Instead, hospital CFOs should focus on finding savings in two of the most controllable areas of expenditures: utilities and supplies, says Tom Lake, director of group purchasing for the Western Healthcare Alliance in Grand Junction, Colo.
WHA is an alliance of 26 rural hospitals and providers in Colorado that have combined their resources to improve operational efficiencies and clinical measures — all while saving money along the way.
Although some may say finding savings in supplies and utilities is difficult because those areas are explored frequently, Mr. Lake disagrees. He says there is always some branch or process within the hospital’s supply and utility expenses that can be altered, changed or revamped to save money. Here, he gives a simple, non-labor cost saving example in each area.
1. Utilities. Example: Water for laundry. Every year, hospitals and other healthcare facilities produce more than 5 billion pounds of soiled linens. Although laundry is commonly outsourced, many hospitals still do it themselves.
Laundry also consumes large quantities of water, and Mr. Lake says there are a plethora of federal regulations on how hot water must be in order to do laundry safely and hygienically — generally, the water temperature must be 160 degrees Fahrenheit. However, a fairly inexpensive investment could save hospital utilities while still meeting the desired health and safety outcomes.
He recommends hospitals wash laundry with colder, ozonated water, a project Mr. Lake says could cost as little as $3,000 for the right equipment. Using ozonated water is a faster process that still sterilizes laundry but at a colder, and less costly, temperature.
“Ozonated water could reduce wash temperatures by 50 to 60 degrees, so instead of using 160-degree water, you can get by at 110 degrees,” Mr. Lake says. “With hundreds of pounds of laundry for every hospital, that’s a huge savings on the utilities side.”
2. Supply. Example: Exam gloves. No matter how big or small organizations are, hospitals go through thousands of exam gloves every year. Mr. Lake says using a group purchasing organization to buy exam gloves has saved many of the rural hospitals within the WHA thousands of dollars.
“A small hospital would maybe spend $10,000 on exam gloves for the year,” Mr. Lake says. “If the hospital works its way into the right GPO, it will aggregate volume, and you can then buy supplies at a million-dollar level.”
These examples are especially relevant for smaller community hospitals, which do not have the big economies of scale seen at larger hospitals and health systems.
“For some facilities, they are seeing 10 to 15 percent in savings through GPOs,” Mr. Lake says. “For a hospital that has $10 million of supply spending, you’re talking about $1 million in savings. That comes to a huge chunk of the budget, and that can go a long way to help avoid laying people off.”
What are some other examples of hospitals saving money on really simple measures? Email Bob Herman at bherman@beckershealthcare.com to share your thoughts.
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