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5 Cost Reduction Priorities for CEOs

Rene Letourneau, for HealthLeaders Media, November 11, 2013

"The hardest part is [that] you still probably have both feet in the fee-for-service canoe, and you are lifting one foot out knowing you are going to put it in a capitated situation, but you can't put it down yet. You just can't put it down yet," West Virginia United's Jones says.

This creates a challenge for system leadership, he says. "You are trying to get people ready, but you can't really, fully implement because it doesn't work right now with payers."

Britt Berrett, president at Texas Health Presbyterian Hospital Dallas, says preparing to move to a value-based reimbursement structure without knowing where the tipping point is presents a major dilemma.

"I think I spend all my time preparing my team to be ready to change… The change management is going to have to be extraordinarily fast when the current reimbursement structures collapse," Berrett says.

Achieving Staff Buy-In
Reducing price variation and cutting the overall cost of care requires buy-in and a willingness on the part of clinicians and staff to change processes and procedures—something that is not always easy to achieve, says Patrick Cawley, MD, CEO at Medical University of South Carolina Medical Center in Charleston.

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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.