Hospitalists Bend the Cost Curve

By  |  September 22, 2015 | 

The United States healthcare system continues to struggle with extremely high cost and variable quality of care. This year alone, the U.S. is projected to spend $2.8 trillion on healthcare, comprising approximately 18% of the entire U.S. gross domestic product (GDP); about 30% of that is spent within hospitals. This is more than Australia, Brazil, Canada, China, France, Germany, Italy, Japan, and the U.K. combined. This growth in cost is completely unsustainable and is threatening all aspects of the U.S. economy, as there is less to invest in infrastructure, education, and other public programs. Until the healthcare industry figures out how to measure cost, we will not be able to control it on a large scale.

One methodology aimed at measuring the actual cost of care is the time-driven activity-based cost (TDABC) accounting method, by which patient time and activity is carefully measured, and cost attributed by time and resource use. Each person that interacts with the patient (from schedulers to clinicians) is measured and the relative portion of their human resource cost is attributed to that patient. In the same way, each piece of equipment-supply-product has similarly attributed cost (that accounts for the purchase, storage, sterilization, delivery, etc).

Although currently this method is resource intensive, The University of Utah has systematized the TDABC method, and created a “Value Driven Outcome” tool that uses a data warehouse to extract and attribute each and every cost from patients within a “population” to measure and analyze the variability and drivers of cost within that population.

Simply by measuring cost, they have been able to discover resource waste that was previously unrecognized (by human resources, facility space, or equipment). This approach can allow for determining the best use of space and resources, some of which should be reserved for complex, unpredictable patients, and others for more routine and predictable patients. It also allows for more visibility on how and when to match the skill mix of providers with the needs of the patients (link below).

By accurately measuring cost, The University of Utah is one of the only healthcare systems to “bend the cost curve”. Hospitalist need to start to understand how to measure and reduce cost within their sphere of influence, as most of us will be working in systems that are moving out of fee-for-service, and moving into bundled payment models. We need to proactively work to get ahead of the cost curve, for the good of our patients, the system, and our future reimbursement.

One Comment

  1. Danielle Smith September 25, 2015 at 11:11 am - Reply

    Dr. Scheurer,
    Thank you so much for pointing out what the University of Utah is doing. I have done a lot of training in Process Improvement and Lean/Six Sigma but finding institutional support to really make those changes valid in practice is so much more difficult. Sometimes it truly does take a different approach and I am glad you are taking the time to point this out so that hopefully others will catch on.


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About the Author: Danielle Scheurer

Danielle Scheurer
Dr. Scheurer is a clinical hospitalist and the Medical Director of Quality and Safety at the Medical University of South Carolina in Charleston, South Carolina, and is Assistant Professor of Medicine. She is a graduate of the University of Tennessee College of Medicine, completed her residency at Duke University, and completed her Masters in Clinical Research at the Medical University of South Carolina. She also serves as the Web Editor and Physician Advisor for the Society of Hospital Medicine.


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