Tips to Improve Your Hospital Utilization Process for Lucrative Cost Savings (Part 2)

This article was written by Lisa Miller.

We’re continuing our series on improving your hospital utilization process. For part one, click here.

Here’s our next set of tips for you to consider.

Compare High-Cost Implants with Implant Audits

Compare your costs to your services and contract terms. For instance, match the cost of your revision implants with the numbers on your implant audit. Determine if the appropriate charges were made for initial implants or were you billed for the higher cost of a revision implant instead? It would take clinical expertise in this area to compare and benchmark price points, including time and effort to analyze all the data in your monthly invoices and utilization records, line-by-line.

Equate Nitric Oxide Utilization Reviews with Operating Performance

Comparing your nitric oxide usage with operating performance is not much different than your other audits. You’ll want to make sure the amount of nitric oxide used appropriately matches your operating performance. Again, in order to do this properly and to effectively find cost savings, you’ll have to employ experts in this area who also have the time to review every detail of your utilization records.

Evaluate Dialysis Utilization

Hospital dialysis is super expensive these days and the majority of end-stage renal disease (ESRD) patients will continue to rely heavily on it until they find a matching donor, extracting a hefty chunk of out of your hospital’s resources.

Hospitals will need to find any reimbursement or discount advantage necessary to remain operational, and a detailed audit of your hospital’s dialysis utilization could do just that. Click To Tweet

An audit would reveal many cost-saving opportunities, such as extra fees charged for dialysis performed after 5 pm.

Examine Your Biologics

Just like any other clinical product, your biologics should be properly and regularly tracked. Inaccurate inventory results in overuse or understocked supplies. Last minute orders are costly and unnecessary if the materials were already in stock. Biologics are also much more complex and sensitive, which means mishandling and contamination are not easily recovered. Expertise in this area is crucial if you expect to properly review your biologics utilization in detail.

Enjoying these strategies? We have more coming your way. Stayed tuned for the final installment of this series.

Tips to Improve Your Hospital Utilization Process for Lucrative Cost Savings

This article was written by Lisa Miller.

Finding opportunities to reduce your hospital utilization costs brings major cost savings, but chances are your GPO or private consultant would rather not attempt it because it’s time-consuming and requires expertise in certain specialized areas. Despite the potential cost savings it adds to your hospital’s financial margins, not everyone is willing to dig that deep.

To find the real savings that often get overlooked, you’ll need a deep understanding of skilled areas, like clinical operations, to accurately interpret the data that you will also need to collect from different sources.

It’s not easy but if you’ve got the resources on site, here are some ways to improve your hospital utilization now.

Review Your Medical Gas Cylinder Utilization

Keeping track of your medical gas cylinders seems arbitrary to some GPOs and private consultants, but we know that tracking usage can significantly improve your bottom line. A hospital with numerous locations could easily lose track of usage and spend extra money ordering new supplies. Managing your cylinders gathers those lost dollars and ensures supplies are always available when they’re needed the most.

Audit Your Lost Linens

Lost linens are probably the most common hospital losses of all, especially for a large hospital losing linens on a regular basis. Statistics show that laundry costs eat 2% to 3% of your hospital budgets. With annual budget deadlines coming up, you’ll want to find cost-saving opportunities in this area to close this gap. Linen loss is a result of several factors, but unless there is a utilization audit procedure put in place, losses will continue to plague a hospital’s financial margins.

Assess Your IT Licensing

IT licensing is difficult to track since technology is constantly changing and IT contracts grow more complex every year. Vendors are always introducing new licensing models, maintenance options and audit clauses every day. Some of these come bundled with technology you may not even be using.

To watch your IT spend, you’ll need to review your contracts and technology usage regularly. Click To Tweet

You’ll also need to benchmark industry pricing options to make sure you’re paying the right price.

Match Bed Size Contracts with Bed Size Numbers

It goes without saying that the number of beds your hospital provides should match the number of beds you actually use. The best way to determine an accurate number is through a detailed analysis. You’ll want to make sure those numbers match up with the terms in your contract. You’ll also want to take other factors into consideration like minimum bed requirements and future growth expectations.

We’ll continue this series with further ideas and strategies. Stay tuned!

6 Steps to Optimize the Value of Your Outsourced Agreements

We’re concluding our series on ensuring quality and financial high performance from outsourced providers. In case you haven’t read them, here are parts one and two.

1. Have clear visibility to data, usage and the ability to understand costs easily. Research indicates that between 40% and 70% of outsourcing value may be lost due to unsustainable contract terms, incorrect pricing and poor relationship management. Understanding these factors, and their impact on revenue and value leakage over time, is absolutely essential to maximizing the value of an outsourcing partnership. Ensure your invoice is accurate, easily understandable and that there aren’t any issues with non-standard and convoluted pricing schemes that make your invoice difficult to validate.

