In times of financial duress, cost cutting can be a viable mechanism for stopping the bleeding.
But hospitals need to be more realistic about what these measures can achieve and what they can't. No amount of cost cutting will enable hospitals to reduce the revenue gaps -- 10% to 20% -- we expect to see created over the course of the next three to four years as reimbursement rates approximate current Medicare rates.
Same goes for year-over-year growth and operational improvements. Will you move the needle in a positive direction? Yes but perhaps not as far as you need to.
For hospitals, closing these revenue gaps requires a renewed focus on optimizing clinical utilization and clinical quality. 'Real' dollars live in reducing cost per case or off-quality costs. And by focusing on driving improvement in clinical utilization, hospitals can create a business model more capable of dealing with the financial uncertainly we expect to see in the years ahead.
Six Keys to Successful Improvement Initiatives
Improving clinical utilization is not easy. Like most initiatives aimed at using change to create long-term value, clinical utilization has its barriers. But with the right approach and system in place to benchmark and measure performance these hurdles can be overcome. Through our work with hospitals and health systems across the country, we've pinpointed six 'dimensions' which we believe are essential to successful initiatives:
1. Physician Alignment: Hospitals have the support and active involvement of physicians in leading clinical improvement initiatives. Without it, your initiative is a non-starter. It's that critical.
2. Access & Capacity Management: Utilization improvement opportunities can often be an artifact of access and capacity management issues. Focus on creating effective processes and systems to manage patient access and throughput as part of their utilization management strategy.
3. Productivity: Inefficient staffing models are often the culprit for high labor costs per patient day. You need effective productivity systems to effectively manage labor expenses.
4. Supply Chain: For some clinical categories, supplies represent a sizeable percentage of the total cost of care. It is critical for hospitals to control costs associated with implants and consumable supplies.
5. Quality & Safety: Adverse quality and safety events add considerable costs to cases. Organizations need effective surveillance systems to monitor quality and safety performance, by case and by physician.
6. Portfolio Management: It is critical to have a continuous, intentional process in place to determine which services require investment, which should be improved, and which should be divested or outsourced.
Given the importance of clinical utilization initiatives, we've developed a unique methodology – that when combined with extensive comparative analytics – has proven to uncover the potential for multi-million dollar savings. To learn more about how to structure a successful clinical utilization initiative, read our whitepaper, Drive Improvement through Clinical Engagement, in our site library.
Gary Auton is a Senior Director with iVantage Health Analytics. Auton has over 25 years of consulting experience, providing strategic and operational advisory services to a broad range of private and public‐sector organizations, including hospitals, health plans, physician practices, employer health coalitions, and state and Federal health agencies. Previous clients included over 120 hospitals and health systems located throughout the U.S. and internationally.
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