Premier puts analytics to work on waste

Banner Health in Arizona and seven other states is working on reducing variation in clinical practice throughout its 23 hospitals.

New dashboard tracks data to cut waste, improve care

CHARLOTTE, NC – There are myriad ways to cut costs in hospitals, even while improving patient care.

The Premier healthcare alliance is working to do one better, by targeting some of the top opportunities for creating efficiencies. To that end, it’s created a dashboard to help identify and track savings. Waste, Premier notes in a recent report, takes its toll on patient care. More care does not necessarily equal better care.

The alliance, which has more than 2,500 hospitals as members, has put the dashboard, which Premier President and CEO Susan DeVore describes as the first of its kind business intelligence tool, to the test.

Premier used the dashboard to calculate the average amount of savings that could be generated each year by a typical 200- to 300-bed community hospital. The dashboard identified five areas with the biggest opportunity for average annual savings per hospital:

1. Unnecessary labor expense, such as inefficient processes that take too long or require too many employees to complete: $6.18 million per hospital per year, and up to 5.1 percent of a hospital’s total labor budget;

2. Excess readmissions: $3.83 million per hospital, per year, and up to 9.6 percent of a hospital’s budget;

3. Inappropriate length of stay: $2.63 million per hospital per year, and up to 5.4 percent of the hospital’s budget;

4. Skill mix dollar variance that occurs when higher paid employees do work that less expensive or less experienced staff could do equally well: $2.38 million per hospital per year, and up to 6.2 percent of a hospital’s total labor budget; and

5. Unnecessary lab testing such as blood, urine or hemoglobin tests: $2.23 million per hospital per year, and up to 1.6 percent of a hospital’s total lab budget.

Premier conducted a follow-up analysis to determine certain drivers. Focused first on readmissions, an analysis of 5.8 million discharges found that the following diagnoses have the highest average percent of readmitted cases and additional costs per case (July 2010 to June 2011):

• Circulatory system (heart attack/heart failure) – 17 percent readmission rate, $15,517 additional cost per case;

• Respiratory system (pneumonia, asthma, chronic bronchitis) – 12 percent readmission rate, $12,146 additional cost per case;

• Musculoskeletal system (major joint replacement, spinal fusion) – 9 percent readmission rate, $17,730 additional cost per case.

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