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7 Ways Hospitals Can Trim Costs

Lillee Gelinas, MSN, RN, FAAN, for HealthLeaders Media, April 12, 2011

Hospitals are under intense pressure to reduce their cost of operations as they prepare for a healthcare environment that will soon require them to provide higher quality care at lower costs. Easier said than done since half of the nation’s hospitals are already operating in the red.

To reach cost reduction targets, hospitals are focusing on improving efficiency. This is a tricky task, because efficiency can be evaluated differently depending on who’s defining it. The definition will likely differ across the organization, or the community, or payers. We suffer somewhat from that fact that we have no definition of “true” efficiency. The Agency for Healthcare Research and Quality states it well: “There is insufficient evidence to say with certainty what and how many healthcare service inputs will yield the greatest efficiency and with what risks and benefits. For example, a variety of imaging approaches can be used to make a diagnosis, each with varying risks, benefits, and acceptability to patient and provider.”

It’s important that we ensure resources are dedicated to improving safety and quality and are not spent wastefully. Most efficiency initiatives focus on two resource areas: labor-related subjects such as “productivity” and supply chain issues such as “inventory turns.” In some instances, efforts to improve efficiency span both areas.

When addressing labor efficiency, the knee-jerk assumption is that this approach should first involve a staffing evaluation. Not true. Medical literature fully supports the benefits of appropriate nursing care and patients suffer when nursing care is diminished. At VHA, we’ve convened several educational forums over the past few years on “the business case for nursing” and we’ve learned that one key to efficient healthcare is using nursing staff effectively in adequately supported care environments. Hospitals that can identify and eliminate inefficiencies in nursing care create better places to work and improve experiences for patients. Addressing “stuff” before “staff,” meaning a focus on supply chain efficiency first, has been used successfully as an approach to “waste management.”

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4 comments on "7 Ways Hospitals Can Trim Costs"


stefani (5/20/2011 at 10:21 AM)
Slash and burn! Spoken like a true Fellow! First thought out of the gate is to reduce staff even tho the literature has shown that reducing staff compromises care. No matter how you slice it. Sure the correct mix is important, but not as important as instilling a culture of accountability and holding ALL providers accountable for outcomes. The days of medical complacency are over....untill execs are willing to tackle the 800 lb gorilla in the room, hospital culture will remire mired in the 1950s

Ebrahim Meisha (4/16/2011 at 10:11 AM)
Thank you

Lisa Sams MSN, RNC (4/15/2011 at 4:27 PM)
As a CNS who walked in the trenches with staff I commend the recommendations in this article...#5 is particularly valuable. If more folks in hospital director and executive roles shadowed staff the discussion would focus on the bigger picture, not one aspect of operations. How clinicians function is often the direct result of other services that are not designed to focus on patient care. Taking an integrated systems perspective is essential in order to draft an effective action plan that meshes with strategic vision. I've seen RNs waste precious minutes running down supplies or sending specimens placing patient needs second to that of obtaining the necessary resources. A bit like asking the airline pilot to locate the ground unit rather than do pre flight for safety.