Kennedy: Save Money By Improving Charity Hospitals

A column by Louisiana Treasurer John Kennedy, who is now the state’s most popular officeholder with 61 percent approval… 

Louisiana has 10 state-owned, taxpayer-funded public hospitals, spread across 64 parishes and 45,000 square miles, to deliver health care to our citizens and train our medical students.  Our Charity Hospital System is not self-supporting.  It is subsidized each year with over $300 million from the state and, this year, nearly $300 million from the federal government, and that doesn’t include Medicaid and Medicare payments.  These subsidies could be reduced, and the state could save considerable money, by achieving greater efficiencies in the way we run our Charity Hospitals.

In 2009, LSU wisely hired Alvarez & Marsal Healthcare Industry Group, a national health care consulting firm, to analyze the operations of the Interim Charity Hospital in New Orleans.  Among its findings were:

1.  Per-patient costs were far above the national average.  The cost per patient per day was $5,031, versus $2,794 at similarly sized teaching hospitals.

2.  The hospital had far more employees, particularly nurses, than necessary by national standards.  There were 8.2 full-time employees per occupied bed, compared to the national average of six per bed.

3.  The hospital had one nurse supervisor for every three nurses.  The normal ratio is one nurse supervisor for eight nurses.

4.  The hospital did not have a system in place to measure worker productivity.

5.  The hospital’s system for managing medical supplies was “poorly organized, operates out of multiple locations, has cumbersome work flow processes, and is minimally automated.”

The recommended changes by Alvarez & Marsal would reduce costs by $66 million per year and generate $6.7 million in new revenues, for a total savings of $72 million.

Louisiana should commission a similar operational assessment by the Legislative Auditor for each of Louisiana’s other nine charity hospitals.  If we can save $72 million at one hospital, the savings for the entire system would likely be in the hundreds of millions of dollars.

Louisiana doesn’t need to raise taxes.  We just need to manage our money better.



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