Research Reveals Eight of Ten Healthcare Providers are Falling Short of Cost Reduction Targets
CHICAGO, Oct. 21, 2014 /PRNewswire/ -- From the floor of the 2014 Strata Decision Summit, Strata Decision Technology (Strata Decision), a pioneer and leader in the development of cloud-based software tools for financial analytics, business intelligence and decision support in the U.S. healthcare market, announced the launch of StrataJazz® Continuous Cost Improvement, the first cloud-based solution designed to help healthcare providers reduce cost on a continuous basis.
Over $3 trillion1 is spent on healthcare in the U.S. every year with one-third of that being considered wasted2. At the same time, margins are contracting for hospitals for the first time since 2008 with average margins dropping to 2.2% in 2013 and one-third of hospitals operating in the red3. Shrinking margins coupled with additional market pressures have driven most hospitals to implement major cost improvement programs with targets that exceed $100 million. Currently, there are no software applications on the market to support these initiatives, which are time consuming, costly and often ineffective.
StrataJazz Continuous Cost Improvement represents the introduction of a new category of healthcare information technology software, designed to help hospitals and health systems reduce cost and drive the bottom line versus traditional revenue cycle software that assists in driving the top line. The application is embedded with pre-built algorithms and workflows that empower healthcare organizations to not only identify opportunities to eliminate waste, inefficiency, and variation, but also to manage initiatives to take cost out on a continuous basis.
CentraCare, a five-hospital system based in Minnesota, recently deployed the Cost of Variation module of Continuous Cost Improvement for one of the system's 500-bed hospitals. Using just this one aspect of Continuous Cost Improvement, CentraCare was able to identify $11.2 million in potential cost savings for the one hospital—which has even broader implications system-wide.
"Continuous Cost Improvement is novel in that it supports healthcare organizations not just for one-time initiatives but rather to engage in cost improvement on a continuous, ongoing basis. It creates a cross-functional focus on cost in a manner that is informed by data and that drives results," stated Greg Klugherz, Chief Financial Officer at CentraCare.
According to a recent Strata Decision Technology survey of 100 healthcare providers – "The Current State of Healthcare Cost Reduction" - over eight of 10 (83%) organizations with cost reduction targets reported that they are not achieving their cost savings goals. Providers are facing many obstacles when it comes to realizing cost savings, with 55% percent citing it was too difficult to quantify and track savings; 44% stating that keeping track of multiple initiatives and projects related to cost reduction presented too many challenges; and 44% reporting that a lack of accountability for driving out cost was holding their organization back4. The full survey results are available for download at www.stratadecision.com/costreport.
These survey findings as well as field research with over 70 organizations contributed to the application design which includes assigning accountability, tracking progress against goals, and helping to refine targets over time. These core features reduce the time and resources spent doing analysis and increase the time and resources spent taking action—or driving out costs.
"Bending the healthcare cost curve is one of the great socioeconomic opportunities of our time. StrataJazz Continuous Cost Improvement was born out of the realization that cost reduction is not a passing trend—it has become a core competency for healthcare providers," stated Dan Michelson, Chief Executive Officer of Strata Decision. "Putting cost data in the hands of clinical, financial, and operational leaders will make a meaningful difference for both the organization's bottom line, and the patients they serve each day."
The cloud-based software is part of StrataJazz financial analytics and performance platform, which includes modules for capital planning, contract modeling, cost accounting, cost management, decision support, financial forecasting, management reporting, operational budgeting, performance improvement, and strategic planning.
1 The Centers for Medicare and Medicaid
2 Institute of Medicine
3 Standard & Poor's analysis of average operating margins for 138 healthcare delivery systems.
4 "The Current State of Cost Reduction in Healthcare," Strata Decision Technology, August, 2014.
About Strata Decision Technology
Strata Decision Technology provides a cloud-based financial analytics and performance platform that is leveraged by healthcare providers for financial planning, decision support and continuous cost improvement. Founded in 1996, the Company's customer base includes 1,000 hospitals and many of the largest and most influential healthcare delivery systems in the U.S.
The Company's StrataJazz® application is a single integrated software platform that includes modules for capital planning, contract modeling, cost accounting, cost management, decision support, financial forecasting, management reporting, operational budgeting and performance improvement and strategic planning. The Company's headquarters are in Chicago, IL.
For more information, please visit www.stratadecision.com.
Lisa Chernikoff, Strata Decision Technology, 312.827.7635 ([email protected])
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SOURCE Strata Decision Technology