Few Cost Cutting Ideas for Hospitals

The basic equation of any business is revenue-costs equals profits. It is clear that hospitals which do everything else right but let their expenses spiral will not survive.

Aditya Sharma, an ex PE investor in healthcare, points out that unless hospitals provide service distinction, especially with the use of technology to create market share and price effectiveness, even the interest of the investors will be finite. “High Capital Expenditure is definitely one of the biggest hurdles for raising funds for a healthcare project and many investors look for an exit within seven years. It is important for hospitals to control their costs,” he explains.

Smart Hospitals see VALUE not just PRICE
Clearly, smart hospitals understand the key principles of saving money. Take for instance, Apollo Hospitals.
“Cost saving happens without compromising on quality, clinical outcomes and patient safety. This is the first principle of cost saving. Better quality and focus on patient safety itself is a major cost saving initiative both for the hospitals and for the patients. At Apollo, we understand that any unnecessary cost would escalate costs for the patient.At every step in patient care, be it a patient facing process or a back end process, we try our best to be sensitive to the patient’s requirements.

At the same time, we do not compromise on patient care and patient safety by adopting unsafe practices.We have inbuilt check mechanisms whereby all the costs are controlled and watched. As far as consumables are concerned, we have standard packages for most of the procedures which are designed based on the minimum requirements for that procedure. We train our staff to be multi-tasking so that in their idle time, they can focus more on other aspects of patient care. This also helps us to control operating costs.Simple processes like saving electricity, finding out ways to save water and preventing food wastage are some other examples of controlling operating costs,” says Dr K Hari Prasad, President, Hospitals Division, Apollo Hospitals.
TECHNOLOGY to help organize activities
The ideas that underlie savings are extremely practical. Hari Prasad points out that technology helps Apollo in revenue cycle management. “We have developed an in house EMR across the group that is in the implementation phase. Automation helps us to manage our costs and as well as helps us to stay on track.This includes medical billing of patients, collections, filings of insurance claims, reimbursements, refunds and claim rejections. A close watch on these processes helps us to improve our process compliance, outcomes and patient satisfaction. Additionally, having systems like ASK APOLLO, where appointments are booked online, consultations are done over video chat, patients managing their own medical records, financial estimation of treatment facilitates patient care,” he explains.
Conserve
Interestingly, Apollo has implemented a structured program called war on waste across all our hospitals. This program empowers all department heads to draw out different patient processes using patient information flow analysis. This allows the staff to identify value add and non-value add activities. The team then works on removing all the non-value add activities that a patient would not want to pay for. “We look out for processes that require a “pull” and not a ‘push’ into the system, example- shifting of a patient from emergency to an ICU.The processes are redesigned, technology is introduced when possible and they are implemented. Further, conducting a detailed root cause analysis also helps to differentiate between what is required and what not or even what is safer and what is not,” he concludes.
Such processes are monitored for almost a year to understand the actual impact of these modifications. Based on the observations and the real time data from a baseline to the actuals, the cycle is repeated again every year. Examples could include reducing food wastage, reducing wastage of consumables and medications among many others.
More REVENUES doesn’t always Mean More PROFITS
Dr.Kaustubh Sardesai, Principal Consultant at Hosmac, says that many hospitals look to growth, but sometimes it usually results in greater costs. At times costs also increase proportionately to revenue, the profit might not be great. Smart hospitals understand that reduce costs has a greater impact on profits than increasing revenues.It is very important to monitor expenses like wages, doctor remuneration and consumables, because it will immediately impact profit, even when the revenues remain the same. For instance, Narayana Hrudayalaya saved 40 percent on gloves by importing them by the container load from Malaysia.

Similarly, Fortis has followed a hub and spoke model where smaller multispecialty hospitals refer patients to larger super specialty hospitals. Such a model serves to reduce duplication of expensive services across hospitals, as well as promote regionalization of care in single high volume facility.
Hospital Expenditure Breakup
It is a truism of expenditure management that visibility reduces spending- or controls it. The simple act of reviewing costs and money spent, often leads to saving. The principle is simple- a person who writes down all their expenses daily, will save more money than someone who doesn’t. Here’s a break up of a hospital’s expenditure.


According to Raghav Sehgal, a seasoned professional with past stints including Fortis Healthcare, founder AI healthcare startup, Curefy hospital cannot or should not compromise on the quality of care delivered to patients under any circumstances. “What hospitals can do is to use combination of Process, Data and Technology to ensure that their current assets — Human (Doctors & Nurses), Machines (Radiology, Pathology etc.) and Real Estate (Hospital/ Clinical layout) are more efficient and geared towards providing better quality of care. For eg. there is lot of discussion around waiting times in OPD for patients. Today, every patient is given same 15min time slot while booking appointment. A 60 year old patient needs twice or thrice the amount of time with a doctor than a 25 year old patient for the same simple issue such as viral fever. We can use data to create personalized appointment schedules that can ease those waiting times. We can provide live notifications to patients where a doctor is delayed for medical emergencies. Following lean methodology along with technology can result in increasing bed occupancy rate and reduce ALOS (average length of stay), thereby contributing positively to ARPOB (average revenue per operating bed) and profitability,”he explains.
Be more DATA driven
Clearly, right numbers presented to right eyes, can have dramatic results. Medical equipment can constitute as high as 50% of the capex while setting up a tertiary care facility. Today, such a huge amount of investment is undertaken with little or no intelligence or data analytics by many hospitals. “Hospitals can use population health analytics and disease prevalence data to not only decide upon the best location possible but also on what medical equipment to put. This way, hospitals can install expensive equipment relevant to their catchment area rather than blindly adding 2 machines of each kind. Of course, this may not be true for destination world class multi-specialty facilities. But this method of using data, tech and lean principles can work for small multi-specialty hospitals, general hospitals, specialty clinics and general primary care clinics as well,” explains Sehgal.

Creating a HOLISTIC approach
Of late, a lot of talk has been around how to apply the lean principle in healthcare. Lean works great in a manufacturing set up where everything is standardized and predictable. Every nut, every bolt, every part of the product will come together on a manufacturing line at the same time every time. On the other hand, in healthcare, every patient has different unique body with unique issues emanating from same diseases. Our understanding of human body is not perfect yet.
Hence, we cannot apply lean principle in same manner as we do it in manufacturing. However, in times of economic crisis, markets evolve and competitive landscapes change and new consumer trends evolve. In such times, management’s’ decisions can seal the hospital’s fate. Hospitals need to develop strategies to reduce cost and transform itself into a fast and agile organization.
For more updates subscribe to https://www.healthcareexecutive.in/#register
Download the Healthcare Executive App Now:
Google Play Store:
https://play.google.com/store/apps/details?id=app.healthcareexecutive.com.tabtest1&hl=en
Apple App Store:
https://itunes.apple.com/in/app/healthcare-executive/id1093125948?mt=8
