Pinching pennies in the ED: Impress administrators with creative solutions

Cutting costs may be easier than you think

ED managers must get creative with cost-cutting, says Sandra M. Schneider, MD, FACEP, chair of the department of emergency medicine at the University of Rochester in NY. "It’s clear that reimbursement for emergency services is only going to [decrease]," she says. "Everyone is going to be paying us less, so we will only have [fewer] dollars to work with. Keep in mind that the hospital which subsidizes us is also in a bind, and will probably not continue to subsidize an ED running a deficit."

Take advantage of the ED’s unique position, recommends Cheryl Grandlich, RN, MSN, patient care director for the emergency and trauma center at Froedtert Memorial Lutheran Hospital in Milwaukee, WI. "The ED is basically a separate entity from the rest of the hospital. We are more encapsulated and almost our own business. So in some ways it’s easier for us to look at specific revenues and cut costs," she says.

Cost is only one outcome

Process improvements should be considered along with cost issues, urges James Espinosa, MD, FACEP, FAAFP, chairman of the department of emergency medicine at Overlook Hospital in Summit, NJ. (See related article on improving efficiency along with cost cutting on p. 52.) "There are four types of outcomes to consider with any medical process: medical, patient satisfaction, cost, and quality of life," he explains. "The problem is that cost tends to be the easiest [measurement] for people to get their hands around."

If you affect one outcome, you have probably made an impact on the other outcomes, notes Espinosa. "So unless we’re simultaneously studying the other three outcomes, we may not know what has happened," he says. "Cost should be studied as seriously as any other outcome, but it should be studied in the context of what’s happening in other areas."

Cutting costs without attention to process reengineering is dangerous, says Espinosa. "We could attempt to reduce cost and improve medical outcomes at the same time. But if all we’re looking at is one stream of data, and not the others, we are on dangerous ground," he says. "We ought to assume there are going to be some changes in medical outcomes, quality of life, and patient satisfaction."

Don’t cut costs without considering the impact on care, Espinosa stresses. "Improve clinical care and allow costs to follow," he says. "To say we’re over budget so we need to knock down labor costs by 10%,’ without having process reengineering, is already dangerous."

Instead of reducing labor costs, it may be a better strategy to invest in the ED to increase volumes, says Espinosa. "You may have to spend money to save money," he explains. "Cost cutting needs to be part of a well-thought-out, rational business plan. When QI teams are tasked only with cost reductions, it could have a deleterious effect on quality of care."

Demonstrate money saved

It’s essential to demonstrate dollars saved to administrators, emphasizes Schneider. "You’ve got to do it every single way you can, and do it repetitively," she says. "You need to continually bombard them with graphics. To accomplish this, you need to frequently meet with high-level administrators. Also, learn how the business world presents this, using language they understand, because many administrators are MBAs."

Many EDs are experiencing higher volumes and revenues are dipping, Schneider notes. "You need to portray that data in several different ways. You need a graph that says volume is going up and revenue going down, a graph showing revenue per patient, and also a graph that says if the average price-per-patient was what it was three years ago, this is how much money we’d be making now."

ED managers should be held accountable for volume, costs, and efficiency only, says Schneider. "We aren’t accountable for what insurance companies are doing with their prices," she explains. "If that’s the case, we should be there when contracts are being negotiated."

When Premier Healthcare Services polled hospital administrators, asking what improvement they most wanted in EDs, the number one response was cost containment, reports Tom Syzek, MD, FACEP, associate director of risk management for the Dayton, OH-based group. "It’s not something they commonly bring up when talking to you. But realize they are under tremendous pressure from their customers, including managed care plans and major employers, to deliver quality care with lower costs," he says.

Even if administrators don’t raise the issue, bring it up yourself, Syzek urges. "This demonstrates to them that you are a good partner with them, and helps continue, cement, and enhance your contracting ability as an ED group," he says.

Here are several approaches for cost-cutting in the ED, encompassing clinical care, supplies, staffing, and risk management:

Reduce unnecessary diagnostic testing. "Two areas where you can cut costs without compromising patient care are radiology and lab tests," says Syzek. "With every study you order, ask yourself: Is this necessary for patient diagnosis or treatment? Or is it something you are simply doing out of habit because of something you were taught in the past?"

By eliminating unnecessary films, you can save thousands of dollars, says Syzek. "For instance, there are very few indications left at all to do skull films, [lumbar spine] films, and rib detail films," he notes. "Research is ongoing on how to do cost-effective radiology without compromising patient care. Pay attention to the literature, because it backs up what you can safely delete in your workup."

Look critically for ways to eliminate laboratory tests, Syzek recommends. "It may be a kneejerk reaction to do CBC, electrolytes, cultures, and arterial blood gases," he says. "For patients with a kidney infection who are going home, do they really need blood cultures, is it really going to add anything to your urine culture and urinalysis? The evidence is showing [that it probably won’t]."

