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The Cost Containment Struggle

HealthLeaders magazine, November 13, 2011

KRONENBERG: The commercial insurers believe that will reduce their cost per encounter. But in terms of the whole system, does it really save money? And do people want less access to the emergency room? That's what we're going to have to come to grips with. It's not that emergency rooms are abusing anything. It's that sometimes patients do go there when they really don't need to.

HART: I practiced family practice for five years, and I would say two-thirds of the patients I saw probably didn't need to be seen in an office. With today's technology many of these visits could be avoided. That's just the mentality of how we respond to illnesses as a country and have designed a reimbursement system to reward this behavior.

WAITER: There's not a client that I have who doesn't raise concerns about things they would like to see improved in the ED. There are so many downstream issues that all bubble back up in the ED that it's not just working on the ED work flow, but hospitalwide patient flow, patient throughput, and care management. The key is to make it a data-driven process. It's critical to be able to develop service-level agreements with ancillary departments, such as lab or radiology. That's not always easy, but even having the dialogue and opening those communications between departments enables them to view each other as customers, which is a good start.

HEALTHLEADERS: What are the opportunities and traps you find in trying to get a handle on supplies, and more specifically, about physician preference items and standardization?

LIMBOCKER: We have agreements with physicians, including cardiology, orthopedics, and neurosurgery. In the last couple of years, we're doing a much better job with getting clinicians, administrators, purchasing people—even vendors—at the table trying to figure out how we can get results. I sat on the cardiology value analysis team. It's amazing going through all the different ideas at the physician level and all the different products they had in the cardiology realm. Many times the most expensive product was chosen. It appeared to me there was a lot of opportunity not only for price reduction, but also product selection. On the efficiency side, we had opportunities with start times and unused block time in the ORs. We put together a physician leadership committee—we call it the OR Steering Committee—because there was a lot of discussion and frustration between the physicians who didn't have preferred block times.

HART: We're in exactly the same spot. I'm not down at that level like I used to be, but I'm involved in it. Overall I've found the physicians understand that there are challenges with costs. That conversation is much easier than four or five years ago. They're willing to step up, and we're looking for ways to develop incentives in our comanagement agreements. Now it's just a matter of getting the physicians educated, because once you educate them, we've found them to be very helpful.

KRONENBERG: Plus, you have to have people on-site doing continuing training, education, and reminders. We've done that with two senior quality officers in medicine and surgery to work with the physician groups on these efficiency and standardization exercises. It's been a big help to getting buy-in because they're trusted people. The doctors listen to me a little bit, but I think they really listen to them. We tried standardization around price rather than around a product. We said, "Okay, you want those screws? Get them for this price." And they were very effective at going to the vendors and doing that with the threat of standardization surrounding vendors.

WAITER: That's a great example. That's a technique that can be used for any product, and it's basically setting up capitation pricing. In other words, our price is X and if you, the vendor, want to do business with our organization—we're not going to do any standardization and we're glad to have to you—but this is our price. A lot of it depends on physician leadership and how much they're willing to stay with the hospital's strategy, and that's the real key. Surgery initiatives can be very complex, but they're usually worth the effort because the OR is the engine that drives an organization's case mix and revenue, and it's also home to some very expensive labor resources and the very costly physician preference items. So the job you do in the OR is crucial and it can have both a significant impact on improving your revenue and a significant impact on reducing costs.

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