Amanda Akers

Fix Preference Cards to Reduce the Cost of Healthcare

In recent years, the steep cost of healthcare in the U.S. has taken center stage. The U.S. spends more than any other country on healthcare, and the cost of care for the patient remains stubbornly higher than in other developed countries. In total, the U.S. spends nearly 18% of its GDP on healthcare, more than twice the average spend of all similarly wealthy countries.

cost of healthcare

The Role of Waste In Driving Up the Cost of Healthcare

The reasons for the hefty price tag of healthcare in the U.S. are various, but waste undoubtedly plays a major role in driving up healthcare cost. A recent study by JAMA estimated that waste constitutes a whopping 25% of healthcare spending in the U.S. This waste naturally contributes to a hospital’s overhead costs and negatively affects its net income, causing care to become more expensive. As the cost of care rises, it is then passed along to the patient.

What exactly constitutes waste in the healthcare system is an intricate problem, but one that experts have scrutinized extensively. A study by the Institute of Medicine and Berwick and Hackbarth divides healthcare waste into six categories: failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failure, fraud and abuse, and administrative complexity.

The Role of Administrative Complexity in Healthcare Waste

Of the six categories identified, “administrative complexity” accounts for the greatest percentage of waste, totaling about 30% or an estimated $265.6 billion per year. It involves any process within the healthcare system that results in unnecessary administrative costs. These primarily include matters related to insurance and physician practice administration, such as medical record keeping and hospital management. Compared to other countries, the U.S. spends over $1,000 per capita on administrative costs alone, which is five times the average that similarly developed countries spend.

The Role of the Supply Chain in Administrative Complexity

A significant percentage of this administrative complexity waste stems from the excessive clerical duties with which physicians today are tasked. But physical waste – that is, medical supply waste – is also a huge part of the problem. A study by Guidehouse found that the hospital supply chain is a primary cause of administrative complexity-related waste: unnecessary spending by hospital supply chains has reached a collective $25.7 billion per year.

The opportunity for hospitals to rectify their supply chains and cut down on such waste is therefore tremendous. In recent years, in fact, hospital executives have pointed to hospital supply chain effectiveness as a top priority for reducing costs and raising the hospital’s bottom line.

The Role of Preference Cards in Supply Waste

Unnecessary supply chain spending doubtless also has multiple causes, but preference cards have become particularly infamous for giving rise to massive supply waste in hospitals. Of the billions of dollars of yearly supply chain waste, millions can be attributed to opened and unused medical supplies. These wasted supplies are all too frequently the direct result of outdated, inaccurate preference cards.

When preference cards contain outdated information, operating rooms are stocked with supplies that surgeons no longer need. If they are not discarded immediately, these unused supplies are rotated in and out of the operating room, requiring restocking each time. This leads to overstock of supplies as well as wasted supplies – when overhandling compromises their sterile integrity, they are finally discarded. Inventory reorders them, even though they will never be used, and the cycle begins again. The result, of course, is billions of dollars of medical supplies wasted every year.

On the other hand, when preference cards lack up-to-date information, items that are needed during a surgery are omitted. When this happens, the surgery must pause while the circulating nurse fetches the items required. Such an event is frustrating for OR staff and dangerous for the patient, and the circulating nurse may spend up to a quarter of operating time searching for necessary supplies.

Waste – both in terms of supplies and time wasted – are a prevalent and direct result of preference card mismanagement. As a result, preference cards have been touted as a “ticket to savings” for hospitals. Effective preference card management will go a long way towards solving the medical supply waste problem, which constitutes a significant percentage of medical waste overall. Reducing waste will, in turn, reduce the cost of healthcare.

Case Study: Hospital Uses PrefTech to Reduce Supply Waste

PrefTech, the nation’s leading provider of preference card management (PCM) software, helped a hospital on the eastern seaboard to make substantial reductions in supply waste and overstock. The hospital lacked a defined process for preference card management and regularly over-ordered medical supplies, resulting in significant waste. Additionally, turnover times and on-time starts were poor; the hospital scored under the 50th percentile compared to like facilities in case volume.

Within 60 days of using the PrefTech OR platform, the hospital was able to identify which preference cards and service lines needed priority attention. Within one year of platform use, the hospital decreased return costs by nearly 70%. Turnover times were reduced by an average of 10 minutes, and physician satisfaction rose from 50% to 80%. To date, the hospital has reduced waste by an estimated $1.4 million and has an estimated hard savings of $3.2 million.

If you would like to learn more about how PrefTech can transform preference card management for your hospital, please don’t hesitate to get in touch.