When tackling healthcare spending, the first step is to identify where waste occurs and establish systems to monitor wasteful expenditure. Once you have the right data, you are in a position to identify where your money is going, to establish the value of that expenditure and launch methods to control any waste involved.
What Is Waste?
A Lean explanation of waste is any expenditure or activity that does not generate a return commensurate with the effort applied. Another definition of waste is "any activity or function that doesn't directly contribute towards a useful outcome." Waste includes:
- Any motion or activity that is not productive
- Moving patients, equipment and supplies unnecessarily
- Spending more on something than needed
- Correcting mistakes
- Making or storing more than is required
Data: The Means to Identify Waste
While casual observation is of some use when identifying waste, this in itself does not allow you to quantify the cost of waste. To do that, which this article supports, you need data or measurable information that allows you to assign a value to that waste. Having the right data also means you can quantify the effectiveness of efforts to reduce waste.
Key features of reducing waste are:
- the ability to quantify waste
- a plan to reduce waste
- a means to monitor the reduction in waste
In order to measure and monitor waste, a top-down approach is useful because it helps to identify the areas of highest cost, to compare costs per day between similar departments and facilities, as well as allowing you to implement controls and action plans to reduce waste.
- Overall spend: As a first step, you need to measure total spend by department or facility. Using this data will allow you to set an initial waste reduction target.
- High-cost categories: The next step is to identify the areas of greatest cost and what is known as low hanging fruit to achieve relatively easy initial savings.
- Cost per patient day (PPD): Another useful measure is to establish the cost PPD and use this information to compare departments or facilities.
- Formulary: Each department uses a different mix of products, so setting a supply product formulary per department provides means to measure spend against that formulary and to monitor exceptions.
- Spending trend: Measurement of spending trends by category and department provides a means of monitoring progress against targets.
- Assign and monitor spending limits: This information can be used to assign spending limits and provide early warning of variances.
- Order history: A useful tool for analyzing expenditure is to track order history.
Smarter Budgeting and Cost Tracking
Access to the right data represents the first step toward improved budgeting, tracking costs and identifying waste in community health centers. This information helps drive a program focused on eliminating waste, reducing costs and improving the financial performance of health centers.
Contact us at Concordance Healthcare Solutions to discover how our uCommand® and BeCompliant™ order and tracking tools can help you identify, track and reduce waste.