Improved business efficiencies can help rein in health costs
By James Jonely
Can you believe the extent of the effort that went into finding the politically correct route to creating a more effective U.S. health care system? Still we are uncertain about whether coverage will become more affordable. It depends on how well the new law — and market factors — prompt reductions in the costs of administering and delivering care.
Such decreases will occur only if everyday business practices improve, however. Medical providers have recognized this. They have previously adjusted their routine operations to achieve substantial cost savings.
Typically, hospitals reduce their costs by contracting with specialists for support services like laundry, housekeeping, cafeteria management, clinical equipment maintenance, foreign-language training and call centers. Such “outsourcing” has long enabled budget-crunched hospitals to operate with less revenue.
Other businesses in the health care supply chain, including insurers and manufacturers, should take note. To continue to prosper, these organizations will need to run smarter and leaner, too.
Federal legislators know this. To control the cost of running Medicare, they have called for more competitive bidding. This process of ensuring cost-effective purchases probably can be deployed more often in most industries. So any public or private entity that collects consumers’ health care dollars is likely to be pressed to increase its use of competitive bidding to cut costs.
Because costs must be significantly reduced, innovation in everyday business practices needs to increase exponentially. Having managed a company that delivers savings to medical providers, I have seen them create less expensive approaches to routine operations.
To control the cost of care now and forever, such improvement must be continuous. Congress isn’t likely to ever stop talking about health care — so this should be part of their deliberation.
While there is no easy answer, a simple business principle can be followed: Leave no stone unturned. Every opportunity to control expenses while maintaining quality care needs to be pursued. For example, Comerica Bank recently unveiled electronic payment processing capabilities for health care providers. The bank estimates that nearly one third of every health care dollar is spent on paperwork and other labor-intensive administrative costs.
Waste reduction represents another frontier for everyday savings. Hospitals’ use of cloth garments, sheets and towels — as opposed to their paper equivalents — saves about $1,000 per hospital bed each year, according to the University of Minnesota. Disposable foam mattresses can be almost entirely replaced with permanent waterproof mattresses. At Legacy Good Samaritan Hospital in Portland, Ore., the latter decision paid for itself in just one year with about $81,000 in savings. Also, for its surgical procedures, this hospital now uses cloth textile products instead of paper. That saves an average of about $100,000 a year, including the additional cost of laundering the textiles.
More medical practices as well as hospitals are recognizing such benefits. Noticeable savings result from the substitution of cloth gowns for their paper disposable equivalents. A presentation at the University of California-Davis reported that cloth saves more than 50 percent compared with paper on a per-use basis. Why? A cloth gown is reused 50 times, worn once a week for a year before recycling or disposal.
Consequently, waste disposal costs are reduced, and when a health care laundry service processes textile products, its sanitizing capabilities add a level of contamination control. Alternatively, a medical practice, clinic or lab could do its own laundry. .
Reprocessing medical devices is another waste-reduction frontier. Scalpels, knives, blades, hooks, probes, catheters and more — including some labeled by manufacturers for single use — can last longer. Hospitals can enliven devices in-house or outsource this work. On average, this saves 50 percent compared with purchasing a new item, the Association of Medical Device Reprocessors says.
Relatively speaking, waste reduction and outsourcing are small steps. Whatever happens with the big-picture issues in health care reform, more attention should be paid to such little things.
As a taxpayer, I just wish our representatives and senators had made better use of their discussions by devoting as much time to looking for ways to save as to how to spend.
James Jonely is general manager, Alsco Inc., Grand Junction.