Benefit from the cost savings of an observation unit. ED observation medicine is where the future of cost containment lies, stresses Syzek. "Four diagnoses have been shown to be less expensive than hospital care in the observation unit: ruling out myocardial infarction (MI) for chest pain patients, asthma, certain infections, and congestive heart failure," he says. "The charges and costs for these can be greatly reduced by a tightly run, protocol-driven observation unit. Even if these patients do end-up being admitted, it will be cheaper in the long run because of decreased length of stay."

Coordinate with home health care. Home health care should be closely tied to ED processes, Syzek recommends. "So if you know all a patient really needs is home health care with home IV antibiotics, walkers, hospital beds, or medications that need to be administered by a nurse, there should be a quick way to access these services right out of the ED instead of getting admitted," he says. "Otherwise, if a patient has a stable pelvic fracture and just needs home care while recovering, they will be admitted if you can’t access those services."

Use bedside qualitative cardiac markers. "We are studying their effect on cost, patient satisfaction, and medical outcomes," reports Espinosa. "They are providing us real-time myoglobin, Troponin I, and CKMB. For ruling out the low-risk chest pain patient, we should be able to reduce LOS [length of stay] from an average of 11 hours to 6.5 hours, because these markers come back positive in five minutes and negative in 15 minutes."

Costs are also cut in half, says Espinosa. "We already have the advantage of not admitting that patient, which reduces costs, but now we will decrease costs by at least half again," he notes. "Patient satisfaction may also improve because they get to go home sooner, and the medical outcomes seem to be no different."

Invest in a pneumatic tube system. Overlook’s ED switched to a pneumatic tube system, which sends medications from the pharmacy to the ED through a chute, eliminating the need for transport. "We have reduced the cost of medications because they are more accurately charged by going through the pharmacy, than by walking back and forth. We are also able to reduce the burden of storage," says Espinosa. "In addition, there is less shrinkage. At the same time, we reduced cycle time for medications to be acquired."

The pneumatic tube system has saved $120,000 annually for the past two years in increased capture of charges, Espinosa reports. "That required an investment of money by the hospital to install the tube," he notes. "However, the return on the investment was accomplished long ago."

Provide cash incentives for employees. Monetary incentives for employees are a good way to generate good ideas for saving money, says Richard Garrison, MD, FACEP, medical director for emergency services at Good Samaritan Hospital in Dayton, OH.

For instance, employees could receive cash incentives for pointing out that a certain supply item was wasteful or expensive and offering a solution, Garrison suggests. "If that idea represented X number of dollars savings, then the employee might hypothetically receive 5% of that proven savings as a reward," he says.

"Those who do the jobs know the ways to save cash and time," he explains. "Rewarding this with part of the savings just makes good sense and rewards people’s egos for using their heads. It also makes for better management/employee relations."

Switch to shorter shifts. "The problem isn’t simply staffing, it’s appropriate management of capacity to demand," says Espinosa. "Typical cost-cutting moves tend to be slashes across the board, such as cutting a person’s position."

Overlook’s ED has created shorter shifts for physicians, Espinosa explains. "They were willing to trade this for a different model of quality of life, being at the hospital less," he says. "However, physicians will stay longer than their new shorter shifts, if there is heavy volume."

Those extra hours are in addition to budgeted hours, Espinosa notes. "So if you were only thinking about reducing costs, this would seem crazy. But if you look at the ratio of hours spent to volume in the ED, you find we have increased volume to our ED by 15%. So, actually, our efficiency, in terms of patients seen per hour, has gone up dramatically," he says.

Put staff on call for double coverage. Instead of continuous double coverage, put staff on call, recommends Schneider. "Clearly, the most expensive thing in the ED is labor," she says. "If you’re doing double coverage because 50% of the time you need an extra person there for six hours, you are continuously paying for two people. If you put an individual on call, your costs would be halved."

During periods of heavy volume, double coverage should be continuous, says Schneider. "For example, we know that in January and February we are really busy, so [staff] would be assigned to a shift, but during other periods they are on call," she explains. "If you assume that a physician costs roughly $100 an hour, and you can eliminate three eight-hour shifts a week, you save $2,400 a week."

Use less expensive pharmaceuticals. Make staff aware of the cost of various pharmaceuticals, recommends Schneider. "Even something as simple as posting the difference between a high-cost and low-cost antibiotic will certainly cut costs," she says. "Since a fair amount of our business is free and uncompensated care, if you are routinely using a low-cost antibiotic, it not only saves on patient out of pocket, but for those people who don’t pay, it’s a low-cost alternative for the ED."

Orally administering antibiotics is also a cost savings, Schneider notes. "Giving the same antibiotic IV as opposed to orally, [creates] a dramatically different cost. We often give IV drugs just because we have an IV in," she says. "You are not advocating using a different product, just giving the same product in a different way."