2. Get feedback from the end-users. It’s important to have the insights from those who are working with your outsourced provider. Conduct quarterly performance reviews, quality surveys and an annual meeting with key end-users to understand how the outsourced provider is performing. Are there gaps? Are there issues that are not getting resolved? Are there opportunities for improvement? A well-designed feedback system will ensure a mutually successful outsourced partnership.

3. Expect that the outsourced provider is an extension of your organization and will be committed to cost improvement, process improvement, and revenue improvement. So many times when we review the services being provided to our clients and find out that there are “utilization” issues and we bring it to the attention of the outsourced provider—the provider says they are doing their job according to the agreement. We say, it’s your “job” to ensure utilization is optimized and costs are minimized. If you oversee laundry services, then you are responsible to deliver best in class services and standards in the industry per pound/patient day. If this exceeds the “norm” then it is the outsourced provider that must lead the charge to fix it.

4. Consider performance-based contracting arrangements. In a performance-based contract, the outsourced provider provides your hospital with specific benefits, such as cost reductions or revenue generation, and in return, the provider shares in the value created. A portion of the price of the contract is linked to a series of key performance indicators that the supplier is responsible for meeting and to business benefits achieved by your hospital through the fulfillment of the contract. Performance-based contracting agreements create an incentive for the provider to control its costs as these contracts align the interests of both parties. Performance-based contracts tend to encourage closer relationships with providers. Performance-based contracts should be implemented for projects with outcomes that can be measured objectively. Performance-based contracts can be used for any contract, including small-dollar-value contracts, but are generally most appropriate when:

• Projects are large, have new technology, or have high risks.

• Existing contracts can be converted to define as much of the requirements in performance-based terms as possible.

• Large umbrella contracts are experiencing cost overruns or performance problems.

• Benefits contributed by providers can be quantified.

• Project implementation and production time need to be reduced.

5. Never be afraid to benchmark. Either informally or formally; and during any time of your agreement. You have a right to know what the competitive marketplace is offering for services, prices, incentives and most importantly new ways of thinking – 16% to 30% can be financially gained when outsourced initiatives are benchmarked by VIE Healthcare.

6. Test-market the relationship — observe behaviors during a well-defined test phase, assuming that realistic tests can be devised and that necessary observations can be obtained, even if pre-contractual monitoring can only be done at a cost that could not be sustained during the contract. For the test to be meaningful, a certain level of environmental stability relative to the contract duration is required. Additionally, it must be possible to perform the test phase without massive irrecoverable investment from either party. Finally, the test must be reliable: it must be too expensive for either party to manipulate the test phase to influence the results, or there must be re-contracting intervals if the initial tests do not turn out to have been reliable.

Outsourced agreements are complex and have many moving parts in the agreement. Click To Tweet

It is difficult for departments to easily validate contract pricing to invoice pricing and the “promises” that were made initially when the agreement was signed. There is a lot of work on the front of putting together a high-performance outsourced agreement.

However, once that work is done, you have a system in place to ensure you are receiving the value for your investment into an outsourced provider. And remember, you don’t have to outsource an entire department or service line—“selective outsourcing” offers a way for your organization to outsource one aspect of a larger service.

However you choose to structure your outsourcing agreements, ensure you’re doing your due diligence in creating an arrangement that leads to success.

Outsourced Providers: Critical Questions and Key Activities

We’re continuing our series on ensuring quality and financial high-performance from outsourced providers. For part one, please click here.

Here are four critical questions that must be answered:

1. What should be outsourced and what services should be performed internally, within the hospital?

2. For those services that should be outsourced, how should the contract be structured?

3. For those services that should be outsourced, how should the contract be negotiated?

4. For those services that should be outsourced, how should the relationship be managed to ensure its continued strategic success? When will the relationship be terminated?

Whether you are in a current agreement with an outsourced provider, in the process of a contract renewal with your current provider or are analyzing the option of outsourcing – it all starts with understanding the needs of your organization and those needs do change over time.

Aspects of a needs assessment can include cost reduction, revenue improvement, and/or the lack of internal specialization. Click To Tweet

The key activities in a needs assessment include:

• Defining the business needs and key objectives.

• Benchmarking the current processes.

• Understanding the standard activities and service level measurements (“as-is”).

• Reviewing future state service delivery options (“to-be”).

• Assessing the gaps between the current and desired state.

• Assessing the feasibility of options & defining the strategy for service delivery alternatives (insource, nearshore, multi-shored delivery, combinations of, etc.).

