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How is it that, in the worst economy since the Great Depression, we’re experiencing one of the biggest hospital construction booms in history?
Why have the nation’s hospitals, which pledged to the White House they would save $200 billion over the next decade, borrowed $144 billion for new construction over the last four years and why are they planning to spend $200 billion over the next ten?
With Medicare and Medicaid clearly on the ropes, why is it projected that America will see the construction of 2,000 new hospitals over the next 20 years, plus nursing homes, assisted living centers, outpatient clinics and physician offices?
And why are bricks and mortar now the default solution when less than two decades ago, hospitals and emergency departments were being closed with a vengeance and over a quarter of a million beds were eliminated from the U.S. Healthcare system?
Without a doubt, the aging of 78 million Baby Boomers and extended coverage for nearly 40 million previously uninsured Americans are the obvious drivers.
But the underlying reason may have more to do with perception than with reality. A common perception in our hospitals is that “we are operating at capacity and don’t have room for more patients.” But studies have shown that they actually may be operating at only 60 percent of capacity instead of the 85-90 percent commonly recommended as the maximum hospital capacity number.
This happens because 80 percent of the nation’s hospitals are still using antiquated manual systems for reporting available beds. Collectively, this means that over the course of one year, millions of bed-hours go un-used and un-reported, creating the illusion of overcrowding and costing our healthcare system untold billions in lost revenue.
But the other 20 percent of hospitals already know that building more hospital rooms is not the only or even the most cost effective answer for accommodating more patients. They have realized that by automating their capacity management processes they can know with absolute certainty how many beds are available and where those beds are — in real time.
Building provides no immediate relief. A new wing can take three or more years to build at well over $1 million per bed, with no immediate impact on today’s problems. Yet, by automating patient flow and capacity management, hospitals can be adding capacity of up to 20 percent from their existing beds within three months.
For a tiny fraction of the cost of building, they can quickly reduce or eliminate overcrowding, capture previously diverted cases, increase throughput and get an ongoing stream of real-time information which allows them to manage performance and make timely decisions on staffing up or down, allocating resources, etc.
Just 12 more turnovers per bed in a 300-bed hospital can net $10 million a year in additional contribution to margin without adding one bed, according to a study by the Advisory Board/True North. For a hospital treating 10,000 inpatients per year, eliminating one hour of “dead” bed time per discharge for every discharge can generate about $1 million in additional revenue.
Show me a brick that can do that!
• There is an uncertain future with the new health care law looming. In the meantime, the focus in healthcare seems to be shifting to slashing costs. Hospitals have cut hundreds of jobs, trimmed overtime hours and renegotiated contracts with suppliers.
• But pressure to meet growing demand as America’s 78 million baby boomers get older is spurring hospitals to push forward, experts say. That leaves hospitals dealing with current financial constraints and preparing for the future.
There isn’t a brick in the world that can do that. However, process change and automation can. So, if your hospital is overflowing during these tough economic times, I’d like to discuss some low-cost options which can help.
I look forward to speaking with you.
~ Dennis Morabito