Three Reasons Why IT Efficiency is Key to Your Hospital’s Survival in the New Healthcare Economy

Guest byline by Doug Coombs director, healthcare strategy, for RES.

The healthcare industry is facing an uncertain future. Governments, employers and patients are putting pressure on healthcare providers to reduce prices even as costs continue to increase. While hospitals differ in size, specialty and many other variables, it will often be an ongoing commitment to operational efficiency that will differentiate successful providers from those that fail. Increased operational efficiency can improve the fiscal health of a hospital by improving its adherence to medical standards and improving its patient satisfaction scores.

One change that can dramatically increase operational efficiency is to simplify complex, frustrating, and outdated IT systems and replace them with processes that maximize usability, reach, and speed. The healthcare industry, like many others, is becoming increasingly reliant on computer technologies both in patient treatment and day-to-day operations. It is vital that these IT systems help, not hinder, a hospital’s commitment to operational efficiency.

Hospitals are predicted to undergo massive shifts in the near future. David Houle and Jonathan Fleece estimate that one-third of all hospitals in the United States will close or be reorganized into another kind of healthcare provider by 2020. [1] A range of factors are expected to contribute to this shakeup, from the exorbitant cost of healthcare in the United States to patient dissatisfaction with inefficient service and long wait times at hospitals.[2] In no uncertain terms, it is a critical time for the well-being of these healthcare organizations.

The shifting health care landscape

Regardless of whether a nation’s healthcare system is private or public or what country it is based in, they all share similar challenges. NYU Wagner School of Public Service professor of health policy Victor Rodwin notes, “You have new technologies, aging populations and more chronic disease. More and more treatments are possible. You have rising demands from consumers and patients to try everything.”[3] These factors all contribute to ballooning costs for healthcare in general and for hospitals in particular. More patients are demanding more treatments with the latest, most expensive technologies. Put all of these factors together and the demands for healthcare are straining the present capacities of hospitals.

At the same time, answers fail to be forthcoming. Governments, as much as healthcare providers, are wrestling with how to best anticipate and address these changes. According to Arthur Daemmrich, a professor at the Harvard Business School: “Healthcare is an area where no country seems to think they have it right.”[4] The United States has recently passed the Patient Protection and Affordable Care Act, one of the most fiscally significant pieces of legislation passed in the nation’s history. Around the same time, the United Kingdom, France, Germany, and others have also updated their healthcare legislation, in some cases rather dramatically.

In response, healthcare has begun to coalesce around three major themes. Healthcare systems internationally are all beginning to stress the importance of operational efficiency, quantifying care (and reimbursement) based on evidence-based medicine, and using patient satisfaction as a metric of measuring standard of care. At the core of these challenges are often extant IT strategies and systems which cause financial repercussions and opportunity costs. The difference between successfully embracing or ignoring these factors for a large hospital in the United States means millions of dollars in reimbursements. In other nations, it could be the difference between inclusion or exclusion from the national medical network.

The true cost of operational inefficiencies

Operational inefficiencies are some of the most persistent sources of avoidable costs. Ideally, computer technology and IT solutions should reduce operational inefficiencies, but they are often a source of frustration for hospital staff. In Terry Maher’s paper on maximizing hospital capacity, he notes that “many healthcare [technology] applications are difficult to use and rarely integrated into the actual processes, so they are seldom used consistently by a frustrated staff, who see them as added complexity and inefficiency.”[5] These frustrations may distract or even waylay clinicians entirely, causing hospitals to incur significant costs. In other instances, distracted or waylaid clinicians slow the general operations of a hospital, and patients may end up in the wrong bed or not being discharged on time.

When clinician salaries are such a significant expense, hospitals cannot afford to waste the valuable time of their doctors and nurses on IT frustrations. Slow login times, slow IT helpdesk response times, and other IT lag issues reduce the amount of patient-facing time for clinicians. One five-minute log in lag per clinician per day in a 100-clinician hospital (with an estimated average salary of $100/hour) would cost a hospital more than $300,000 a year in lost patient-facing time. Multiply those five-minute events by the myriad of non-optimized IT interactions a clinician might face in a day, and these inefficiencies can quickly escalate into an even more serious expenses.

In addition, if a clinician is distracted from patient care by IT frustrations, they may fail to take the appropriate action with a patient in a timely manner due to a backlog of tasks. Something as seemingly simple as assigning a patient to the wrong standard of care, or failing to discharge a patient on time may incur a huge cost for the hospital. For instance, the difference between maintaining an ICU bed versus a Med/Surg bed is conservatively $1,000 a day. If a patient is incorrectly placed in ICU only once per day, that’s $365,000 a year in inefficiency costs. In addition, a delayed discharge may result in an unpaid day or even a completely un-reimbursed visit for the hospital. An average unpaid day costs $2000 per patient.[6] One failure to discharge a day, if the hospital only loses the reimbursement for the extra day, adds up to over $700,000 in costs per year.

