The United States spends more on health care than any other nation: roughly $3.6 trillion in 2018. A large portion of that spending — nearly 30%, by some estimates — is wasted.

New research from Michigan State University and Rutgers University quantifies how much money is being wasted in hospital operating rooms. The findings reveal that hospitals could save on average $1,800 per surgery, or nearly $28 million annually, by avoiding and reducing unplanned costs.

“This problem is due to the fact that quality of care has always been given precedence over cost — and rightly so,” Anand Nair, professor of operations and supply chain management, said. “However, with increasing pressure on health care organizations to reduce their costs, they are now trying to find ways to jointly increase quality and reduce costs.”

The research paper, “The Impact of Planning and Communication on Unplanned Costs in Surgical Episodes of Care: Implications for Reducing Waste in Hospital Operating Rooms,” was published in the latest issue of the Journal of Operations Management. David Dreyfus, assistant professor at Rutgers Business School and an alumnus of MSU’s doctoral program in operations and sourcing management, and Claudia Rosales, assistant professor of supply chain management at MSU, coauthored the paper alongside Nair.

The team spent more than 250 hours observing hospital operating rooms, witnessing everything from planning and preparation to the execution of 92 surgeries. They also observed communications and planning processes of surgical teams to gain a holistic understanding of how inefficiencies can be addressed.

They found that 5–10 minutes were added to each surgery due to unplanned costs. Although that doesn’t sound like a lot of time, in an operating room, every minute can be critical. As noted in the paper, longer surgery times not only become expensive for hospitals due to staffing costs but also endanger patients under anesthesia with potentially harmful complications.

Prioritizing standardization

Ultimately, the issue stems from a lack of standardization for the planning processes. With each surgery, or episode of care, the surgeon lays out the plans according to his or her own needs and priorities through a document called the physician preference card (PPC). The expectation is that the PPC accurately captures the current requirements of supplies for a given surgery.

However, Nair explained, “In most hospitals, every surgeon is allowed to make their own decisions in terms of equipment and supplies to be included on their PPC. Surgeons are comfortable with using certain supplies due to their past experiences; this increases the variance among items within different PPCs and the number of items that hospitals need to carry in inventory.

“The hierarchical nature of the health care delivery process and the expert role of surgeons result in their preference [being] given higher priority” than standardizing these planning processes, Nair said. The result is that hospital systems end up having multiple PPCs for the same procedure to accommodate the preferences of different surgeons.

In the absence of a carefully planned PPC, teams often resort to “firefighting” tactics, for instance, to address any immediate shortages of supplies that are needed for a surgery. As discussed in the paper, the firefighting approach addresses the immediate concern but “reduces quality, increases costs and presents possibilities of potential security lapses.”

When the surgeon leaves items off the PPC, a surgical team member must search for what is needed, which becomes an unplanned cost. In some cases, the team member may need to leave the operating room to locate something. As noted in the paper, in addition to the cost implications, the risk of patient infection can also increase each time a door is opened during an episode of care. In contrast, if something is on the PPC that ends up not being necessary for the surgery, it’s simply a waste of money to supply the item.

“Hospitals need to recognize that these workarounds are happening in the short term and they’re adding up to significant amounts of wasted money,” Nair said. “Managing medical supplies [through the PPC] is a critical aspect of the health care supply chain. Mechanisms need to be put in place to provide more learning opportunities from such operational failures for long-term benefits to happen.”

Systemic learning and planning

Complicating the issue further, surgical teams are not a constant, making it difficult to create a robust feedback mechanism for incorporating updates to PPCs. Team members, skill levels and team sizes can change with each surgery, which can greatly impact the intensity of communications flow and knowledge sharing in the operating room and post-surgery. The study captures the intensity of communication by means of the density of the communications network, or how openly and how often the surgeon and team members talk. The findings show that open and active communication among surgical team members helps in anticipating needs and reduces unplanned costs in a surgery.

The research also demonstrates that learning can happen along the way during an episode of care. Although unplanned costs initially go up with every change in the PPC, these costs start declining after about the sixth change to the PPC. This suggests that with each instance of changes made to the PPC, the surgical team is learning together to make improvements.

Ultimately, the research highlights how hospitals need to embrace systems that can better track unplanned costs so that learning can happen on a larger scale and better planning can happen from the outset. The researchers suggest that hospitals could “explore methods to incentivize surgeons to plan more often. This may be achieved by providing visibility about unplanned costs and workarounds, offering greater control on administering supplies and rewarding for unplanned cost reduction.” Processes should be streamlined and standardized, and surgeons should be included when making improvements to the system and provided data to make their plans better.

Considering that operating rooms stand to be both hospitals’ highest revenue source and their highest expense, accounting for over 50% of revenues and over 25% of expenses, making such process improvements could save tens of millions of dollars — an enormous payoff.