8 Steps for Reducing Healthcare Waste Costs
Healthcare waste disposal expense is a burdening line item on every hospital’s balance sheet; however, it is imperative not to cut corners in regards to waste management to ensure the hospital’s compliance, and the safety of employees, patients, and the general public. Waste disposal is a necessary expense, and the majority of healthcare facilities stomach the expense without exploring cost reduction strategies. The following eight steps will help any healthcare organization reduce waste costs significantly and improve facility sustainability.
1. Determine the hospital’s baseline waste management cost.
The first place to gather this information is accounts payable. Through this process, practitioners will become familiar with matching costs with vendors, areas of operation, types of waste generated, amounts of waste generated, and ordering habits of managers. As a hospital delves into its accounts payable, administrators will learn that the hospital’s expenditures in waste management include both products and services. The next place to gather this waste cost information is payroll. Often, significant costs of waste management are borne by the hospital in the form of internal payroll costs. These “soft costs” are just as significant as accounts payable costs when evaluating the true baseline waste management costs of the hospital.
2. State the hospital’s baseline cost metric in terms of a denominator that is meaningful to the hospital.
Well-run hospitals understand a number of different performance and results indicators as defined by a single denominator. Whether a hospital orients its expenses by its gross revenue, square footage, adjusted patient days, or something else; in order to get a purpose on waste management costs - administrators must first define those costs in terms of the hospital’s key denominator. Once the hospital has developed the ability to express its waste management costs in terms of a denominator that is meaningful to key stakeholders, that hospital has developed a powerful tool that can bring costs down quickly, keep them down over time, and even continue to reduce the hospital’s costs.
3. Define quality outcomes for the plan.
As hospitals plan for consistent decreases in waste management costs over the long term, administrators need to consider what pitfalls lay in the road before them. By definition, as a hospital removes costs from its waste program, the hospital effectively removes resources from its waste program. As the hospital removes those resources, it must be certain that the resources it removes (and ultimately returns to the hospital’s operating budget) are either wasteful, or otherwise unnecessary to achieving the quality outcomes, as defined by key stakeholders. A complete stakeholder analysis is the first step in defining plan quality.
4. Define the hospital’s year one cost objective relative to the ambitiousness of the plan.
The paradox of sustainability stems from the fact that practitioners know that the word sustainable connotes long-term success and viability. However, in hospitals, the need for savings and performance improvement is immediate. Moreover, hospitals reward administrators overwhelmingly for current-term performance, in favor of long-term performance. A waste management plan that favors cost savings over the long-term above all else, will usually yield the greatest overall financial benefit to the hospital; however, hospitals need to balance this reality against the need for immediate impact, as well the need for quality. Successful administrators will need to satisfy skeptics who pose the false choice between cost and quality. A balanced plan will deliver high quality outcomes, immediate savings, and the ability to further reduce costs over the long term.
5. Define the hospital’s ten-year cost curve.
Once a hospital has defined its quality requirements and near-term cost reduction demands, it has the luxury to model the shape of a long-term cost reduction curve. The steeper the curve in year one, the fewer the savings a ten-year plan is likely to deliver. At this point in the process, hospitals can analyze the trade-offs and make the choices that most appropriately meet the needs of the hospital.
6. Develop plan support among key stakeholder groups.
The biggest managerial conundrum facing hospital administrators is how to bring about constructive and lasting change in large, complex organizations. Initiatives that achieve top-decile results must modify waste disposal behaviors within the hospital. Accordingly, absent-minded disposal decisions and outmoded disposal methodologies must give way to more progressive, leaner methodologies of managing purchased commodities and the waste created by those commodities. If executed correctly, these plans can achieve superior quality outcomes, exceptional cost performance, and improved socialization among key stakeholder groups.
7. Execute the plan.
This step is not rocket science, but it is the most critical of all. A hospital’s response to waste management costs is driven largely by the need for the hospital to make a serious shift to change in order to survive. Success is far more likely if the hospital executes well.
8. Measure the plan’s effectiveness and make adjustments to accommodate changing conditions.
Continual improvement is the process by which organizations frequently review their procedures, aiming to correct errors or problems. The focus of continual improvement is to identify problems before they occur, which will save time and money later on. Since the hospital has already defined its cost and quality objectives, it is able to measure execution against plan objectives. If the execution fails to meet the plan, the change agent must make the necessary adjustments to ensure stakeholder satisfaction and economic goals.
What to do next.
This eight step plan is a great baseline to follow to reduce healthcare waste expense. Tactics such as waste diversion, total waste management, and recycling will help your organization save costs and become a more sustainable hospital. Innovative healthcare waste cost-saving programs, like GreenPrint, will lower expenses substantially in both the short and long-term, while also increasing employee education, and making the facility “greener.”
This eight step plan was taken from our Whitepaper “The Cost of Waste Management in Healthcare” which was written by our internal Healthcare experts. Download the full Whitepaper to learn more about healthcare waste cost reduction.