Five Ways to Reduce Cost in Your Hospital In One Lesson from Kindergarten

If recent activity in the stock market reflects reality, health care systems in the US are struggling to stay financially healthy. At Cohealo, we try to be part of the solution by introducing the technology-enabled new economy to a critical industry that remains, in many ways, the envy of the world.

My daughter’s kindergarten class recently developed their class rules and one struck me as especially meaningful:

“Share generously and take care of what friends share with you.”

So what does a kindergarten class have to do with technology and the US health care industry?

When health systems internally share resources they already own, they cut costs and unlock value in many ways while maintaining and even improving quality for patients, doctors, and clinical staff. Sharing generates direct as well as non-obvious benefits:

Reduce unnecessary rental expenses – Surgical equipment rental companies provide a great service: the right equipment, often with a trained operator, ready to go at the right time and place.  Renting is convenient, so it often becomes the default solution when a required piece of equipment is not immediately at hand.  However, renting nearly always costs more than sharing.  By using existing assets rental costs can be avoided as can the higher cost of disposables associated with many rentals.

Increase OR throughput – Though it may sound callous and mechanical to focus on speed and efficiency rather than the patients when discussing critical surgical care, increasing OR throughput can actually provide a better experience for everyone. Completing more procedures in the same amount of time with the same staff, reduces staff downtime and decreases patient wait time.  Surgeons often tell us their teams have too much time between cases as they wait for equipment to be readied. Sharing can increase the availability of equipment and reduce wait times for teams and patients alike.

Improve quality – In a manufacturing environment, higher quality equates to lower cost because it reduces rework. This principle stands true in hospital systems as well. For example, through our system two hospitals were able to share a drying lamp, which allowed the surgeon at the borrowing hospital to shorten the procedure, reduce the amount of time the patient was anesthetized and on the table, and move the staff to another case more quickly.  A faster outcome led to less risk, which translated to less cost.

Another massive cost-saving opportunity in hospitals is to manage new equipment capital expenses.  To stay competitive and to continue to attract patients, hospitals must offer the latest and best procedures.  To attract and retain surgeons, hospitals have to provide access to the best, most recent technology.  New procedures and equipment often propagate slowly through health systems because new equipment purchases are only justified once their use is frequent enough to pay for themselves.  An individual hospital may not have enough new procedure volume to compel a purchase on its own; but by aggregating procedure volume, two or more hospitals can justify the capital expense sooner.  Instead of purchasing a new piece of equipment too early and allowing it to sit idle much of the time, hospitals can share the expense and the equipment across multiple sites, yielding better utilization.  The net result is a faster pay back on individual purchases, and a smaller aggregate population of highly-utilized equipment across an entire health system.

A smaller equipment population can also lower aggregate service and repair costs, another significant expense lurking in hospital income statements.  Most new equipment, particularly highly technical equipment, is sold with service contracts. Owning fewer pieces of equipment means lowering related service contract expenses.  A smaller equipment population decreases the burden on internal clinical engineering teams by reducing preventive maintenance episodes, simplifying the asset management responsibility, and reducing the number of service contracts to manage.  The net result is lower service and repair costs regardless of whether those tasks are performed by hospital employees or contracted out to service providers.

It seems my daughter’s kindergarten class has already figured out what the stock market has been trying to teach the healthcare industry for a while: sharing is good for the entire community in many different ways.