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Cost Reduction in Healthcare: Your employees can facilitate the solution

The basic core philosophy of healthcare reform is to reduce costs and improve quality. The emergence of Accountable Care Organizations (ACOs) and Bundled Payment regulations are two relevant examples of the external pressures healthcare organizations are navigating.

Hospitals are under pressure to produce a margin, and a major element in the calculation of margin is cost. While continuing to tweak your revenue cycle and working on ways to increase cash or accelerate cash flow can be a good place to start, you should also consider looking at the expense side of the coin.

Cost reduction often lives at the front line of your organization, where your employees and patients are engaging each day. And if addressed ahead of time, organizations can avoid the need for urgent or drastic action.

A great way to efficiently address cost reduction is to include your internal stakeholders in the process. Look inward, and ask your directors, managers and front-line employees for help. When doing so, consider including communication such as:

  1. Stating the mission and/or values and/or vision of the organization.
  2. Relating the concept of stewardship to what you have stated in number one.
  3. Asking for each directors’ /managers’ thoughts and ideas on how the organization might:
    1. reduce duplication of work
    2. improve scheduling issues
    3. reduce rework
    4. reduce patient wait times
    5. reduce inventory excess
    6. improve process flow issues that might help reduce costs for the organization

This approach requires solid sponsorship from the leaders of the organization and the call for a “no-penalty” doctrine – where no individuals can be penalized for what ideas they share.

A Winning Cost-Reduction Plan in Action

The leadership of a 75-bed hospital knew they needed to reduce costs. They hoped to find a way to meet their goals without affecting FTEs. Leadership enlisted the help of Blue & Co. to guide the process. At a “town hall” meeting, leadership described the landscape, the challenge, and the approach. They were clear that there was a dollar amount they needed to reach and wanted to allow employees to contribute to meet the goal and maintain or improve patient care. Leadership asked for open and honest information and recommendations of how they could meet their goal with the spirit of “no penalty.”

The nursing staff described a recurring issue in which the hospitalist would write discharge orders for patients in the morning, but the patients often were not discharged until after the next shift. This state had a strict nurse-to-patient ratio, and these to-be-discharged patients often caused the need for an additional contract nurse. Nursing, discharge planners, and other relevant parties came together to redesign a process for more timely discharge.

The contract nursing costs were reduced by $225,000 per year.

A Win for Everyone Involved

In the example above, the hospital won by engaging its employees to contribute to cost reduction and by ultimately reducing costs without affecting FTEs, the employees won by being included and contributing to the mission of the organization, and the patients won by experiencing more timely discharge.

Blue & Co. has experienced professionals who can guide you through this process. Please contact John Britt if you would like more information about implementing a winning cost-reduction program at your organization.

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