To cut hospital costs, executives should focus on reducing care variations, Advisory Board says
Research findings indicate that "meaningful" reduction of variations in care is doable and more effective than traditional cost-cutting.
High-quality hospitals delivered lower-cost care for 82 percent of diagnoses, according to a new analysis from the Advisory Board that looked at variations in care that don't improve care costs or patient outcomes. Advisory Board analyzed cost and quality data from more than 20 million de-identified patients across 468 hospitals. The findings indicate that a "meaningful" reduction of variations in care is doable and more effective than traditional cost-cutting.
WHY IT MATTERS
It has been a long standing goal of clinical leaders to boost care quality by cutting down on care variations. Health system execs are hoping it will bend the healthcare cost curve too. Moreover, Advisory Board's recent Annual Health Care CEO Survey showed executives told Advisory listed their top concern for 2018 as preparing their organization for sustainable cost control and and the runner-up was innovative approaches to expense reduction. Knowing that care variation reduction, or CVR, is proving effective is a motivator to keep after that goal.
WHAT IS THE TREND
To establish a benchmark, Advisory Board designated a top-quality set of hospitals. Institutions with high care quality measured across 13 service lines by patient mortality rate, complication rate, readmission rate, and length of stay. These institutions were compared to average national costs for 983 severity-adjusted patient groups.
According to the Advisory Board, the typical hospital spends up to 30 percent more to deliver care with comparable or lower-quality outcomes than the top-performing cohort. The findings showed that a typical hospital could save up to $29 million by providing care aligned with with cost benchmarks for the high-quality hospitals. Even though the research said realizing this kind of savings won't happen in the short term, if a hospital closed just a quarter of the cost gap for less than 10 percent of the conditions analyzed, that hospital could see more than $4 million in annual savings.
That means up to or over $40 million for a ten-hospital system, a notable difference for systems trying to slash operating expenses by even 2-3 percent.
ON THE RECORD
"CVR is one of the few avenues for generating the level of savings needed to withstand downward pressures on hospital revenues without negatively impacting care, and hopefully improving it. .Achieving a realistic chunk of this savings opportunity, however, will require most health systems to rethink how they prioritize, set and embed care standards," said Steven Berkow, executive director of research at Advisory Board.
Twitter: @BethJSanborn
Email the writer: beth.sanborn@himssmedia.com
