This document provides a guide for strategic cost transformation in hospitals and health systems. It discusses three pathways for strategic cost transformation: 1) reducing costs of current operations through cost management, 2) reducing costs by restructuring businesses and services through business restructuring, and 3) reducing costs through clinical transformation. The guide focuses on specific elements of pathways 1 and 2, including understanding an organization's readiness for cost management, evaluating businesses and services, and conducting service distribution planning. It emphasizes that strategic cost transformation is required for hospitals to continue meeting community needs in a value-based healthcare system with constrained payments.
The Need to Embrace Profit Cycle Management in Healthcare - WhitepaperGE Healthcare - IT
Executive Overview
Healthcare organizations have been operating under a fee-for-service
model for many years. As such, financial leaders have become well
versed in implementing revenue cycle management systems and
processes that primarily focus on the money that comes into an
organization. Today, a new need is emerging. Healthcare reform
and other system changes are moving the industry toward hybrid
payment models such as bundled payments, shared savings, and
capitation. To thrive in this new environment, financial leaders need
to move toward profit cycle management – an emerging model
that matches the revenues from new payment models with an
improved understanding of the true costs to deliver patient care.
The result: Positive financial performance – even in the face of
declining payments – that can be reinvested in the mission to
provide better care.
The foundation of any business or household is profit, defined as
revenue net of expenses (and applicable as such even to not-for-profit
organizations). Regardless of whether you are start-up, a Fortune 500
company, or a family of four, you need to ensure that you are bringing
in more money than you are spending. In many businesses, the
formula to determine your “profitability” is fairly straightforward.
In healthcare, however, the situation is significantly more complex,
as existing and new payment models make it difficult to determine
exactly how much revenue is going to come in the door. On the cost
side, the move to accountable care and value-based payment has
shifted the management of risk and cost onto the providers and
delivery networks, yet most providers lack the tools that would
provide a detailed understanding of the costs required to deliver
quality care, especially when that care is delivered in multiple
locations. A new model of software tools is required – representing
the next generation of revenue cycle management tools and an
emerging class of healthcare cost accounting tools. The end goal?
A solution for profit cycle management that will help organizations
generate a positive financial performance and can be reinvested
in the mission to provide better care.
This change will not happen overnight. Rather, it will be an evolution
over the next five years, as integrated delivery networks update
their revenue cycle solutions to accommodate the new payment
models, and as they deploy new activity-based costing solutions.
The Need to Embrace Profit Cycle Management in Healthcare - WhitepaperGE Healthcare - IT
Executive Overview
Healthcare organizations have been operating under a fee-for-service
model for many years. As such, financial leaders have become well
versed in implementing revenue cycle management systems and
processes that primarily focus on the money that comes into an
organization. Today, a new need is emerging. Healthcare reform
and other system changes are moving the industry toward hybrid
payment models such as bundled payments, shared savings, and
capitation. To thrive in this new environment, financial leaders need
to move toward profit cycle management – an emerging model
that matches the revenues from new payment models with an
improved understanding of the true costs to deliver patient care.
The result: Positive financial performance – even in the face of
declining payments – that can be reinvested in the mission to
provide better care.
The foundation of any business or household is profit, defined as
revenue net of expenses (and applicable as such even to not-for-profit
organizations). Regardless of whether you are start-up, a Fortune 500
company, or a family of four, you need to ensure that you are bringing
in more money than you are spending. In many businesses, the
formula to determine your “profitability” is fairly straightforward.
In healthcare, however, the situation is significantly more complex,
as existing and new payment models make it difficult to determine
exactly how much revenue is going to come in the door. On the cost
side, the move to accountable care and value-based payment has
shifted the management of risk and cost onto the providers and
delivery networks, yet most providers lack the tools that would
provide a detailed understanding of the costs required to deliver
quality care, especially when that care is delivered in multiple
locations. A new model of software tools is required – representing
the next generation of revenue cycle management tools and an
emerging class of healthcare cost accounting tools. The end goal?
A solution for profit cycle management that will help organizations
generate a positive financial performance and can be reinvested
in the mission to provide better care.
This change will not happen overnight. Rather, it will be an evolution
over the next five years, as integrated delivery networks update
their revenue cycle solutions to accommodate the new payment
models, and as they deploy new activity-based costing solutions.
Total quality management report by brands academyBrands Academy
Brand Academy provides details brand analysis, research, article and insights for free.
Contact us :
brandsmentor@gmail.com
https://www.facebook.com/1stbrandsacademy
How Quality Ensures Success
An Overview
GlaxoSmithKline (GSK) was formed from the December 2000 merger of Glaxo Welcome and SmithKline Beecham plc.
The $70 billion deal created the world's largest drug manufacturer and research-based pharmaceutical concern.
PRODUCTS
PRODUCTS
GlaxoSmithKline develops, manufacturers and markets:
pharmaceuticals, vaccines, over-the-counter medicines and health related consumer products
Our broad pharmaceutical product line includes:
antibiotic, antidepressant, gastrointestinal, dermatological, respiratory, cancer and cardiovascular medications
PRODUCTS
PRODUCTS
VISION
“We want to become the indisputable leader in our country, not simply in terms of size, but in how we use that size to achieve our mission and improve the quality of human life.”
MISSION
SPIRIT OF GSK
TOTAL QUALITY MANAGEMENT
SIX PILLARS
“Commitment” – the commitment from the top level to the operational level was observed during our visit as the lower staff and the strategic level gave the same answer for the quality that is to “follow the benchmark”.
“An unwavering focus on the both customers” – the organization believes that both internal and external customers are the key players in being profitable and so they never assist their stakeholders in every means to get the required output.
“Employee Involvement” – employee involvement acts as strong pillar in meeting the targets. The organization provides a linked database system through which every employee can contribute in terms of suggestions and ideas for growth and improvement.
SIX PILLARS
“Optimal use of resources” – they do understand the importance of the concept of scarce resources and thus tries to minimize the waste and get the optimal level of benefit from the raw material and other available resources.
“Treating suppliers as partners” – the output of the firm do depend on the quality of the raw material and differentiating on the basis of quality requires consistent and accurate level input with sustainable quality level and thus the organization has treated the supplier as their long term strategic alliance.
“Benchmarking” – GSK Pakistan over the period of time has developed its own standard, which includes ISO standards and their best practices.
QUALITY POLICY
QUALITY IMPROVEMENT STRATEGY
Reduce failure costs by problem solving methods and tools
Contributing in the selected prevention activities
Reduce appraisal costs in a statistically sound manner
Continuously monitoring and reinforce the prevention effort to gain desired quality improvement level.
QUALITY PLANNING
The overall planning can be summarize as the following steps
Customer needs
Forecast the future
Gap- analysis
Closing the loop holes
Alternatives Evaluation
Implementation
This presentation is a resume chapter 5 on book Strategic Supply Chain Management - The 5th Disciplines For Top Performance by Shoshanah Chohen And Josep Roussel
A New Payer Model for Medical Management ExecutionCognizant
To combat rising costs and inefficient use of resources, payers can streamline utilization management and optimize care management through medical management delivered as a service.
If you’ve ever spent time in a hospital — either as a patient, staff member, or visitor — then you know that institutional health care is extremely complicated by nature.
t’s the largest ionospheric heater in the world. Capable of heating a 1000 square kilometer area of the ionosphere to over 50,000 degrees. It’s also a phased array. Which means it’s steer-able and those waves can be directed to a selected target area. What they have found is that by sending radio frequency energy up and focusing it, as they do with these kinds of instruments, it causes a heating effect. And that heating literally lifts the ionosphere within a 30 mile diameter area therein changing localized pressure systems or perhaps the route of jet streams. Moving a jet stream is a phenomenal event in terms of man being able to do this. The problem is we cannot model the system adequately. Long term consequences of atmospheric heating are unknown. Changing weather in one place can have a devastating downstream effect. And H.A.A.R.P. has already been accused of modifying the weather,creating super storms like katrina ,phalin recent in orissa.....
Extinction marks the evolutionary death of a species. Observing the fates of many species ancient and recent, it appears to be Nature’s mechanism of periodically clearing out the outdated to make room for the fit. But is extinction necessarily inevitable for every species? More specifically, are humans destined to meet an unavoidable end? A pandemic will kill off all humans.
In the past, humans have indeed fallen victim to viruses. Perhaps the best-known case was the bubonic plague that killed up to one third of the European population in the mid-14th century . While vaccines have been developed for the plague and some other infectious diseases, new viral strains are constantly emerging — a process that maintains the possibility of a pandemic-facilitated human extinction.
Physics,balances ,and mathimatics govern our lifes and entire universe,its my small analysis on Like poles repel and unlike poles attract...It is my very well researched article..
Healthcare policies for progress an indian healthcare perspective by Mahboob ...Healthcare consultant
Can India have absolute Affordable and Quality Healthcare in every City and Town?
Healthcare in India is heading towards a major makeover, thanks to the liberalisation and globalisation of the economy. Like every other field, such a change starts from the class room. Involvement of private players in education has set the bar high; now it has to be followed by government institutions as well. Health education in India is comparable to anywhere in the world. Policy change from MCI had ensured relaxation of stringent criteria required for operating medical colleges. Currently there are around 300 medical colleges all over India; around 30,000 to 35,000 students graduate every year. Yet there is room for improvement.
Total quality management report by brands academyBrands Academy
Brand Academy provides details brand analysis, research, article and insights for free.
Contact us :
brandsmentor@gmail.com
https://www.facebook.com/1stbrandsacademy
How Quality Ensures Success
An Overview
GlaxoSmithKline (GSK) was formed from the December 2000 merger of Glaxo Welcome and SmithKline Beecham plc.
The $70 billion deal created the world's largest drug manufacturer and research-based pharmaceutical concern.
