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Lanny’s pushing pretty hard on us to reduce our ALOS [average length of stay]. I’ve done just about everything I can think of to comply, but I’m still a few 10ths of a day short of his target. As far as I can tell, the only option left is to begin to look at our case mix and see if we can adjust it a bit.
The speaker was Tom Williams, M.D., associate chief of orthopedics at Lowalos General Hospital. He was reacting to the pressure being placed on him and the other chiefs by the Chief Medical Officer to reduce the hospital’s average length of stay. He continued.
I’m now looking at our two most common case types: regular orthopedics and tumors. We’re a regional quartenary center for tumors; in fact we’re the only hospital in the Tri-State region with the capability to do this tricky procedure which entails extracting a bone tumor. However, the tumor cases have an average length of stay of six days, while the average for regular orthopedic cases is only four days. I don’t think it makes sense for us to try to shift our case mix toward more regular orthopedic cases, not only because of the loss of teaching and research opportunities, but because I feel pretty sure that the tumors are more financially beneficial to the hospital. But the shift certainly would help us reduce our ALOS.
In an effort to present the relevant information to Dr. Green, Dr. Williams had gathered some length of stay and financial data. Working with the hospital’s accounting staff, and relying on its sophisticated cost accounting system, he had learned the following:
DRG Average Length of Stay Revenue Variable Expenses Contribution
A (a regular orthopedic case) 4.0 days $5,000 $4,100 $900
B (a tumor case) 6.0 days 8,000 6,000 2,000
He knew the data were not completely accurate since, they were only for Medicare patients, where there was a flat revenue figure per discharge. Some other insurers paid on the basis of services provided. However, he felt that, with the rather sophisticated tests needed for tumor cases, the contribution from other payers probably would be even greater than that for Medicare.
Resolved to present the data in a way that would make his case as clearly as possible, he sat down in front of his computer and opened up his spreadsheet program.
Assignment
1. Assume that last month the orthopedic department discharged 10 cases each of DRG A and DRG B. Compute the average length of stay and the total financial contribution for these 20 cases.
2. Assume that Dr. Williams could work with the physicians in his department to shift the case mix for the upcoming month by 5 cases in either direction, i.e., a mix of 15 cases of DRG A and 5 cases of DRG B, or a mix of 5 cases of DRG A and 15 cases of DRG B. Which DRG should he emphasize?
3. Assume the orthopedic department has 12 days of unused capacity that could be filled with either DRG A or DRG B cases. Which case type should Dr. Williams emphasize?
4. Should Dr. Green emphasize days or dollars? Why? Under what circumstances are reduced lengths of stay and increased financial contribution compatible? Under what circumstances are they not?
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