More patients, less payment: increasing hospital efficiency in the aftermath of health reform

Abstract

A major issue for the US health care system will be accommodating the needs of the estimated thirty-two million Americans who will gain insurance coverage under the Affordable Care Act by 2019. For hospitals, a traditional response to this increased demand might be to add resources, such as more staff and beds. We argue that such actions would be unaffordable and unnecessary. Research has demonstrated that large gains in efficiency can be made through streamlining patient flow and redesigning care processes. We argue that once managed efficiently, US hospitals, on average, could achieve at least an 80-90 percent bed occupancy rate--at least 15 percent higher than the current level--without adding beds at capital costs of approximately $1 million per bed. This article outlines a plan for hospitals to accommodate more patients without increasing beds or staff, and for policy makers to require hospitals to make these changes or provide incentives for them to do so.