PRODUCTS
PRODUCTS
GlaxoSmithKline develops, manufacturers and markets:
pharmaceuticals, vaccines, over-the-counter medicines and health related consumer products
Our broad pharmaceutical product line includes:
antibiotic, antidepressant, gastrointestinal, dermatological, respiratory, cancer and cardiovascular medications
PRODUCTS
PRODUCTS
VISION
“We want to become the indisputable leader in our country, not simply in terms of size, but in how we use that size to achieve our mission and improve the quality of human life.”
MISSION
SPIRIT OF GSK
TOTAL QUALITY MANAGEMENT
SIX PILLARS
“Commitment” – the commitment from the top level to the operational level was observed during our visit as the lower staff and the strategic level gave the same answer for the quality that is to “follow the benchmark”.
“An unwavering focus on the both customers” – the organization believes that both internal and external customers are the key players in being profitable and so they never assist their stakeholders in every means to get the required output.
“Employee Involvement” – employee involvement acts as strong pillar in meeting the targets. The organization provides a linked database system through which every employee can contribute in terms of suggestions and ideas for growth and improvement.
SIX PILLARS
“Optimal use of resources” – they do understand the importance of the concept of scarce resources and thus tries to minimize the waste and get the optimal level of benefit from the raw material and other available resources.
“Treating suppliers as partners” – the output of the firm do depend on the quality of the raw material and differentiating on the basis of quality requires consistent and accurate level input with sustainable quality level and thus the organization has treated the supplier as their long term strategic alliance.
“Benchmarking” – GSK Pakistan over the period of time has developed its own standard, which includes ISO standards and their best practices.
QUALITY POLICY
QUALITY IMPROVEMENT STRATEGY
Reduce failure costs by problem solving methods and tools
Contributing in the selected prevention activities
Reduce appraisal costs in a statistically sound manner
Continuously monitoring and reinforce the prevention effort to gain desired quality improvement level.
QUALITY PLANNING
The overall planning can be summarize as the following steps
Customer needs
Forecast the future
Gap- analysis
Closing the loop holes
Alternatives Evaluation
Implementation
This presentation is a resume chapter 5 on book Strategic Supply Chain Management - The 5th Disciplines For Top Performance by Shoshanah Chohen And Josep Roussel
A New Payer Model for Medical Management ExecutionCognizant
To combat rising costs and inefficient use of resources, payers can streamline utilization management and optimize care management through medical management delivered as a service.
If you’ve ever spent time in a hospital — either as a patient, staff member, or visitor — then you know that institutional health care is extremely complicated by nature.
t’s the largest ionospheric heater in the world. Capable of heating a 1000 square kilometer area of the ionosphere to over 50,000 degrees. It’s also a phased array. Which means it’s steer-able and those waves can be directed to a selected target area. What they have found is that by sending radio frequency energy up and focusing it, as they do with these kinds of instruments, it causes a heating effect. And that heating literally lifts the ionosphere within a 30 mile diameter area therein changing localized pressure systems or perhaps the route of jet streams. Moving a jet stream is a phenomenal event in terms of man being able to do this. The problem is we cannot model the system adequately. Long term consequences of atmospheric heating are unknown. Changing weather in one place can have a devastating downstream effect. And H.A.A.R.P. has already been accused of modifying the weather,creating super storms like katrina ,phalin recent in orissa.....
Extinction marks the evolutionary death of a species. Observing the fates of many species ancient and recent, it appears to be Nature’s mechanism of periodically clearing out the outdated to make room for the fit. But is extinction necessarily inevitable for every species? More specifically, are humans destined to meet an unavoidable end? A pandemic will kill off all humans.
In the past, humans have indeed fallen victim to viruses. Perhaps the best-known case was the bubonic plague that killed up to one third of the European population in the mid-14th century . While vaccines have been developed for the plague and some other infectious diseases, new viral strains are constantly emerging — a process that maintains the possibility of a pandemic-facilitated human extinction.
Physics,balances ,and mathimatics govern our lifes and entire universe,its my small analysis on Like poles repel and unlike poles attract...It is my very well researched article..
Healthcare policies for progress an indian healthcare perspective by Mahboob ...Healthcare consultant
Can India have absolute Affordable and Quality Healthcare in every City and Town?
Healthcare in India is heading towards a major makeover, thanks to the liberalisation and globalisation of the economy. Like every other field, such a change starts from the class room. Involvement of private players in education has set the bar high; now it has to be followed by government institutions as well. Health education in India is comparable to anywhere in the world. Policy change from MCI had ensured relaxation of stringent criteria required for operating medical colleges. Currently there are around 300 medical colleges all over India; around 30,000 to 35,000 students graduate every year. Yet there is room for improvement.
Smoking causes immediate constriction of proximal and distal epicardial coronary arteries and an increase in coronary resistance vessel tone, despite an increase in myocardial oxygen demand. These acute coronary hemodynamic effects may contribute to the adverse cardiovascular consequences of cigarette smoking.
The mission statement sets the direction and priority for developing and implementing the quality plan. It clearly states the nature of the organization’s commitment to quality and should then be tied to the organizational operations through programs, projects, actions and rewards/recognition.
The Joint Commission is a Chicago-based organization which accredits 15,000 hospitals in the United States. The Joint Commission International (JCI) is its subsidiary which accredits hospitals outside the U.S. As the medical travel trend grows, JCI accreditation is becoming an important benchmark for quality standards.My questions and answers.
Employee retention refers to the ability of an organization to retain its employees. Employee retention can be represented by a simple statistic (for example, a retention rate of 80% usually indicates that an organization kept 80% of its employees in a given period). However, many consider employee retention as relating to the efforts by which employers attempt to retain employees in their workforce. In this sense, retention becomes the strategies rather than the outcome.
Medical Records is a foremost important in the healthcare accreditation bodies like JCI,NABH are very adherent about its documentation,retention and confidentiality.
Chapter 101. Describe the concepts and models of plann.docxcravennichole326
Chapter 10
1. Describe the concepts and models of planning and decision making in the context of the healthcare supply chain.
2. Discuss the importance of situational factors (trends, environmental issues, technology, regulatory compliance, etc…) in the planning process and how leadership principles, metrics and improvement tenets can be used to positively impact the organizational culture of healthcare supply chain operations.
3. Relate, discuss and provide areas of integration between planning and decision making amid continuous operations of the healthcare supply chain to include the use of metrics and improvement strategies.
4. Distinguish the differences between planning and contingency planning.
5. Merge principles of leadership, planning and decision making to develop a personal plan for operating in a fast paced healthcare supply chain environment.
6. Evaluate the benefits for organizational operations with a solid planning process and standing operating procedures as part of the healthcare supply chain culture to include outside sales representatives.
Chapter 10: Building a Culture of Healthcare Supply Chain Excellence: Leading, Planning, Managing, Deciding, and Learning
Learning Objectives
Describe the concepts and models of planning and decision making in the context of the healthcare supply chain.
Discuss the importance of situational factors (trends, environmental issues, technology, regulatory compliance, etc…) in the planning process and how leadership principles, metrics and improvement tenets can be used to positively impact the organizational culture of healthcare supply chain operations.
Relate, discuss and provide areas of integration between planning and decision making amid continuous operations of the healthcare supply chain to include the use of metrics and improvement strategies.
Distinguish the differences between planning and contingency planning.
Merge principles of leadership, planning and decision making to develop a personal plan for operating in a fast paced healthcare supply chain environment.
Evaluate the benefits for organizational operations with a solid planning process and standing operating procedures as part of the healthcare supply chain culture to include outside sales representatives.
Introduction
Planning and decision making are essential to efficient, effective and efficacious healthcare supply chain operations and strategies.
Leaders and managers must structure and facilitate plans that integrate well with the healthcare organization’s strategic plan and must make consistent decisions in alignment with those plans.
Creating standing operating procedures for routine and consistent operations of the supply chain allows leaders and managers to spread the operational culture at all levels of the supply chain enterprise.
This chapter provides an overview of planning, improvement strategies, metrics, regulatory compliance and decision making.
These constructs should be reviewed and ...
The 100-Percent Solution to Improving Healthcare’s Operating MarginsHealth Catalyst
Healthcare organizations face unparalleled pressure to increase operating margins as they adapt to the revenue compression from COVID-19 and growing competition from insurers and digital disrupters. Yet, many health systems rely on outdated, revenue-centric cost accounting solutions that are ill equipped for strategic financial decision making. As a methodology for today’s complex healthcare environment, activity-based costing (ABC) can capture healthcare resource use at a granular level. With this service-level insight into clinical cost, ABC provides actionable intelligence to help organizations improve profitability and make strategic cost-reduction decisions. These comprehensive costing solutions give health systems a full understanding of cost across the care continuum—the only level of insight that will enable strategic cost transformation in the industry’s new normal.
Article 1ECG management consultants. (2007). The Strategic Imper.docxfredharris32
Article 1
ECG management consultants. (2007). The Strategic Imperative of Adapting the Hospital’s Management Structure. Insight, 1-6. http://www.healthleadersmedia.com/content/86219.pdf
a)
The author points out that many hospitals are struggling with how to execute strategic plans effectively in their organizational structure. These institutions lack efficient decision-making processes, accountability for the performance of key strategies and the recognition of the importance of hospital strategies to propel them to new business. The key challenge in provider-based organizations is their inability to focus their strategies on the provision of high-quality patient care services. Hospitals should stop focusing on performance-driven traditional strategies and instead align their strategies to focus on a service line.
To ensure that such procedures are executed efficiently, it is important that their organizational structures are informed by the care service strategy. The organizational structure should ensure that the strategy is encompassed in their strategic plan, organizational control structure, management responsibilities and physician leadership. In today’s world, patients are seeking more care on their heart conditions, cancer or other illnesses or injuries rather than on traditional hospital departments such as nursing, physical therapy or radiology. By focusing on patient care functions along these service lines, hospitals can optimize performance. The organizational structure should also be streamlined to support key strategies. Laying a strong foundation for the organization structure is important to ensure that key strategies are executed effectively. The control structure should also be flexible enough to adapt to shifts in strategy. Introducing changes such as a focus on traditional performance-driven strategies to a service line is sometimes stalled due to a rigid management structure. It is important to have a flexible control structure to facilitate decision-making processes that are most times challenged by poor leadership structures.
b)
Given the opportunity, I would correct an inefficient hospital strategy by reorganizing the organizational structure to focus entirely on key strategies of a service line. Clinical services, planning, marketing and public affairs are some of the new elements that I would to traditional organizational structures in hospitals. This way, any shifts in strategies can easily be adapted due to a flexible control structure. At the same time, as a leader, I would focus on building value around my employees by assigning them responsibilities based on the right service lines. This will ensure that they remain accountable for their performance and use of resources along with their service lines. A good management structure is also necessary to maintain a good relationship between the business strategy and the performance of my employees.
