This time last year, I started my blog post with “It’s not new and it’s not old, healthcare organizations continue to make it a priority to evaluate their cost structure on an ongoing basis and identify opportunities to reduce spending while maintaining or improving patient outcomes. Hospitals continue to be under significant competitive pressure to reduce costs, improve quality, achieve superior outcomes, and enhance the patient experience.” Guess what? Nothing has changed.
Today we will look at driving financial improvement through linen and laundry improvements.
The Healthcare Laundry Industry
The healthcare linen rental industry is estimated at $3 billion in annual revenue. This includes the laundering of bed linens, towels, patient gowns, scrubs, medical apparel, reusable operating room linens, and disposable linens that are used by hospitals, long term care facilities, clinics, and surgical centers.
Roughly, 2% to 3% of a hospital’s budget is spent on laundry and linen services. Healthcare linen can be rented, owned, self-laundered, or outsourced. An estimated 80% of hospitals and other large institutional linen users rent linen, while the other 20% own it. Of that total 8% launder in-house.
If a hospital outsources its linen processing, choosing the best vendor is a critical financial decision. It can be a temptation to choose the linen vendor solely on the offered price-per-clean pound of delivered laundry. But this approach is beset with risks.
Today, leading hospitals are requiring that commercial laundries and cooperatives meet certain accreditation or quality requirements including accreditation from the Healthcare Laundry Accreditation Council (HLAC) or documentation that the linen is Hygienically Clean from TRSA.
HLAC accreditation is also available to on-premise laundries.
The potential risks to a hospital of using a laundry not following the highest standards of infection prevention can far outweigh any perceived savings in linen cost per pound. While documented cases of linen contributing to HAIs and deaths are rare, reports of microorganisms on linens as a source of infections is possible, and can threaten not only patients and staff, but also a facility’s reputation and finances.
Hospitals Seek Change for a Number of Reasons
Soriant evaluates a significant number of laundry agreements and facilities over the course of a year.
The primary driver of laundry evaluations during the past 12 months has been related to the processing of laundry versus the distribution of laundry within a facility. Organizations are undergoing this evaluation is for the following primary reasons:
- Service: Dissatisfaction with the quality of current service provider or deterioration in customer service from the current provider
- Cost: Desire to benchmark price
- Market Consolidation: Continuing market consolidation has health systems receiving service from multiple vendors under different models – the healthcare organizations desire to simplify the relationships and process
- And, Outsourcing: The continued reduction in hospitals owning and managing their own laundries
Let’s circle back to price for a quick discussion because we are talking about IMPACTING THE BOTTOM LINE…
What does price per pound actually mean? Many laundry vendors will quote an attractive laundry price per pound but hide the real price behind lots of other fees.
It is important to understand the true cost per pound once these fees are factored in. Then do an “apples-to-apples comparison.”
The total cost of laundry handling is made up of more than just a single invoiced line item for processing, which typically ranges between 42 cents per pound and 50 cents per pound. There are additional line items that push your total cost up an additional 20-30%. These include:
- Your textile program – if you are using a rental program or customer owned goods program AND the quality of the linens used
- Textile Loss – the replacement cost of lost linen and end of life linen
- Surcharges for specialty items
- Surcharges for scrubs
- Cart Builds – there can be a charge for exchange carts if you choose to have the outsourcing provider build those carts for each floor instead of having your in-house labor do that
- Other miscellaneous charges include utility surcharges, fuel surcharges, inventory carrying cost, special handling fee, and the list goes on…
Additionally, your linen program needs to have an optimal labor model for the distribution of linens throughout the organization. You should also have an effective program for managing the distribution of scrubs to control excess usage and scrub loss. All of these items make up the total cost of your laundry and linen program.
Controlling Costs through Linen Management
Excessive linen losses can become very costly for hospital organizations. It is proven that by following good linen management practices, losses from normal wear and tear can be maintained at normal acceptable levels, or even reduced. The goal is simple… provide a system of clean, dependable products and services, in the right amounts, at the right time. These steps should be included in a comprehensive linen management program:
- Carefully review your data by evaluating and preparing your statistics
- Review linen loss trends, soiled to clean factors, piece counts, percent allowances, etc.
- Work with your laundry vendor to perform Linen Studies to review and recommend improvement opportunities
- Train completely on optimizing Linen Management Software Programs
- Optimize Linen Room floor plans
- Order appropriate linen quantities
- Establish Par by Item by department
- Departmental tracking
- Procedures for quality control
- Consistent collection of soiled linen
- Scrub distribution and Inventories
Reducing linen utilization can have a significant impact on your total overall cost. Let’s look at the following example: Hospital A and Hospital B both pay the same amount to a vendor for processing laundry. Both hospitals have 125,000 annual adjusted patient days. Hospital A uses 18 pounds of linen per adjusted patient day, their cost is $1,125,000 annually. Hospital B has implemented a linen management program and uses 12 pounds of linen per adjusted patient day. Hospital B’s cost is $750,000 annually, 33% less than Hospital A!
Short but Sweet
We want to provide you with insight and strategies so that your healthcare organization operates at its very best. Our hope is that this blog post has provided ideas on implementing an effective linen management strategy to drive bottom line financial improvement. I’ll leave you with a few final thoughts:
- Focus on Making it Happen
- Determine who should lead the in-house loss prevention improvement effort
- Create that “Sense of Urgency
- Follow-Through and Communicate