Hospital leaders may not be looking in the right places when they are looking to cut costs.
According to Kaufman Hall in its second annual State of Cost Transformation report, 72% of the 190 surveyed hospital and health system executives named traditional areas—the supply chain and labor—as their key targets for cost-cutting.
At the same time, they overlooked others ideas such as re-examining their service offerings and rethinking clinical design, the report said.
Focusing on traditional sources isn't necessarily working, according to the report. Fewer than 20% of the surveyed executives said they achieved cost reductions of more than 5% in any area they prioritized last year.
Executives should open their minds about ways to save money, Lance Robinson, managing director and leader of Kaufman Hall’s performance improvement practice, told FierceHealthcare.
“How do you institute a process of continuous improvement? That’s a big initiative,” Robinson said. “You have to constantly be on that journey.”
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Service rationalization, or thoughtfully examining service offerings, was listed as the hardest and most impactful area to change. But just 29% of those surveyed were looking at service lines to cut costs.
Robinson said rethinking the physician enterprise and cutting waste there is another area that’s ripe for transformation. But fewer than half (45%) of those surveyed were looking there for savings.
In addition, just 45% and 40%, respectively, of respondents were considering changes to clinical design or clinical workforce design.
“You can find a lot of opportunity in those areas," Robinson said.
Re-examining services, for example, could also become part of a positive branding effort, as doubling down on the strongest offerings could lead to a center of excellence or other marketing strategy in tandem, Robinson said.
The report offers several strategies that leaders can use to build a more successful cost-transformation process, including:
- Think bigger: Leaders need to be aware of and consider nontraditional methods of improving cost efficiency and producing savings, according to the report.
- Focus on accountability: Effective cost transformation will require improved accountability and incorporating stakeholders from across the hospital, according to the report. Almost one-third of respondents (32%) said their organizations do not set goals for cost reduction.
- Harness the power of data: Analytics are crucial for benchmarking and measuring success, according to the report, but data can also help get more reluctant staffers, such as physicians, on board.
Robinson said that last point is crucial, as doctors especially want to see the figures to back up significant changes.
“Physicians are very much data-driven,” he said. “You don’t need to be afraid of sharing data.”