facility, or discharge home.
Delays in patient progression can waste valuable resources. Extended hospital stays and misused resources can directly impact the bottom line. To address this, hospitals must identify and eliminate "white space" (waste) in patient progression, ensuring efficient care delivery. By optimizing patient progression, hospitals can reduce costs and improve patient flow, leading to better resource management and financial outcomes.
Mary Washington Healthcare is a Care Logistics partner that has been able to use our solutions to improve their operational efficiency. When we sat down with their CFO, Sean Barden, he cited inefficient patient progression as a previous source of wasted resources, remarking:
“[Pain points] I think really center around inefficient utilization of our services. This is one of the most expensive settings in the world in terms of resources… so anything that slows the flow of patients through the system or causes people to be in one particular environment longer than they need to be is a massive waste of resources.”
By implementing Care Logistics solutions, Mary Washington Healthcare has been able to eliminate systemic waste through the visibility, connectivity, and insights that our tools provide. Improving their efficiency has saved the organization resources, and consequentially improved their profitability.
Investing in operational solutions that track and resolve barriers to patient progression can enhance the entire system. By utilizing cutting-edge technology, hospitals can facilitate better communication between healthcare teams, streamline patient handoffs, and ensure timely interventions. These improvements can lead to shorter hospital stays, decreased resource wastage, and ultimately, increased profitability. Our patient progression-focused solutions result in an average reduction in acute length of stay by 0.52. Decreased LOS is great for the patient, but also saves your organization money that might have been wasted caring for patients who no longer need it.
#5: Not Getting the Most Out of Your EHR
Your organization heavily invested in your Electronic Health Record (EHR) technology, but how do you make the most out of this expensive investment? While your EHR may claim to be able to help you manage some of the previously discussed resources, the reality of doing so is often awkward and inefficient. EHR suites aren’t typically focused on operations optimization, so those features are often not as effective as purpose-built operational solutions.
One of the best ways to get the most out of your EHR is to find solutions that integrate with and complement it. Your EHR may provide a wealth of data, but by supplementing it with tools that can aggregate that data and provide actionable insights from it, you’ll be able to use that data much more effectively. Adding operational solutions to your existing EHR can facilitate better resource management through enhanced visibility, prescriptive insights, and increased connectivity, all resulting in a better financial return for your organization.
Leveraging Innovation for Financial Growth
The challenge of balancing innovation and cost reduction often weighs heavily on hospital leaders. However, embracing innovation doesn't have to be a drain on finances; instead, it can lead to financial growth. Successful examples of hospitals integrating innovation and cost-saving demonstrate that investing in innovation can yield substantial long-term benefits.
"In healthcare organizations, things tend to sort of revert back to somewhat of a chaotic state if we're not really on top of them.” Barden comments, “So with a tool like Care Logistics, we're really able to take a look at the whole enterprise… we’re able to make sure that things are running as efficiently and effectively as possible"
Mary Washington Healthcare CFO, Sean Barden, provided some of his thoughts on the importance of operational excellence:
Our company's operational solutions are designed to promote innovation in hospital operations while supporting cost-saving initiatives. From advanced data analytics that identify areas for improvement to a purpose-driven digital platform, CareEdge™, that optimizes resource allocation, our solutions empower hospitals to innovate and maximize their financial potential.
You might have heard the statistic that it takes about $1M to add a new hospital bed. Imagine the financial waste if these beds are poorly managed on a system-wide scale. Resource management allows you to make the most out of every bed and treat a higher volume of patients. Whether it’s through decreased LOS, staff optimization, or any of the other previously discussed means, your system needs to get more patients into those beds without the excessive cost of expansion. Care Logistics customers experience an average capacity increase equivalent to 31 additional beds, each of which could give more patients access to care and make your hospital more financially sound.
Effective Resource Management for Your Health System:
Efficient resource management is the backbone of a financially healthy hospital system. Hospitals can achieve better care outcomes with fewer resources by addressing the hidden ways that hospitals may be wasting money, such as incorrect patient statusing, improper staff utilization, lack of diagnostic stewardship, poor patient progression, and lack of innovation.
As Barden mentioned previously, operational efficiency and specifically resource management are of great importance, especially in the complex healthcare landscape. With stakes as high as these, health systems need solutions that address their system’s unique priorities. That’s why we aim for ongoing partnerships, not just one-time transactions. Our dedication to your success doesn’t end after implementations, unlike other vendor relationships.
Barden remarks on the significance of this, commenting:
“I really feel like they (Care Logistics) are committed to our success and that it isn't just a vendor relationship, it's a partnership.”
By investing in operational solutions upfront, hospitals can reduce operational waste, increase patient throughput, and position themselves for long-term financial growth. Prioritizing resource optimization not only sets the foundation for financial sustainability but also increases patient access to high-quality care. As you develop the financial plan for your hospital, remember the importance of matching resources to demand, working towards a future of better care and improved financial health for our health systems.