I’d like to point out a rather serious error in this otherwise excellent article. The authors claim to reduce hospital cost by over $60,000 for each avoided MRSA SSI. That simply will NEVER happen. Here’s why.

First and foremost, hospital costs are almost entirely fixed – perhaps as much as 85% - 90%. So, when you reduce length of stay, you don’t reduce cost by any significant amount. Consider this: if you reduce ALOS from five days to four days, do you send home a nurse? Without pay? Of course not. But sending home staff without pay is the only way you truly would reduce cost. And if you did send the nurse home without pay you’d never see him or her again.

Second, the authors confuse charges/revenue (the money the hospitals wants paid IN to them) with cost (the money hospitals have to pay OUT for salaries and supplies). The two are VERY different. So the cost reduction identified is really a charge reduction – for which the insurance companies will be most grateful, but which they are unlikely to share!

Third, since costs were not really reduced, but revenue was (150 cases x $60,000 = $9 million), the hospital bottom line has taken a pretty hard hit.

But wait, there really is good business sense to all this – just not the way the authors have explained it. Here is the financial benefit – and it is real.

The 150 cases that would be discharged 23 days sooner generate added operating capacity of 3,450 patient days. Using a rough 5 day ALOS, that translates into 690 potential additional, incremental admissions each of which brings with it revenue. Using the average per case revenue of $50,463 for uninfected cases used in article yields total revenue from these potential new cases of $34,819,470. That’s a lot of money, but it is not likely to fully materialize. Assuming a rough collection rate of 40%, it drops to just under $14 million! And THAT, not the never-gonna-happen cost reduction, is the real financial impact of reducing/eliminating MRSA SSI.

This is the same kind of error that makes most, if not all, the articles that identify cost reduction in the clinical literature incorrect. They focus on charges, assume that costs are 100% variable, and fail to look at the revenue implications associated with improving institutional throughput. Worse though is the fact that erroneous claims like those in this otherwise fine article continue to contribute to the notion that hospitals can make it via a strategy of cost reduction. They can’t. And the sooner hospitals recognizes this, switch the emphasis to resource maximization (via improved throughput - which is what clinical quality improvement initiatives always lead to) and begin competing for patients, doctors and payers on the basis of quality the sooner they’ll fix the issues of quality and affordability that have beset hospitals for decades.