Article 2
Perera, F. D. P. R., & Peiró, M. (2012). St ...
Making the shift to value-based care is not easy. However, a growing number of healthcare organizations are finding success leveraging Lean process improvement and health IT to reduce waste, lower costs, and improve quality.
In fact, leading health systems like Bon Secours, Prevea Health, and North Mississippi Medical Center are using these principles to improve care management processes and achieve better patient outcomes.
We have assembled these strategies into a new whitepaper. You will learn:
- How key concepts of Lean thinking can be applied to healthcare
- Why high-performing practices are using Lean to enable care team members to provide better care
- The financial advantages of a team-based, population health management approach in a value-based reimbursement system
Aligning Healthcare Organizations: Lessons in improved Quality and Efficiency...Nathan Ives
Aligning Healthcare Organizations describes how best practices in measuring organizational performance in the nuclear power industry can be applied to healthcare providers facing the daunting challenge of concurrently increasing production, efficiency, and quality while reducing operating costs.
Elevating Medical Management Services to Meet Member ExpectationsCognizant
Healthcare payer organizations can lower the cost of commoditized medical management functions via better and different processes, and invest the savings in member-centric care management services.
· In this assessment, you will propose an economic initiative that.docxoswald1horne84988
· In this assessment, you will propose an economic initiative that presents an opportunity for improved care quality.
Scenario
As an emerging health care leader, the senior management has requested that you independently research and explore one of the economic opportunities that may be available in your care setting. This may be offering a new service line, working to improve a service line already offered, retiring an outdated or unprofitable service line, or any other economic initiative that you believe will be of benefit to your care setting in the short and long term. One example of this is a recently launched partnership with a local bicycle sharing company. Your care setting partners with them to host healthy community events that offer free screenings for early detection of various health issues. This helps fulfill some of your care setting's preventive and healthy lifestyle initiatives, while also potentially driving referrals to other services provided by your care setting. You have been asked to submit your proposal in the form of a 2–4-page executive summary that includes your proposed economic initiative, supporting economic data, and an analysis of the proposal's benefits for your department and for the care setting overall.
Directions
You have been asked to ensure that your report addresses the following. Note: The bullet points below correspond to grading criteria in the scoring guide. Be sure your work is, at minimum, addressing each of the bullets below. You may also want to read the scoring guide and the Guiding Questions: Executive Brief: Proposal of New Economic Opportunity document, linked in the Resources, to better understand the performance levels that relate to each grading criterion:
· Propose an economic initiative that presents an opportunity for your care setting at both the micro (departmental, neighborhood) and macro (organizational, community) levels that you believe will provide ethical and culturally equitable improvements to the quality of care.
· Analyze the supply and demand for your proposed economic initiative within contexts relevant to your care setting.
· Explain relevant economic and environmental data that support your proposal and analysis.
· Communicate your economic proposal in a logically structured and concise manner, writing content clearly with correct use of grammar, punctuation, and spelling.
· Effectively support your proposal with relevant economic data and scholarly sources, correctly formatting citations and references using current APA style.
Example Assessment: You may use the assessment example, linked in the Assessment Example section of the Resources, to give you an idea of what a Proficient or higher rating on the scoring guide would look like.
Additional Requirements
Your assessment should meet the following requirements:
· Length: 2–4 double-spaced, typed pages. Your proposal should be succinct yet substantive.
· APA format: Resources and citations are formatted according to c.
The Top Five Insights into Healthcare Operational Outcomes ImprovementHealth Catalyst
Effective, sustainable healthcare transformation rests in the organizational operations that power care delivery. Operations include the administrative, financial, legal, and clinical activities that keep health systems running and caring for patients. With operations so critical to care delivery, forward-thinking organizations continuously strive to improve their operational outcomes. Health systems can follow thought leadership that addresses common industry challenges—including waste reduction, obstacles in process change, limited hospital capacity, and complex project management—to inform their operational improvement strategies.
Five top insights address the following aspects of healthcare operational outcomes improvement:
Quality improvement as a foundational business strategy.
Using improvement science for true change.
Increasing hospital capacity without construction.
Leveraging project management techniques.
Features of highly effective improvement projects.
Explore the dynamic world of healthcare management with an MBA in Hospital Administration. Gain expertise in strategic planning, healthcare operations, and leadership, preparing yourself for a rewarding career at the intersection of business and medicine. Enroll now to become a future-ready healthcare administrator and make a positive impact on the evolving healthcare industry.
The 12 Fundamental Best Practices of Supply Chain ManagementIntalere
This article highlights the fundamental best practices of healthcare supply chain management. Intalere assists our customers in managing their entire non-labor spend, providing innovative technologies, products and services, and leveraging the best practices of a provider-led model.
NHS-FP6008 Assessment 1 Context
Assessment 1 ContextHealth Care Economics: An Industry Overview
Providers and consumers of health care services have experienced significant changes following the enactment of the Patient Protection and Affordable Care Act of 2010 (Affordable Care Act). New terminology, concepts, methods of valuation, reimbursement, and decisions accompanied this landmark legislative change. Health care leaders are responsible for maintaining the financial viability of their organizations, aligning with both the organizational mission statement and directional strategy, and allocating finite resources. This task has become increasingly complex due in part to changes associated with the Affordable Care Act.
Conditions of participation in state- and federally-funded health care programs have generated new requirements, and some represent major challenges with respect to implementation and compliance. An example of this can be seen with the electronic medical records initiative, which has been an ongoing challenge. Leaders must grapple with questions such as:
· What is the actual cost to the organization?
· Are there funding shortfalls for full implementation?
· Are there unexpected additional costs that result from existing software incompatibilities?
· Are there additional security measures to ensure HIPAA compliance, such as staff training?
· What about patient satisfaction scores and how these can affect reimbursement?
The role of the health care executive in exercising sound economic decision making has become increasingly challenging, especially when one considers the potential adverse financial and operational consequences, or civil and criminal penalties, that can result from oversights or errors. Health care executives serve in a fiduciary role within their organizations and communities. To this end, it is helpful for leaders to understand applicable laws that drive economic decision making and its accepted tools from authoritative sources, industry standards, and risk management.
The Provider Organization
How have recent changes in health care affected your current or future desired role within the industry? Do you recognize new concepts and terminology emerging with our changing health care system? To illustrate this point, consider your familiarity with the following economic concepts and their associated implications for providers: accountable care organizations, Readmissions Reduction Program, HCAHPS scores, HAC Reduction Program, never events, value based purchasing, open payments public data, cost shifting, risk sharing, and medical capital equipment (lease versus purchase). These are just a few examples of facets that involve financial, and thus economic, decision making.
It is important to maintain the environmental, larger perspective and to understand what resources are available from the government for economic problem solving and decision making. It is also important to maintain "bifocal vision" as ...
Summary of this courseHealth care business analysesHealth Care.docxmattinsonjanel
Summary of this course
Health care business analyses
Health Care Business Operations and Performance
Introduction
In this module, you will explore the relationship and potential synergy created by consistent vision, mission, goals, and strategic plan. Health care strategy can be formed in one of two ways: it is intended and deliberate, which is created by plans, or it emerges through a pattern of uncoordinated decisions and actions (it just happens). Plans help to create a deliberate strategy. This is a discovery process in which health care organizations define their markets and assess internal operations. Plans move the organization forward toward the realization of a vision. The strategic plan or plan of action is necessary to achieve certain goals and objectives. The plan helps to create alignment and consensus around the organization's intentions. Key managers help to organize efforts and garner momentum for these strategies.
The Strategic Plan
The strategic plan changes or creates additional service lines, clinical procedures, and geographic locations of new clinics, rooms, or other facilities. The plan helps decide where to allocate resources for the high-level initiatives such as new medical technologies. The plan also identifies potential partners for an integrated delivery network or expanded system. When assessing a health care organization, ask what evidence you see of them attempting to work towards a certain vision. What services are they providing? How do they implement the strategy? How are they different from other clinical organizations in the community? How do they remain competitive?
Operations Internal Assessment and Improvement
Introduction
In this module, you will learn to identify methods of assessing and improving the quality of a health care organization. Developing processes is critical in assessing and improving quality since a process is how work gets accomplished. Until processes are fully documented, the interactions and steps cannot be appreciated. The "as-is process" documents what is actually occurring, versus what is supposed to occur. The "to-be process" documents the vision and the proposed process once improvements have been made. By fixing the process, you improve performance. The business process is a set of activities and tasks that are performed in sequence to achieve a specific outcome. The strategy of process improvement increases the throughput (capacity or volume) of a process; eliminates choke points or bottlenecks; and reduces costs, steps, waste, and resources. Look for steps that add value and eliminate those that do not. Reduce the variation in performance over time, remembering that variability causes resource inefficiency.
Analyzing Performance
Methods for analyzing performance include trend analysis and benchmarking. Trend analysis helps health care organizations answer the question, "How are we performing over time?" Benchmarking asks how we compare to our competition. Benchmarking is th ...
Similar to Guide strategic cost_transformation_hospitals_health_systems (20)
In India, Young Graduates Struggle by Dr. Mahboob Khan to Get Jobs.pdfHealthcare consultant
In the world’s most populous country, tens of thousands of graduates and postgraduates, many with professional degrees, such as engineering, spend years studying at the tutoring centers that have mushroomed in Indian cities, hoping to qualify for a highly sought-after government job. The chances are slim. Less than one-half of 1% of the more than 1 million who take the exam each year pass.
