HMC Study Shows Hospital Quality Problems Impact Overhead Costs

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SOURCE: The Healthcare Management Council, Inc.

A recent study by The Healthcare Management Council, Inc. (HMC) discovered that poor hospital inpatient care has a multiplier effect on overhead costs.

Using the proprietary HMC Cost Quality Matrixâ„¢ methodology, HMC routinely identifies the direct cost of quality related to patient safety and inpatient quality outcomes. New HMC research has discovered that off-quality at the patient bedside has a rippling effect to overhead costs like malpractice insurance, quality management, case management and utilization review costs. The cost of off-quality overall costs grows exponentially as a result, both at the system and individual hospital level.

Increasingly, the industry is moving toward defining quality as conformance to technical specifications and interim patient requirements. This has the unfortunate impact of locking in current processes. While applying conforming standards reduces variation, it ignores innovative new ways of providing patient care, a situation desperately needed in healthcare. By focusing on measures that reflect patient outcomes, HMC revealed the key relationships to the entire hospital cost structure. Focusing on outcomes, and avoiding quality measures focused strictly on processes, unlocked this discovery. Excessive indirect costs like malpractice insurance and high quality management expenses are symptoms of patient outcomes.

The HMC Cost Quality Matrixâ„¢ is part of a suite of HMC tools that provides benchmarks, simplifies innovation (Idea Treesâ„¢), creates action plans (HMC Action Plan Developerâ„¢), and communicates results (HMC Trackersâ„¢ and the HMC Digital Dashboardâ„¢). Department managers and hospital executives use these tools to monitor action plans that focus on key strategic initiatives. Together they give a hospital a more complete view of current performance improvement efforts, and where performance is headed. HMC clients share acute hospital financial and practice information, which then use the HMC suite of products to move managers to action that will yield measurable results.

This recently discovered hospital cost dynamic does not include even greater negative impact of new hospital payment strategies that focus on higher reimbursement for better quality.

HMC President, Tom Day, says, “We’ve found that the downstream hospital costs are 6 to 7 times the direct patient care costs of poor quality. Adding to that the effect of reduced reimbursement for poor quality and the result is astonishing. What was thought to be an incremental battle of cost reduction reveals a clear pathway to measurable performance improvement.”
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