Study finds one-day LOS reduction cuts costs by 3%
As part of their study published in the Journal of the American College of Surgeons,1 researchers reviewed the cost-accounting records of all surviving patients discharged from the University of Michigan Medical Center during fiscal year 1998 with hospital lengths of four days or more. Actual costs were identified through the University of Michigan general ledger and an activity-based accounting system. Individual patient costs were tracked on a daily basis and broken down further into three categories: variable direct, fixed direct, and indirect.
Variable direct costs measured expenditures that could be identified directly with the care of individual patients on a particular day, such as laboratory tests, radiographs, and disposable supplies. Fixed direct costs encompassed expenditures that could be identified with a particular department but not with a particular patient, and indirect costs lay outside of individual departments. Examples of fixed direct costs included equipment and medical devices used to care for trauma patients. Indirect costs included the admissions area and the CEO’s salary. Together, fixed direct and indirect costs were collectively referred to as "hospital overhead."
The population was analyzed by determining the incremental cost of the last full day of stay vs. the total cost for the entire stay. The data were also stratified by length of stay (LOS) and by surgical costs. To gain a more focused perspective, the study examined all 665 trauma patients discharged from the hospital’s adult level 1 trauma center.
Costs were determined on specific days, including admission day, each intensive care unit (ICU) day, day of discharge from the ICU, and each of the last two days before the discharge day. Within this group, a total of nine activities accounted for more than 99% of surgical costs: nursing (42.8%), surgical services (12.7%), laboratory (9.4%), radiology (8.4%), pharmacy (8.3%), emergency services (7.9%), respiratory and pulmonary (5.1%), rehabilitation services (3.3%), and supplies (1.3%).
The results indicated that the incremental costs incurred by patients on the last full day of their hospital stay were $420 a day on average, or just 2.4% of the $17,734 mean total cost of stay for all 12,365 patients. Mean end-of-stay costs represented only a slightly higher percentage of total costs when LOS was short (6.8% for patients with LOS of four days). Even when the data were modified to focus on patients without major operations, the $432 average last-day variable direct cost was only 3.4% of the $12,631 average total cost of care.
For the institution’s trauma center, the study found, variable direct costs accounted for 42% of the mean total cost per patient of $22,067. The remaining 58% was hospital overhead (fixed and indirect costs). The median variable direct cost on the first day of admission was $1,246, and the median variable direct cost on discharge was $304. Interestingly enough, approximately 40% of the variable costs were incurred during the first three days of admission.
In conclusion, the study found that for most patients, the costs that can be directly traced to the last day of a hospital stay account for a relatively insignificant amount of total costs. Reducing LOS by as much as one full day decreases the total cost of care on average by 3% or less. Results of the study indicated that hospitals would come out better by de-emphasizing LOS and concentrating instead on process changes and care delivery during the early stages of admission, thereby reducing costs at the front end of a patient’s stay.
Reference
1. Taheri P, Butz D, Greenfield L. Length of stay has minimal impact on the cost of admission. J Am Coll Surg 2000; 191:123-130.
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