The middle class in India is growing unexpectedly, however they're still dealing with demanding situations in accessing excellent and low-priced healthcare. This is because of a number of of factors, such as inefficient healthcare gadget, high price of healthcare, and lack of know-how.
Chat GPT for Doctors -Revolutionizing Healthcare Communication by Dr.Mahboob.pdfHealthcare consultant
Learn how Chat GPT for doctors can revolutionize healthcare communication by improving efficiency and accuracy of patient-provider interaction.
In recent years, there has been a growing interest in the potential of artificial intelligence (AI) to transform healthcare. One area that has received particular attention is communication between patients and healthcare providers. The emergence of chatbots powered by AI has provided a new tool for improving the efficiency and effectiveness of healthcare communication. One of the most promising applications of AI-powered chatbots is Chat GPT for doctors.
As an expert in hospital management and administration i have written this book -Hospital Management is a new theory in management faculty. Earlier a senior doctor used to perform the role of a hospital manager. However, nowadays everything demands a specialist. Almost all the things related to hospital have changed. Many categories concerning medical sciences and hospital have altered totally. There are various types of hospitals today, including ordinary hospitals, specialty hospitals and super specialty hospitals. The categories are regarding to the types of facilities they offer to the people.
Steve Jobs logged off too soon. He was a serial innovator whose illness cost the world a bright talent who was also a great company leader. I hope that the music from the hymns of praise sung to him in his waning days is playing on his iPod as he ascends into the firmament of the greatest American business leaders. If there were a Nobel prize for business, surely he would have won it. He did what he set out to do and more. He saw the potential for computing power for the masses, useful and accessible to everyone. In a phrase that drove the early Apple, he created bicycles for the mind.
“He is a charismatic leader who inspires people to follow him. A strategic thinker who can master the details. A tireless worker with incredible focus and problem-solving skills. He is well-liked by his employees but is also able
to make and execute unpopular decisions. Above all, he is an exceptional communicator who can convey a vision to any audience, from Wall Street to
the most junior employee.”
Some of the lower vibrations, as you can see on the chart are anger, grief, shame, fear. Some of the higher vibrations are love, joy, appreciation and excitement.
Going to higher vibrations means more energy ,lower vibration is easily achieved and is default in everyone of us and is easily aggravated by gravity.
thats why anger, grief,shame and fear are more common than love ,joy appreciation and excitement.
Hospitals profitability can be increased by boosting patient satisfaction, reducing readmissions and understanding revenue cycle performance.
In this period of healthcare reform, numerous organizations continue to change their business practices so they can obtain more hospital profitability while also delivering quality care. Healthcare expenditures are expected to reach $4.4 trillion by 2022, and this high level of spending activity has hospitals currently under a lot of pressure to reduce costs.
Development of the digital economy started way before COVID-19. The exact date of the beginning may be defined in different ways, depending on different definitions of “digital economy.” The popularly understood “digital economy” phenomenon began when T-Mall was set up in 2003 and when Alipay came online in 2004. While the digital technology brings about the fourth industrial revolution, just like the steam engine, electrical machines, and computers, respectively.
Strategy is not complex. But it is hard. It’s hard because it forces people and organizations to make
specific choices about their future—something that doesn’t happen in most companies. Dr .Mahboob
Khan
Couch potatoes as they are called are the ones who stick on to their sofas just watching the idiot box that has caused many such unwarranted developments in health.
Probably a long vacation could be a precipitating factor for inactivity while the unexpected strife in the country’s developments has brought with it some unexpected holidays. This is the time when children tend to relax but when they cross the line the human body becomes mentally and physically inactive.
While Metaverse is evolving, it holds new potential in healthcare that combines the technologies like Artificial Intelligence, Virtual Reality, Augmented Reality, Internet of Medical Devices, Web 3.0, intelligent cloud, edge and quantum computing along with robotics to provide new directions to healthcare.
Robotic Process Automation in Healthcare-An Urgency! By.Dr.Mahboob KhanHealthcare consultant
More and more industries are adopting RPA because RPA exceeds adopters’ expectations not only when it comes to the rapid rate of ROI(Return on Investment) increase, but also when it comes to facilitating compliance (92%), improved quality and accuracy (90%), or improved productivity (86%).
As per a study conducted by McKinsey, the healthcare sector had a 36% technical potential for automation. It also stated robotic process automation as one of the emerging technologies that will reshape healthcare and create between $350 billion and $410 billion in annual value by 2025.
Apply This to Your Life
We know this is boring, but you know you need to do it!
Clear an hour in your schedule somewhere in the next week, and set your filing system up!
Many inventions originated in wealthy countries and these were responsible to produce global public goods and medical goods.In which everyone got benefitted even developing and poor countries too.This transfer of knowledge is now compromised by the extension of intellectual property rights and held by high-income countries.
Precision medicine will drive new standards of care in post COVID -19 world. In simplest terms precision medicine is the right test for the right patient and at the right time. A physician must choose from an array of complicated tests that are appropriate for a diagnosis and creation of a treatment plan for their patient in a timely manner.
Ways That Quantum Technology Could transform Health Care. By.Dr.Mahboob KhanHealthcare consultant
You probably don’t grasp the finer points of how quantum mechanics works, but scientists are using its tricky rules to make medicine faster, less painful, and more personalized.
How is COVID-19 Reshaping the role of Institutional strategy? By.Dr.Mahboob KhanHealthcare consultant
While workers around the globe are keeping essential services running, it is imperative for business leaders, particularly senior strategy executives, to reflect on the lasting implications of COVID-19 and what they can do to best position their people, their businesses, and society to recover and thrive in the long term. Five key shifts can help chief strategy officers (CSOs) successfully guide their organizations through the pandemic.
Retaining Healthcare Quality During COVID-19 and Future of Care Delivery. By....Healthcare consultant
With the onset of COVID-19, healthcare delivery organizations around the world were collectively faced with one primary challenge: How to effectively deliver quality healthcare to all patients, regardless of the entry point into the system, while protecting the well-being of non-COVID-19 patients and the healthcare workforce.
4. Executive Summary
Exacerbated by the U.S. deficit and other economic challenges, the rising cost of health
care is a front-and-center issue nationwide for patients, employers, providers, and govern-
mental and commercial payers alike. As health care moves to a value-based business
model, health care payments will likely be constrained, while care efficiency, quality,
outcomes, and access will be expected to improve. To continue meeting community
health care needs in this new delivery and payment environment, hospital and health
system leaders will need to think and act strategically about managing cost. Strategic cost
transformation will be required.
In this guide, we propose that such transformation must occur along three pathways
(see figure 1 on page 7): Pathway 1 involves reducing costs of current operations; path-
way 2 involves reducing costs through restructuring businesses and service lines, among
other elements; and pathway 3 involves reducing costs through clinical transformation.
This guide focuses on specific elements of pathways 1 and 2.
Hospitals and health systems can lay the groundwork for strategic cost management by:
»» Ensuring that the CEO drives the strategic cost transformation process
»» Developing and implementing a strategic cost transformation master plan
»» olstering the organization’s business platform and ensuring its full functioning
B
at all levels
»» Creating and supporting cultural change
Cost management pathway (pathway 1): Cost management is an approach to significantly
reshape and reduce cost by (1) improving planning and execution of current operations
and (2) attacking overhead and non–value-added functions, overhead costs, and costs
“flying below the radar.” Cost management opportunities can best be achieved in organi-
zations through:
1. Understanding your organization’s readiness for cost management
2. Defining cost-reduction goals based on the organization’s capital shortfall
3. Using internal and external benchmarks to identify possible sources of savings
4. Supplementing benchmark data with other data analyses
5. nderstanding and focusing on the key drivers of staffing and productivity
U
problems
6. Drilling down on staffing methods
7. Streamlining overhead functions
8. nsuring that cost-reduction targets are integrated with organizational plans and
E
budgets
Business restructuring pathway (pathway 2): Forward-thinking organizations, whether
freestanding hospitals, multihospital systems, or other provider entities, are evaluating
all aspects of their business in light of changing market conditions and requirements for
future success under the new business model. They are asking, “What businesses and
services are core to our mission and vision going forward?” and “Where can we most ef-
fectively invest our limited capital and human resources to meet the continuing health care
needs in our communities?”
4 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
5. Eight action items can help hospital and health system executives and boards define the
business strategies appropriate to their organizations, and the plan by which those strate-
gies can be executed.
1. Start with an evaluation of your organization’s strategic options.
2. Evaluate each business unit and service line to identify core elements.
3. Use a structured process to analyze the core businesses and services.
4. Implement a business/service line analysis framework.
5. Understand when and why service distribution planning will be needed.
6. nitiate the process of defining the most efficient and effective distribution
I
of services.
7. Use a structured framework for service distribution planning.
8. Ensure a solid fact base for the service distribution plan.
Hospital and health system leaders have an opportunity to make a significant contribution
to health care delivery in their communities by moving their organizations to a value-
based business model, using the strategies of strategic cost transformation outlined here.
The time to move is now.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 5
6. Introduction
Due to factors including the federal and state budget deficits, rising health care costs,
and the large percentage of gross domestic product consumed by health care spending,
health care must focus on value. This value proposition, which is improved quality
at lowest-possible cost, will not be undone.
Under health care’s value-based business model, health care payments will be constrained,
while care efficiency, quality, outcomes, and access will be expected to improve. At the
same time, quality and cost will be much more transparent to patients and purchasers.
Indicators will be closely monitored and reported in public forums.
To continue meeting community health care needs in the new delivery and payment
environment, hospital and health system leaders will need to think and act strategically
about managing cost. In this guide, we propose that this process—strategic cost transfor-
mation—will be required and that such transformation must occur along three pathways
(see figure 1): Pathway 1 involves traditional cost management, namely reducing costs of
current operations; pathway 2 involves reducing costs through restructuring businesses
and service lines, among other elements; and pathway 3 involves reducing costs through
clinical transformation.
