How calculating the cost of a minute of hospital care saves money, improves outcomes

University of Utah Health Sciences has become well known for its data-driven approach to self-examination. Recent findings from the health system include an association between physician ratings transparency and improved outcomes, a bold move that few other hospitals have followed through on. In a new study published in the Journal of the American Medical Association, researchers from the hospital found crunching the numbers to get into the nitty gritty of hospital expenses — from the cost of a single bandage to a minute of a nurse's time — is effective for improving patient outcomes and cutting costs. The organization's value-driven outcomes program gets specific about costs, from materials used to the time different clinicians spend with patients.

"In order to provide higher value care, we need to better understand our costs," lead author Vivian S. Lee, MD, PhD, senior vice president at University of Utah Health Sciences and CEO of University of Utah Health Sciences, said in a statement. "We're making the case that an organization can quantify and manage value, and that's going to be a huge part in improving the healthcare system."

The paper addresses inefficiencies in three of the most commonly performed procedures — joint replacement, in-hospital laboratory testing and sepsis management. After calculating the total inpatient and outpatient costs across all departments for each procedure, as well as the cost variability for Medicare severity diagnosis, and care cost and composite quality indexes, the hospital saved up to 11 percent on the procedures. Among other factors, the researchers attribute the savings to putting the exact costs of procedures, and where those costs come from, in front of hospital staff.

The authors write variability in care delivery is the area with the greatest opportunity to improve quality and reduce costs through standardization and process improvement. By thoroughly analyzing costs, the underlying factors that result in that variability are identified, allowing for targeted interventions.

"The capacity to measure the quality and cost implications of interventions in real time facilitates physician engagement and assurance that cost-reduction initiatives can lead to quality improvement and vice versa," they conclude.

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