• Investigating the implications of assessment.

• Validating the associated costs, cost savings, revenue and process improvements.

• Identifying risks, assumptions, dependencies, and creating a mitigation plan.

• Business case development and sponsor alignment.

Once you have a detailed analysis of what your organization “needs” then everything is built from there. Your contract, monthly, quarterly and annual measurements, the ability to ensure you will have best-in-class services provider, competitive pricing for those services as well as a system of accountability built into your agreement.

In the next part of this series, we’ll cover the steps to optimize the value of your outsourced agreements.

How to Ensure Quality and Financial High-Performance From Outsourced Providers

First and foremost an organization must understand why they want to outsource and what it is they are trying to accomplish through outsourcing.

Many organizations gloss over or skip this step entirely believing that they already have most of this information and/or a mandate to move forward with the project. That may very well be true – but to skip this step of due diligence is inviting disaster.

Not only is it critical to understand where the organization is today and where the organization is required to go in the future, but this is the time to begin tracking assumptions, dependencies and risks associated with the project along with appropriate mitigation strategies. Above all else, the senior leadership of the organization must be fully onboard with the effort. If executed properly, this step in the continuum may produce alternatives to outsourcing that are more efficient and cost-effective.

Activities that represent core competencies cannot be outsourced and non-core activities are candidates for outsourcing. Outsourcing decisions rarely fully examine the expected benefits, seldom fully understand the risks of outsourcing and the costs that these risks impose, and almost never are based on a sound trade-off of risks and benefits. That would imply that many poor outsourcing decisions are made. Risks include the risk of overpaying, the risk of damage to reputation resulting from inferior service, and risk of loss of control over vital assets.

Before an organization begins building an outsourcing framework it must first decide that outsourcing is a viable alternative and that all other options have been thoroughly reviewed. Click To Tweet

Outsourcing is complex and time-consuming to establish. There is no single approach to outsourcing that will guarantee success. Every situation is unique in one way or another. These unique elements are what keep clients, vendors and advisors up at night as no one can see into the future and anticipate every potential outsourcing challenge.

The key to success is preparation and experience. Just as a sports team would not walk onto the field of play without a meticulous playbook and a coach to lead them, nor should an organization that is contemplating outsourcing move out of ideation without an experienced outsourcing advisor and a strategy to ensure success.

The first requirement in building a strategy for success is to develop a framework that will guide the involved parties. This strategic framework for success must be based upon years of hands-on experience to avoid the obvious and customary crises and pitfalls. Also, the framework must be detailed enough to ensure stability and consistency yet flexible enough to be adaptable to the uniqueness of each client/vendor situation.

Here is a high-level five-step system for outsourcing: assessment, contracting, transformation, transition, and management of the outsourcing process.

These 5 steps provide a framework to ensure that all major phases and processes are addressed, and identify any gaps or missing processes that need to be included for proper planning of an outsourcing engagement.

In the next part in this series, we’ll cover critical questions you must answer prior to outsourcing and other key activities for success.

Late Start Times in Operating Rooms (Part 2)

In the first edition of the series, we covered several potential reasons that OR start times get delayed. Nobody likes to wait, and when ORs are consistently lagging behind schedule, it often leads to increases in cost and decreases in revenue.

But, every problem has a solution, And in the second part of this series, we’ll cover these solutions and provide actionable steps on multiple fronts to help your OR start on time and stay on schedule.


  1. Identify the need for improvement. Discuss and show statistics/detailed analysis of the delays and the actual cost of delays.
  2. Align objectives of management and staff to create clear/common goals.
  3. Identify the specific causes of delays through discussion with a multidisciplinary team.
  4. Develop specific measures to address each cause with the multidisciplinary team.
  5. Evaluate/document effectiveness of each measure in improving first case start times.
  6. Monitor/adjust for improvement based on the percentage of first cases starting on time.

Process for Multidisciplinary Team:

  1. Take turns sharing what each member believes to be the causes for delays (narrow down to top 10).
  2. Take turns sharing what each member believes to be the measures needed to address delay (narrow down as well).
  3. Enforce, maintain, and document the effectiveness of each measure taken.

Approaches to motivation for improving first case start time:

  • Punitive – loss of allocated block time for surgeons.
  • Meetings/formal presentations to motivate employees.
  • Create task forces dedicated to ensuring on-time starts.
  • Calculate and convey the actual cost of OR delays.
  • Communicate the possibility of adding an extra case at end of the day for the surgeon.
  • Communicate the possibility of finishing earlier at the end of the day to staff.