Most organizations have attacked or are currently attacking costs through pathway 1.
But these savings may not be sufficient to achieve the overall cost reductions needed in
the new environment. Furthermore, to ensure optimal long-term success, work occurring
through pathway 1 must be carefully coordinated with work occurring through pathways
2 and 3. Some organizations have started to use pathway 2, business restructuring, as a
means to reduce costs; but this work is much more difficult, and many organizations have
not yet started it. Finally, though many providers talk about clinical transformation, many
organizations have not started work in pathway 3, which takes the longest time to achieve
but also has significant potential for true reduction of the cost of care.
This guide focuses on specific elements of:
»» athway 1. Cost management: Reducing costs of management operations, including
P
planning and execution, nonlabor costs, overhead costs, and costs “flying below the
radar”
»» athway 2. Business restructuring: Reshaping businesses and services offered and
P
conducting service distribution planning
Future guides in this series will cover additional pathway elements.
6 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
7. Figure 1. Three Pathways for Strategic Cost Transformation
Strategic Cost
Transformation
1. 2. 3.
Cost Management Business Clinical
Restructuring Transformation
Planning and Businesses/ Care processes
execution services offered
Nonlabor costs Service Physician
distribution integration
Overhead costs Facility planning Effective care
transitions
Costs “below the Enhanced capital Relationships with
radar” allocation other providers
Supply chain/ Enterprise risk
revenue cycle management
Source: Kaufman, Hall Associates, Inc. Used with permission.
Laying the Groundwork
For health care management teams and boards, four strategies will be critical to achieving
strategic cost transformation.
Strategy 1. Ensure that the CEO drives the strategic cost transformation process.
Removing costs to increase efficiency across an organization, while improving quality, will
require sustained effort and attention at the highest level.
Strategy 2. Develop and implement a strategic cost transformation master plan.
The plan articulates the order and sequencing of pursuit and achievement of the cost-
transformation pathways. While pursuit of all three pathways is likely required, it may be
beyond a management team’s resources to pursue initiatives in all areas simultaneously.
Some CEOs are very unsure of what they should do first. Many are diving into clinical
integration and care-model change. Others are pursuing initiatives to enhance services or
secure partnerships.
Or, if the hospital or health system is experiencing relatively stable financial performance,
some CEOs are focusing on revenue or integration initiatives in lieu of cost reduction
because they believe what is commonly cited in the literature that “the low-hanging
fruit has already been picked.” This may not be the case.
Very few organizations seem to have the time and human and economic resources to
pursue all pathways concurrently. The order of priority for cost transformation for any
organization will vary based on its market, clinical resources and environment, and
financial position. In addition, political will within the organization, the strength of its
management and clinical teams, its culture of measurement and accountability, and
other factors will play a significant role in whether and how strategic cost transformation
proceeds. An objective evaluation of these characteristics is strongly recommended.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 7
8. Strategy 3. Bolster the organization’s business platform and ensure its full functioning
at all levels.
The systems and technology required for monitoring and managing progress in delivering
health care value, defined with cost and quality dimensions, must be put in place,
functioning, and used effectively. Requirements include:
»» orporate finance-based business systems and tools for business planning, financial
C
planning, capital allocation and management, budgeting and cost control, and capital
structure and risk management
»» Clinical information systems and tools
High-quality IT and clinical information tools must support the monitoring and manage-
ment of performance under changing financial and care delivery arrangements. Clinical and
business data must be integrate-able and integrated. Analytic capabilities and disciplined
use of quantitative techniques are required.
Strategy 4. Create and support cultural change.
At the most fundamental and pervasive level, strategic cost transformation will require
cultural change. Supported by the board of trustees, executive leaders must create a
culture of results and accountability.
Executive communication of the strategic cost transformation plan to all stakeholder
groups will be critical. Visionary leaders will recognize and enable active participation
organizationwide. This will be key to sustaining the required changes. Major initiatives
will need to be led in a way that is cognizant of the larger framework and the power of
participation to drive meaningful change.
Leaders also must understand that, after 40-plus years, the mindset of the fee-for-service
business model permeates organizations. Sustainable success within the new business
model will require new forms of governance, organizational and management structure,
and performance measurement that will alter the basic approach to care delivery. As
described by Atul Gawande, M.D., new values and new attitudes will be needed to move
from a sickness model, characterized by physician and hospital autonomy, to a wellness
model, characterized by independence and team-centric care delivery. 1
Takeaways
»» ue to rising health care costs, the industry’s value proposition—best-possible
D
quality of care at lowest-possible price—will not be reversed.
»» aking costs out of the health care system will require the sustained effort and
T
attention of health care leadership teams and boards across multiple dimensions.
The CEO must drive this process.
»» he strategic transformation of a hospital or health system’s cost structure
T
involves rigorous cost management to reduce costs of current operations, careful
consideration of businesses and services offered (and the ability to make and
implement tough decisions related to this), and clinical transformation through
redesign of clinical operations and structure for maximum efficiency and
effectiveness of the care delivery process.
»» n some organizations, the low-hanging fruit has not already “been picked.”
I
»» he systems and technology required for monitoring and managing progress in
T
delivering health care value, defined with cost and quality dimensions, must be
put in place, functioning, and used effectively.
»» t the most fundamental and pervasive level, strategic cost transformation will
A
require cultural change.
1
Gawande, A. “The Real Reform of Healthcare.” Kaufman Hall Report, Winter 2010.
8 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
9. Cost Management Opportunities
Cost management is an approach to significantly reshape and reduce cost by improving
planning and execution of current operations, attacking overhead and non–value-added
functions, and addressing the major strategic drivers of cost. Eight strategies can help
hospital and health system executives achieve solid results.
Strategy 1. Understand your organization’s readiness for strategic cost management.
Specific organizational competencies are required for success with strategic cost
management. These include target setting and tracking; scope of cost-management
focus; systems thinking; alignment between plans, targets, and financial performance;
accountability and execution; management controls; operational planning; and overhead
management. Detailed awareness of your organization’s current level of preparedness is
critical to effective planning. A cost management “readiness assessment,” completed by
an objective party and summarized based on a comparison with national performance, is
recommended. Figure 2 provides a sample tool.
x = National Estimate
Figure 2. Sample Tool for Strategic Cost Management Readiness Assessment
Unprepared Hospital Well-Prepared Hospital
Most departments look great in
current productivity and budget Aggressive cost-management
reports, but hospital performance targets
Target Setting and Tracking is lagging
x
Extensive scope of cost-
Focus of cost-management management effort addressing
Scope of Cost Management effort is fairly limited
x all major drivers
Focus exclusively on individual Decision making driven by the
departments and silos “greater good”
Systems Thinking
x
Schedules, staffing plans,
Total disconnect between plans, targets, budget, financial needs
Alignment targets, and financial performance aligned
x
Highly creative and unending Demanding culture with little room
Accountability and Execution excuses are the norm for excuses
x
Lots of workarounds for
Management Controls managers to get the staffing and
resources that they want Strong controls on hiring and use
x of premium labor
Managers told to cut cost with
Operational Planning no evidence that fundamental Structured process in place to
changes are being made drive changes in how work is done
x
Mechanisms in place to rationalize
Overhead Management Overhead services and functions overhead and corporate/system
x
“fly below the radar” expenditures
Strong
Composite Position
Weak
x
Source: Kaufman, Hall Associates, Inc. Used with permission.
Strategy 2. Define cost-reduction goals based on the organization’s capital shortfall.
An accurate analysis of the organization’s capital position, as commonly prepared as part
of an integrated strategic financial plan, enables organizations to identify their expected
capital shortfall. In an era of flat-to-declining revenue, cost-reduction goals should be
established to close as much of this capital shortfall as possible. The goals quantify the
performance levels necessary to fund the organization’s strategies and maintain its
competitive financial performance. In this way, goals are connected directly to the
organization’s current financial position as well as its current and future strategic
capital and other requirements.
All organizations should be thoroughly revisiting their integrated plan to examine the
cumulative, projected impact of strategic initiatives and changes due to health care
reform and the new business model. Projections of payment, volume, capital costs, capital
investment needs, and other variables are changing and will likely continue to do so.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 9
10. Strategy 3. Use internal and external benchmarks to identify possible sources
of savings.
To define the sources and amount of possible savings, organizations can review historical
trends, apply global and departmental benchmarks and peer department comparisons, and
conduct supplementary drill-down data analyses.
Given operating characteristics that may be unique to the departments at any specific
organization, there are limitations of, and sensitivity to, benchmarking. However, use
of specific benchmarks, available within the organization or industry, is often entirely
appropriate. Use of both internal and external benchmarks helps to build consensus within
the organization around the level of cost reduction that may be available.
Strategy 4. Supplement benchmark data with other data analyses.
Other data analyses can be used to identify savings opportunities and validate cost-
reduction estimates as realistic and achievable. A range of opportunities can be identified
for each department using historical trends and budgeted performance, for example. While
a department manager may not agree about the applicability of one benchmark source,
use of three reference points will triangulate the savings and support the appropriateness
of cost-reduction opportunities and targets.
Example: A community hospital and a small multihospital system each used data from
the following three separate analyses to quantify their expense reduction needs and
opportunity:
»» he operating performance improvement that would be required to support their
T
strategic capital needs
»» ost reductions that would be required to bring the hospital or each facility within
C
the organization to a 90 percent Medicare revenue-to-cost ratio (which was then
extrapolated to Medicaid and commercial business)
»» otential cost savings based on application of industry cost benchmarks (median
P
ratios for health care bond ratings, as published by the rating agencies)
Figure 3 illustrates how triangulation of data from these three sources helped the health
system to identify a preliminary expense-reduction target of $30 million or more and the
community hospital to identify a global cost-reduction target of $7 million. Analyses
related to each source quantified the level of improvement (i.e., cost reductions) needed
to position the organizations to support a greater level of capital investment, enhance
operating performance, and improve their balance sheets.
