Hospital Leaders’ Priorities
How important is quality for hospital leaders? One would assume it’s a foremost priority. But in ACHE’s most recent Top Issues Confronting Hospitals Survey, hospital CEOs ranked workforce challenges and financial challenges as the top two immediate priorities for their organization. Patient safety and quality and patient satisfaction, meanwhile, ranked sixth and seventh, respectively.
In one sense, this is not surprising. Healthcare organizations are struggling with rising costs and workforce issues amid a growing population of people living longer with chronic ailments. Reimbursement is not increasing, and operating in the black is becoming more and more difficult. Needless to say, keeping the doors open is a pressing issue for any hospital executive.
There is a business case, however, for prioritizing quality, safety, and patient experience. Healthcare consumers are increasingly seeking out organizations where they can get the best clinical outcomes, and clinicians prefer to work in settings where quality and safety are embedded in the culture. Quality focus as a foundation can:
- Reduce costs.
- Enhance revenue.
- Lower staff turnover.
- Boost recruitment.
Below are key questions hospital leaders can ask as they look to improve their financial performance by focusing on quality and safety.
Revenue Gain
Is your organization the destination of choice, or is questionable quality leading patients to seek care elsewhere?
Public perception impacts the bottom line, either positively or negatively. Reputation in the market and competitive position will drive patient volumes either into or away from healthcare organizations, particularly in densely competitive areas. Consumers are becoming more aware of publicly reported quality ratings, using that information to make informed choices about where they receive care, and even traveling to be diagnosed and treated where they feel they will get the best clinical outcomes. Depending on the geographic region and clinical condition, the net operating revenue per adjusted discharge can range from $15,000 to $18,000, so increasing market share by even 1% as the provider of choice can significantly improve financial performance.
What performance-based reimbursement dollars are you leaving on the table?
To get healthcare costs under control and “bend the cost curve,” CMS is driving a shift from a fee-for-service (FFS) reimbursement model, which rewards quantity over quality, to value-based care payment models that encourage efficient delivery of high-quality, lower-cost care. Commercial payers are also shifting away from FFS and tying payment to quality metric scores in pay-for-performance (P4P) arrangements.
Many hospitals are leaving money on the table by not meeting P4P quality process and outcomes measures related to areas such as.
- Harm avoidance and patient safety.
- Unplanned readmissions.
- Appropriate use of imaging modalities.
Achieving these targets can equate to tens of millions of dollars in additional reimbursement per year depending on the specific P4P program. And if a health system participates in multiple value-based arrangements, the additional incentive revenue can be significantly higher.
Are capacity and access issues impacting your operating margin?
Hospital-acquired conditions (HACs), complications, and medical errors result in longer lengths of stay, limiting the bed capacity available for higher-margin procedures. Long lengths of stay—particularly for patients who remain hospitalized for an HAC or are chronically readmitted to the hospital—often result in the cost of care exceeding the associated revenue.
Decreasing one avoidable day saves a hospital approximately $500 per instance —by avoiding HACs, utilizing consistent evidence-based practices, and being proactive with discharge planning. Combine that reduced expense with filling that vacated bed with a surgical case having a $1,000-plus contribution margin, and the benefits add up.
Cost Reduction
How much does your organization pay annually on expenses related to medical errors and litigation, and in which direction is that amount trending?
Preventable medical errors can result in millions of dollars in administrative penalties, fines, and legal expenses. These events, such as wrong-site surgeries or medication errors, also drive up insurance costs and malpractice premiums. The reputational harm is harder to calculate—and to fix.
Organizations where leaders drive a strong culture of safety, particularly with the goal of zero harm as the foundation for all clinical and operational decisions, see significant reduction in medical errors and the associated expenditures. Eliminating even a few incidences per year can result in a meaningful decrease in litigation expenses.
Is there opportunity to improve clinical and operational processes to reduce errors, rework, and non-valued-added activities?
Poorly designed, variable processes create inefficiencies and add needless extra expense. Deficient processes often cause treatment delays and also lead to frustration and burnout for staff and providers. Costly errors and rework occur when processes are not standardized and are dependent on individuals, not systems. As W. Edwards Deming stated, “A bad system will beat a good person every time.”
Lean, Six Sigma, and root-cause analysis are some approaches that can be used to evaluate and address process issues and make changes that improve quality of care, minimize staff burnout, and ultimately reduce costs. A strong culture of safety makes it easier for frontline staff and clinicians to speak up when there are safety risks or opportunities for improvement that need to be addressed.
Are evidence-based clinical practices regularly utilized, and do you have consistent, exceptional clinical outcomes?
Unnecessary care variation is the enemy of quality. Without standardized protocols and care pathways, different physicians may choose different treatments for the same condition, or order unnecessary tests and procedures. Disparities in patient outcomes may lead to additional treatment and follow-up care, and lack of standardized pre- and post-operative protocols can also result in prolonged hospital stays, complications, or infections—increasing hospital resource utilization and cost. A recent systematic literature review showed that up to 94% of hospitals investing in and measuring the impact of evidence-based practices achieved a positive ROI.
Do you know what your historical VBP penalty trends looks like?
Under the CMS Value-Based Purchasing (VBP) program, many hospitals are paying penalties, year over year, for readmissions and HACs. Clinical leaders often are unaware of how much this penalty is costing the hospital and where the opportunities for improvement lie. Conservatively, the VBP adjustment revenue loss can exceed $2 million or more annually depending on how the hospital is performing on each measure. Analyzing performance metrics and implementing improvement plans with real-time monitoring systems can reduce VBP penalties paid by the hospital.
Collective Impact of Prioritizing Quality and Safety
Focusing on one, or even just a few, of these items may not be enough to turn poor financial performance around. But by assessing these areas in aggregate—and making quality and patient safety a cultural underpinning that informs all hospital decisions and activity—leaders can create a solid foundation to build upon.
On our podcast with Becker’s Healthcare, ECG principal Tim Babineau, MD, talks with Dr. Mark Chassin, President Emeritus of the Joint Commission, about the origins, progress, and challenges of the quality and safety movement in healthcare.
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