A Cookie for Cost-Cutting

HealthLeaders Media Staff, May 8, 2009

Hospitals are cutting costs. They're doing it in a variety of ways. Some are engaging their employees to help rein in significant costs, while some are taking a top-down approach to cost cutting. It's essential and painful, but it has to be done. Not a day goes by that I don't see a news story about some hospital cutting labor costs through layoffs, through supply reorganization, through revenue cycle initiatives—but mainly through layoffs.

Still, cost-cutting is not a long-term strategy with much staying power. Once you've wring out all the excesses, where do you go for further stabilization, and further, where do you go for growth? Cost-cutting's like sugar. It offers a heckuva high, and its results taste sweet, but it's a short-term fix that might mask other shortcomings.

Without more long-term strategies to pick up the slack when the relatively easy cuts have been made, you're only buying time. Yet some CEOs want special congratulations for the cost issues they've solved. My question as I read many of these stories is why did it take a recession of this magnitude to focus you on waste? Shouldn't you have been running a tight ship all along?

Perhaps that's why I'm reminded of a particularly harsh routine by one of my favorite stand-up comics, Chris Rock, in which he talks about the various efforts for which many of us want special credit or recognition, but really don't deserve much. Check out 1996's Bring the Pain, or this clip from it, for some decidedly un-PC, but hilarious takes that I thought of when I was writing this column. In reality, like cost-cutting, what Rock talks about are efforts that most people with common sense and a touch of responsibility for their actions always do. His tagline after he brings up one of these scenarios: "What do you want, a cookie? That's what you're supposed to do!"

Fresh off my long stint as the senior editor of finance here at HealthLeaders, I'm inclined to give cost-cutting and fiscal responsibility a lot of weight, especially in this faltering economy that we've had to get used to over the past couple of years. It's responsible, for you as a leader, to charge your lieutenants with turning over every stone to try to find ways to save money. Cost cuts are quick and often successful, especially after a long period of relatively good times in the healthcare industry. Of course, eliminating waste in healthcare is a laudable strategy from a macroeconomic standpoint. But let's be honest: while you need to do it, cost-cutting is not a long-term strategy.

Perhaps that's why it received such short shrift in the CEO breakout survey contained in the 2009 HealthLeaders Media Industry Survey. When asked to rank their organization's top three priorities for the next three years, cost-cutting ended up pretty low on the list, behind such stalwarts as quality and patient safety, revenue cycle efforts, physician recruitment, reimbursement, and consumer satisfaction.

You'd think it would be higher in this environment.

But after some reflection, I realized that cost-cutting was in its rightful place on the list. Good leaders, which I'm assuming were most of the people who answered our survey, rightly recognize that some of the other strategies I've mentioned work better to solve healthcare's long-term issues. Cost cutting is a quick fix, so it's not a top long-term priority.

So perhaps I'm preaching to the choir here, but it's a good idea to remind yourself not to get distracted by the fact that you have made strides in cost cutting.

What, do you want a cookie? That's what you're supposed to do!

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