To achieve the target, the example health system identified staffing and productivity
initiatives centered on the following: better alignment of staffing levels to patient demand;
better targeting of workloads and assignments; reduced use of overtime and premium
labor through cross-training; and reduced functional redundancies across the facilities. The
hospital identified similar initiatives.
Figure 3. Understanding Cost-Reduction Needs
Capital required to support strategic initiatives
$27M
Expense
Reduction
Need
Medicare revenue/cost at 90% Gap to desired bond rating
$33M $24M–$33M
Source: Kaufman, Hall Associates, Inc. Used with permission.
10 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
11. Strategy 5. Understand and focus on the key drivers of staffing
and productivity problems.
The types of cost-reduction opportunities and their drivers vary by Sidebar 1. Key Drivers of Staffing
organization, but many of these are common to hospitals and health and Productivity Inefficiencies
systems nationwide, independent of size (see sidebar 1). Staffing
and productivity drivers should be a key focus, as labor costs often »» Inadequate plans/
constitute more than half of an organization’s operating expenses. alignment
»» oor execution of staffing
P
Example: By addressing both cost structure (doing the right things) plans
and cost management (doing things right), an independent community
»» Inappropriate/unclear
hospital identified 10 labor cost-reduction initiatives. Figure 4, a
staffing roles, target workloads,
high-level mapping of the financial impact expected of these initiatives, and assignments
can be used for all types of improvement opportunities.
»» ervice and functional
S
In the cost-management domain, the “align staffing plans and redundancy/excess capacity
schedules” initiative—number 1 in the graph—ensures that staff »» Insufficient management
work schedules appropriately reflect patient and workload demands controls
and staffing plans. This initiative can yield significant financial return »» se of overtime/premium
U
and thus appears at the top of the high-impact quadrant for cost- labor
management efforts.
Source: Kaufman, Hall Associates, Inc.
Cost-structure initiatives, such as “consolidate functions or the sites/ Used with permission.
locations supported” (number 7 in the graph), also can be expected
to yield a high return. Such initiatives could include, among other
things, eliminating duplicative services in over-served markets and
consolidating the number of satellite laboratory locations. Similarly,
initiatives to “eliminate or cut back on lower priority/non–value-added
functions”—number 8 in the graph—can provide considerable savings.
A structural approach to scrutinize all work and functions for their
cost/benefit “value” can be used, looking at both the importance of
the functions and how well they are being performed.
Figure 4. Labor Cost-Structure and Cost-Management Opportunities
High Impact
Cost Management: Doing Things Right
1
Labor cost-reduction initiatives
2 1. Align staffing plans and schedules
2. Implement targeted operational improvements
3
4
3. Reassign work or cross-train staff
4. Improve execution of existing staffing plans
5. Reduce premium labor use
6 5 6. Reduce “indirect” staffing
7. Consolidate functions or sites/locations supported
8. Eliminate (or cut back) on lower priority/non value-added functions
Low Impact
9. Cut hours of operation or coverage for department or selected
10 9 8 7 functions within department
10. Deploy technology to automate
Low Impact High Impact
Cost Structure: Doing the Right Things
Source: Kaufman, Hall Associates, Inc. Used with permission.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 11
12. Strategy 6. Drill down on staffing methods.
Poor alignment of staffing with patient volume, coupled with poor execution of existing
staffing plans, can be among the more common contributors to high labor costs. While
organizations may believe that their current staffing methods are highly effective in
matching staffing and volume, such assumptions should be rigorously tested.
It may be possible to strengthen the relationship between staffing and patient demand.
Staff schedules may not be geared to when patients arrive at the operating room
or emergency department, for example. Planning for staff “flexing”— i.e., adjustment
upward or downward with changes in volume—may not be occurring as expected.
A close review of census-based staffing grids for inpatient units can reveal a less-than-
ideal correlation between staffing and volume.
Figure 5 illustrates the results of a concerted effort by one hospital to more closely
align staffing to demand in its intensive care and critical care units. The diamond-shaped
points are the values for hours worked by pay period at specific patient-volume levels be-
fore alignment. The triangle-shaped points reflect staffing after focused alignment efforts
were implemented. The effectiveness of this effort can be seen in the improved statistical
alignment of staffing to demand as measured by the correlation (R-squared value), which
increased to 83 percent from 73 percent.
Additionally, the data demonstrate the department’s ability to improve the efficiency
of staffing at every volume level. This is illustrated by the fact that the black “after”
line is lower at all points on the chart than the orange “before” line. This productivity
improvement/staff alignment initiative saved the organization nearly 600 hours of
staffing cost per pay period.
Figure 5. Aligning Staffing to Volume Demand
Note: The red line is performance before the initiative; the black line is performance after the
initiative.
Source: Kaufman, Hall Associates, Inc. Used with permission.
12 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
13. Strategy 7. Streamline overhead functions.
Opportunity exists in most multifacility organizations to achieve greater “system-ness” by
eliminating redundancy of functions across facilities. Cost savings can be achieved through
selective centralization or regionalization of administrative and/or overhead services and
functions. These include human resources (HR), accounting and finance, revenue cycle,
information technology, marketing, legal/risk management, and materials management,
among others. Consolidation at the appropriate level can improve operations and yield
large savings.
Example: Figure 6 illustrates how one health system reallocated HR functions, resulting in
FTE savings of $6 million. The system achieved such savings by reducing the duplication
of HR services and reducing excess capacity. A large portion of the savings resulted from
the health system’s decision to relocate several HR functions to regional or system-level
offices.
A data-driven and objective evaluation of system services from a “total spend”
perspective, regardless of where such services may currently reside, is highly
recommended.
Figure 6. Integration of Systemwide Human Resource Functions
Human Resources Current Structure
Hospital A Hospital B Hospital C Hospital D Hospital E REGIONAL SYSTEM TOTAL
Current FTES 11.2 7.4 16.1 18.0 13.0 0.0 6.3 72.1
Organizational Development X X X X X
Human Resources Info Systems (HRIS) X X X X X X
Employee Relations X X X X X
Benefits X X X X X
Compensation X X X X X
Employee Health X X X X
Staff Training X X X X X
Labor Relations X X X X X
Employment Recruiting X X X X X
Workers' Compensation X X
Human Resources Proposed Structure
Hospital A Hospital B Hospital C Hospital D Hospital E REGIONAL SYSTEM TOTAL (1)
Recommended FTES 5.2 3.6 8.0 8.8 6.4 20.0 11.2 63.2
Organizational Development X
Human Resources Info Systems (HRIS) X
Employee Relations X X X X X
Benefits X
Compensation X
Employee Health X
Staff Training X
Labor Relations X
Employment Recruiting X
Workers' Compensation X
FTE Savings Due to Rationalization of
H.R. Functions 6.0 3.8 8.1 9.2 6.6 -20.0 -4.9 8.9
Note: As evident from the many red boxes on the top portion of this illustration and the comparatively fewer
boxes on the bottom portion, this organization was able to significantly reduce duplication of overhead HR
functions.
Source: Kaufman, Hall Associates, Inc. Used with permission.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 13
14. Strategy 8. Ensure that cost-reduction targets are integrated with
organizational plans and budgets.
Sidebar 2. Lessons from the To realize cost reductions, the specific initiatives identified through
Trenches the processes just described must be thoroughly integrated with the
organization’s strategic financial plan, annual budget, and operating
»» Targets without specific
plan. Targets and reports must be aligned with financial statements
improvement initiatives will so that the impact of initiatives is reflected in overall organizational
produce unsatisfactory cost performance. To ensure that progress toward specific goals can
savings.
be monitored and measured, the initiatives also must be readily
»» Improvement initiatives without
identifiable within these plans.
targets may enable or support
various organizational priorities Additionally, productivity reporting systems and target metrics
but will produce unsatisfactory must integrate appropriately with the organization’s budget. Staffing
cost savings. plans with aligned staffing schedules should be reflected in the budget
»» eaders must understand
L as well. If “disconnects” occur among any of these elements, cost
the political will or appetite efficiencies and reductions will be very difficult to achieve and will
to pursue cost reduction in result in expenses that are higher than expected or warranted.
traditionally sensitive areas
before undertaking such a Target setting and achievement are critical leadership functions. But,
strategy. targets alone are not sufficient. They must be monitored, readjusted,
and reported upon departmentwide and/or organizationwide. The
»» eriodic “look backs” are
P
helpful in evaluating how the best results are achieved when targets are assigned to specific
organization’s cost structure improvement initiatives and specific executives. Stretch targets
has evolved and whether must allow for “slippage” in planning and execution. Beware of an
opportunities exist to use unwillingness to set targets! Sidebar 2 provides lessons from the
resources more effectively trenches.
in support of mission and
strategy. Takeaways
»» esults must be tracked
R »» etailed awareness of your organization’s current level of
D
meticulously. preparedness for strategic cost management is critical to
effective planning.
Source: Kaufman, Hall Associates, Inc.
Used with permission. »» n an era of flat-to-declining revenue, cost-reduction goals
I
should be established to close as much of the organization’s
capital shortfall as possible.
»» taffing and productivity cost drivers should be a key
S
focus, as labor costs often constitute more than half of an
organization’s operating expenses.
»» o realize cost reductions, the specific savings initiatives
T
identified by the organization must be specifically identified
and integrated components of the strategic-financial plan,
annual budget, and operating plan.
