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5 Cost Reduction Priorities for CEOs

Rene Letourneau, for HealthLeaders Media, November 11, 2013

Reducing Cost Variations
Several CEOs noted that identifying and rectifying variations in costs among clinicians treating similar patient populations is also important to reducing the overall cost of the care their organizations are delivering.

"One of the things that we've done is take a look at all of our hospitals and look at variation around certain DRG clusters," says Steve Newton, west region president at Baylor Scott & White Health in Grapevine, TX.

Like West Virginia United, Baylor Scott & White is using its best performers to set the standards for other clinicians, Newton says, noting that the system's administration will work with low performers on finding ways to improve.

"Literally, we are rolling out an expectation that all of our hospital leadership teams are going to set up a group to look at the analytics and to find exactly where the low performers are and what the levers are," Newton says. "I personally feel like this is one of the biggest untapped reservoirs in terms of cost reduction opportunities."

Preparing for New Reimbursement Structures
The CEOs at the Exchange all agree that one of the largest challenges for their organizations is the looming transition from a fee-for-service payment structure to one based on value. While the senior leaders acknowledge that they are moving toward a capitated reimbursement environment, they say it is difficult to know how quickly to make changes when they are still mainly being paid on a fee-for-service basis.

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4 comments on "5 Cost Reduction Priorities for CEOs"


Tom O'Brien, Sr VP Healthcare (12/12/2013 at 10:34 AM)
Two paths to success... 1) Cost must be at the transaction/process level. TDABC costing has been the best source for this (see Harvard Business Review, "The Strategy That Will Fix Health Care" by Michael E. Porter and Thomas H. Lee in the October 2013 - page 11) 2) Change management. EVEN if you have good data to share with the physicians a strong change acceleration process is key. Data alone will not get you to the finish line!

Rob Tholemeier (11/29/2013 at 11:56 AM)
One of the things I have been looking for is the use of activity based costing in HCOs, which seems to be almost unheard of. I do not see how you can effectively reduce costs unless you know them. In labor intensive industries, with high paid labors, it seems like the adoption of activity based costing is a pre-requisit. Rob Tholemeier Chilmark Research

Stefani Daniels (11/12/2013 at 1:39 PM)
Back on July 14, 2008 HealthLeaders Media published an article 'The Myth of Length of Stay." In it, I presciently entreated execs to stop their slavish focus on LOS and instead focus on cost per case...it is the last pool of untapped opportunities to drive costs down. The volume of excessive, wasteful, and duplicative interventions that physicians prescribed is well known to those of us who have been on the front line. I'm delighted that execs finally see the light - though not surprised it took so long.