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3 Cost-Cutting Skills of Smart Hospitals

Jim Molpus, for HealthLeaders Media, January 28, 2013

To face a future where cost is an opportunity, healthcare systems must blend three values or skills:

  1. Hardwired thriftiness. In an industry where even a midsized health system can have an annual budget approaching eight figures, it's tempting to chase only items with the largest opportunities for cost savings. That leaves too much money in the margins, as it were. Curt Kretzinger, chief operating officer at St. Joseph, MO–based Heartland Health, says his health system set a goal a while back to find $10 million or more in savings annually, which means they have to look harder each year. "To get the savings, we've had to find it in multiple smaller areas," he says. "We have one team that's looking at $2 million on a redesign of a technology. So we will still probably have one or two of that size, but the vast majority is smaller savings of $100,000 here, $80,000 there, and $300,000 here. When we start adding them all up, it becomes real money. It's a lot of small efforts that become a big win for the organization."

  2. Data, analysts, and accountability. If you don't have the data to understand where you are really losing money, the analytics in your IT system to poke it out, and then the analysts who can translate those opportunities into a plan for transformation, your opportunities for cost saving are invisible. Heartland Health uses what they call PASTE teams—problem, analysis, solution, transition, and evaluation—to identify ground-level opportunities for reducing waste and shaving cost. When there is a need for more resources, including Six Sigma black belts, those requests are submitted to an oversight team where initiatives are prioritized and results tracked with an organizational scorecard.

  3. A line to the patient. Cutting just for the sake of cutting poses risks. But the typical healthcare encounter has so much process waste that cuts can be made that also improve the patient experience. Savings have to pass the "voice of the customer" test at Heartland Health, says Dottie Bray, process leader for performance management. For example, in a typical primary-to-specialty referral, the patient may have to be the one who actually calls to schedule the appointment. When Heartland was redesigning its scheduling portal, it created a module so representatives in any office could see and schedule appointments in others within the Heartland network. It's better for the patient, Bray says, while also cutting down on the call volume (which equals time which equals money) in both primary and specialty care.

To be fair, I'm fairly certain a broad swath of healthcare systems have the vision to understand there is opportunity in the value side of delivery. I'm just not so sure there are many like Heartland—which was a 2009 Malcolm Baldrige National Quality Award winnerwhich have built the hard-won capability to contain costs that will enable them to compete in a high-quality, high-value care market.

To learn more about Heartland Health's journey, download the free HealthLeaders Media Live case study. To join our three-hour HealthLeaders Media Live videocast from Heartland Health on March 19 (noon-3 p.m. ET), please go to our registration page, where you can find a full agenda and list of speakers.


Jim Molpus is Leadership Programs Director of HealthLeaders Media.
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