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3 Hidden Hospital Cost-saving Strategies

Dan J. Woods, for HealthLeaders Media, July 18, 2011

In an era when healthcare organizations are laser-focused on cost, obvious excesses in spending are long gone. That doesn’t mean the pressure to increase efficiency and reduce expenses has ended—it simply means that organizations have to look more closely at what they do, how they do it, and how much value they receive.

Today it’s possible for your facility to become still more efficient without sacrificing performance and morale, by encouraging people to be more innovative. Here are a few examples:

1. Outsourcing Contracts

Recent surveys have shown that numerous hospitals are not satisfied with their outsourcing contracts.  This often happens when contracts are awarded purely on price—which subsequently turns any vendor’s service into a simple commodity instead of a way to create value.

When outsourcing, the objective must be clear from the beginning. The economic benefit should be balanced with defined metrics for direct and indirect services related to the outsourced function. For example, hospitals often outsource environmental services, yet the hospital receives a publically reported measure indicating the “cleanliness” of a patient room. Since the function strategically supports the hospital’s brand and reputation, incentives should be established that improve the relationship and economic value on both sides of the contract. This win-win approach can be structured like a joint venture agreement, incorporating elements such as shared goals and defined criteria for success.  

Any agreement that is structured without creating alignment will eventually lead to dissatisfaction by one of the parties. Moreover, the buyer will incur the costs associated with disruption when operations are transferred to a new vendor—not unlike the costs associated with employee turnover.

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