Cost and Revenue Strategies
Healthcare executives who have embraced the task of determining the true cost of providing care at their organizations are in a better position to offer transparency, and see doing so as a competitive differentiator in the healthcare industry.
This article first appeared in the June 2017 issue of HealthLeaders magazine.
In an ideal world, business leaders are able to maintain financial growth and stability simply by driving down costs and preserving or even increasing revenue through conventional means. However, the healthcare industry—with its mix of third-party payers, for-profit and nonprofit entities, and increasing reimbursement pressures—creates unique challenges for its leaders.
Note that the healthcare industry is making steady progress—the transition from fee-for-service to value-based care encourages healthcare organizations to embrace a financial and clinical mission of providing high-quality care at more affordable costs.
According to the 2017 HealthLeaders Media Cost and Revenue Strategies Survey, for example, 49% of survey respondents say that the transition from fee-for-service to value-based care has either significantly improved or somewhat improved their cost containment efforts, and only 24% say that this has significantly hindered or somewhat hindered their efforts.
However, while positive change is being achieved through healthcare reform efforts, progress is moving at a slower pace than many would prefer. In the interim, traditional methods such as driving down costs through purchasing and supply chain efficiencies and maximizing revenue collection through disciplined revenue cycle practices remain effective strategies.
Further, initiatives focusing on process redesign and care standardization, to name just two, are also yielding positive results. But one issue that remains an obstacle is the industry’s inability to determine the true cost of delivering care.
True cost of care
Survey results reveal that the biggest barrier to achieving sustainable cost reductions is the lack of data on the true cost of care (58%). This is followed by a closely grouped series of responses that cover a range of different areas: insufficient integration with care partners (45%), lack of technology in place to achieve goals (34%), with lack of patient engagement in their care (33%) and regulatory compliance (33%) in a tie. Responses are fairly evenly spread across most of the factors, an indication that achieving sustainable cost reductions touches on all aspects of provider organizations.