Hospitalists save $2.5 million and decrease LOS: improvements achieved in first two years

HealthCare Benchmarks and Quality Improvement, May, 2004

Baptist Hospital in Pensacola, FL, winner of this year's Malcolm Baldrige award for quality, has saved $2.56 million in two years as a result of its inpatient management program. The program, developed and operated by Cogent Healthcare Inc., an Irvine, CA-based inpatient management company, also was successful in improving the quality of patient care and in meeting the hospital's standards of patient satisfaction.

In addition to these savings, length of stay (LOS) decreased an average of two days, and cost per case dropped by 44% for patients managed by the hospitalists. Thirty-day readmission rates for patients treated by hospitalists were 40% less than for patients treated by nonhospitalists. Satisfaction ratings by both patients and primary care physicians were more than 99%.

The decision to institute a hospitalist program was made in April 2000, recalls Craig Miller, MD, senior vice president of medical affairs. "It was driven by a number of factors, including increasing medical staff dissatisfaction with unassigned ED call and a growing number of physicians who wanted to have ambulatory practices and did not appreciate doing consultations on patients brought here by subspecialists whose PCPs [primary care physicians] were not on our medical staff and thus did not follow up. Then, of course, the hospital was concerned about having a focus on inpatient care, including length of stay and cost per case. These unassigned patients that were admitted by the PCPs were not the staff's primary priority; thus there were delayed decisions, orders and changes in care."

Based on a review of the literature, the leadership at Baptist decided they had a sufficient volume of patients to justify and benefit from a hospitalist program, Miller says.

Benchmarking aids choice

After the decision was made, Baptist began benchmarking various hospitalist programs across the country. "No program we knew of was directly linked to a hospital," Miller notes. "Many were contracted by insurance companies or worked for IPAs [independent practice associations]; we had slim pickings in terms of who could craft a contractual relationship to manage an inpatient hospitalist program that would align their incentives with ours."

It came down to two or three choices, he says. There was an interview process, "and we quickly came to the conclusion that Cogent was willing to work with us to craft a new relationship." It took about six months for the partners to figure out how the relationship would work operationally and clinically, and the program was rolled out in January 2001.

"Basically, Cogent provides the infrastructure and management of the hospitalist program; they employ the physicians," Miller explains. "We started with two, and we have four now. We will go to five in the next few months, and eventually, by the end of the year, we will have six."

Goals are established

At the outset, four goals were established for the program:

1. Have a voluntary program the medical staff could adopt.

2. Take all unassigned emergency department patients that required admission.

3. The hospitalists would participate in clinical performance improvement for Baptist's core measures.

4. Have a quality incentive focused on patient and primary care physician satisfaction, timeliness of completion of medical records, and reducing the readmission rate below current hospital performance.

A fixed case rate was paid to the physicians through their management company, and in turn, there was a financial offset. "Cogent remits to us a portion of the case rate based on what they collect from the insurance company," Miller explains.

Baptist's payer mix was about 12% unfunded and 5% to 6% underfunded at the program's inception. "Today, because of the program and attention to those patients, we have had a decline in that unfunded payer mix to 7.1%, and our under-funded remained about the same," he notes. The partners held joint quarterly contracting meetings, at which time Cogent provided validated data on the patients their physicians saw, which included different clinical categories, LOS, and their indication of possible avoidable days--where the hospital's systems did not respond as quickly as they could to help expedite care.

"During ongoing audits, we looked at meeting CMS [the Centers for Medicare & Medicaid] core measures such as pneumonia and GI bleeding," notes Miller. "These audits were provided by Cogent and, in turn, validated by us."

Baptist has a McKesson cost-accounting system, which is capable of looking at each individual DRG the hospitalists take care of. "For us to validate the cost savings under this program, we require a minimum of five admissions by a hospitalist in any DRG in order for us to compare it with a nonhospitalist performance in the same DRG." Miller says. Then they take nonhospitalist experience for the same DRG, LOS, and cost per case.

Miller says the arrangement costs Baptist about $700,000 a year, and based on their own statistics, "we got an average return over the first two years of $1.3 million per year."