U.S. Hospitals Waste $12 Billion Annually Because of Poor Communication

College Park, Md. – March 9, 2009 — Researchers from the University of Maryland’s Robert H. Smith School of Business put a price tag on the cost of poor communication in U.S. hospitals at $12 billion per year. The research, newly released from the Center for Health Information and Decision Systems(CHIDS), is the first to quantify the economic impact of a health care system rife with communication delays and failures. Among key findings was unnecessarily long hospital stays – such as the time and resources patients squandered waiting to be discharged – account for 54 percent of total losses.

To put the $12 billion amount into perspective, the loss equals approximately two percent of hospital revenue nationwide, a figure that is more than half of the average hospital margin of 3.6 percent.

“Simply stated, the average hospital wastes a figure that is in substantial proportion to the amount it makes,” said Ritu Agarwal, director of CHIDS at the Robert H. Smith School of Business and the study’s lead researcher. “The industry ramifications for recouping these losses – particularly in light of the need for health care reform in improving patient access to care and services – are tremendous.”

In an article, Agarwal and CHIDS researchers say the solution to these inefficiencies rests largely in investment in information technology that would help streamline communication among hospital caregivers. Theirs is a timely observation following the $787 billion economic stimulus bill recently signed into law by President Obama. Of that, more than $140 billion is earmarked for health care, with $19 billion to modernize health information technology systems. As part of his proposed $634 billion budget to expand U.S. health care, Obama has also charged Congress to come up with the means of making it available to 46 million Americans now without medical insurance.

“An infusion of IT investment in the U.S. health care system is sorely needed as a step toward ensuring long-term sustainability,” said Agarwal. “This research quantifies and supports what we’ve intuitively known for some time – information technology is a critical component in creating the cost efficiencies that will enable us to revamp and repair our beleaguered health care system – efficiencies that will be passed along to the consumer to significantly improve patient quality of care and access.”

Agarwal points to solutions that include location-based technology that would help staff identify caregivers’ locations at all times and shared communication systems that would allow nurses to identify an attending physician. These investments would significantly reduce the amount of time and resources wasted identifying and locating attending caregivers, as well as the likelihood of hospital error. She also suggests telecommunications systems to facilitate remote consultations with specialists, thereby reducing patient travel and waiting time. Future CHIDS papers and studies will look at how process changes and applications of technology at the hospital level can alleviate these inefficiencies.

In conducting the research, Agarwal, Kenyon Crowley, CHIDS assistant director, and Jorge Diaz Schneider, CHIDS graduate research fellow, developed models for quantifying the economic burden of poor communication between doctors and nurses in U.S. hospitals. They conducted a comprehensive review of the literature and interviewed senior hospital administrators and clinical staff from seven U.S. hospitals of different types and sizes. Using this information, they were able to develop a scenario of possible outcomes and create conceptual and quantitative models to estimate inefficiency. While the situation at individual hospitals varies depending upon size and staffing, they found that the typical 500-bed facility stands to recoup an astounding $4 million with improved caregiver communication.

CHIDS’ research and mission is connected to issues currently under discussion as critical to the nation’s economy and future. As an academic research center with collaboration from industry and government affiliates, it is designed to research, analyze and recommend solutions to challenges surrounding the introduction and integration of information and decision technologies into the health care system. CHIDS’ corporate members include: Cisco Systems, Inc., Johnson & Johnson and CNSI, Inc. More information, including the research briefing “Quantifying the Economic Impact of Communication Inefficiencies in U.S. Hospitals,” can be found at the center’s Web site.

About the University of Maryland’s Robert H. Smith School of Business
The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 13 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, MS in business, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations on three continents — North America, Europe and Asia.