It’s not just a “nice thing” to have your OR running on schedule. You can benefit from increased OR efficiency and productivity, a reduction of frustration in hospital employees, increased patient satisfaction, cost reductions, higher revenue and long-term sustainability and profitability.

It's a no-brainer. If your OR is lagging behind, be strategic about how you can get things running on schedule! Click To Tweet

Late Start Times in Operating Rooms (Part 1)

Nobody likes to wait.

This can be especially true in hospitals where stress levels, fear and anxiety are often high. It goes without saying, but each hospital should be making active and consistent attempts to ensure their OR starts on time.

First, let’s take a look at the potential (and numerous) causes of late start times:

What are the causes of late start times?

  • Unclear policy/lack of policy enforcement.
  • Anesthesiologist/surgeon late arrival.
  • Nurse/tech late arrival.
  • Patient late arrival.
  • Room/equipment not ready.
  • Lengthy pre-op paperwork.
  • Last-minute diagnostic tests.
  • Pharmacy delay.

Unfortunately, this can create a series of negative results for your hospital. Including decreased patient satisfaction due to longer wait times, frustrated staff because of longer hours worked, over-expenditure of the OR’s time and resources, and paying staff for longer and later days.

While all of this is bad enough, these results lead to a common destination: increased costs and decreased revenue.

You can't simply look the other way when OR start times in your hospital are lagging behind. Click To Tweet

If you are finding late start times are becoming, or are already the norm in your organization, you need to start looking at solutions.

What are some of these potential solutions? We’ll cover them in part two of this series.

The Need for Price Transparency

Here are a couple of points in the name of price transparency for FY 2019 and beyond according to Becker’s Hospital CFO Report.

“5. Under CMS’s final inpatient payment rule for FY 2019, hospitals are required to publish a list of their standard charges online in a machine-readable format and to update this information at least annually. Hospitals are currently required to make this information publicly available or available upon request.

6. As part of the proposed IPPS rule released in April, CMS put out a request for information to better understand what stops providers from giving patients sufficient price information and how price transparency can be improved. The proposed rule highlighted concerns such as surprise out-of-network billing, particularly by radiologists and anesthesiologists, and unexpected facility fees. In the final rule, CMS said information and suggestions submitted to the agency will be considered for future rule-making.”

Increased Cost & Increased Competition

Along with the rising cost of healthcare, the increased prevalence of high-deductible health plans has placed a tremendous financial burden on patients.

A study by the National Bureau of Economic Research shows that high-deductible health plans do indeed reduce healthcare spending, but not for the reasons that health insurers had hoped. Instead, the reduction in healthcare spending is due to the fact that patients are skipping/delaying care and refusing to fill prescriptions as concerns loom over their ability to pay for these treatments. By delaying necessary care, patients are setting themselves up to face greater complications, and therefore greater healthcare costs, in the future. With the rising financial burden, healthcare consumers are becoming more interested in “shopping around” for the best quality of care at the best price.

“To continue running profitable businesses, hospitals and providers must help consumers plan for healthcare costs appropriately by providing clear, accessible, and accurate information about pricing.” (

According to PwC’s Health Research Institute (HRI), U.S. hospitals are losing customers to retail clinics, standalone surgical centers, and walk-up medical facilities. Remaining competitive means they must make their prices more transparent, accessible, and defensible.

Changes on the Horizon

Currently, hospitals are required by CMS to make a list of their standard charges available to the public upon request. For the FY 2019, hospitals will be required to publish this list “via the Internet in a machine-readable format and to update this information at least annually, or more often as appropriate. This could be in the form of the chargemaster itself or another form of the hospital’s choice, as long as the information is in machine-readable format.” (

Patients have become increasingly confused over pricing, with growing concern about their out-of-pocket expenses. Click To Tweet

CMS has made clear their desire to increase price transparency in healthcare. They are seeking to discover what barriers exist that prevent providers from disclosing out-of-pocket expenses to their patients and are committed to making changes that support greater transparency. Suzanne Delbanco, executive director of the Catalyst for Payment Reform, expressed that by making standard charges public, hospitals may face a certain level of scrutiny from patients that they have not had before, leading to more competitive pricing – or at least more reasonable pricing. (

Be Proactive, Not Reactive

As CMS rule changes encourage this shift towards greater price transparency, hospital leaders must ensure that they are receiving the best prices from vendors/suppliers so that they are able to provide services at competitive rates. Additionally, “in a competitive healthcare landscape, the facilities that discover how to provide patients and their families with a simple, intuitive way to find pricing information on their own will be better equipped to attract new patients and retain existing ones.” ( With these things in mind, it becomes clear that revenue cycle managers and other healthcare leaders must develop effective price transparency programs if they hope to stay ahead of their competition.

