Commonly Overlooked Areas of Savings for Hospitals (Part 1 of 2)

by webadmin on April 19, 2013

The Huron Consulting Group has released a report titled “Ten Overlooked Opportunities for Significant Performance Improvement and Cost Savings.” The report looks at the “untapped” areas that internal improvement teams should be examining in an effort to reduce costs. Huron believes these areas “can create a total improvement of 14-26 percent” if they are “implemented rigorously and systematically.”

Along with the 10 opportunities for reducing costs, the report gives the percentage of improvement opportunity for each area, a figure that is oriented around a $365-million, 350–bed hospital, along with the challenges of implementing changes in these areas. The report also gives the key self-assessment questions that each organization should be asking of themselves about these 10 facets of operation.

Over the next two postings, we’re going to break these 10 areas down. The report itself can be found here, and we recommend referring to it for the self-assessment questions, all of which could prove valuable for your organization.

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The first opportunity for improvement is with HR benefits, such as medical, prescription, dental, vision, and long-and-short-term disability. Huron estimates that hospitals can make a six to eight-percent or $2.2 to $3-million improvement in this area. The problem with implementing HR benefits savings involves the lack of “specialized expertise in new reform requirements, compliance, 340B, patient-centered medical homes, population-health management, and other capabilities to maximize investment in benefits.”

The second area listed involves purchased services that aren’t a part of your group-purchasing organization, such as equipment service and management contracts and printing and banking services, all of which could provide a five to 15-percent savings or $1 to $2 million. Huron fears that attention to streamlining these services falls between the cracks when large-scale implementations are the focus. Once again, the lack of specialists who can “maximize the benefit” also hinder improvements in this area.

Third, staffing to demand or “a flexible staffing approach” to all departments of the hospital can save $10 to $16-million or a five to eight-percent labor-costs improvement per department. However, Huron writes, “many providers do not have tools or infrastructure in place to closely manage staffing on a real-time basis. High level of discipline [is] required to create [the] full benefit.”

Fourth, front-end revenue cycles, such as access, point-of-service collections, insurance verification, and financial counseling, could offer a $7.5 to $15-million or two to four-percent savings improvement in net patient revenues. This area, however, involves other stakeholders, Huron writes, and decentralized processes. It may be difficult to get everyone on board in a relatively small area of savings.

Fifth, maximizing the 340B Pharmacy Benefit Program discount may be difficult, but it could bring a 10 to 30-percent savings or $1 to $2-million. This area demands “careful management of compliance requirements,” the kind of real-time monitoring, experience, and expertise many organizations do not readily possess.

In our next post, we’ll look at the final five overlooked areas. What do you think of the first five? Is there a potential for savings as Huron posits or are these areas too complex to address? Perhaps your organization has achieved savings in one or more of the above areas. Which processes and initiatives contributed to your success?

-by Pete Fernbaugh

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