Rising Costs

Economic Realities

The economic landscape of healthcare is currently undergoing tremendous change, with rising costs and decreasing reimbursements delivering a severe financial blow. From 2006 to 2010, rising costs accounted for a full 63% of the overall growth in hospital spending.1 Moreover, since 2010, hospitals have had to withstand nearly $122 billion in new cuts.2

A significant factor in these changes is the Patient Protection and Affordable Care Act, which affects hospitals and private practices alike. As part of the PPACA, cuts in government funding of uncompensated care are intended to be offset by payments by Medicaid or Medicare. However, in states slow to rollout health care reform, or which have chosen not to adopt the Medicaid expansion, these cuts are not being offset, resulting in an additional financial hit on medical practices in those regions.3

In response, healthcare leaders are taking stock of every aspect of their practices, looking for ways to maintain the highest quality patient care, while simultaneously reducing costs. This is the motivation behind the drive towards efficiency and systems integration. In 2014, the Health Research & Educational Trust reported that over half of hospital C-suite level executives surveyed gave “improving efficiency through productivity and financial management” as a top priority, and nearly a third cited “integrating information systems.”4

In this climate, it is important to focus on the expenses that can be controlled. (See: What Your CFO Wishes You Knew about Staff Scheduling.) Staffing, as the largest percentage of operating costs, is a prime area of focus for improving efficiency. Nowhere is this more apparent than when attempting to align staff and resources with patient load and acuity.

Carlos’ Headache

Carlos* is the Business Administrator of a large anesthesiology practice. In conjunction with the Anesthesiology Chairs of the different hospitals that his practice serves, he is working to see where inefficiencies are costing them money. As he heads to this evening’s meeting, he is wondering what they will be able to figure out. As far as he can see, they are surrounded by technology that should be making their lives easier, but none of it seems able to communicate with their other systems.

Just yesterday, they had a problem with a cardiac case being delayed because a liver specialist had been scheduled erroneously. As it happened, one cardiac specialist was in surgery and the other was across town at another facility. The schedulers had followed their staffing quotas but they were not able to account for a case load requiring more than two cardiac specialists.

The result had been a significant delay while they scrambled to find a locum with the proper credentials. Luckily, the patient was doing well, but it was a closer call than Carlos liked to see. On top of it, the operating room was backed up for the rest of the day – and all the surgeons on the unit seemed to make it their business to point out to him that they didn’t like their time being wasted.

Carlos thought of what the cost was to having the operating room underutilized, and he didn’t like it, either.

Patient Demand Forecasting

Medical practices, despite careful planning, frequently struggle to ensure they have the right provider mix for each day’s patient load. Both patient mix and provider availability change from day to day, often at the last minute, and traditional scheduling methods are unable to account for this level of variability.

Patient demand forecasting refers to the technological capability to handle exactly that situation. By linking staff scheduling to patient data, as well as to provider credentials, patient demand forecasting gives practices the ability to adjust their provider schedule based on real-time changes in patient load.

Patient acuity, procedure, and credential requirements can all be pulled automatically from the EHR and compared to scheduled providers. Gaps in credentials or provider count can then be adjusted, making attaining a high level of room and staff utilization feasible. In addition, patient demand forecasting has been proven to have a positive impact on employee satisfaction, staff retention, and – most important of all – patient outcomes.

Patient demand forecasting represents a major change in thinking from traditional methods of planning and scheduling. Yet, as a response to the current economic trends in healthcare, it is a change that will have a positive impact on your practice for years to come.

*Names and situations presented throughout this post are meant to serve as fictional examples only. They have been created as composites representing common situations, but do not reflect specific individuals or organizations.

This post is an excerpt from the OpenTempo report on Patient Demand Forecasting.


1 “The Cost of Caring,” American Hospital Association. 2012, http://www.aha.org/content/12/CostofCaring2012.pdf.
2 “Cumulative Cuts,” American Hospital Association. http://www.aha.org/content/14/cumulative-cuts.pdf
3 Teresa A. Coughlin, et al, “An Estimated $84.9 Billion In Uncompensated Care Was Provided In 2013; ACA Payment Cuts Could Challenge Providers,” Health Affairs Vol. 33, No. 5 807-814 (2014): 1. http://content.healthaffairs.org/content/33/5/807.abstract?=right
4 Health Research & Educational Trust, “Building a Leadership Team for the Health Care Organization of the Future.” 2014, http://www.hpoe.org/resources/hpoehretaha-guides/1613