In the course of their normal work day, many employees do not see or directly care for a patient. However, a new PIP goal for 2014 involves reducing what is called the "cost per equivalent discharge" and every employee can influence that cost.
Last year, Yale-New Haven Hospital discharged more than 80,000 inpatients and — at its growing network of cancer care centers, radiology offices and blood draw stations, to name just a few — treated more than 1 million outpatients. While adjusting to reimbursement cuts from state and federal sources, YNHH was one of only a few hospitals in Connecticut that experienced growth.
Thomas Balcezak, MD, senior vice president, Safety and Quality, explains that Yale-New Haven — like most major American medical centers — has developed a very sophisticated cost accounting system that calculates the cost of care for outpatients, inpatients and patients under observation. The cost per equivalent discharge standardizes the cost of care for inpatients and outpatients — who outnumber inpatients by a factor of 12, so that the hospital can compare these costs over time.
The expenses that go into creating these calculations include the cost of the hospital day, medications, nursing, physical therapy, radiology, nutrition and more. The costs cover patients in the Emergency Department, the primary care clinics, Shoreline Medical Center, Smilow Cancer Care centers, pediatric specialty care centers and Heart and Vascular Center offices — to name a few.
"Using the equivalent cost per discharge allows us to quantify what we are spending and look for areas where we can reduce costs," says Dr. Balcezak. "The number allows us to compare like to like and track our progress in our cost of delivering quality care."
YNHH introduced reducing the cost per equivalent discharge in PIP this year because it helps employees understand what goes into the calculations and to see their personal role in reducing costs. This year's threshold goal is to reduce the cost per equivalent discharge to a minimum of $16,127 and the maximum goal for a 3 percent PIP payout is a reduction to $16,062. If YNHH can achieve these goals, YNHH can continue to improve its comparisons to national benchmarks for hospitals similar to YNHH.
"While we focus on expense control, we must simultaneously ensure that we are delivering high-quality, safe care," Dr. Balcezak stresses. "Quality care means better outcomes and fewer complications and adverse events. Quality distinguishes Yale-New Haven and drives patients to choose YNHH for their care — because they know it will mean better outcomes for them."
Stephen Allegretto, vice president, Financial Planning, echoes Dr. Balcezak's emphasis on overall value driven by quality and cost containment.
"Improved quality improves operating margin so we have to focus on reducing pressure ulcers, preventable falls, hospital-acquired blood stream infections — all the adverse events which unnecessarily drive up the cost of patient care," Allegretto points out.
Allegretto also points to a rapidly changing reimbursement environment in which revenues are declining. Medicare pays 90 percent of costs, if certain safety and patient satisfaction standards are met. Medicaid currently pays 65 cents on the dollar and that is expected to decrease. Finally, private payers make up some of this shortfall but are pushing back on having this burden fall on them.
"The cost shift to private insurance will not continue and the reimbursement cut-backs are affecting our bottom line," says Allegretto. "Our cost/value positioning is helping us understand the relationship of cost, quality and value — allowing us to make decisions that enhance our overall value to patients.
"Our challenge now is to reduce the cost per unit of service or we will face an operating loss — and that's why reducing the cost per equivalent discharge is such an important goal for employees," says Allegretto.
Employees can help by relentlessly eliminating waste in their areas of work. For example, the cost of office supplies figures into the cost per equivalent discharge — so employees must be more targeted about what they order. Keeping patients and their appointments on schedule so time is not wasted is also an area ripe for savings.
Clinicians are working hard and thoughtfully to drive down costs while ensuring or improving quality of care. Dr. Balcezak points to outstanding work being done to standardize the care of patients suffering from hip fractures; the work on Sickle Cell/General Medicine Unit which standardizes care and provides a medical home for patients with sickle cell disease; and the work being done in Laboratory Medicine to investigate the necessity of tests and their timing for patients — evidence will show which tests are better administered after discharge, for example, or not administered at all.
"Treat hospital spending like you treat your own household budget," Dr. Balcezak advises employees. "Look for waste and eliminate it because, I guarantee you, it contributes to the cost of patient discharge. The services we provide must provide value and quality. It is a fact: safe, standardized care improves patient care and hospital performance — and every employee has a role in contributing to the effort. Each of us needs to be economically responsible."