Efficient Cost-Cutting Practices in Hospitals

Currently, materials management in healthcare is in a transition stage due to the Affordable Care Act, or ACA. This legislature was enacted in 2012 to bring patient healthcare costs down and to offer opportunities for hospitals to collaborate to cut costs. However, leaders in the healthcare materials management space have concluded that additional action needs to be taken to effectively streamline operations and processes in hospitals. Hospital margins have decreased in recent years and are expected to continue declining in the near future. To combat this, healthcare providers are incorporating new practices while reorganizing operations to focus on cutting costs.

One of the most critical operational policies being adopted is the standardization of hospital data, which leads to improved interoperability and transparency in healthcare systems nationwide. As hospital facilities and systems continue to merge, it is important that both healthcare data and administrative systems are standardized, so that hospitals can easily adapt as part of a new health system. Housing data in the same accessible platform allows for an easy merge of data from two or more facilities joining the same hospital system. Through data standardization, hospitals can cut costs of merging with hospitals or hospital systems while improving the efficiency of their care and their overall organization.

One of the most effective ways to standardize data is to move data to the cloud. Data standardization through the cloud improves interoperability between hospital systems because it allows for data to be collected properly when patients move between hospitals. Even if a hospital is diligently collecting data, it can be lost when moving between hospitals if it is not securely stored in the cloud. Also, data in the cloud is easily organized and enhances transparency by providing comprehensive, visible data; hospital executives can easily and clearly understand what is happening in different departments within a hospital or in different hospitals within a hospital system.

Another benefit of housing all relevant data in the cloud is that this allows for secure and easy access by authorized hospital parties. In addition to streamlining the efficiency of individual hospitals and securing information, data standardization leads to a more efficient nationwide healthcare system. This allows for data to be easily combined and compared to produce insight into trending practices and areas for improvement across hospitals in the United States.

As we have previously discussed in our blog, many hospitals have begun forming value analysis committees, designed to collaborate across departments to realize savings in the purchasing of new medical devices and products. By setting up a product review board that involves many departments, hospitals can ensure that they are both improving their quality of care and reducing their operational expenses. These groups typically meet once a month and have proved to be successful in many hospitals in improving the quality of products while reducing the bottom line cost. However, forming a value analysis committee is only the first step. To augment the value analysis process, hospitals should be tracking the products that pass through the committee and are implemented in the hospital. By incorporating technologies such as RFID tags and barcodes into products, value analysis teams can get deeper insight into the successes and failures of these device approval decisions. They can better understand when and how the products they have approved are being used and then work to measure the direct impact those products have on patient outcome. Tracking medical products is absolutely crucial because this gives value analysis committees the power to identify any product that turns out to be detrimental to their facility, costing more than expected or failing to impact patient outcome to the desired degree. In addition, tracking products allows executive management to understand where a product is being used and then to construct the appropriate steps to remove it from the supply chain and adjust utilization accordingly. However, it is very important to recognize that integrating value analysis committees and device tracking into a hospital is not enough to ensure efficient care — physicians also must be engaged in the product review process.

A 2014 study published in Health Affairs illuminated an alarming problem in healthcare: doctors do not know the price of the devices they use with their patients every day. In fact, 36% of physicians and 75% of residents assessed their awareness of medical device prices as “poor” or “below average.” What is also troubling is that 80% of this same group considered the costs of medical devices to be “moderately”, “very”, or “extremely” important in device selection. This disparity can be attributed to the fact that physicians are not given enough of a say in the product review process. When considering that physicians are the people delivering care in the hospital, it seems obvious they should be involved in the supply side of the products they rely on. To combat the lack of physician involvement in the product review process, hospitals have to tactically align each doctor within the appropriate value analysis members evaluating the products and the services they offer to patients. As previously mentioned, physicians are very closely related to patient outcomes and can offer direct insight into how specific medical products correlate to quality of care. Accordingly, physicians should be involved in the product review process to provide valuable recommendations for the hospital supply chain.

By incorporating efficient practices such as standardizing data, tracking medical products used, and involving physicians in value analysis committees, hospitals can realize the cost reductions they have been pressured to achieve. As hospital operating margins have declined by approximately 30% in the last 4 years, fulfilling the prediction of Health Industry Distributor’s Association (HIDA) in their 2013 report, hospitals are facing an increased incentive to take immediate action to cut costs in their facility. The aforementioned practices provide initial strategies hospitals can employ to begin reducing expenses and enhancing collaboration across hospital systems. As can be seen through the successful expense reduction achieved with GPOs and value analysis, collaboration is very important in achieving cost reduction. Beyond that, improving national healthcare collaboration could very significantly improve the quality of care across our country and move the United States closer to the many goals that have been set for our healthcare system.

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Goodbaum, Beth. “Streamlining the Hospital Supply Chain: Just What The Doctor Ordered.” Inbound Logistics. Inbound Logistics, Jan 2015. Web. September 30, 2015.