Switch to generic drugs, other steps save Newton Medical $2.1 million
Newton Medical Center was able to trim costs by $2.1 million over the past four months by switching to generic drugs, shopping more competitively for products and streamlining internal processes.
The hospital contracted with consulting firm Lynne Sisak and Associates, which implemented a Lean Waste Recovery program, a derivative of the Six Sigma process popularized in manufacturing that seeks to save money and streamline operations by eliminating waste and standardizing procedures.
At the hospital board’s September meeting, Chief Financial Officer Troy Brooks said the hospital’s 35 department heads all looked for savings, but there were a couple of exemplary savings efforts.
Pharmacy Director Robert Halliday saved $490,000 in drugs costs by switching to generics or discounted name brands; his department had the greatest savings in the hospital. He credited the hospital physicians for buying into the program.
The savings came on top of the hospital’s previous efforts to save money on drugs by participated in a group savings plan through MedAssets that trimmed $550,000 in costs.
Surgical Director Karen McAfee suggested 29 different savings ideas, which earned her the nickname the “Queen of Lean” in the hospital. Brooks said she ferociously approached savings and haggled with every vendor she had, in addition to creating a spreadsheet for every item in her budget.
“Much of the savings gained in surgical services were a result of product conversions. We have an excellent surgeon
community who supported us in each initiative by participating in product evaluations to ensure that there would be no compromise in quality as a result of the proposed conversions,” McAfee said in an email. “The surgeons also supported our efforts in working with our product vendors to renegotiate pricing on costly orthopedic and pain related implants.
“The department employees were also very engaged in this initiative, and we could not have realized the success without their support. Everyone submitted ideas which ranged from elimination of under-utilized supplies, standardization of products, reduced linen usage, and consolidation of instrument sterilization methodologies. I am very proud of everyone’s commitment to the challenge we were given and the manner in which they supported the initiatives while maintaining focus on quality patient care.”
CEO Jim Weadick said the hospital more than doubled its initial goal of $1 million in savings, and additional savings could still be found. He said at the board meeting that the hospital could hire Lynne Sisack’s firm for another round of cost-cutting searching next year. Weadick noted that an executive from St. Mary’s Hospital in Atlanta was “flabbergasted” when told about the savings.
“We are proud that our staff has turned this program into such a success. Through their dedication, we were able to greatly surpass our expectations; and are all dedicated to continue searching for ways to become more efficient,” Weadick said in a follow-up email.
“And it happens at a time in our life when it’s important that everything we do in this hospital is looked at two, sometimes three, times before we commit,” Weadick said in the email.
Weadick said Newton Medical embarked on the lean savings program because operational activities need to periodically review to eliminate costs that “may have gradually crept into the business.” He credited Human Resources Director Greg Richardson for proposing the idea.
Brooks said officials will periodically check-in on existing savings procedures and consistently look for new savings ideas.
Dr. Mark Hanson passed along a note that there could be an opportunity for savings in pacemaker products from BioTronics. Hanson said competitor Medtronic has largely cornered the pacemaker market in Atlanta.
The savings come at an important time for a hospital that’s technically losing money every month, when you take into account depreciation, and is just beginning its budget process for next year.
According to the August financial report, the hospital provided $23.59 million in services, but only collected $6.18 million for those services, in addition to another $404,878 in other revenue (cafeteria and gift shop sales, etc.).
Total operating expenses totaled $6.77 million, causing the hospital to end up with a negative balance of $190,899. To date, the hospital has had $1.45 million more in expenses that it’s collected in revenues, though the hospital has had $4.14 million in depreciation for buildings and equipment during that time.
The hospital continued its familiar trend of actually losing money on Medicare, Medicaid and self-pay patients. The only category of patients the hospital makes money on are those with private insurance.
In August, Newton Medical saw 225 Medicare patients along with 70 Medicaid, 41 self pay and 89 private insurance patients. As of August, the hospital has had 3,340 admissions, nearly identical to last year’s total of 3,339.
In other hospital news, Lisa McWilliams was promoted to Director of Diagnostic Imaging Services, the new name of the hospital’s radiology department.
“Lisa has been a good, experienced, responsive manager,” Weadick said at the board meeting.
Taking over McWilliams former position of director of the Women’s Diagnostic Center will be Shauna Fincher.