Q&A: Banner CEO on 'Getting the Cost Out'
The pilot culminated in a day-long meeting of the senior leadership in which 123 recommendations were reviewed and 116—valued at $104 million to $133 million annually or 18% to 24% of Banner's G&A expense—were approved. Among the approved recommendations were opportunities to save nearly $4 million in HR administrative costs by deploying more self-service technology supported by a shared services organization, nearly $8 million from insourcing second physician reviews of inpatient charts, and up to $3.5 million by creating an internal facility for drug compounding and packaging.
Fine's happy to boast of the results so far. In a wide-ranging interview, he details the executive team's role in nearly half the $70 million in savings the organization achieved between 2012 and 2013, and lays out a prescription for success in a dynamic future for healthcare.
HLM: Why is cost cutting so important for today's hospitals and health systems?
Fine: Clearly the pressures on reimbursement and the reduction of the use of services that are a driving force in today's environment—whether fostered by federal programs or large businesses—require us to reach a level of efficiency not only from a cost but a clinical outcome perspective at levels we have not historically performed at in this industry. I don't believe these pressures are going to change.
HLM: I think I know part of the answer, but why did you as an executive team decide to focus on general and administrative expenses first?
Fine: Because the opportunities to spread fixed overhead over a big base are undeniable. In a large system, back-office functions, if they are going to meet the needs of the direct caregiving environment, have to function at a high level for the customer base.
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