PLGL: The largest controllable cost hides in plain sight

Series 2 · The Economics of Safety · Blog 1

From the “why” in behavioral health to the economics

During my first series, Inside Behavioral Health, we looked at the reality that the way we keep patients safe in an inpatient psychiatric unit has barely changed in sixty years. We discussed the challenging environment of a mental health facility, the patient checks and observation gaps that are a core part of daily work, the safety and risk issues, and the dedication of the clinical teams that carry the work. We also highlighted the arrival of innovation and technology that could positively transform the inpatient psych unit. My goal was to raise awareness, and to argue that the door is now open to a better way to operate, and to support the people who do the work.

This next series turns from the why, and the hope, to the economic reality.

What is PLGL (Patient Liability and Grievous Loss)?

We start with the term we introduced earlier, PLGL (Patient Liability and Grievous Loss), which I argue is the largest cost on a psychiatric unit that the finance team cannot point to today: the cost of safety. Today that cost is scattered and hard to see. And remembering the adage, you cannot manage what you cannot measure, let's outline the rationale, the reasoning, and the upside of naming and calculating PLGL.

PLGL is the expense associated with the cost of observation (staffing, agency and overtime) plus the expense of catastrophic events. Those today sit in two places, and they represent real expense lines based on what you think you need. 

1. Observation budget

You budget for the observation coverage a facility needs, i.e. you staff to a certain level of 1:1s. Ideally your budget creates the right environment for operating safely and avoiding something bad happening. 

2. Event impact

If something bad does happen, the second part of PLGL is recognized: the expense impact of that event.

Calculating the true financial impact of patient safety

Acknowledgment: Before we dive deeper, I want to recognize the devastating costs and everlasting impact to an individual, family, and loved ones of these terrible events and that impact is something that cannot be overlooked. I also want to remind the reader that this blog is scoped around the economic argument and is purposefully narrower.

Let's take a closer look at how PLGL shows up today: through the existing run rate, and the surprise tail.

1. The continuous 1:1 observation run rate

Firstly, what does a continuous 1:1 cost for a day? Based on the independent literature, it is approximately $561 per day, or roughly $205,000 annually if sustained. 

When you calculate this on a per-bed basis, assuming roughly 15 to 20 days of 1:1 per at-risk bed a year, you get $8,000 to $12,000 per at-risk bed per year. Rather than paying for the sitter on the hard plastic chair at 3am, how much clinical care could you buy for that?

3. The high-severity cost of sentinel events

Secondly, what does one bad outcome cost: a fall with an injury, a sentinel event, or staff harm?

We know that the direct cost of a fall with injury runs just under $37,000, and the costs around a sentinel event are easily seven figures once legal and liability are counted. These are low-frequency, high-severity events that impact everyone: the patient, the family, the staff, the broader team, the community. 

How do we move from reacting to managing? How do we lessen the chance that an unwatched minute can have the impact it has?

Managing and reducing PLGL costs with technology

PLGL is the run-rate cost of continuous observation, plus the normalized one-off cost of a catastrophic event, spread across your beds as an expected annual expense. Add them together and look at it on a per-bed basis.

From what we have seen talking to operators of mental health units and facilities, PLGL is a sizeable number, and it represents a real, addressable opportunity to invest in technology and manage it down.

And that is what this series is about: the economics of safety in an inpatient psychiatric facility, what we call PLGL, and how to measure it, manage it, and improve it.

Now that we have set the stage, our next post goes deeper into calculating the costs themselves. In other words, rather than shining a flashlight onto a sleeping patient's face for proof of life, let's bring light to making the mental health unit safer, by going deeper into PLGL.

‍Author: Todd Haedrich, CEO, LIO