image from forbes.com
Each year, America’s hospitals waste hundreds of billions of dollars in their health care systems. In fact, according to an Institute of Medicine
report released in 2012, more than $750 billion was spent on unnecessary health services in 2009 alone.
To say that health care system and hospital operating margins are different today than they were ten years ago may be an understatement. Numerous factors have created a situation where many hospitals, especially smaller hospitals, are simply content with a break–even balance sheet. While 2015 may appear to be a bleak year for hospitals to cut their costs and keep their finances positive, there are things they can do to go beyond simply maintaining solvency.
Americans spend one out of every five dollars on health care. This is according to the CMS, Center for Medicare and Medicaid Services. In 2014, for instance, the cost of health care amounted to $3 trillion. Of that, about $765 billion was wasted due to errors, inefficiency, over-utilization, redundancy, and unnecessary differences in clinical practices.
In addition to this, hospitals also have to deal with the issue of payments that are not rising as fast as hospital expenses. In fact, most payments are actually declining. Consequently, 30% of hospitals currently have a negative operating margin.
Due to these worrying developments, it is no wonder that cost reduction ranks as the top overall strategic concern for hospital management. However, reducing cost is a difficult undertaking in any industry. In the health care industry, the difficulty is further compounded by the need to maintain and/or improve patient satisfaction, quality of care, and health outcomes.
Given the complexity and difficulty of saving money and reducing costs, it is also not surprising that hospital leadership often hire expensive consultants for feasible solutions, only to end up with the same one size fits all answers that are often unsustainable and unattainable. According to a 2014 survey conducted by Strata Decision Technology, 88% of hospitals surveyed claimed to have cost-saving measures in place. Of these, only 17% were able to meet their targets, while 70% achieved some cost savings, but were unable to meet their financial targets.
Most hospitals cited that their cost reduction measures often fell short due to the fact that they were too data intensive and time-consuming. Furthermore, while some health care organizations were able to identify potential savings opportunities, they often found that the actual cost savings were smaller than they hoped for because strategies could not be put into practice due to a lack of accountability for results. They also claimed that accurately tracking cost savings was too difficult and time consuming.
3 Ways for Hospitals to Cut Costs
1. Implementing an e-signature to replace pen and paper forms
As the traditional pen and paper-based world gives way to e-business, forms and documents often require signatures from people, such as customers, external partners, and employees. To address this issue, many organizations are turning to innovative solutions that allow them to get rid of paper altogether. While many organizations are already using digital systems to manage their documents, the final step of having those documents signed often breaks the otherwise fully digitized workflow by requiring users to print out the documents and sign with a pen. This prevents organizations from enjoying the full benefits of automation and adds unnecessary expenses and delays to what can be a completely automated process.
Electronic signatures, or paperless signatures, are legally valid to execute documents that need written signatures. Unfortunately, many hospitals continue to make errors when implementing paperless signature protocols. Such basic errors can result in material liability if a dispute arises. Therefore, when implementing and modifying electronic signature protocols, healthcare providers should follow eight rules:
• Clearly display the relevant terms to the party issuing the signature
• Clearly demonstrate patient consent
• Keep a record of the time, date, document version, and user identification
• Provide an option to receive an emailed or printed copy of the terms
• Avoid unilateral updates to agreements
• Verify that the person signing is the person identified on the electronic document
• Observe the in writing requirements
• Consult with legal counsel to ensure that the paperless signature protocols comply with applicable law.
What health care providers need to solve the problem of escalating costs are easy-to-use tools for electronically signing and authenticating forms and documents. These tools must be able to transform the hospital’s paper–based processes to digital ones by doing the following:
• Reducing or eliminating some paper-related costs, such as scanning, printing, and couriering
• Allowing everyone outside and inside the hospital to sign anytime from any device
• Ensuring prompt turnaround by speeding up all signature–related processes
• Offering a low cost of ownership and a rapid return on investment
• Providing the same level of trust and security that exists with traditional documents
• Guaranteeing non–repudiation by providing solid protection against forgery
Some of the top electronic signature providers include Signority.com, silanis.com, CoSign, and formfast.com.
2. Focusing on the continuum of care
The full-scale shift away from volume–based and fee-for-service measures towards quality-based measures and accountable care organizations is one of the biggest changes taking place in health care. Therefore, hospitals need to focus on the continuum of care if they want to stay profitable. Essentially, hospitals need to look at the admission process, the quality of service provided to enable the most efficient process for a quick discharge, and follow–ups with that discharge.
Health care providers can take it a step further by cultivating mutually beneficial and stronger relationships with physicians. In addition to value–based and quality principles, health care improvement is also centered on managing chronic illnesses, preventive care, and keeping people healthy before a trip to the hospital is required. To accomplish all this while staying profitable, hospitals must actively engage with primary care providers and focus on physician alignment. In a sense, primary care providers are the air traffic controllers for patients.
3. Come up with ways to reduce re-admissions
When a hospital realigns its goals towards the continuum of care, it can then focus on one of the most important cost reduction measures: reducing re-admissions. Hospital re-admissions negatively impact a hospital’s bottom line in a number of ways, including:
• Scrutiny from patients and private health insurers
• High costs associated with re-admissions
Fortunately, hospitals can successfully reduce their re-admissions by providing resources to patients to ensure that they are following the right post-discharge steps and ensuring patients attend post-discharge office visits routinely. Most of the responsibilities, however, fall on a hospital’s preventive care staff and case management, who will need proper training to ensure readmission rates go down.
In addition to the cost cutting measures outlined above, hospitals can also save money and reduce costs by controlling labor costs, reducing supply costs by working with physicians and vendors, improving deficiencies in the OR and ER, ensuring proper maintenance of medical equipment, and outsourcing some services. In addition, going green can also have a positive impact on a hospital’s bottom line.
As the federal government continues to cut Medicare reimbursements to hospitals, reduce funding from the NIH, and reduce Medicare reimbursement s to hospitals with unusually high readmission rates, many hospitals are looking for ways to strengthen their bottom lines. When it comes to cutting costs and saving money, hospital executives should examine overlooked areas where costs can be trimmed and find smarter ways to pay for operational costs.