Failures to move patients to the correct bed, as well as failures to discharge patients on time, contribute to slower admittance rates. These factors prevent hospitals from running at their optimum levels and lead to decreases in the number of patients a hospital can serve. This slowdown leaves patients stuck in the emergency department or, when an emergency department is full, diverted to another hospital, costing the hospital that patient’s potential revenue. One $20,000 diversion a week results in $1 million dollars of lost revenue each year.

How evidence-based medicine will impact hospitals

In healthcare, the trickle down effects of IT inefficiencies can manifest themselves in several ways. The slowdown resulting from an incorrect bed placement or a failure to discharge a patient may, and often does, result in lost revenue greater than just an immediate penalty. Stricter adherence to evidence-based medicine standards means that a delayed discharge may result in a completely unpaid reimbursement. In evidence-based medicine, the patient’s treatment is dictated by their diagnosis.

Clinicians do not run tests for problems that are not apparent. Instead of running every test available – an expensive, time-consuming, and labor-intensive process – a clinician would run a pre-determined regimen of tests, based on reasonable course of action and the available evidence. Moreover, under evidence-based medicine, treatments are standardized, and reimbursement is based on those standards. Hospitals are often penalized for treatments and hospital stays that do not meet the appropriate criteria. When hospitals deviate from these standards, they risk being reimbursed at a decreased rate or even forfeiting the reimbursement entirely.

The effect of patient satisfaction on reimbursements

Patient backlog issues can also negatively impact a hospital’s fiscal health by reducing patient satisfaction. Patient satisfaction is increasingly becoming an essential metric for standard of care in medicine. In addition to influencing where patients seek care, patient satisfaction can be used to determine reimbursement levels. In many of these new reimbursement schedules, a hospital’s overall patient satisfaction rating can affect all reimbursements, not just the ones for patients who have poor satisfaction experiences.  For a busy hospital the loss of even 1 percent of its government reimbursement will result in millions of lost dollars.

Improving patient satisfaction does not necessarily require expensive investments in construction or staffing as much as it requires a rearrangement of priorities. Often, IT systems and services are at the core of what needs to be changed. The New York Times reports, “Many hospitals are finding that small changes, like having nurses visit rooms hourly, often improve patients’ responses to the surveys more effectively than do new hotel-like amenities.”[7] And each moment spent dealing with a technological mishap automatically reduces the amount of patient-facing time clinicians have available. In addition, one of the most common complaints that patients cite – that could be improved by addressing the same problems that result in failures to discharge patients promptly – is the long wait time that plagues most health facilities.

Simple (IT) solutions to a complex problem

While these issues seem to stem from a lack of sufficient resources, the problem is often about logistics and efficiency rather than physical capacity. In particular, technology-induced inefficiencies are relatively easy to address. Increasing patient-facing time for clinicians is only a matter of streamlining their other responsibilities. Moreover, the shortage of beds in a hospital can also be addressed as an efficiency problem. Maher notes, “[…] some administrators consider their institutions to be at full capacity when their census is 85% of staffed beds.

So, for many the looming bed crisis is not necessarily insufficient capacity, but inadequate patient management systems.”[8] More and more, the systems that Maher refers to are computerized, and if clinicians are frustrated by the applications and programs a hospital uses or if IT problems delay a step-down or discharge, the whole system gets backlogged.

Here, these high complexity situations incur high costs without any benefit to patient care. Having a streamlined, easy-to-use, and highly responsive IT framework prevent these issues from arising in the first place and could accelerate the resolution of issues that do arise.

[1] David Houle and Jonathan Fleece, “Why one-third of hospitals will close by 2020,”, March 14, 2012. Accessed September 20, 2013.

[2] David Houle and Jonathan Fleece, “Why one-third of hospitals will close by 2020,”, March 14, 2012. Accessed September 20, 2013.

[3] Corey Flintoff, “Like The U.S., Europe Wrestles With Health Care,” NPR, March 29, 2012. Accessed September 20, 2013.

[4] Flintoff, “Like the U.S.”

[5] Terry Maher, “Discharge Focus Puts Hospital Capacity Issue to Bed,” USC Consulting Group. Accessed September 20, 2013. .

[6] Kaiser Family Foundation, “Hospital Adjusted Expenses per Inpatient Day,” The Henry J. Kaiser Family Foundation. 2011. Accessed September 20, 2013.

[7] Jordan Rau, “Test for Hospital Budgets: Are the Patients Pleased?,” The New York Times, November 7, 2011. Accessed September 20, 2013.;

[8] Maher, “Discharge.”

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