This article appears in the May 2012 issue of HealthLeaders magazine.
In our annual Industry Survey, healthcare leaders place cost control and process improvement as their third-highest priority for the next three years (behind patient experience and satisfaction, and clinical quality and safety). They also cite labor, government laws and mandates, and information technology as their top healthcare cost drivers. How difficult will it be to be to achieve significant, sustainable spending cuts, and which line items present the best opportunities?
Tammie Brailsford
COO, MemorialCare Health System,
Fountain Valley, Calif.
The degree of difficulty will depend upon how far along healthcare organizations are in this endeavor already. For those that are beginning today and trying to achieve the 20%–25% reduction in overall expenses in order to thrive on Medicare margins, it will be very difficult. For those that have a culture of financial discipline and rigorous cost control in place already, it is doable.
MemorialCare is very far along in this journey. We started in 2009 immediately after the financial crisis of 2008. We established a goal of reducing our expenses to be able to thrive at Medicare margins. We have had a plan that we have been chipping away at ever since then.
Where are the greatest opportunities? We believe they are in rigorous labor and productivity management. It's using Lean to identify waste and to eliminate it. It is utilization management and partnering with physicians to ensure that the right things are done for patients—not more, not less. And it is care model redesign—looking at the levels of care, where patients are receiving the care, and making sure they are getting the proper care at the right level.
Jack Kolosky
Executive Vice President and COO,
H. Lee Moffitt Cancer Center & Research Institute,
Tampa, Fla.
If we look at it as just cost reduction, then I would put the other two— patient experience and clinical quality and safety—as the two higher priorities. At Moffitt we think that process improvement, what we are calling clinical transformation, really can lead us to all of these things: cost reductions, improved safety, and improved patient experience.
We think that there are various points in the system that are not value added. Indentifying those points is probably the easy part—where there are additional steps in the processes whether because of paperwork, or people double-checking something, or a lack of automation. Those are also frustrations for the patients, particularly for our cancer patients. One of their most precious commodities is time. They don't have time.
We can't cut costs and reduce the amount of patient safety. We know we have to increase it. We know that the process is one of the biggest problems in patient safety. So how do we improve the process and reduce those opportunities for errors on a going-forward basis? It's the same thing with the patient experience.
Mina Ubbing
President and CEO,
Fairfield Medical Center,
Lancaster, Ohio
When you look at patient experience, satisfaction, quality, safety, cost control, and process improvement, they are not mutually exclusive from one another. We have a time right now to be creative. We can make cost controls stick if we get to the right size and realize that, given all the regulations we have—particularly for community hospitals—a hospital like mine can't be all things to all people.
What is the definition of a community hospital anymore? If we can get those pieces of the puzzle well thought through and if we can get some experience and traction about what is going to be, because we are still making rules on the fly, there are some very good things there.
We are going to look at processes. What is not value added to the things we do? And that comes back to the voice of the customer, which comes back to patient satisfaction. Quality and safety and doing it right the first time certainly cuts costs out of your system because you don't have to do it a second time. Mitigate some risk. Some of these things are going to work hand in hand.
Dean Swindle
CFO, executive vice president for business services,
Catholic Health Initiatives,
Englewood, Colo.
On the challenge ahead: To get effective sustainable transformational cost movement, you are going to have to engage your clinical folks and have a partnership that redefines how you deliver care and make it a process improvement. At the same time you are trying to maintain what level you have of patient experience, and take that into consideration as you re-define processes. It will be the most difficult thing that any of us have done in this industry.
On cutting versus changing: You try not to use the term cost cutting because it alienates three fourths of the workforce. But at the same time it doesn't give credit for what needs to be done because you do need to change processes. Even broader, you are going to see some saying we need to change how the operating model is set up.
On surviving the transition: Everyone knows we have already done a lot, but it's not enough and the traditional way of looking at it is not going to be enough. Having transformational change in how we do our work every day across the board is a daunting task. A lot of us are still trying to survive in the current environment of fee-for-service as we migrate to who knows where we are going even as we are being held accountable for value and quality.
On the need for efficiency: Cost efficiency and effectiveness now becomes much more of an integrated part of a broader theme. We have to keep finding efficiencies. Because of the uncertainty of volumes and revenue that we have experienced in the past couple of years, and which will continue, cost will become more of a discussion point because it is something people feel you can control more than the uncertainty around revenue.
This article appears in the May 2012 issue of HealthLeaders magazine.
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John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.