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Purchasing and Supply Chain Efficiencies, Process Redesign Remain Top Cost Containment Contributors

By Jonathan Bees  
   July 21, 2017

Purchasing and supply chain efficiencies continue to be an area of focus for providers, and there is no sign that it has reached diminishing returns.

Purchasing and supply chain efficiencies (60%) and process redesign (54%) provide the two highest dollar values in cost containment contributions for organizations' operations/
administrative activities in the most recent fiscal year, according to respondents in the June 2017 HealthLeaders Media Cost and Revenue Strategies: The Need for Transparency and Understanding True Costs survey.

The results are comparable to last year’s survey: 64% and 58%, respectively. Forming a second tier of responses are targeted budget reductions (39%), consolidating/centralizing business functions (39%), and reducing incomplete or inaccurate coding (37%).

Purchasing and supply chain efficiencies continue to be an area of focus for providers, and there is no sign that it has reached diminishing returns. "I don't know one organization that believes they’re completely tapped out on purchasing and supply chain efficiencies," says Chad A. Eckes, MBA, executive vice president of corporate services and CFO at Wake Forest Baptist Medical Center, an integrated health system in Winston-Salem, North Carolina, that operates more than 1,000 acute care, rehabilitation, and psychiatric care beds, and offers outpatient services and community health and information centers. "In my opinion, this is just one of those things where as you shine a light on efficiencies, you see the improvement, and the minute that you’re not shining that light on it, you see the opportunities creep in again."

Perhaps not surprisingly, survey results for process redesign reveal a correlation with value-based care. For example, responses for process redesign are higher among respondents who say the transition from fee-for-service to value-based care has either significantly improved or somewhat improved their cost containment efforts (63%), compared with respondents who say that this has significantly hindered or somewhat hindered their efforts (48%) and had no impact on their efforts (47%).

Respondents say that the top three contributors to clinical cost containment are clinical documentation improvement initiatives (57%), care standardization (49%), and efficient use of clinical labor (40%).

As with operations/administrative cost containment activities, there is a correlation between clinical cost containment and value-based care.

For example, responses for care standardization are higher among respondents who say the transition from fee-for-service to value-based care has either significantly improved or somewhat improved their cost containment efforts (58%), compared with respondents who say that this has had no impact on their efforts (47%) and significantly hindered or somewhat hindered their efforts (39%).

However, Eckes points out that, while there is a positive correlation between value-based care and cost containment efforts such as care standardization, value-based care is not the only driver of activity in this area. "Before value-based care was ever in the discussion, many of us talked about the priority to standardize clinical processes and the efficiencies born from it."

 

Jonathan Bees is a research analyst for HealthLeaders.


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