Revenue Cycle

Q: Do you have any tips on how to get started implementing a length of stay (LOS) program?

Patient Financial Services Weekly Advisor, December 10, 2004

A: Before embarking on a focused LOS program, it's imperative that your team ensure that clinical pathways, order sets, and protocols have been developed with input from the medical staff.

Once the standard tools have been implemented, identify where your problems lie.

  • Run your top 25 DRG's and compare the length of stay of each DRG to a benchmark. This benchmark can be Medicare Geometric mean LOS, or local best practice benchmarks. Once the deviation in days is calculated, it may be multiplied by the number of cases in that DRG to estimate the number of unnecessary hospital days that could be eliminated through more efficient management.

    This simple analysis is completed by multiplying the number of unnecessary hospital days by your direct cost per day, which is generally accepted to be $250-$400 a day.

    The formula is (actual LOS - benchmark LOS) x number of cases x direct cost/day.

  • Repeat this analysis by physician and then by physician by DRG. Not only does this examination allow you to learn the economic impact of poor utilizers, it allows you to determine whether a problem truly exists with a particular physician or there is a systemic issue that might be solved by a process change.

  • Look at lost revenue from lost throughput. This helps you truly understand the magnitude of financial impact of LOS. Estimate the number of hours per month your hospital is on divert and how many additional admissions you could achieve if LOS is less-in other words, estimate your ability to backfill beds. This is a harder calculation than the first two-and variation from month to month requires a much more detailed analysis.

    Ironically, the shorter your LOS, the greater the impact of reduction in LOS has on your bottom line. For example, if your length of stay is five, you need to save only five days to accommodate an additional admission (with additional revenue). If your length of stay is 10, you need to save twice as many days.

    This question was answered by Joseph Zebrowitz, MD, executive vice president and senior medical director at Executive Health Resources in Drexel Hill, PA.

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