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ALOS – Why Less is More

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Dr Vikram Munshi, Founder and Principal Consultant, Whitespace Consulting and Capability Building explains why lesser ALOS will help hospitals improve operational efficiency

The hospital industry in India is predominantly driven by the private sector both in terms of the number of hospitals and beds. In spite of this, India currently has only seven beds / 10,000 patients against a global average of 27 beds / 10000 patients as per reports.

The profitability of private hospitals experienced a hit in early 2017 when the government announced price control on medical devices including a slash of 70 per cent on stents. Consumables normally contribute more than 60 per cent to a hospital’s profitability but with price control, enormous pressure was put on the margins.

Hospitals also have a high entry barrier especially in the metros and tier-1 cities owing to the soaring cost of land, cost of skilled manpower (doctors and paramedics) and other capital expenditure such as high-end medical devices for diagnostics and treatment. This increase in costs has also reduced the profitability of the hospitals.

A leading business journal reported that the hospital sector showed a 7 per cent drop in Q2 FY 2019 of EBITDA. The situation is not improving. While the margins are reducing, the trust deficit between the patients and hospitals also seems to be increasing. In such a scenario of tightening regulations and demanding patients, profitability and patient satisfaction seems to be a paradox.

Is it possible for a hospital to work on both fronts? The answer is probably yes. There are certain critical key performance indicators which help impact both patient satisfaction as well as hospital profitability.

One of these indicators is the average length of stay (ALOS). ALOS is the average number of days a patient stays in a hospital. It is calculated by dividing the total number of days a patient spends in the hospital by the total number of admissions or discharges done in a year (or in a given time period).

ALOS is a measure of operational efficiency of hospital processes. To understand this, we can take an analogy from the airline industry. An airplane is an expensive piece of equipment and its utilisation is critical for efficiency and profitability of an airline company. An airplane only makes money when it is flying and not when it is on the ground. Efficient airlines monitor aircraft turn around time (TAT). The TAT is not only monitored but efficient airlines ensure that all the processes like baggage loading, aircraft cleaning, aircraft inspection, refuelling, passenger loading, etc. which impact TAT is relentlessly honed to ensure maximum efficiency.

A lesser TAT also ensures more flights are on time leading to higher passenger satisfaction. All airlines monitor TAT but only a few know how to reduce TAT. Similarly, most of the hospitals do monitor ALOS but apart from the bigger hospitals, only a few know how to actually improve the ALOS.

A greater ALOS will increase the cost for a hospital and can also negatively impact a patients’ perception, fuelling distrust that the hospital may have some vested interest in keeping the patient for a longer duration than actually necessary.

It is known that ALOS gets impacted by various factors like the disease condition, diagnostics, patient condition at admission/discharge, payment mode, etc.

Hence, there is a need for hospitals to look at their internal processes that directly impact ALOS. For each of the key processes identified, the sub-processes need to be understood. After process identification, teams can be created to brainstorm ways of fine-tuning each of the steps. Once the key steps have been determined, all the concerned stakeholders need to be communicated about alignment, followed by training.

Historical patient data analytics of the hospital can also give insights on factors impacting ALOS. These insights will help the hospital to better prepare themselves with reference to aligning resources when a certain patient type is admitted.

Research has shown that hospitals providing better patient experience perform better financially compared to others. Thus, a consistent approach towards not only monitoring ALOS but aligning the hospital processes and people towards ALOS will definitely help the hospital to improve its operational efficiency and drive a positive patient experience which will lead to a healthier bottom line.

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