8 habitsofhighlyeffectivecostmanagementinhospitals
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There is no shortage of “opportunities” to reduce hospital cost. There is, however, a shortage of R-E-S-U-L-T-S. The need faced by most health care organizations to reduce cost provides a compelling platform to push through execution barriers and hardwire an “endless loop” of good habits into your organizational D.N.A.
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8 habitsofhighlyeffectivecostmanagementinhospitals
- 1. 8 Habits of Highly Effective Cost Management™ © 2015 Channon & Associates, Inc. All rights reserved. The 8 “Keystone” Habits of Highly Effective Cost Management
- 2. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ An overemphasis on BIG ideas often leads to an endless loop of failed cost reduction! Key Takeaway Cost Reduction Efforts Are Often Characterized By…
- 3. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ Meeting the Cost Reduction Challenge in Brief 1. There is no shortage of “opportunities” to reduce hospital cost. There is, however, a shortage of R-E-S-U-L-T-S 2. There is a need to push through execution barriers and biases in order to move from “opportunities” to results 3. Reducing cost provides THE PLATFORM to hardwire an “endless loop” of good habits into your organizational D.N.A. Execution barriers need to be replaced with 8 Habits of Highly Effective Cost Management™ This is the fastest and most effective path to improved performance. Key Takeaway
- 4. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ Set Goal/Start with WHY Fast Track Targets and Plans “COUNT” the right things DO the right things CHOKE up the bat DEMAND better results 8 Habits of Highly Effective Cost Management™ BAKE plans into budget
- 5. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ HABIT #1 GOAL-SETTING Why it matters 1. Establishes strategic context and “burning platform” 2. Defuses pushback on need to reduce cost 3. If you don’t know where you are going any path will take you there
- 6. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ TARGET-SETTING and PLANS Why it matters 1. Engages management team by aligning goal with individual accountability 2. Accelerates timing of results 3. Because over 33% of executives surveyed identified this as their weakest link HABIT #2
- 7. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ COUNT the right things Why it matters 1. Align departmental cost-reduction targets with GOAL 2. Counting the wrong things can inflate your cost structure by as much as 5 to 10% HABIT #3
- 8. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ DO the right things Why it matters 1. Frees up time and resources to be deployed where greater value may be added 2. Adopt a “first-things-first” perspective in making resource- allocation decisions 3. A “stop-doing” list may be more important than a “to- do” list -- Source: Good to Great, Jim Collins HABIT #4
- 9. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ CHOKE UP on the bat Why it matters 1. Implements what works, achieve quick wins 2. Stage initiatives based on risk-reward payoff 3. Grow “organizational capacity” “Don't swing for the fences: When promised quick profits, respond with a quick no.” HABIT #5
- 10. © 2015 Channon & Associates, Inc. All rights reserved. 8 Habits of Highly Effective Cost Management™ Tap Into HIDDEN Management Reserve Why it matters 1. Relies on the experts that already reside in your organization to develop and implement plans that work 2. Because your managers will step up to the table 3. Because over 25% of executives surveyed identified this as their weakest link HABIT #6
- 11. 8 Habits of Highly Effective Cost Management™ © 2015 Channon & Associates, Inc. All rights reserved. BAKE Plans into Budget Why it matters 1. Aligns performance improvement initiatives and results 2. Becomes basis for tracking results 3. Because 25% of executives surveyed identified this as their weakest link HABIT #7
- 12. 8 Habits of Highly Effective Cost Management™ © 2015 Channon & Associates, Inc. All rights reserved. Why it matters 1. There will always be distractions to take you off course 2. Stick-to-itiveness is needed to hardwire these habits into your organizational D.N.A. for sustainability HABIT #8
- 13. 8 Habits of Highly Effective Cost Management™ © 2015 Channon & Associates, Inc. All rights reserved. Set Goal/Start with WHY Fast Track Targets and Plans “COUNT” the right things DO the right things CHOKE up the bat DEMAND better results What Good Habits Does Your Organization Need to Develop? BAKE plans into budget
Editor's Notes
- Alternative titles: What’s New and Exciting in Hospital Cost Reduction? Keeping All Your Employees Happy While Reducing Cost Having Fun While Bending the Cost Curve Pain-Free Pathways to Hospital Cost Reduction let me start with a story COO need bold ideas Director of pharmacy need to remove roadblocks
- Click through first bullet There are literally hundreds of ideas to improve hospital performance but only a small fraction ever get implemented. Click through second and third bullets Why is there so much difficulty executing on identified initiatives and opportunities? And why do so many organizations with so many outstanding initiatives insist that it is innovation that they need? As challenging and grim as execution barriers may be there is a bright side. These barriers account for such significant losses that, if you are willing to confront them by introducing new habits and routines, you will produce a huge impact and major gains to your organization.