14 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
15. Strategic Businesses and Services and Their Distribution
Forward-thinking health care organizations, whether freestanding Sidebar 3: Five Questions to
hospitals, multihospital systems, or other provider entities, are Guide Leadership Thinking About
evaluating all aspects of their business in light of changing market Essential Businesses and Services
conditions and requirements for future success under the new busi-
ness model. They are asking, “What businesses and services are core »» s this an essential business/
I
to our mission and vision going forward?” and “Where can we most service that is required to deliver
effectively invest our limited capital and human resources to meet upon our mission?
the continuing health care needs in our communities?” »» s this business/service fully
I
integrated into the fabric of
The costs involved in building competencies for the new business our organization and its care
model, including tight physician integration, care-management delivery model?
infrastructure, a sophisticated health information technology platform, »» ill this business/service
W
and partnerships across the care continuum, will be considerable become more or less relevant
for all organizations. For small community hospitals, it may not be as success requirements
possible to continue being “all things to all people.” Rather, community under reform and the new
access to needed services may have to be accomplished through business model evolve?
referral or partnership arrangements. Eight strategies can help »» s our organization best
I
hospital and health system executives and boards define the business positioned to own and
strategies appropriate to their organizations and the plan by which operate this business/service
those strategies can be executed. or could another organization
provide these services more
Strategy 1. Start with an evaluation of your organization’s strategic effectively and efficiently for
options. our community or communities
Identification and assessment of strategic options under alternative through contractual and other
scenarios, supported by integrated strategic-financial planning related relationships?
to these options, are more important than ever before in order to »» ow can our resources be
H
get to sustainable organizational positioning. Evolving incentives most effectively deployed to
will force inefficiencies out of the broader health care system; those maintain and further advance
organizations unwilling or unable to make necessary strategic changes our mission and strategic
are at risk of being marginalized in their markets. position?
Source: Kaufman, Hall Associates, Inc.
Strategy 2. Evaluate each business unit and service line to identify
Used with permission.
core elements.
Criteria for this evaluation should include, fit with strategic mission
and vision in community or communities served, current market
attractiveness, competitive landscape, current financial performance,
and projected financial performance under new delivery and payment models. Sidebar 3
provides the key questions that health care boards and management teams must ask and
answer.
Strategy 3. Use a structured process to analyze the core businesses and services.
Using a structured approach, the efficiency and effectiveness of each business and
service should be evaluated, as should the organization’s ability to sustain the business
or service’s relevance in a changing market (see figure 7).
The multistep approach involves the following: articulating organizational goals;
identifying the businesses and services for consideration; evaluating the geographic
market; assessing each business/service within that market; identifying how services
could be better distributed across the delivery system; formulating strategy for achieving
more optimal distribution; preparing and evaluating volume and financial projections
for individual businesses/services and the hospital or health system; making and
implementing decisions for desired future delivery system.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 15
16. Figure 7. Approach to Assessing Businesses and Services
Across multiunit Within a single hospital or
health systems other provider entity
Are we concentrating our Are we concentrating our
efforts and resources in efforts and resources in business
markets that will result in units and service lines that will
long-term relevancy and result in long-term relevancy
sustainability? and sustainability?
Source: Kaufman, Hall Associates, Inc. Used with permission.
Strategy 4. Implement a business/service line analysis framework.
The framework should consider mission, nature of operations, market environment/
competitive position, financial performance, and compatibility with new-era needs
and competencies (see figure 8). Appendix A includes a full description of each
framework element.
Ultimately, discussions related to an organization’s businesses and services must openly
address total value of the business to determine if it is the best use of scarce resources
available to meet community needs. Figure 9 provides an appropriate evaluation matrix,
with four categories of businesses and services—core, achievers, nonstarters, and prodi-
gies—as defined along strategic-position and financial-contribution axes. Tough decisions
will need to be made and implemented by hospital and health system boards and execu-
tives teams.
Figure 8. Framework for Business/Service Analysis
Unnecessary Essential
Mission
Nature of Disconnected Integrated
Operations
Market Environment/ Unfavorable Favorable
Competitive Position
Financial Weak Strong
Performance
New-Era Incongruent Consistent
Compatibility
Increasing Value to the Organization
Source: Kaufman, Hall Associates, Inc. Used with permission.
16 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
17. Figure 9. Business/Service Evaluation Matrix
Strategic
Position
“Prodigies” “Core”
Despite solid growth Well suited to
prospects, will remain/become
continue to evaluate the essential
the potential value provider of care
provided
“Nonstarters” “Achievers”
Both external and Fulfill a key role
internal environments in the community, but
suggest significant may lack long-term
challenges prospects
Financial
Contribution
Source: Kaufman, Hall Associates. Used with permission
Example: Given the significant capital investment requirements of the new business
model, one academic medical center evaluated its options in the changing landscape.
The evaluations started with the development of a financially oriented business plan for
each service line and business unit currently owned and operated by the organization.
The medical center owned a home health business and a reference laboratory business,
among other entities.
Each business plan was supported by fact-based assumptions about volume, revenue,
expense, and associated capital costs going forward. Sensitivity and scenario analyses
were completed for the key drivers to understand the range of possible outcomes. Each
plan was integrated into the organization’s long-term strategic financial plan in order
to understand the impact of the businesses on the organization’s strategic and financial
success going forward.
Home health business. The academic medical center needed access to high-quality
post-acute care in order to manage patients’ health following discharge, thereby
minimizing readmissions. But the economics of its home health business were difficult.
Competition was intense in its market. The business was not profitable, and its losses
were expected to increase. The medical center was concerned about its ability to sustain
the business in the long run and provide the necessary capital and resources to maintain
ongoing quality services. It decided to divest the home health business to one of the major
players in the market, which could continue providing quality services more effectively
and efficiently in the community. The divestiture would mitigate the medical center’s
losses and enable the organization to redirect capital capacity to initiatives in its core
competency and mission-driven areas.
Reference laboratory business. The academic medical center’s reference laboratory busi-
ness, on the other hand, was very profitable, having been significantly capitalized over the
years. But the business did not meet leadership’s criteria for core services, as identified
through the key questions outlined in sidebar 3. Two large laboratory companies, which
already provided services in the community, proposed to purchase the medical center’s
business to increase their market penetration. The medical center decided to divest its
reference lab business and use the proceeds to build its balance sheet in support of core
strategic initiatives.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 17
18. Strategy 5. Understand when and why service distribution planning
will be needed.
Sidebar 4. Critical Questions for Service distribution planning is structural work that reshapes the
Defining Your Organization’s programs and services offered by an organization across its geographic
Position in the New Landscape markets. Given the strategic and capital challenges posed by the new
business model, such work will likely be required of many types of
»» hat services should we be
W organizations and for many different reasons, including the following:
offering in each location (and to
what scope and scale), with »» ommunity hospitals that wish to remain independent will need to
C
consideration of the population’s redefine their service offerings, including inpatient and ambulatory
care needs and of access, cost, sites, to maintain competitive performance.
and quality objectives?
»» ommunity hospitals that wish to partner with another community
C
»» re there services that we
A hospital to form a system or to join an existing health system will
currently provide in multiple want to determine the fit of their business and service offerings.
locations that could or should
be concentrated at fewer sites »» s community hospitals partner with or join regional health systems,
A
(for example, specialty-based parent systems will need to integrate hospitals, outpatient facilities,
ambulatory services, resource- and physician networks to deliver a coordinated system of care and
intensive services)? gain scale efficiencies.
»» re there other services that
A »» efore proceeding with transactions, partnering organizations will
B
require broader access (for need to be certain of marketplace synergies for effective operations
example, primary care) and going forward.
services that should be covered »» maller multihospital community health systems will need to refine
S
in lower-cost intensity settings? their service offerings to strengthen their market position.
»» f we were able to start fresh,
I »» egional and super-regional systems will begin focusing beyond
R
what would be an optimal care aggregation of providers to increase the efficiency and effectiveness
delivery system across our of delivery system resources.
inpatient and outpatient Service distribution planning is aimed at determining the appropriate
offerings? level of care, access, and quality to achieve desired outcomes at a cost
»» ow can we migrate from our
H that considers the needs of patients and payers. At the same time,
current situation toward this such planning aims to maximize capital capacity and to ensure that
more optimal system? the organization remains financially competitive. The end product is
Source: Kaufman, Hall Associates, Inc. a plan that drives improved operating performance through efficient
Used with permission. care delivery across a geographic area, without compromising quality
and outcomes, and often improving both.
Strategy 6. Initiate the process of defining the most efficient and effective
distribution of services.
Health care executives and boards are now working to define their roles in local
communities, to ensure that their organizations deliver value-based care, and to
manage the transition. They are asking and answering critical questions that often
require difficult decision making (see sidebar 4).
Given the speed with which health care is expected to change, delay in answering these
questions increases the probability that markets will shift around organizations that
are not redefining or refining their service distribution. As relationships between payers,
physicians, hospitals, health systems, and other providers are secured in the new
environment, organizations must have a clearly articulated service distribution strategy
to remain relevant.
Additionally, inefficient service distribution stresses an organization’s clinical, facility,
technological, human, and capital resources, making the organization less viable as a
value-based provider.
Strategy 7. Use a structured framework for service distribution planning.
Similar to the process used to evaluate and analyze the organization’s core business and
service offerings described earlier, the service distribution planning process should be a
structured one, using a solid framework.
18 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
19. Educating the board, management, and physicians about why it is important to
restructure the service delivery system provides the starting point. All key constituents
need to understand the changes that are occurring in the environment and why this
effort is essential to reposition the organization for sustained success. A clear and
concise objective statement should be crafted and then reaffirmed on almost a
continuous basis throughout the planning effort.
Strategy 8. Ensure a solid fact base for the service distribution plan.
A solid fact base provides a foundation that helps better contextualize barriers or
challenging issues going forward. The fact base includes data related to the organization’s
markets, strategic and financial positions, and the impact of current and possible future
trends on those markets and positions. Within the planning framework, key realities
and assumptions must be defined related to payment mechanisms, the competitive
environment, physician market characteristics, and core competencies required for
provider success (see figure 10).
A comprehensive financial fact base must also be developed, quantifying the organiza-
tion’s capital position, future financial position, and debt capacity. In the current uncertain
environment, scenario modeling and sensitivity analyses are imperative in order to
understand how changes in utilization, payment, capital, and other assumptions will
impact future strategic and financial performance.
