California hospitals could save $10B a year if run more efficently

California hospitals could save as much as $10 billion a year if they were made more efficient, according to a report by a prominent actuarial firm in the state.

"Our firm's consulting projects have demonstrated that approximately two-thirds of what can be saved in today's healthcare system directly relates to reductions in hospital inpatient costs," said the report, issued by Axene Health Partners.

Axene focused on the performance of 275 hospitals throughout California and used discharge data that hospitals report to state regulators and compared it against its own proprietary database depicting an efficient care model. It concluded that hospitals coded its patient visits with about 28 percent more complications or severe conditions that what is reported nationally.

"We are spending more than we should, and there is still tremendous opportunity to reduce costs," David Axene, the report's author, told the Los Angeles Times.

Hospital pricing for services is often a mystery, but gaps between a hospital's actual costs and what it charges patients have been widening in recent years, according to a study released last year by the Jayne Koskinas Ted Giovanis Foundation for Health and Policy, leading to a rise in overall healthcare costs. Consolidation among hospitals and other providers have also contributed to rising costs.

The Axene report said that improved efficiencies could yield $3.7 billion a year among commercial patients, $3.6 billion a year among Medicaid patients and $2.7 billion a year among Medicare patients. Larger hospitals and hospitals in the state's two largest metropolitan areas--Los Angeles County and the Bay Area--are among the least efficient, according to the report. 

To learn more:
- read the Axene report (.pdf)
- check out the Los Angeles Times article

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