- Click through and ask for show of hands. I would like to tell a story and with this I will close. The Kaufman Hall team had just completed a structured cost reduction planning meeting at a client. The meeting included department heads and executives. At the end of the meeting the director of pharmacy raised his hand and said that he had been frustrated by the many roadblocks that had gotten in the way of successful cost reduction previously. The COO summarized her take on the meeting by saying that she had heard many of the cost reduction ideas previously and was frankly disappointed. We need some “gamechangers”, we need something bold, we need to push the envelope. The client’s inability to execute on its improvement initiatives had led the COO to call for bolder ideas. But why would anyone want to invest the time and energy to create new ideas that may never see the light of day? As you go back to your hospital ask yourself the question: What is our best path to sustainable cost reduction, removing the barriers to improved execution or bigger GAME-CHANGING ideas.
- There is a common misconception that an in-depth opportunity assessment must be complete before a goal is set. Our view is that the cost reduction goal should be associated with the strategic aims of the organization and should not rely on an opportunity assessment. COMMUNICATION GOALS: Education and buy-in: educate staff and providers about the need for cost management change in 2014. Inspire teams to be part of the change and implementation. Articulate a compelling and realistic vision – not just fear of the alternative, but hope for the future. What are we managing costs for? Drive Engagement: engage two-way communication that provides vehicles for listening to, and resolving key concerns. Temper Anxiety: temper fear and anxiety about job loss or change through open, principled communication. Support teams to mitigate negative effects including lowered productivity, inattention to safety, or increased sick days. Goal-setting – we haven’t set our cost-reduction goal Target-setting – we have identified a “laundry list” of improvement opportunities but haven’t aligned cost reduction goal with individual accountability for results Cost-reduction planning – our plans are not comprehensive enough or don’t get us to our targets Hardwiring targets and plans – we have targets and plans but haven’t hardwired these with metrics, budgets, tracking, and hiring controls Project oversight and accountability – we have all or most of the pieces in place but our timing/ speed of execution is unsatisfactory None of the above As challenging and grim as execution barriers may be there is a bright side. These barriers account for such significant losses that, if you are willing to confront them by introducing new habits and routines, you will produce a huge impact and major gains to your organization.
- Albert Einstein was quoted as saying that “Not everything that counts can be counted, and not everything that can be counted counts.” Let’s assess the impact of measuring the wrong things.
- Over 25 million people play fantasy football as pretend general managers. Real life GMs have to figure out whether the teams should spend more money on the offensive line versus the defensive secondary, should we carry three tight ends or four? If we carry four tight ends we may only be able to carry three running backs. Here are GM questions to raise in your organization:
- When Michael Lewis’ best-selling book, Moneyball, about the Oakland Athletics came out last decade, the world found out about Billy Beane’s “secret.” Get guys on base and reduce outs. That’s how you score runs. And win games. Put in statistical terms: in a study of baseball teams from the last 20 seasons on base percentage had a multiplying coefficient nearly twice as much as Slugging percent. Put another way small changes in on base percentage are worth twice as much as small changes in slugging percentage. So keystone habit #5: Click twice – Choke up the bat and get on base. And if you don’t believe Billy Beane perhaps you will believe Warren Buffet, click twice: "Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick 'no.' " Click to why it matters
- Quite often when we start a new project our client sponsors will talk about their managers, how weak they are, they have worked in the organization for so many years that they don’t know what they are doing, they can’t understand payroll, budget, and productivity reports. They need a lot of hand-holding. Their plates are full, they are so overwhelmed so how can I ask more of them. How can I set a cost reduction target without somehow asking for permission? In the Harvard Business Review article the author identifies THE critical determinant of a performance improvement effort and it’s not bolder ideas or greater use of technology. It is when management becomes committed to demanding higher levels of performance, what the author views as the most universally underdeveloped management skill. This experience is completely consistent with ours. While managers may vary in their capabilities throughout your organization and from one organization to the next, they are your experts and they do have the capacity to step up and produce the needed results.
- Click through and ask for show of hands. I would like to tell a story and with this I will close. The Kaufman Hall team had just completed a structured cost reduction planning meeting at a client. The meeting included department heads and executives. At the end of the meeting the director of pharmacy raised his hand and said that he had been frustrated by the many roadblocks that had gotten in the way of successful cost reduction previously. The COO summarized her take on the meeting by saying that she had heard many of the cost reduction ideas previously and was frankly disappointed. We need some “gamechangers”, we need something bold, we need to push the envelope. The client’s inability to execute on its improvement initiatives had led the COO to call for bolder ideas. But why would anyone want to invest the time and energy to create new ideas that may never see the light of day? As you go back to your hospital ask yourself the question: What is our best path to sustainable cost reduction, removing the barriers to improved execution or bigger GAME-CHANGING ideas.