By implementing standardized pricing for the most common services, healthcare providers can minimize a patient’s cost-confusion and potentially broaden their customer base by attracting more patients. Using technology to help patients determine the cost of a procedure or visit with a particular doctor at a particular facility can also give some control back to consumers, leading to improved patient satisfaction, and ultimately, more customers. Making prices clear and creating user-friendly platforms will encourage consumers to use the forward-thinking healthcare provider that has made the daunting process of finding quality care at a competitive price more manageable.

Additional info: While healthcare providers can list the standard charges, another major factor to consider is the amount that insurance companies will pay for specific procedures. Variation between what hospitals charge for certain services is less than the variation between what insurance companies will pay. (

Hospital Value-Based Purchasing Program: How YOUR Hospital’s Quality is Being Graded

Quality can be difficult to judge and determine.

To use an example outside of healthcare, a gymnast or figure skater needs to know how the judges score and what they’re looking for in order to perform well.

In a similar way, hospitals need to know what Medicare is looking for in order to maximize reimbursement while maintaining and improving high-quality patient care.

The vision of the Centers for Medicare and Medicaid Services is that “all CMS beneficiaries [achieve] their highest level of health, and disparities in healthcare quality and access [are] eliminated.”1 In accordance with this vision, a shift is taking place. Historically, hospitals were paid based on the quantity of services they provided. Recent changes reinforce the need to reward hospitals based on the quality of care they provide. This includes a renewed focus on following best clinical practices and enhancing patients’ experience in the hospital.

Under the Hospital Value-Based Purchasing (VBP) Program, Medicare makes incentive payments to hospitals based on either: 2

  • How well they perform on each measure compared to other hospitals’ performance during a baseline period.
  • How much they improve their performance on each measure compared to their performance during a baseline period.

Every hospital in the Inpatient Prospective Payment System (IPPS) is given a Total Performance Score (TPS) to determine the amount of funding it receives. Specific measures are used to determine each hospital’s TPS. This is Medicare’s “scorer’s card” or blueprint for evaluating the VALUE that each hospital provides.

For the Fiscal Year 2018, the TPS is derived from four domains (25% weight for each):

  1. Clinical Care Domain.
  2. Patient and Caregiver-Centered Experience of Care/Care Coordination Domain.
  3. Safety Domain.
  4. Efficiency and Cost Reduction Domain.

HCAHPS Survey results form the basis for the Patient Experience of Care domain in the Hospital Value-Based Purchasing program.3

The world of healthcare is an ever-changing one. If an organization hopes to continue to thrive, those who lead it cannot be spectators. Click To Tweet

They must recognize the changes that are taking place – the standard by which they are being judged – and adjust accordingly.

How will your organization respond?




Physician Preference Items (Part 2)

In the first article in this series, we highlighted several important points about physician preference items, including issues, inefficiencies and discrepancies. Here, in part two, we’ll discuss potential solutions.

One study published by The Milbank Quarterly: A Multidisciplinary Journal of Population Health and Health Policy discussed the value of “standardization strategies.” These strategies are designed to restrict physician choice in one way or another.

“The formulary model restricts the number of choices of manufacturers from which physician preference items are purchased or of the range of products that are bought for a given procedure,” while “the ‘payment-cap model’ does not explicitly restrict particular products or manufacturers but instead standardizes costs by restricting the price paid for products in a particular category.”

Restricting surgeon choice is not a popular approach, but change is never popular. However, change is necessary in a healthcare system that seems to always have rising costs and falling reimbursement rates (

Education is another way to address the issue of supply chain inefficiencies. Surgeons need to be made aware of similar and even superior products that can be purchased at better prices. Other programs have provided surgeons with the breakdown of costs for a particular surgery they perform and how it compares with the costs for other surgeons to perform the same surgery. This model informs surgeons and creates a safe form of competition which could help reduce a hospital’s spending.

No matter what approach is taken, the relationships affected by any changes implemented must be considered. Click To Tweet

Physicians often have strong ties to sales reps. Perioperative administrators must maintain healthy relationships with surgeons. Hospitals must remain in good standing with the communities they serve. Many hospitals, in an effort to focus their efforts on providing excellent patient care, have partnered with third-party organizations who excel in negotiations and have experience in finding cost savings for hospitals, particularly in the area of supply chain. Whatever steps a hospital takes to contain spending in the supply chain and minimize waste on overpriced PPIs, administrators must understand that doing nothing is no longer an option.

The stakes are too high and the potential savings too great to ignore the impact PPIs have on supply chain inefficiencies.

What has your organization done to minimize supply chain inefficiencies?