Analysis also identifies main drivers of readmissions, and potential savings per case
The first of its kind dashboard analyzed hospitals with opportunities for savings improvement. Of those, Premier calculated the average amount of savings that could be generated each year by a typical 200- to 300-bed community hospital. Through this process, the dashboard identified the following five areas with the biggest opportunity for average annual savings per hospital:
1. Unnecessary labor expense, such as inefficient processes that take too long or require too many employees to complete: $6.18 million per hospital per year, and up to 5.1 percent of a hospital’s total labor budget;
2. Excess readmissions: $3.83 million per hospital, per year, and up to 9.6 percent of a hospital’s budget;
3. Inappropriate length of stay: $2.63 million per hospital per year, and up to 5.4 percent of the hospital’s budget;
4. Skill mix dollar variance that occurs when higher paid employees do work that less expensive or less experienced staff could do equally well: $2.38 million per hospital per year, and up to 6.2 percent of a hospital’s total labor budget; and
5. Unnecessary lab testing such as blood, urine or hemoglobin tests: $2.23 million per hospital per year, and up to 1.6 percent of a hospital’s total lab budget.
Guided by these findings, Premier conducted a follow-up analysis to determine certain drivers of spend. Focused first on readmissions, an analysis of 5.8 million discharges found that the following diagnoses have the highest average percent of readmitted cases and additional costs per case (July 2010- June 2011):
- Circulatory system (heart attack/heart failure) – 17 percent readmission rate, $15,517 additional cost per case;
- Respiratory system (pneumonia, asthma, chronic bronchitis) – 12 percent readmission rate, $12,146 additional cost per case;
- Musculoskeletal system (major joint replacement, spinal fusion) – 9 percent readmission rate, $17,730 additional cost per case.
The analyses are part of an article titled “The cost of healthcare: Does more care = better care?” which appears in the spring 2012 edition of Premier’s Economic Outlook. The Economic Outlook highlights emerging economic and industry trends impacting Premier members and the industry overall.
“There’s a saying that you can only change what you can measure,” said Susan DeVore, Premier president and CEO. “We all know that there is opportunity for big savings in healthcare, but we have lacked specific measures to effectively go after these opportunities. We created this dashboard and the analysis to give hospital leaders a road map to leverage in ongoing work to enhance efficiencies and wring as much savings as possible out of the system.”
Premier will release more detail on other efficiency opportunities in the coming months.
The Premier efficiency dashboard was developed by a cross-functional team of internal and external subject matter experts. This team sought to pinpoint the common opportunities for savings using existing literature, Premier data assets and lessons learned from alliance cost reduction efforts. Measures were then assessed by participants in the QUEST®: High Performing Hospitals collaborative to ensure they were useful and able to achieve quantifiable cost reductions.
During assessment, Premier found that QUEST hospitals had opportunities for further savings in all 15 measures, even though these hospitals already have reduced costs by more than $4.5 billion in three years and have lower per-patient costs than others. This indicates that even the highest performing hospitals have opportunities to pinpoint and eliminate inefficiencies, unnecessary tests and errors that can contribute to higher spending.
According to Premier Chief Operating Officer Mike Alkire, “Our research demonstrates that even the best performing hospitals in the nation have an opportunity to improve efficiency. Considering the magnitude of improvements possible with a group of hospitals already performing at a high level, the national implications of Premier’s efficiency dashboard is likely to be far more significant.”
The efficiency dashboard is customized by hospital to give the most information possible. Using hospital data pulled from Premier’s comparative clinical, operations and purchasing database, a benchmark is set based on top quartile performance. The hospitals receive quarterly reports showing areas where their organization falls below the benchmark, and the magnitude of potential savings. Measures are tracked over time to show where progress has been made quarter to quarter. The measures are being continually assessed and expanded to help zero in on further opportunities for savings.
In addition to the top five categories of average annual savings, the dashboard measures 10 additional areas. For these categories, the average annual savings, per hospital are:
1. Unnecessary diagnostic imaging: $1.52 million per hospital, per year;
2. Unnecessary respiratory therapies $1.50 million per hospital, per year;
3. Blood utilization: $1.06 million per hospital, per year;
4. Unnecessary overtime pay: $708,922 per hospital, per year;
5. Unnecessary patient safety events, such as infections, medication errors: $564,126 per hospital, per year;
6. Overuse of anti-infectives: $419,008 per hospital, per year;
7. Overuse of intensive care services: $595,222 per hospital, per year;
8. Excessive length of stay in the intensive care unit: $339,083 per hospital, per year;
9. Anesthetic and sedation drug expense per operating room case: $68,089 per hospital, per year; and
10. Non-automated purchase orders: $51,700 per hospital, per year.
About the Premier healthcare alliance, Malcolm Baldrige National Quality Award recipient
Premier is a performance improvement alliance of more than 2,500 U.S. hospitals and 81,000-plus other healthcare sites using the power of collaboration to lead the transformation to high quality, cost-effective care. Owned by hospitals, health systems and other providers, Premier maintains the nation's most comprehensive repository of clinical, financial and outcomes information and operates a leading healthcare purchasing network. A world leader in helping deliver measurable improvements in care, Premier has worked with the Centers for Medicare & Medicaid Services and the United Kingdom's National Health Service North West to improve hospital performance. Headquartered in Charlotte, N.C., Premier also has an office in Washington. https://premierinc.com. Stay connected with Premier on Facebook, Twitter and YouTube.
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