Quality only seems expensive, say leaders of the healthcare improvement movement. In reality it can save money and enhance the economic viability of your hospital or health system, they say. The trick is to make sure the improved outcomes accrue to the bottom line.
Easier said than done.
Ironically, improvements in processes can harm a hospital's revenue stream, said Maureen Bisognano, executive vice president and chief operating officer at the Institute for Healthcare Improvement, a consulting group in Boston.
To improve quality and finances, hospitals must innovate, reduce procedural and clinical errors, and cut waste. Each area should have its own budget, and revenues should be projected for innovation.
In a presentation at the 10th National Forum on Quality Improvement in Health Care, held in Orlando, Fla., in December, Bisognano explained how to turn "light-green dollars," or unrealized savings, into "dark-green dollars," or real cost reductions.
If, for example, hospitals decrease lengths of stay, they should also use fewer resources per patient treated. But that can happen only if facilities strip out superfluous resources.
To estimate possible savings, a hospital or health system quality-improvement team needs to estimate how much money is potentially being saved by an improved clinical outcome, then multiply it by the frequency of the treatment. Those potential savings are what Bisognano calls light-green dollars (See chart).
Dark-green dollars directly enhance the bottom line. Those result only when management changes the budget and policy and communicates those changes to the whole organization, encouraging staffers to work differently.
Bisognano, a former senior vice president at the Juran Institute, a Wilton, Conn.-based consulting organization, and chief executive officer at Massachusetts Respiratory Hospital, Braintree, said she took a "walk of shame" at her hospital, which opened her eyes. She followed the trail a patient would take through the hospital. CEOs should observe what works and what doesn't, but they usually don't notice service bottlenecks, petty restrictions and waste when they make their usual rounds. "Seeing processes through the patient's eyes gives you a different view of the complexity and the work setting," she said.
One executive who took the walk of shame found that patients traveled farther to take a stress test than they did on the treadmill during the test.
Bisognano said that executives were pleased when her hospital's infection rate fell below the national average. But then she found that the hospital's rate was 10 times higher than another leading facility's rate.
She changed processes and adopted some of the other hospital's methods. But when the infection rate improved, the bottom line didn't change. "I didn't attend to the finance end," Bisognano said. Throughout the hospital, people were still working as if nothing had changed. They hadn't altered staffing or the way they ordered supplies related to treating infections.
Improving processes can harm the bottom line, however. Bisognano said she recently visited a hospital that had a grant to improve care for congestive heart failure. The nursing director and senior leadership supported the program, which could decrease laboratory work and readmissions.
"When the finance person from this hospital looked at the improvement plan, he said, `If you do that you will kill us. You're taking work out of the system and taking revenue out of the system."
Perversely, some facilities make money on their defects. Under fee-for-service healthcare, clinical improvements can reduce revenues because costs are built on a level of poor quality.
"It's our management responsibility to drive that waste out but to understand strategically the impact of that on the organization," Bisognano said. "In some cases it is a short-term revenue drop that has to be managed through other means.
"Install an innovation process so you're building new things that are going to bring in reimbursements at the same time you subtract revenues from the existing framework," she said.
That requires innovation.
But the bottom-line orientation "is sucking the lifeblood out of innovation in the hospital," Bisognano said.
Other industries set aggressive targets for reducing waste every year regardless of the bottom line. Managers must innovate to root out waste, Bisognano said.
At General Electric, for example, managers who want to be promoted must earn a "black belt" in quality improvement by carrying out two substantial projects. Although the quality improvements aren't required to save money, the average innovation saves $70,000, Bisognano said.
"In healthcare we wait until there's a crisis and we have to cut 4%, as opposed to taking out 1% every year," she said.
Bisognano said the only way to keep a hospital afloat is by pursuing relentless innovation.