Sustaining Through Stress

This article appears in the June 2012 issue of HealthLeaders magazine.

Last fall, 30 healthcare CFOs gathered for the inaugural HealthLeaders Media CFO Exchange for three days of peer discussion moderated by our editors. The topics of concern included value-based purchasing, accountable care organizations, ICD-10 preparation, and especially, cost control.

The CFOs told us that they would need to take out as much as 20% of their annual operating costs over the next few years simply to survive. Their prediction was supported by a survey of HealthLeaders Media Council members, executives who have agreed to help build our proprietary research.

Now that's a bracing challenge, particularly for an industry notable for high-fixed-cost facilities and regulations governing everything from labor hours to surgical pack contents. By definition, these cost cuts must be sustainable, since one-time savings will leave you in the same fix for the next budget cycle.

This issue's cover story, "Shaping Sustainable Cost Control," by Senior Finance Editor Karen Minich-Pourshadi, provides a valuable set of approaches for every healthcare leader: make sure you have measurement systems in place, focus on value, target the top costs, create collaborative care teams, and apply Lean management techniques, if you haven't already.

In the host of priorities that healthcare leaders must deal with, sustainable cost control will be one of the biggest for years to come. If your organization isn't yet transitioning to the pay-for-performance revenue model, get ready; volume-based revenue will necessarily fade.