It is very common to see an average length of stay (LOS) performance indicator in a hospital performance scorecard. Only looking at the LOS can miss a hospital silent inefficiency worth thousands or millions of dollars. Our assessments supported by hospitals’ data and trends have consistently shown two common factors that are not getting the attention they deserve:
- We find that hospitals do a decent job managing their length of stay Monday through Friday. That means they are discharging several patients before an expected length of stay (LOS) without realizing that they are getting fewer reimbursements from Medicare than they deserve. Do you know your revenue loss according to the Transfer DRG rules? We have estimated this loss can be worth about $250,000 to $750,000 for hospitals with an average daily census of 100 to 150 patients. It is possible that this is not big money for some hospitals, but we doubt that. Even if we take a conservative estimate of $250,000, this amount can go a long way to meet hospital needs. If the revenue cycle team does not know about this, then chances are that the case management staff is aware of the Transfer DRG rules but do not have the right tools to manage their patient population concurrently. It does not have to be this way.
- The days the hospitals discharge patients before expected LOS are drained by their inefficient operations on weekends. This can be worth $1 million to $3 million dollars for a hospital with an average daily census of 100 to 150 patients. We have seen this with hospitals that have an average LOS very close to the GM LOS. If a hospital’s average LOS is much higher than the GM LOS, chances are very high that the hospital is losing millions of dollars in operation.
The bottom line is that hospitals are paying the financial penalties for being efficient while taking care of Medicare patients without any additional reimbursement for higher LOS. Fortunately, most of it can be well managed with a few simple changes and internal process improvements.
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