The final plan that is developed for the service delivery system, based on the above-
described process, fully defines:
»» How the organization will serve the market
»» ow each of the organization’s operations and service lines will relate to other
H
operations and service lines
»» How clinical resources will be organized and deployed
»» The financial impact of the service distribution plan on the overall organization
Most organizations will not be able to be all things to all people. They will need to
define and re-scope core community service offerings as appropriate to overall capital,
management, and clinical resources.
Figure 10. Service Distribution Planning Framework
Point of View
(Key Organizational
Environmental Mission
Assumptions)
A
Development
Goals
Market and Projections of Future
Competitive Service Demand and
Environment F
Future Capacity Needs
Service
Distribution
Plan
Current Service Financial Assessment
Distribution System and Projections
Inventory of
Clinical Resources
Source: Kaufman, Hall Associates, Inc. Used with permission
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 19
20. Example: To effectively deliver high-value and high-quality patient care, i.e., the
right care (at the appropriate level/scope) at the right locations, and at the right cost,
Bloomington Hospital in Bloomington, Indiana, and Indiana University Health, headquar-
tered in Indianapolis, initiated service distribution planning in connection with the
affiliation of Bloomington Hospital with the IU Health system. The organizations wanted
to have in place a regional service delivery plan that would optimize the delivery of the
combined entity’s services in South Central Indiana. A regional plan would enable the
combined organization to serve patients as close to their homes as possible, improve
referral processes and physician support, improve care coordination, enhance the quality
of services being provided, and ensure a seamless care delivery system.
Figure 11 provides a high-level look at the strategic roles envisioned for entities
within Bloomington Hospital and IU Health. By focusing and optimizing their combined
geographic footprint once the affiliation was completed, Bloomington Hospital and IU
Health ensured appropriate coverage to serve their service areas, without unnecessary
saturation or overextension of clinical, human, or technological resources in ambulatory
or inpatient settings. Appendix B provides additional information on this example.
Figure 11. A Service Distribution Plan for the South Central Indiana Region
Source: IU Health and Kaufman, Hall Associates. Used with permission.
20 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
21. Takeaways
»» orward-thinking health care organizations, whether freestanding hospitals,
F
multihospital systems, or other provider entities, are evaluating all aspects of
their business in light of changing market conditions and requirements for future
success under the new business model. They are identifying core businesses and
services using concrete criteria.
»» ospitals and health systems should use a structured process and fact-based
H
framework to analyze their core businesses and service lines. Discussions must
openly address total value of each entity to determine if each is the best use of
scarce resources.
»» ost organizations will not be able to be all things to all people. They will need
M
to define and re-scope core community service offerings as appropriate to overall
capital, management, clinical resources, and community need.
»» ough decisions will need to be made and implemented by hospital and health
T
system leadership.
»» iven the strategic and captial challenges posed by the new business model, service
G
distribution planning will likely be required of many types of organizations and for
many different reasons.
»» he end product of service distribution planning is a plan that drives improved
T
operating performance through efficient care delivery across a geographic area
without compromising quality and outcomes, and often improving both.
Concluding Comments
The transformation of U.S. health care to a very different delivery and payment system is
underway. Proactive executives are moving forward aggressively to reshape and stream-
line their costs in anticipation of this new health care environment. Hospital and health
systems leaders have an opportunity to make a significant contribution to health care de-
livery in their communities by moving their organizations toward value-based care, using
the strategies of strategic cost transformation outlined here. The time to move is now.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 21
22. Appendix A
Components of an Analysis Framework for Businesses and Service Lines
Essentiality of a business to an organization’s mission
This element is exceedingly difficult to measure. As with most social goods, there is a
nearly insatiable appetite for the services that hospitals and health systems provide for
the benefit of their communities. Mission considerations include, among others: benefit
provided to, and support provided by, the community; whether a void would be created
if the business/services were not provided; and whether other organizations would
appropriately fill that void.
Nature of operations
Considerations include: whether patients/customers flow across the businesses and
services or whether the operations are detached and separate; the extent to which the
business/service functions as a stand-alone operation (i.e., systems, management,
funding of operations, utilization of shared services); the alignment of associated strategic
requirements and financial incentives with the core operations of the organization; and
the downstream or upstream implications of eliminating this business/service.
Market environment and competitive position
Considerations include: attractiveness and demand for this business/service; the key
industry drivers and requirements for success of this business/service; the intensity of
competition and the organization’s ability to differentiate from others; and whether the
organization has a competitive position that is relevant and sustainable in its market.
Financial performance
Considerations include: the historical financial performance of the business/service; the
level of financial performance generally achieved within the industry for this type of
business/service; future capital requirements and the level of performance that can be
expected; the estimated valuation of the business/service; the impact divestiture would
have on the overall credit profile and the financial position of the organization; and the
impact development of a new business/service or acquisition would have on the credit
profile/financial position of the organization.
New-era compatibility
Considerations include: whether the business/service supports longitudinal patient
management across the continuum of care; whether this business/service creates or
supports strong physician-hospital alignment; its impact on the organization’s brand
and image; whether this business/service has a material cost structure advantage or
disadvantage relative to competitors; and whether the organization can be an essential
provider of this business/service with sufficient scale of operation to succeed.
22 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
23. Appendix B
Example of Effective Distribution of Services at Indiana University Health
Objectives
To effectively deliver high-value, high-quality patient care, i.e., the right care (at the
appropriate level/scope) at the right locations, and at the right cost, Bloomington
Hospital in Bloomington, Indiana, and Indiana University Health, headquartered in
Indianapolis, initiated service distribution planning in connection with the affiliation of
Bloomington Hospital with the IU Health system.
The organizations wanted to have in place a regional service delivery plan prior to
their integration in 2010 so that the delivery of services would be optimized once the
affiliation was completed. A regional plan for South Central Indiana would enable the
combined organization to serve patients as close to their homes as possible, improve
referral processes and physician support, improve care coordination, enhance the quality
of services being provided, and ensure a seamless care delivery system.
Processes
Bloomington Hospital and IU Health sought to gain a comprehensive understanding
of their service areas, their strategic and financial positions, and the impact of current and
possible future trends on those areas. A thorough fact base was developed for the two
organizations. Key strategic analyses included a service delivery profile, physician and key
clinician resource inventory, facilities assessment, competitive evaluation, and an internal
performance profile.
For planning to be successful, a team-based approach was used. Board members, execu-
tives, physicians, and staff provided needed information and perspectives to help ensure
success at the implementation stage. A facilitated committee structure proved effective.
A thorough schedule of activities and a timeline kept the teams moving toward goals
within a tight time frame.
A management steering committee, whose members included systemwide leadership
and executive management from each of the organization’s hospitals or major facilities,
provided oversight throughout the process.
At the conclusion of the planning process, the roles for each of the system’s major
hospitals and medical centers were as follows:
»» U Health Bloomington (290 beds) would serve as the primary provider of most
I
tertiary and inpatient care to the South Central Region.
»» U Health Paoli (25 beds), formerly Bloomington Hospital Orange County, would
I
provide basic outpatient and low-acuity inpatient care (including surgery) for
patients in the southern portion of the region.
»» U Health Bedford (25 beds), which was owned by IU Health prior to the merger,
I
would provide routine inpatient and outpatient services for patients east and west
of Bedford.
»» U Health Indianapolis (2,000 beds) would provide sophisticated quaternary care
I
throughout the region, including a dedicated Children’s Hospital, telemedicine
support, and subspecialty physician outreach.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 23
24. Figure 1 provides a high-level look at the strategic roles envisioned for entities within
Bloomington Hospital and IU Health.
Figure 1. A Service Distribution Plan for the South Central Indiana Region
Source: IU Health and Kaufman, Hall Associates. Used with permission.
Clinical task forces, comprised of key physician and administrative leaders represent-
ing each service line and clinical site, served as the core planning groups for service lines.
Through an iterative facilitated process, they developed preliminary plans defining which
services will be offered at which sites and to what scale, considering both existing and
potential new locations.
A facility planning task force reviewed facility priorities and investment needs and
provided direction on how the investments should be prioritized. The team based its
recommendations on the volume/capacity, operating impacts, and associated capital
requirements of specific strategies or initiatives identified by the other teams, for
example, ambulatory services joint ventures, inpatient programs, and others.
Based on the work accomplished by the teams, the financial impact of the regional
strategic plan on the combined organization was assessed. The resulting service
distribution plan included: definition of the service delivery system; service area, program/
service, physician, operating, and other strategies; facility impacts; organizational
structure and implementation considerations; and financial goals.
Outcomes
By focusing and optimizing their geographic footprint, Bloomington Hospital and IU Health
ensured appropriate coverage to serve their service areas, without unnecessary saturation
or overextension of clinical, human, or technological resources in ambulatory or inpatient
settings.
For example, Bloomington Hospital Orange County (in Paoli) would focus on basic
outpatient and low-acuity inpatient care, while Bedford Regional Medical Center, 20-plus
miles north of Paoli, could also offer more complex treatments in a few selected areas. This
would allow patients in surrounding counties to receive certain care locally, rather than
having to drive 20 or more miles further north to Bloomington Hospital. By providing a
more sophisticated level of selected services at one of its small hospitals, the system
could also avoid operating an underperforming program at each of the locations.
24 A Guide to Strategic Cost Transformation in Hospitals and Health Systems
25. IU Health Indianapolis and Bloomington Hospital were able to complement each other’s
services. A coronary artery bypass graft surgery program, which had been in place at
Bloomington Hospital since the mid-1990s, would continue at that site, reserving the
quaternary Indianapolis-based hospital for the most complex, critical heart cases requiring
the highest level of clinical and technological sophistication. The cardiovascular surgery
group at IU Health Indianapolis was able to help Bloomington Hospital by placing two
full-time surgeons at Bloomington Hospital, as and when needed by that hospital.
This plan enabled the higher-cost Indianapolis hospital to avoid overbuilding its facilities
to accommodate volume that actually required a lower level of sophistication. The
plan totally reshaped the way the organization was looking at plans for major facility
renovations, enabling the organization to make the best possible use of scarce capital
and clinical resources.
A Guide to Strategic Cost Transformation in Hospitals and Health Systems 25