The Myth of Length of Stay, Revisited

by Stefani Daniels, Founder and Managing Partner
Published on Oct 03, 2020

When the Inpatient Prospective Payment System (IPPS) was introduced by the Centers for Medicare & Medicaid Services (CMS) back in 1983, hospital executives accepted the thinking that if Medicare is paying the hospital a set fee based on an expected length of stay (LOS) for a specific diagnostic-related group (DRG), then if the patient stays in the hospital for less than the expected length of stay, the hospital earns a profit. 

History, however, has proven that this assumption was egregiously flawed. Studies confirm that while LOS did indeed decline over the years, resource utilization costs remained steady. Or, to put it another way, physicians continued to practice pretty much the same way they did pre-DRG, but they did it in fewer days.

So, while LOS declined nationally, costs per case, which are largely dependent upon physician practice behaviors, didn’t drop. It is this legacy that still pervades much of the thinking about length of stay.

That's not to say that LOS is a useless metric. Indeed, it is often used to gauge hospital efficiency. The case mix index (CMI):LOS correlation may evidence improved efficiencies,  though by itself, the ratio provides little insight regarding the source of the inefficiencies. Tracking LOS to maximize patient flow and bed availability may be valuable, though it’s a crapshoot to determine whether the next patient waiting for a bed will have insurance coverage that promises to yield a profit. Monitoring LOS may enable leaders to maximize the volume of patients in profitable service lines, and to maintain alignment with regional and national benchmarks. And truth be told, it is a very easy metric to obtain. Though hospitals are replete with data, it is often difficult to access information that would prove particularly helpful to hospital leaders in their quest to improve efficiency, reduce costs, and decrease LOS.

There are many internal operational situations that every physician, care coordinator, or nurse routinely encounter in their efforts to advance a patient's treatment plan and effect a timely transition. Singularly or in combination, these situations add up to a complexity of variables that needlessly prolong LOS.

Situations ranging from inaccurate or incomplete registration information (which, based on a totally unscientific survey taken at every client hospital, occurs in approximately 40 percent of admitted patients, and results in delays in care planning and discharge planning) to ancillary services availability, timely diagnostic testing and reporting, scheduling obstacles, and communication mishaps all abound. Add to this list the many physician practice behaviors that impact LOS, such as prescribing excessive or low-value medical interventions, “suggestions” embedded into imaging and physiatrist reports to consider additional services, the number of consulting specialists and their responsiveness, refusal to discharge until consultants on the case sign off, ordering non-formulary pharmaceuticals that must be purchased, and ordering esoteric tests that require referral lab involvement.

Overtreatment is a major contributor to excessive healthcare spending and adverse patient outcomes, and it adds more hours to LOS.

Since 1983, controlling LOS has been translated into C-suite directives to care coordinators and utilization review specialists to lower LOS – although neither are the cause of LOS inflation. Nevertheless, care coordinators beg, harass, coax, and sweet-talk physicians into discharging their patients quickly. They negotiate with department heads to schedule and expedite the diagnostics the doctors have ordered so each patient can be discharged promptly. These discussions have been going on since 1983, and little has changed. Physician practice decisions and delivery-of-care processes still drive the patient's navigation through the hospital system, with the end result of a LOS that keeps the chief financial officer awake at night. This scenario is a classic example of that overused refrain about doing the same thing over and over and expecting different results.

Physician Practice Behaviors
It has long been known that there are large variations in practice patterns caused by the cumulative impact of several factors: medical school imprinting, malpractice fears, fee-for-service incentives, and physician ignorance of costs, among others. But as hospital executives struggle to rein in costs and adapt to new value-based and downside risk payment models, it is becoming increasingly clear that attention must be paid to the anatomy of physician practice behaviors.

Internal data on the use of resources are rarely made available by hospital leaders. Utilization review committees (URCs), which should be the recipients of these data, rarely have a chance to influence practice behaviors without access to objective trends and patterns of practice information. Hospital boards of directors and executive leadership are either unaware of the problem or incapable of implementing solutions, and physicians, who are driving excessive costs, face few consequences. Make no mistake about it, under new payment schemes, resource utilization and its associated costs – not length of stay – are key to every hospital’s financial health.

Research from Dartmouth University and the RAND Corporation has consistently confirmed that physicians aren't prescribing more resources because their patients are sicker, but rather because of practice behaviors, resource availability, and a perverse reimbursement system that typically pays physicians for doing more, not doing better.

Delivery-of-Care Processes
Hospitals are complex organizations. Administrators are put to the test daily to improve patient flow and delivery-of-care processes to meet staggering demands and overcome the challenge of communication between multiple caregivers and the traditional siloed infrastructure. Hospitals have tried their best. From Deming to Six Sigma, administrators have leveraged various strategies to help hospital departments streamline processes to make them more patient-centric. But the structural and operational complexities of the hospital and the dysfunctional culture of siloed services often defy every effort, and obstacles continue to emerge from every service delivery department. To understand LOS, hospital leaders must track progression of care and the obstacles that delay efficient patient flow.