ED physicians should look closely at their prescribing habits, with the goal of prescribing the least expensive, effective drug for the patient’s condition, says Syzek. "Why use an expensive antibiotic when a $5 antibiotic will do?" he asks. "Three areas where there are very expensive drugs and a cheap alternative are antibiotics, anti-inflammatories, and antihypertensives. We are in charge of millions of prescriptions nationally in these three areas. By looking at evidence-based medicine, using the least expensive drug will add up to a lot of savings."

Use a database for insured patients. "Insurance companies have made their database available to us, which tells us which patients are seeing which doctors, which pharmaceuticals they’ve had filled, and when they’ve had certain diagnostic tests," says Schneider. "That way, we don’t duplicate a CT scan or give them an antibiotic when they’re already on one."

Switch to electronic charting. "In terms of data acquisition for billing, it doesn’t cut down on costs in the front end, but it does cut costs in the back end," says Schneider. "All the pages are together, the charts don’t get lost, it’s easy to archive a chart, and if I need to pull up a chart it’s right there. You do get a lot of cost recovery because you don’t lose charts and there are no incomplete charts."

Add trauma activation fees. "Our goal is not only cutting costs, but improving revenue," says Grandlich. "To increase our trauma revenue, we developed trauma activation fees, which we were not previously charging. This recoups the cost of having 24 hours of CAT scan, x-ray, and consulting services. The fees depend on the severity of the patient, and are included as part of their ED charge."

Examine supply charges. "We went through all of our equipment and supplies and looked at what they were costing the hospital, to make sure they were in line with what we were charging the patient," says Grandlich. "In some cases, we were actually charging less than the hospital was paying, because the charges were never updated with inflation or changes in vendors."

Get best prices from vendors. Contact various vendors to find the best price for each piece of equipment, says Grandlich. "We were able to significantly cut costs with our orthopedic supplies, such as knee immobilizers, by choosing the one that fit our usage at the best possible cost," she explains.

Costs were cut by following up with problems, Grandlich says. "If we got defective items, we’d send them back and complain. In some cases, the vendor would give us 10 free items back because we had a problem. Many times, vendors will also give volume discounts, but a lot of times people just don’t bother to ask about this," she notes.

Standardize equipment. "We had 52 different glove types in the hospital and we reduced that to several different types," says Grandlich. "We were able to get discounts for purchasing in bulk quantities, so that was a cost savings. Previously, specific physicians wanted specific gloves, which would be twice as expensive but we ordered them just because they were used to that brand or that vendor was courting them."

Eliminate excess shelf stock. "We cut down our par levels to the bare minimum," says Grandlich. "On a daily basis, we tracked our usage of supplies like IV solutions, and plotted that out over a couple months. That way, we were able to stock what we needed, and not have equipment sitting on the shelves. If you are not using those supplies, you have a lot of money tied up sitting on the shelf."

At Mercy Health Partners, a task force is focusing on reducing costs of supplies in the ED. "We are looking at which supplies we don’t use any longer, such as suction catheters, or major trauma kits which are outdated, so that we can return them and get credit," says Kathy Johnson, RN, BA, director of emergency/ambulatory services Mercy Health Partners in Springfield, OH. "We are taking a long, hard look at how we can be more judicious in our use of supplies, and we’re hoping for a 5%-10% savings."

Audit charts for charges. At Mercy’s ED, a part-time ED nurse was hired as a billing specialist. "She audits 100% of our charts for correct charges to make sure that everything was correctly billed," Grandlich says. On a monthly basis, the nurse has captured approximately $200,000-$300,000 in charges, she reports.

A nurse was selected because of the benefit of clinical knowledge, Grandlich notes. "That person is technically overqualified for that type of position, but a nurse knows how to read the charts and knows what is done in the ED," she says.

In some cases, patients were not charged at all, or charges were missing, says Grandlich. "Before we hired her, we tried other alternatives to get the charging improved on the nursing end, but nothing worked," she explains. "We tried revising our charge sheets to make it simpler, audited every chart, and gave feedback to the nurses. But because of the busy nature of the ED, nurses spend more time with patients than paperwork, and that tends to be pushed to the end of the shift."

To justify the new position, the nurse initially worked on a trial basis, says Grandlich. "We paid the nurse her regular staffing hours as a staff nurse, and on her days off we’d pay her to come in to do the chart auditing," she explains. "Hospitals are looking at cutting FTEs, not adding new positions. But when you look at the savings, it pays for her salary many times over."

Restructure skill mix. "We have decreased our RN hours slightly, but increased our paramedic hours to revamp our skill mix," says Johnson. "Paramedics will be working as partners with the RN in collaboration for the patient’s care, working under the direction of the RN. We will realize a significant savings by going to this model."