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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