August 19, 2009
Can quality improvement and cost reduction go hand in hand? Definitely, say the authors of a new report from the Institute of Healthcare Improvement (IHI).
In an exclusive interview featured this month on HFMA's Healthcare Financial Pulse project web site, the IHI's Maureen Bisognano, a co-author of the report, makes the business case for quality improvement and tells CFOs how they can drive the process of change.
The Business Case for Quality Improvement
A hospital's mission to do the right thing has often been the driving force behind quality improvement efforts. But healthcare finance leaders can also make a strong business case for quality improvement efforts, especially when those efforts help to reduce inefficiencies and waste.
In "CFO: You Can Reduce Operating Costs While Improving Quality," IHI executive vice president and COO Maureen Bisognano states that most waste appears off a hospital's budget in the form of delays, failures to hand off patients efficiently, and duplicated efforts. A CFO called upon to reduce costs might be tempted to reduce budgets across the board. But an alternate route is to redesign processes to drive waste out of the system while improving the quality of patient care.
Bisognano cites the example of patient transfers. In the average hospital, a patient will be transferred two, three, or even four times during hospitalization. Each transfer presents the potential for waste: nurses must rewrite medical records, medications must be stocked on the new unit and dietary trays redirected, linens and supplies are often discarded. "The whole transfer process is a waste," says Bisognano, "but it doesn't show up on anybody's budget."
Driving the Process of Change
CFOs need a new set of "waste glasses" to see where waste is occurring, says Bisognano. Once they identify waste, they can make the changes that will produce "dark green dollars"—actual savings that accrue to the bottom line.
To drive the process of change, CFOs should also be pushing aggressively to understand the connection between clinical quality and cost. When improvements such as getting patients into the right beds the first time can be translated into dollars, CFOs can make the business case for quality.
HFMA offers numerous resources to help CFOs drive process improvements that reduce cost and improve quality. HFMA's CFO Forum recently offered "Calculating the Financial Impact of Reducing Length of Stay" to its members. The article describes a step-by-step sensitivity analysis for identifying the viability and financial impact of reducing length of stay for different service lines and different payer mixes. And new to this fall's Revenue Cycle Strategies Conference is a special panel discussion providing the CFO perspective on the revenue cycle. The discussion will focus on how CFOs can use key revenue cycle leaders as their eyes and ears, fostering organizational nimbleness in identifying and responding to opportunities for change.
Also New on the Pulse Web Site
Also featured this month on the Healthcare Financial Pulse site are tips on pursuing directed retail, an emerging source of demand for tax-exempt healthcare bond issues.
Directed retail is a large investor class of those who purchase on behalf of small individual investors and for their own accounts. In "Better Pricing on Your Bond Issue? Think 'Directed Retail,' Ziegler's Kerry Rudy and David Johnson note that this investor class is often interested in bonds with shorter maturities, which are often of less interest to large investors. In addition to providing tips on pursuing directed retail investors, the article provides a link to Rudy and Johnson's recent publication on steps to better bond pricing.
HFMA's Healthcare Financial Pulse sponsors, McKesson and RelayHealth, are also offering provider case studies on the project web site. And check out the News section of the site, which currently offers links to recent reports from the three major rating agencies on the fiscal strength of not-for-profit hospitals and health systems.