What to do about it
The combination of physician practice decisions and progression of care processes adds costs to every patient admission, extends LOS beyond the geometric mean, and eats away at potential margins. Hospitals are overrun with data relating to both of these major variables, and severity-adjusted comparative data are being used by many hospital executives to identify the source of their financial hemorrhaging.

Data is used to highlight which physicians are consuming resources beyond the mean for a similar group of patients; data provides evidence of the physicians who are making questionable referrals to specialist consultants; data offers insights into what organizational or community obstacles obstruct patients' safe and swift navigation through the acute level of care; and data shows which physicians or service lines produce the needed margins to stay economically healthy. Armed with this information, it's time to shift the center of attention from length of stay to costs per case, using physician-specific margins, resource utilization, and avoidable days data demonstrating system inefficiencies.

Include Physician Practice Profile Review by the Utilization Review Committee
Back in 1997, with the passage of the Balanced Budget Act, MedPac recommended that physicians’ resource use be measured as a way of encouraging physicians to reduce the “intensity of their practice.” The recommendation was based on studies that show that greater resource use in defined geographic areas did not improve health.

Physicians must be able to understand what the drivers are for utilization and what the concerns are for reducing costs. By first understanding behaviors, the URC can then work to impact them.  Electronic medical records and claims processing software generate data demonstrating the volume and costs of every supply, pharmaceutical, diagnostic test, service, and procedure ordered by the attending physician. While the chargemaster price may be an arbitrary number, it nevertheless represents the use of resources.

Profiling data is used to assess the broad pattern of medical decisions made over time. They help identify and characterize differences in practice behaviors and influence patient outcomes. Profiles are not based on rigid rules, and are easily adjusted by case mix or severity of illness categorization.

The practice pattern of a single physician can be expressed as a rate, as the cost per case or some other measure of the use of resources for the population served. The resulting profile can then be compared with a norm for the same population that is either based on practice among physicians within the organization, or based on standards such as practice guidelines. It should be noted that the American College of Physicians and Congress have advocated physician profiling.

Capture Information Describing Delay in Progression of Care
One of the features of a contemporary utilization review program involves capturing, quantifying, and reporting progression of care delays and potentially avoidable days. Using an electronic list of every possible system-, patient-, community-, nurse-, or physician-related reason why a patient's navigation through an episode of care has been delayed, resulting in an avoidable increase in LOS, Utilization Review Specialists (URS) are providing objective information to the C-suite on hospital efficiency.

Like physician profiles, delays and potentially avoidable day (PAD) reports are not an exact science, but they paint a vivid map of barriers and obstacles that impede or delay a patient's progress through an episode of acute care and subsequent return to the community. Knowing that every day in the hospital increases the patient's risk of a medical misadventure, every hospital associate is expected to advocate for the patients under their care, and this should be the first line of defense to avoid delays, whether due to operational or medical decisions. At some point, however, the physician and heads of service departments must be held accountable, or hospitals will continue to see patients suffer and margins decline.

A New Future
Slavish focus on length of stay is an out-of-date tactic. If cost per case is less than the DRG reimbursement, the per diem rate, the bundled payment, or the value-based benchmark, the hospital achieves a margin no matter what the LOS might be. If quality patient outcomes and financial viability are the hospital's goals, then it's time to switch strategies.

Hospital executives must commit to using severity-adjusted physician resource utilization practice profiles to help physicians target practice areas that evidence under- or over-utilization of resources and impact patient outcomes. And they must hold department heads accountable for efficient service provision, with consequences to both within a given time frame.

Unless the medical staff sees a genuine interest in improving patient outcomes by streamlining operational processes, they will be less likely to participate in changing practice behaviors. Executives must resist the temptation to focus on savings alone. Patient outcomes are paramount.

Length of stay has always been an easily obtained proxy metric of both physician practice decisions and the inefficiencies of hospital delivery-of-care processes. While there are many other variables that contribute to LOS, these two factors comprise the major stumbling blocks, but they can be modified with renewed vigor in the administrative suite and by the URC, supported by the board.

We have a long way to go in engaging physicians in efforts to reduce unnecessary utilization and cost. But after 37 years since the IPPS was introduced, it's time to shift priorities. Influence physicians’ use of the “pen” and remove (or at least minimize) system, process, and community barriers, and LOS will fall like a row of dominos. Unfortunately, many hospital administrators have been reluctant to tackle the former and have not been very successful in improving the latter.

EDITOR’S NOTE: Portions of this commentary were previously published in HealthLeaders Media, 2008.