Lean strategies for rural hospitals

Many small, rural hospitals have struggled financially in recent years. But one critical access facility in Nebraska has discovered a means to financial stability and beyond.
Since Daniel Griess became CEO of Alliance, Neb.-based Box Butte General Hospital in 2003, the facility has turned a profit every year except fiscal 2009, when it lost $140,160. This year, the 25-bed critical access hospital on the eastern edge of the Nebraska panhandle is on track to record increased revenue and turn a profit once again.
Through 10 months of a fiscal year ending June 30, BBGH had total patient service revenue of $37.1 million, an increase of 2.5 percent over revenue for the same period last year. And the hospital had $845,143 in net income, he said.

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Griess uses a variety of strategies to boost revenue and contain costs. He’s also somewhat of an expert in small rural hospital management. After being named CEO, he earned a Masters degree in health administration. For his thesis, he studied critical access hospitals in Kansas, Nebraska, Oklahoma, and Texas. To be successful, he says, these hospitals must control expenses, keep the charge master up to date, have a solid payer mix, and control patient volume.
“Every 18 months we have our charge master reviewed to ensure that it’s current,” he said. “We have a well-insured population working in manufacturing, agriculture, and railroads. They represent about 30 percent to 35 percent of our patient revenue. Medicare is about 50 percent, Medicaid is about 10 percent to 12 percent, and self-pay is about 3 percent to 5 percent.”
To help self-pay patients with out of pocket costs, BBGH has partnered with a local bank to let patients pay over time if needed. Because BBGH guarantees the loans, the hospital repays the bank if patients default. But over the 10-year length of the program, only about 1.5 percent to 2.0 percent of patients who finance their hospital bills in this way have defaulted, Griess said.
A lean approach
Last year, Griess took another step to boost efficiency and control costs by enrolling 13 of the hospital’s 270 employees in a lean training program sponsored by the Nebraska Critical Access Hospital Lean Collaborative. Lean is a management approach that incorporates continuous quality improvement in all aspects of care delivery.
John L. Roberts, executive director of the Nebraska Rural Health Association, says hospitals are using lean not just for performance improvement, but also for survival. “Traditionally small hospitals have absorbed cuts in reimbursement by eliminating services or laying off staff,” he said. “If they don’t, they may go into a death spiral. But we’ve shown that lean helps hospitals reduce their costs while improving quality and therefore they may survive rather than face the alternative.”
Griess plans to have the first 13 trained staff members teach other employees about lean. In the meantime, these initial trainees have developed lean initiatives in imaging, payroll, purchasing, surgery and other departments.

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In imaging, the staff wants to cut patients’ wait time and thus avoid the need to refer imaging patients to Regional West Medical Center, a competitor in Scottsbluff, Neb. Before starting the program, BBGH was turning away about three imaging patients each month, resulting in an annual loss of about $108,000, Griess said. By cutting wait times, the imaging department hopes to fill more slots on the schedule without adding technologists, he added.
In finance, the staff eliminated steps in payroll processing and contract management to make both of those processes more efficient. Instead of preparing surgery supplies for each case as it occurred, the staff now prepares supplies for all surgeries scheduled for the next day. The savings totaled 183 hours in time, 140 miles in eliminated steps, and $56,797 in expense.
“We have to do a better job of eliminating waste and redundancy by reducing variation so that we can lower our costs,” Griess concluded. “If we continue down the path we’re on in healthcare, small rural hospitals won’t survive.”