'Overlooked' areas hold key to hospital cost savings

Hospitals and healthcare systems can cut their costs by up to 26 percent overall by improving performance in 10 "overlooked" areas, a consulting group says.

Savings opportunities in the key areas range from 5 percent to 40 percent, according to the report by the healthcare segment of Chicago-based Huron Consulting Group. The 10 target areas are based on an analysis of improvement initiatives identifying where operations can be streamlined significantly, even at high-performing organizations, the group noted.

Among top money-savers:

  • Maximize the 340B pharmacy benefit program to achieve a 10 percent - 30 percent improvement in drug discount savings. Strategies include developing a retail pharmacy strategy and network, and including employees in the benefit program.

  • Improve utilization of nonclinical supplies and experience a 5 percent - 20 percent improvement in linen costs. Strategies include comparing performance to industry benchmarks, examining weekly linen utilization and considering revised workflow.

  • Reprocess single-use clinical devices and improve costs by 15 percent - 40 percent. Strategies include evaluating reprocessing opportunities.

  • Implement blood management for a 10 percent - 20 percent improvement in costs. Strategies include examining blood-transfusion criteria, processes to manage overall blood and blood-product costs, and how costs have changed compared with volume.

Changes in four of the 10 areas were labeled as difficult to implement: the 340B pharmacy discount and blood management, as well as flexible staffing to meet demand and revising the front-end revenue cycle.

A 2011 survey found the 340B drug program saved participating hospitals an average of $5.2 million per year, cutting pharmaceutical purchase costs by an average of 27 percent.

The program is intended to provide low-cost drugs to uninsured patients, but Sen. Chuck Grassley (R-Iowa) has led the charge against hospitals accused of selling those drugs at hefty markups to insured patients. Earlier this month the American Hospital Association urged the Health Resources and Services Administration (HRSA) to delay by at least six months a new rule banning hospitals from purchasing drugs for outpatients through a group purchasing organization.

Hospitals are always on the lookout for ways to streamline operations and cut costs. In a report issued last year, the AHA promoted cost management, business restructuring and clinical transformation as the means to achieving strategic cost transformation. The report was written by the Kaufman Hall consulting firm in Skokie, Ill.

To learn more:
- download the Huron Consulting report (.pdf)