New Approaches and Technologies for Improving Cost Performance in Health Care

December 26, 2018 1:45 pm

A seven-hospital system lowered costs and reduced readmissions by managing hospital overstays.

Hospitals and health systems are constantly looking for ways to reduce readmissions while also directly lowering costs and improving care. Long Island Health Network, a seven-hospital system in New York, accomplished that goal by working to lower overstays, with an overstay defined as any length of stay (LOS) that exceeds the case-mix-adjusted expected LOS by two or more days. a

Given that hospitals also are looking for new ways to manage the flow of patients through their facilities, while payments are tied to per-case rates, overstay cases represent an opportunity for improving cost performance. As described here, the straightforward approach that Long Island Health Network used for identifying overstays, intervening to reduce the days of care, and measuring the results can be implemented by any hospital.

From the summer of 2016 to October 2016, quality management committees evaluated reports going back to 2014 showing the volume of patients who experienced overstays, the impacts of the overstays, and the suspected causes. In the third quarter of 2016, the health system created a marker in its unified analytic and reporting system to enable healthcare data analysts and nurse quality managers to view overstay cases retrospectively so they could understand when and where they tended to occur. From the third quarter of 2016 to the second quarter of 2017, after helping the health system leadership and the leadership at each hospital understand the magnitude of the overstay issue, the team charged with overseeing the overstay-reduction initiative settled on a focused approach to the health system’s five highest-volume major diagnostic categories (MDCs), which comprise diseases and disorders of the following: b

  • Kidney and urinary tract
  • Respiratory system
  • Digestive system
  • Circulatory system
  • Musculoskeletal system and connective tissue

Patients who had died or whose conditions exhibited an extreme severity were excluded from any analysis and interventions.

Once the team retrospectively identified the patients who had overstays, they could study the rate of overstays and the factors correlated with them and take remedial steps. Steps identified that could help reduce overstays included:

  • Supporting weekend discharges and services
  • Reducing delays in discharge planning
  • Reducing delays in authorizations for home care or skilled nursing facility care
  • Discouraging outpatient testing performed during the inpatient stay
  • Moderating physician preferences for extra days of care
  • Modifying patient and family expectations

The Overstay Problem

The issue of overstays is too large to ignore. The rate of overstays across the seven hospitals in Long Island Health Network ranged from a low of 4 percent at a primarily rehabilitation hospital to as much as 9.2 percent of staffed beds in other hospitals. In other words, each day, on average, almost 10 percent of beds were occupied by patients categorized as overstays. Whereas a stay lasting up to two days longer than the CMS arithmetic mean for a diagnosis-related group (DRG) is considered to be within expected limits, patients in the overstay category occupy beds and consume resources in excess of this expectation. Many of these patients stay 11 or 13 days, when the expectation would be closer to 5 or 6 days. Thus, with these patients, the opportunities for reducing costs and improving quality, as well as for reducing readmissions, are vast, particularly when a patient is still in the hospital.

A New Approach

The process of managing overstays begins with a retrospective analysis of one year of hospital claims data targeting the five MDCs previously identified as exhibiting the highest rates of overstays. The health system classified inpatients into four discharge categories:

  • Understays—those two or more days under the Medicare arithmetic mean LOS
  • Understays within expected limits—those less than two days under of the Medicare arithmetic mean LOS
  • Overstays within expected limits—those less than two days over the Medicare arithmetic mean LOS
  • Overstays—those two or more days over the Medicare arithmetic mean LOS

This categorization of MDCs, as shown in the exhibit below, helped the clinicians at the hospitals to see how patient overstays played a role in each of the MDCs and the extent of the problem in terms of numbers of patients.

Having identified the hospital discharge claims for patients with overstays, the team performed a correlation analysis to uncover the causes of the overstays. Overstays were highly correlated with the following factors:

  • Number of consults
  • Number of preoperative days
  • Number of present-on-admission comorbid conditions
  • Admission source transfers (versus physician admission or skilled nursing facility)
  • Discharge status (i.e., home health or skilled nursing facility versus home)

The numbers of inpatient consultations for both medical cases and surgical cases were particularly revealing. Patients with overstays were much more likely to have three to six, and in some cases seven or more, consults, compared with all other cases. Clearly, the path to reducing overstay days involved addressing how and when consultations were ordered. A further analysis revealed that the overstays were clumped among certain admitting physicians and hospitalists as well. Helping these physicians to understand the implications of overstays and why the stays were higher than expected had to be part of the solution.

Although quality of care is paramount, sometimes putting a price tag on the implications of overstays can be eye-opening to the people caring for such patients and promote a cultural change in how overstays are perceived. The team looked at the ratio of cost to charges on a per patient basis for each of the categories of understays or overstays. The results provide a sharp contrast for the clinicians to appreciate the significant impact overstays can have on a hospital’s financial health.

