As the economy continues to limp along, the old adage "doing more with less" may never be more applicable than it is now. And no industry may be living it more than health care.
Deficit-weary politicians at the state and federal levels have targeted significant cuts to hospital reimbursements. Businesses trying to sustain modest growth are no longer willing to accept the principle of cost shifting that historically has enabled health systems to plug financial holes left by underpaying government programs. And consumers are becoming ever more vigilant in watching their out-of-pocket expenditures.
As if that weren't enough, there is a whole host of new investments health systems must make to adjust to a value-based delivery model, including, but certainly not limited to, expensive information technology systems.
"Of all the transformations reshaping American health care, none is more profound than the shift toward value," the Healthcare Financial Management Association notes in the preamble to its Value Project. "Economic pressures and the growing numbers of uninsured are cutting hospital margins. Meanwhile, quality and patient satisfaction are being factored into Medicare reimbursement, while private payers are pushing for performance and risk-based payment structures, capitated contracts, and pay-for-performance incentives."
Over the past year, H&HN's Fiscal Fitness series, made possible by the support of VHA, looked closely at how hospitals and health systems are transforming operations to rein in expenses without sacrificing quality and safety. The multimedia series delved into everything from the supply chain and energy utilization to clinician efficiency and the workforce. It also examined ways hospitals are adopting Lean, Six Sigma and other programs to create — and sustain — a culture of performance improvement.
"Cost reductions are the end result to improvements in quality and patient flow, and reducing waste from the process. Lean is not about cost-cutting," Mark Graban, president of Constancy, a Keller, Texas, consultancy, said in one early Fiscal Fitness blog. "To properly engage people in performance improvement, cost-reduction can't be the primary driver. People working in hospitals are more prone to talking about improving quality and improving care. That's what gets people excited."
Throughout the series, we tried to emphasize that point. What follows are a few examples we cited along the way of how hospitals are getting a handle on costs while keeping on eye on performance improvement. For the complete catologue of articles, blogs, podcasts and videocasts, go to www.hhnmag.com/fiscalfitness.
In 2013, Fiscal Fitness will shift focus to "Demonstrating High-Value Health Care." Beginning in January with a special fold-out section in the magazine and a podcast in H&HN Daily, the print and online series will take a solutions-oriented approach to perhaps the knottiest problems confronting hospitals today.
Fiscal fitness case studies
Energy | Gundersen Lutheran Health System, La Crosse, Wis.
With the costs of health care and energy rising, Gundersen Lutheran launched an initiative to become energy-neutral through renewable-energy and energy-efficiency programs by 2014. Executives at the organization believe there's a strong link between sustainability and fiscal fitness. "It's the right thing to do for the environment and it's the right thing to do from a financial perspective," says Jeff Rich, executive director of Envision, Gundersen Lutheran's environmental program. In 2007, the organization's energy costs increased by $350,000. Through a combination of energy-efficiency programs, including retrocommissioning heating and cooling systems and reprogramming air handling systems, the organization has realized a 25 percent improvement in energy efficiency at a savings of more than $1 million a year.
Workforce | Valley Health, Winchester, Va.
Understanding the "new normal" in total rewards, Valley Health revamped its program to be fair, competitive and sustainable. Elizabeth Savage-Tracy, vice president of human resources, says pending changes in reimbursement compelled the organization to take a look at its cost structure from a total rewards standpoint. The organization focused on benefits, premium pay and absenteeism. "It's the right thing to do," says Savage-Tracy. "There was a real need to be proactive."
By taking this proactive approach, the organization was able to transition to the new system over time. For example, employee salaries will not change for the first two years. Prior to and during that time, employees will receive extensive communication and education about the changes, which include a benefits revamp and the separation of premium pay from base pay, among other things. Savage-Tracy stresses that the savings will be long-term since changes will be phased in. "We are bending the cost curve," she says. "We don't have to make knee-jerk reactions."
Clinical efficiency | Park Nicollet Methodist Hospital, St. Louis Park, Minn.
Shorter lengths of stay and high quality scores helped the 426-bed hospital earn the designation of Highest Value Hospital. Administrators and clinical leaders told Jennifer Edwards, Commonwealth Fund, and Sharon Silow-Carroll, Health Management Associates, that several strategies are key to its success:
- Integration with Park Nicollet Health Services' outpatient clinics and post-hospitalization treatment programs
helps to prevent hospitalizations, keep hospitalizations shorter and lessen the risk of re-hospitalization. For example,
a shared electronic health record system makes patient information available throughout the delivery system.
- The wide distribution of performance data at all levels of the organization enables staff to benchmark their clinical
and financial performances and motivates them to improve.
- Methodist works to delegate staff to meet demand, optimize patient flow and ensure effectiveness, thus improving quality and
- Looking ahead to a health care system in which performance is measured and rewarded, Methodist has taken steps
to ensure that it meets all national quality and safety standards while controlling costs.
Information technology | Cooper Green Mercy Hospital, Birmingham, Ala.
While many hospitals are torn between daunting balance sheets and long information technology to-do lists, few are fighting those dueling pressures as acutely as Cooper Green Mercy Hospital in Birmingham, Ala. The safety-net hospital, with an emergency department that's Birmingham's busiest with 36,000 visits a year, launched a new electronic health record May 1.
All told, the system has 16 ongoing IT projects, including the implementation of physician archiving and communication systems, computerized provider order entry, a new revenue cycle system and a new data center.
Cooper Green is operated publicly via indigent care funds provided by Jefferson County, Ala. The county declared bankruptcy in November 2011, and in April, the hospital announced $6.7 million in across-the-board cuts, including 89 layoffs. "Getting capital funds is next to impossible," says Srikanth Karra, director of information services at Cooper Green. Instead, the hospital is tapping into its monthly operational funds to pay for the improvements.
Cooper Green also is taking an extremely cost-conscious approach to its EHR rollout. The system uses open source software originally created by the Veterans Administration, saving the hospital money on software rights. Karra expects to implement the EHR for roughly $2.3 million to $2.7 million. "All we had to pay for were implementation services," he says. The hospital also worked closely with county officials to explain the EHR's expected return on investment from meaningful use funding. Hospital leaders also assured vendors that the project was going forward regardless of the county's financial situation.