The Value of a Strategic Partner When Examining and Executing Cost-Reduction Strategies

Due to the recent COVID-19 pandemic, hospitals and health systems have to rethink “business as usual” as they look forward and set strategic goals. They are adjusting to managing dual systems of care along with addressing shifts in payer mix, consumers’ demands and increasing cost pressures. These changes, combined with the loss of revenue due to recent reduced patient volumes, is putting unprecedented financial pressures on health leaders to reduce operating costs to improve margins. It is clear that there is a critical need for changes in hospitals and health systems cost structure and operating performance, as well as a need for new sources of revenue. Both of these will add new complexities and challenges to business operations.

The extreme sense of urgency to put cost reduction strategies into action are also putting additional strains on already burdened resources, which could potentially create unintended consequences, such as employee burnout and potential turnover, or challenges to quality of care and safety, if not managed properly.

A recent survey of approximately 60 health system executives conducted by The Chartis Group highlights the strategies underway for health systems to achieve financial recovery and sustainability.

85 percent of the respondents cited cost reduction as one of their top three priorities for coping with COVID-19’s impact on their organization, which dramatically drove down patient volume and revenue.  90 percent said they want to meet their cost-reduction goals in less than 12 months, with 88 percent seeking up to a 15 percent cut in operating expenses.

So how are they going to do it? Here, in ranked order, are the top 10 cost-reduction strategies that the surveyed executives say they are pursuing:

1. Optimize revenue cycle (78%)
2. Optimize labor/workforce management (69%)
3. Improve supply chain (64%)
4. Streamline management structures (50%)
5. Improve inpatient throughput (50%)
6. Improve ambulatory access (50%)
7. Rationalize clinical programs (40%)
8. Optimize perioperative/procedural utilization (38%)
9. Reduce fixed asset base (34%)
10. Optimize informatics and technology (34%)

While these cost-reduction strategies are critical, it’s rare that a hospital or health system has the resources to execute these strategies successfully, simultaneously and on time while also trying to recover from an unprecedented public health emergency. The executives acknowledged the biggest risks that could delay or derail their plans citing:

43%Managing future COVID-19 surges
29%Lack of resources or bandwidth to manage implementation
29%Their lengthy, multi-level decision-making process
28%Competing priorities
22%Poor data or lack of information to support decision-making and monitoring

“The extreme sense of urgency to put these cost reduction strategies into action are also putting additional strains on already burdened resources, which could potentially create unintended consequences, such as employee burnout and potential turnover, or challenges to quality of care and safety, if not managed properly,” Chartis said in a press statement releasing the survey results.

The gap between what is needed and the associated challenges speaks to the need for a strategic partner who can help. A strategic partner can provide:

Expertise

to help successfully execute advanced strategies like revenue cycle optimization to cope with your growing margin pressures

Resources

to help successfully execute multiple strategies like improving patient access and throughput and rationalizing clinical services

Objectivity

to help successfully execute sensitive human resource-related strategies such as workforce optimization and streamlining management structures

Data

to support, measure and monitor the implementation of those strategies to ensure that they’re hitting their strategic clinical, financial and operational objectives

TAKEAWAY

Successfully recapturing patient volumes and recovering quickly from the COVID-19 pandemic will demand that hospitals and health systems simultaneously execute aggressive cost-reduction strategies and tactics in multiple areas of their operations. Selecting the right strategic partner can help by giving you the expertise, resources, objectivity and data that you need now.

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