On Demand Webinar | Overview | Cost Reduction
One of the highest costs in any healthcare organization is the pharmaceutical spend, yet there often exists a dichotomy between the purchasers and the end users, which leads to unexpected expenses that are poorly controlled.  This webi...
Save
Live Webinar | Cost Reduction
One of the highest costs in any healthcare organization is the pharmaceutical spend, yet there often exists a dichotomy between the purchasers and the end users, which leads to unexpected expenses that are poorly controlled. This webinar wi...
Save
Article | Cost Reduction

Virginia Mason Institute transformation expert says healthcare systems can reduce waste and improve their margins

Article | Cost Reduction

Virginia Mason Institute transformation expert says healthcare systems can reduce waste and improve their margins


Rhonda Stewart, senior transformation sensei, Virginia Mason Institute

  • The focus on reducing waste has contributed favorably over the years to margin at Virginia Mason Institute, a two-hospital, multi-clinic system in Seattle.
  • A large driver of healthcare costs is the waiting and processing, according to Virginia Mason Institute Senior Transformation sensei Rhonda Stewart.
  • Reducing waste can be done in any processes, within finance, administration and within hospitals and clinics.

Tips for eliminating waste in healthcare settings to cut costs and improve the patient and employee experience were shared by Rhonda Stewart, senior transformation sensei with Virginia Mason Institute, during a presentation June 26, the second day of HFMA’s 2020 Digital Annual Conference.

The focus on reducing waste has contributed favorably over the years to margin at this two-hospital, multi-clinic system in Seattle, according to Stewart.

Among the examples she shared were:

  • How reducing the number of steps nurses take by 750 miles per day freed up RNs’ time by 250 hours, increasing their time at the patient bedside by 60%.
  • How reducing surgical instrument setup time from 19 minutes to 10 seconds and operating room turnover from 68 minutes to 10 minutes saved costs, reduced time and resource waste and improved patient metrics.

“By reducing nursing walking distance, by reducing the setup time for instruments for surgery, changing our rooms quicker, all of that really calculates into cost,” Stewart said. “But at Virginia Mason we’re not really focused on cost, we’re mainly focused on removing waste and improving the metrics for the patient.”   

While the examples she gave were on the clinical side, Stewart said, “We can reduce waste in any processes, within finance, administration and within our hospitals and clinics.”

What is waste?

The Virginia Mason Quality Equation — Q = [A x (O+S)÷W] —  doesn’t work mathematically, but it makes sense when thinking about appropriateness, according to Stewart, who explained that in the equation, Quality equals Appropriateness times the sum of Outcomes and Service divided by Waste.

Typically, that equation is divided by cost, but changing the focus to waste instead works because it improves quality by removing wasteful costs and burdens on both employees and patients.

Waste is any task or item that does not add value from the perspective of the customer, according to Stewart. Non-value-added activities include:

  • Work required to comply with regulations and activities
  • Work that can be stopped immediately with no detrimental effect (this is the category that draws the focus of leaders at Virginia Mason Institute)

Four questions to determine added value

Asking four questions can help determine whether a process or procedure adds value.

  1. Does the task contribute to meeting customer needs?
  2. Is the customer willing to pay for the task?
  3. Does the customer want or need the service?
  4. Is the task done right the first time?

For example, leaders at Virginia Mason Institute considered the appropriateness of doing MRIs on every patient who had uncomplicated lower back pain.

In consultation with employer groups, leaders posed the question, “Do we really have to wait for a referral for the MRI to become available, maybe three weeks later, while this patient is off work and racking up more and more claims that are expensive and probably won’t be covered.

“We had to make some really tough decisions because … radiology services are often … cash cows,” Stewart said. “And to say, ‘We’re not going to do any MRIs for uncomplicated lower back pain for those certain diagnosis codes,’ and to set up a system to prevent us from ordering those … you’re now going to remove all this revenue off the books.”

In the case of an MRI for certain diagnosis codes, the answer was “no,” according to Stewart. “[Patients] just want to feel better; they just want to get right to physical therapy and start to do their exercises and start to feel better right away versus spending time waiting.”

Stewart characterized patients waiting for procedures or services as “the waste of waiting.”

Challenge: Think differently about reducing cost

A large driver of healthcare costs is the waiting and processing, according to Stewart, who challenged Digital Annual Conference attendees to consider how to do things more efficiently.

“I want to inspire you to think about reducing cost differently,” Stewart said. “Not to do the same old thing, where we cut 10% and hope and cross our fingers that it’s going to happen this year, but by really having focused improvement activities that eliminate waste.”

About the Author

Deborah Filipek, HFMA Senior Editor,

is a content editor with HFMA.

Advertisements

Related Articles | Cost Reduction

How To | Supply Chain Management

A 5-step process to achieve and sustain physician preference item cost reduction

To identify and reduce the costs of physician preference items, hospitals and health systems should use a five-step process that begins with cleaning and organizing PPI cost and utilization data.

How To | Practice Improvement

5 high-leverage areas for improving medical group financial performance

By examining five high-leverage areas within medical group operations, health systems can identify improvement opportunities.

How To | Financial Sustainability

Beyond COVID-19: A guide to economic recovery for health system CFOs

As healthcare CFOs prepare fro the aftermath iof the COVID-19 pandemic, they should adopt a new mindset for addressing strategies around human capital, revenue recovery, cost reduction and capital investment.

Article | Analytics

HFMA's Digital Annual Conference continues Aug. 12 and Aug. 14 with more virtual education for healthcare finance professionals

HFMA's Digital Annual Conference continues Aug. 12 and Aug. 14 with a focus on optimizing performance with the latest KPIs, using analytics strategies to lower cost and maximize revenue and using behavioral economics to engage patients.