Banner Health moves to cut costs

Anticipating cuts in government reimbursements, Phoenix-based Banner Health has ordered up cost-cutting measures that will impact hospitals across its network, including those in Northern Colorado.

North Colorado Medical Center in Greeley and McKee Medical Center in Loveland are both working to reduce costs in a variety of areas, from reconfiguring floors to increase efficiency to simply optimizing supply-ordering procedures.

Overall, Banner is aiming for $150 million in cost reductions in the next 12 months. The company operates 23 hospitals with 37,000 employees in seven states.

As part of its campaign, Banner will take a look at its labor costs, which account for half of all hospital spending. Banner is one of Northern Colorado’s largest employers, with more than 4,000 workers. Top officials at NCMC and McKee, though, say that at their hospitals, cost reductions will come from other areas.

Building for efficiency

At McKee, construction is under way to optimize the use of existing space on the second floor of the hospital, according to hospital CEO Marilyn Schock.

The space currently consists of three separate patient-care units, each with a nurses’ station.

The $700,000 project will convert an existing lobby into a centralized nurses’ station that will include workspace for physicians, hospitalists and others engaged in care management. In turn, waiting areas will be established in each unit so that families can be closer to patients.

The first phase of the project is scheduled to be complete this month and a second phase should be complete in mid-June.

Beyond greater efficiency, Schock said she expects the reconfiguration will lead to better patient experience because all of the services present at the new nurses’ station will be equally available to all patients and because their families will be closer than the previous setup allowed.

Reducing length-of-stay

For both hospitals, length-of-stay – how long a patient remains hospitalized – is a crucial factor to consider when working to reduce costs.

New technologies are allowing for less-invasive procedures; smaller incisions require shorter recovery times.

Both hospitals are making use of new technologies, including robotics, to shorten the amount of time patients spend in bed.

“We watch length-of-stay like a hawk,´ said Rick Sutton, CEO of NCMC.

NCMC is also making building improvements, but they are less obvious than those occurring at McKee. The hospital also is making infrastructure improvements as needed, upgrading pieces of equipment that have reached their life expectancy.

Whenever aging equipment is replaced, Sutton said, cost savings can be expected, because newer devices work more efficiently. The infrastructure improvements are expected to take place over the next three years, finishing up in 2015.

The hospital is also working to ensure that it is not treating the same patient twice for the same issue. That, of course, has always been the ideal but is a more urgent issue now because of policy changes that will bar Medicare from reimbursing providers if a patient is readmitted for the same issue twice within 30 days.

Like many other hospitals, NCMC promotes proactive health care, encouraging proper diet and exercise, to keep patients healthy and out of the hospital, Sutton said.

System-wide solutions

Both McKee and NCMC also make use of an electronic medical records system, which both Schock and Sutton say saves money by helping providers avoid duplicative tests.

Both hospitals have also worked to streamline supply ordering for “everything that comes through our doors,” according to Schock.

The hospitals will also make sure that work is appropriate to pay grade, which means making sure that higher-paid employees are not doing work more suited to someone at a lower pay grade.

Neither CEO could give a dollar amount for how much their hospitals were being asked to reduce costs. Instead, they’ve been asked to evaluate their operations and make cuts where possible.

Both cited the Affordable Care Act as the reason for the cost-cutting efforts.

“We know there’s a health care storm on the horizon,” Schock said. “The best we can do right now is try to predict where cuts and shortfalls are going to be, and make good business decisions while still focusing on patient care.”

One thing is for sure, according to Sutton:

“No matter what happens, we’ll be seeing more patients for less money.”

That’s because cuts to Medicare, which are expected regardless of whether the Supreme Court upholds the Affordable Care Act, will reduce the amount that providers receive for Medicare patients.

There is some good news on the health care cost question.

Health care spending has slowed down nationwide, with total health care spending growing less than 4 percent per year in both 2009 and 2010, the slowest pace in more than 50 years, according to the latest figures from the Centers for Medicaid and Medicare Services.

Health economists point to a variety of factors to explain the slowdown.

One cause is obvious: the recession. When Americans began losing their jobs, they lost their health insurance as well, and as household budgets tightened, going to the doctor for non-emergencies seemed less necessary.

Other factors include the changing attitude of both patients and providers and the increased pressure to reduce the country’s long-term debt, to which Medicare and Medicaid are two of the largest contributors.

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Molly Armbrister covers real estate, banking and health care for the Northern Colorado Business Report. She can be reached at 970-232-3139, or

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