Catholic Health Initiatives, one of the nation's largest health systems, will seek to slash $2 billion from its operating expenses over four years as the Englewood, Colo.-based hospital operator prepares for healthcare reform.

The cost-cutting efforts come as the system seeks to increasingly shift its operations outside the hospital and toward efforts to promote health, Michael Rowan, executive vice president and chief operating officer of Catholic Health Initiatives, told attendees of the American College of Healthcare Executives Congress on Healthcare Leadership.

The system will also seek to increase its ability to take on the functions of a health insurance company, such as controlling the financial risk related to providing healthcare services, he said.

Catholic Health Initiatives is one of several health systems that has moved recently to acquire insurers.

Operations outside the hospital, such as ambulatory-care clinics, outpatient laboratory services and long-term care, account for half the health system's revenue and are expected to increase to two-thirds in coming years, he said.

Rowan, who described CHI as a “large, unwieldy organization,” called the organization's push to improve clinical and operational efficiency a challenge and the first step toward its reform preparations. To do so, the 80-hospital system must standardize, centralize and reduce variability, he said.

Catholic Health Initiatives looked internally for hospitals that outperformed others to find effective strategies, an advantage of a large health system, said Bob Strickland, senior vice president, performance management for Catholic Health Initiatives. “We have not been exploiting” that advantage as the system could, he said.

Efforts identified $72 million in potential savings from services such as banking, food services, office supplies, pharmacies, marketing and other contracts, said Steve Kehrberg, senior vice president of supply chain and clinical engineering, including $36 million in recurring savings.

Catholic Health Initiatives also targeted its $5 billion in labor expenses. The initiative, which began in 2009, has reduced labor costs by $338 million through 2012, Strickland said. And the system has also separately launched a few strategies to target clinical and operational efficiency, he said.

More Live@ACHE Coverage