How to Save $14 Million? Stanford Hospital & Clinics Asks and Its Employees Speak Up

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Stanford Hospital & Clinics administrators didn’t wait for proposals on how to remove six cents from every non-labor operating cost dollar. They just did it – over $14 million – and left the particulars of how to save that amount to be determined. Less than a year later, after a brick-by-brick evaluation of 20,000 different items bought from 6,000 vendors and dozens of standard operating procedures, the Hospital’s expense ledgers have exceeded that daunting and ambitious target.

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This is not a one-time project

It's been more than just recognizing that only operating room towels need to be de-linted, a modification that will save an annual $147,000. "We're completely changing the culture of how things are done," said Rex Fieck, the Hospital's materials management director and a 30-year veteran of ordering health care's nuts and bolts.

Fieck is talking about a change to an evidence-based management system – an approach that begins by challenging the status quo and ends with fact-driven decisions. The Hospital's protocols are now based on a hybrid methodology Fieck jokingly says he stole from proven working solutions elsewhere. Fieck's hybrid has already attracted inquiries from two major medical facilities on the East Coast and he has been asked to present the Hospital's strategies at a meeting this summer of a major industry association.

Accomplishing this kind of systemic change and making it a permanent part of any large organization's thinking is not easy. But Hospital administrators are committed to it. "This is not a one-time project," said Jerry Maki, Vice President for Clinical Services and head of the Value Analysis Steering Committee. "Our value analysis approach is the new way the Hospital will continue to secure appropriate products and services at the best price. Involvement of end-users and physician leaders – especially the department chairs – has been a key to our success."

What Maki is describing is complete outreach – structured around departmental coordinators and more than 100 people dubbed "champions" who agree to take on particular projects. Through them and widespread internal publicity, all employees are being asked for ideas – and hundreds have come back for consideration, including one that suggested the Hospital stop buying 11 ounce cans of shaving cream for patient use and instead buy 1.5 ounce cans. Patients rarely finished the large cans. That thoughtfully-observed phenomenon, a tiny detail that adds up in a hospital that treats thousands of patients each year, is something that wouldn't have been noticed by a manager. The annual cost dropped from more than $800 to less than $400. That sum does not include the obvious resource and landfill savings.

Another change was prompted by Hospital employees who saw that mats meant to be kept clean and in good condition by an outside contractor – were worn and dirty. The company agreed to give the Hospital a $20,000 credit.

People working at the Hospital's Hoover Pavilion saw that the trash dumpsters there weren't full when emptied three times a week. The Hospital reduced the frequency to twice a week and brought in smaller dumpsters. Fewer pick-ups and always-full dumpsters meant a cost saving of $87,000. Another small item multiplied large for savings: One person in each Hospital department has been assigned the job of checking for unused phone lines and pagers. So far, enough of those have been found to add up to a savings of over $100,000.

Products used for years without question – like exam gloves - are being subjected to rigorous value analysis using standardized criteria and field testing for direct feedback from those who use them. The Hospital spends more than $300,000 each year to buy tens of thousands of these essential tools of infection control for every department. In the spirit of looking at everything as fair game for analysis, the Hospital asked eight vendors to make proposals and provide gloves for testing. "It's not just about cuttings costs," said Kate Surman, director of the Hospital's Process Excellence program. A cheaper product might not be as sturdy – and require more frequent replacements that would eat away at the initial cost savings, she said. Hospital employees are in the final stages of broad field testing of a new glove.

Contracts for everything from temporary staffing to uniform rentals have been examined against current market pricing and market share and renegotiated. Regular reminders go out on the Hospital's internal website to urge people to make small changes – like turning off their computers and lights before they go home – that can save as much as $100,000 annually. Supply shelves were being stocked on historic use of products, but those use numbers hadn't been evaluated for years and now, Fieck said, "We're getting out of the big stock style."

Many products the Hospital uses are intrinsically expensive, but new recycling enterprises are available to enable the platinum tips from certain kinds of catheters to be sold and their cost partially recovered. Other items are not only costly, but have a very limited shelf life. In the past three years, the Hospital lost $1 million in revenues because of a particular protocol for handling blood platelets. Changes were made that regained that revenue and avoided the waste of a critical resource.

Some changes will take time – the conversion to digital radiographic imaging from film is not yet complete.

To give visibility to the project and encourage participation, organizers created a newsletter, "The Six Cent Solution," which touts savings and lays out very compelling statistics. The January edition told its readers that the Hospital prints out more than 76 million pieces of paper each year. And while the general industry standard is one printer for 25 people, the Hospital has one printer for every four. To bring the Hospital more in line with that industry standard – for a potential $400,000 savings – toner ordering is being centralized, duplex printing encouraged and other steps taken to reduce printer count and paper use. Those changes include environmental resource savings, for a double win. Another change in process: converting paper paychecks to electronic direct deposit. Payroll managers want to get the word out that any current employee – and there are nearly 7,000 – can make the switch any time. New employees will automatically get electronic checks unless they ask for paper – the opposite of the prior practice.

To keep momentum going, the coordinating group meets monthly and talks more often, sometimes with pride, sometimes with frustration. The meetings are a lively, although sometimes tense and competitive, around-the-table listing of who's doing what. Each department has a specific dollar amount to eliminate from its budget and progress is charted in Power Point slides for all to see. Maki is an excellent cheerleader, generous with praise, but he doesn't flinch from the problems that still exist. The installation of EPIC, the new electronic medical records system, produced a temporary glitch that set back some savings. That bug, Maki said, has been worked out. And if a department is having trouble meeting the savings goals, Maki urges persistence, sometimes offering to have a chat with a higher level of manager who might be able to break up a log jam. The Hospital's size renders it like a bulky battleship not easy to turn.

The Hospital's Renewal Project – 1 million square feet of construction nearing a $2 billion cost – is pushing its financial needs, but even if that project did not exist, it makes sense for the Hospital to change the way it looks at its costs. "Medicine and health care are changing,'' said Value Analysis Program administrator Su Tsao. "The evolving structure of reimbursement, regulation and pricing impacts the operation of any hospital and the better understanding we have of the business, the better equipped we are to change."

Finally, Fieck said, while improving the Hospital's business practices, this new systemic review and evaluation process is about "getting the right product for patient outcome – supporting patient care."

About Stanford Hospital & Clinics

Stanford Hospital & Clinics is known worldwide for advanced treatment of complex disorders in areas such as cardiac care, cancer treatment, neurosciences, surgery, and organ transplants. Ranked #15 on the U.S. News and World Report annual list of "America's Best Hospitals," Stanford Hospital & Clinics is internationally recognized for translating medical breakthroughs into the care of patients. The Hospital is part of the Stanford University Medical Center, along with the Stanford University School of Medicine and Lucile Packard Children's Hospital at Stanford. For more information, visit http://www.stanfordhospital.com.

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Scott Leykam
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