Obviously, patients with short stays were shown to produce a positive margin. Meanwhile, however, the patients with overstays generated a considerable—even surprising—magnitude of loss. As shown in the exhibit below, among patients with circulatory problems who had overstays, negative margins amounted to almost $8,000 per patient. For such patients, each day saved would help the bottom line.

Patients with overstays also are associated with patient safety concerns and can present opportunities for improvement on the quality front as well. Each of the MDCs identified had more hospital-acquired diagnoses than did the patients with shorter stays, as shown in the exhibit below. Most cases involving overstays had twice as many hospital-acquired diagnoses per case as did their shorter-stay counterparts with the same MDC. Reducing the days in the hospital of patients with overstays would, by definition, reduce the risk of hospital-acquired diagnoses.

Finally, readmissions were strongly associated with patients who had overstays. For each of the five targeted MDCs, patients with overstays accounted for the largest share of readmissions. Identifying these patients while they are still in the hospital and knowing they are predictive of an all-cause 30-day readmission (as shown in the exhibit below) means extra efforts can be made to reduce their overstay days and provide effective post-discharge interventions when a readmission is potentially preventable.

No Single Magic Bullet

The path to lowering overstays and improving cost performance involved several straightforward efforts reinforced with periodic reports to each hospital on its progress and where it might direct more attention.

For the most part, the overstays were affected by a list of activities the hospitals were already doing. The hospitals just had to do those activities better and be more focused on patients in the overstay category. The areas of focus included the following.

Providing greater support for weekend discharges and/or services. The practices of limiting discharges on weekends and limiting availability of some hospital services to less than seven days a week can cause patients to remain hospitalized unnecessarily, affecting patient flow and hospital revenue and increasing exposure to hospital-acquired conditions.

Reducing delays in discharge planning. A focus on providing early interventions such as engaging the patient’s support network, monitoring patient medication compliance, and making prompt referrals allowed for expedited discharges. Referrals were made promptly by the hospitals even when the source of payment was unsure in the absence of medical insurance for the patient.

Reducing delays in authorizations for home care or skilled nursing facility care. Communication with outpatient facilities should occur early and involve the patient and family. Training on LOS and barriers to discharge can provide physicians with the necessary information to refer patients to the most appropriate and safe discharge plan.

Limiting outpatient testing performed during an inpatient stay. Unrelated diagnostic testing for convenience should be discouraged. It adds to the LOS, is not reimbursed, and may expose the patient to harm.

Moderating physician preferences. Creating peer-to-peer comparison reports opens the dialogue on best practices among not only specific clinical specialists but also hospitalists. Physicians can enter the expected LOS into the electronic health record, and this information should be monitored and benchmarked. The ordering of consultations also should be benchmarked to peers, and counseling should be provided to physicians with outlier performance.

Reshaping patient and family expectations. Patients and family should participate in rounding. Using a “SNAP” protocol helps to standardize the discussion:

  • Status—expected day of discharge
  • Now—what is being done today
  • Anticipated—what is scheduled
  • Plan

The issue of overstays cannot be addressed through any single action. What is required is a combination of smart use of the hospital electronic health record, ongoing improvement of professional performance, and comparisons among peers to help create awareness and a more-informed focus on these special patients.

ROI Findings

There will always be patients for whom a lengthy stay, equivalent to an overstay, is appropriate. But even a modest effort can put a major dent in excessive days of care that cost the hospital resources, impose unnecessary burdens on nursing and other staff, and expose patients to risk of hospital-acquired conditions.

Long Island Health Network’s effort to track and reduce its overstay rate produced exemplary results. Before the interventions, the health system’s overstay rate for the five major diagnostic categories discussed was never below 21 percent. Immediately after the interventions, the overstay rate fell, and after a small increase, it has since been trending downward further. In the preintervention period, 12,104 discharges were associated with 120,121 days of care. After the intervention, 10,475 days of care were saved by reducing overstays among the types of patients who had tended to experience them previously. Moreover, the readmission rate fell 8 percent, and it, too, has been trending downward ever since.

This type of intervention can be successfully performed by any hospital or health system. A retrospective review of several years of hospital discharge claims can lead to identification of an organization’s high-overstay MDCs in a straightforward analysis of LOS. A concerted effort with support from finance, quality, and operations can lead to focused activities to reduce overstays. And continuous monitoring of overstays will tell organizational leaders whether the efforts are working and identify the payoff in terms of lower costs and reduced readmissions.


a. The expected LOS was drawn from the Centers for Medicare & Medicaid Services FY18 Inpatient Prospective Payment System Final Rule showing MS-DRGs and risk-adjusted mean LOS. See “Details for title: FY 2018 Final Rule, Correction Notice, and Notice Tables” at

b. The teams charged with this effort represented the highest level of leadership including chief financial officers, chief medical officers, directors of quality, and quality improvement nurses.


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