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3 Insider Tips on Cutting Costs without Strangling Growth

Philip Betbeze, for HealthLeaders Media, July 25, 2014

You can't cut your way to profitability. The CEO of a 12-hospital system divulges how to achieve both growth and cost cutting. He ought to know. He's slashed $165 million in costs while investing in growth.

You're so focused on cost cutting that you might be strangling the opportunity for your organization to grow.

How do I know?

Dan Wolterman, president and CEO of Memorial Hermann Medical Center in Houston, told me so.
 
I'm working on a story about growth strategies for healthcare organizations for an upcoming issue of HealthLeaders magazine, and I had an interesting interview this week with Dan. I'm hopelessly over budget in word count as so often happens, but even though it won't fit into the magazine, some of what we talked about is too important not to share.

As I try to do with all the folks I interview, I ask them at the end to think about what we've talked about generally, and to think of advice they would give their leaders at other organizations. In this case, we were talking about the difference between cost control and growth strategies.

The challenges of surviving on less reimbursement are daunting, so it's tempting to rely on a strategy that offers near-immediate results: reduction in headcount, salary or hiring freezes, supply chain work, and administrative overhead reductions.

Some or all of these strategies may be necessary, but it's easy to get lost in them if you don't have a disciplined strategy of where to invest some of those savings on growth.

Part of that is difficult because developing strategy for growth means taking huge perceived risk while a lot of uncertainty rules the business environment. That's also known as vision and entrepreneurship, and more of it is needed in healthcare today.

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