Hospital Linen Distribution: Mining the Savings

Hospital Laundry ServiceMost hospitals today rely on external central laundries for the processing of their linens. Operating budgets for linen distribution departments of $1 to $2 million annually—as well as savings potential of 10% to 20%—are not uncommon. Many hospitals have not identified opportunities for cost savings in the distribution and utilization of linens. In the linen management world, metrics play a key role in determining whether or not a linen distribution department (and hospital) is operating at peak performance and maximizing the linen budget.

Comparing the ratio between linen weights going out (soiled) against those returned (clean) is a reliable way to determine whether linens are being misused, discarded, hoarded, or stolen. Because soiled linen is heavier than clean, weight is a significant indicator of potential issues. The optimal weight variance is 9% to 12% in the hospital acute care setting, according to the article “Management by Numbers 594” by Sarah James and Graham Skinner.1 Remarkably, life cycle end accounts for just 25% of linen loss, while the remaining 75% can be attributed to theft by ambulance companies, unexplained loss or discard in the trash, or misuse, according to the Hospital Laundry Accreditation Council (HLAC) . This is critical if the hospital is operating on a customer-owned goods (COG) basis or if the linen rental program charges for excess loss. Tracking this metric over time and educating primary linen users is essential to controlling these costs.

Another measurement used in determining linen utilization is pounds per adjusted patient day (APD). According to the HLAC, the national average of pounds per APD is 15.5. Actually, this number can be driven even lower. Factors such as inner hospital environments can contribute to increased average APD. For example, a hospital with annual costs of $950,000 for processing 1.9 million pounds with APDs of 110,000 is operating at 17.27 pounds per APD. Decreasing this usage to the national average of 15.5 pounds per APD would equal savings in excess of $97,000. Achieving improved utilization by linen users requires time and effort and is highly focused on ongoing education efforts. It is also important to introduce standardized processes including the development of a bed makeup that reduces the use of heavy items and establishes bed change frequencies (only change linens during a patient’s stay when absolutely necessary), and incorporate these into a linen use policy that is followed consistently. Other linen use practices include establishing “ragout” and scrub use policies. Setting linen standard levels on clinical units is yet another way to curb usage by identifying requirements instead of randomly overstocking the linen carts or cupboards. Some hospitals are pursuing another direction: charging the individual nursing clinical areas for their usage. This method assigns accountability directly to the end user and has received some traction in linen conservation efforts.

Linen replacement is another category in which metrics apply. Most hospitals that outsource linen processing are part of a rental program: the laundry owns the linen and “rents” it to the hospital. Laundries charge hospitals either per pound, by the piece, or a combination of the two. As discussed above, weighing linens going out (soiled) and coming back (clean) and establishing the acceptable ratio is an essential element to monitor in order to detect and proactively reduce loss. When a hospital is operating on a COG basis, the focus on loss is elevated since linen purchases represent a visible cost for hospital administration. Typically, linen replacement expenses should average between $.08 and $.12 per pound of clean linen. Factors affecting this metric include the hospital’s use or non-use of disposable items. Another example involves scrub wear: loss can wreak havoc if not closely monitored with controls in place, such as scrub dispensing machines. When replacement costs are exceeding the standard of $.08 to $.12 per pound in a COG environment, savings can be implemented. Using the example above of processing 1.9 million pounds per year with linen replacement costs of $285,000 (or $.15 per pound), savings can reach $57,000 per year if the hospital decreases the replacement cost to $.12 per pound.

Laundry ServiceWith financial pressures top of mind for hospital leadership, it makes sense to capture savings opportunities whenever possible in the hospital environment. Controlling linen use and cost is a team effort that involves hospital leadership backing the initiatives, linen management monitoring and educating, and clinical departments being mindful of their linen use.

Reference

James S, Skinner G. Management by Numbers 594. ALM Journal. Summer 2011;18-19.

 

About the Author:

Tom Millar is a seasoned operations leader with expertise in contract management services, profit and loss management, cost reduction initiatives, client retention, and business growth. He possesses a passion for developing and mentoring subordinates, building teams, and working with clients to drive operational savings.