The business of hospitals

healthcare_costs

The University of Utah Health Care in Salt Lake City asked a big, hard-to-answer question: How much do the goods and services of a hospital cost?

Medicine is a difficult business to quantify. Hospitals know what they are paid by insurers and what they pay their employees, but Dr. Vivian Lee (the inspiration for the studies) wanted to know more, like the cost per minute in the emergency room (which comes out to 82 cents).

An article in The New York Times looked at the data assembled by the University of Utah Health Care and how it uses the information to improve care and cut expenses.

The federal Agency for Healthcare Research and Quality reported that nearly 30 percent of healthcare spending in the country is for inpatient treatments. And as Medicare and the Affordable Care Act change to singular payments rather than fee-for-service, hospitals now bear the responsibility for the costs of additional testing or patient readmittance.

University of Utah Health Care built a computer program that tracks costs of “drugs, medical devices, a doctor’s time in the operating room and each member of the staff’s time.”

According to the article:

The software also tracks such outcomes as days in the hospital and readmissions. A pulldown menu compares each doctor’s costs and outcomes with others’ in the department.

Researchers at the Utah hospital began by looking at the costs of supplies, including bandages and medication. Then they traced those supplies to individuals. The idea was to look at specific cases, such as hip replacements, and see if one surgeon’s patients consistently needed more bandages. Then they would find out why.

The researchers found calculating labor costs a bit problematic. They collected the data with stopwatches, by timing staff to see how long they spent in hospital rooms, with patients or on various procedures.

One way hospitals can easily cut expenses is by reducing the number of lab tests. University of Utah Health Care saved $200,000 a year by requiring justification from residents for lab tests, dramatically reducing the quantity ordered.

Finally, Utah spent time developing nine variables that comprise “perfect care,” which if managed well can lower costs by 30 percent.

According to the Times:

The variables included such practices as keeping blood sugar under control … and giving oxygen to patients who are having trouble breathing when they are taken off the ventilator. The usual quality measures, like giving antibiotics before surgery, did not affect length of stay.

The group standardized the care after surgery with those nine items in mind, and nurses were permitted to give medications or oxygen without having to contact a doctor first.

Because of these new measures, the Utah medical center’s costs have declined by half a percent per year, compared to the nearly 3 percent increase at other academic hospitals, according to the article.

Reach Stephanie Roman at sroman@publicsource.org. Follow her on Twitter @ShogunSteph.