Hospital execs fail to reduce costs where needed, report says
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • Walgreens to sell Labcorp COVID-19 PCR home collection kits over-the-counter
      Becerra confirmation starting to look more likely
      Blue Cross and Blue Shield of Oklahoma, OU Health Physicians mired in contract dispute
      COVID-19 could dent hospital revenue by at least $53 billion in 2021, AHA says
    • Walgreens to sell Labcorp COVID-19 PCR home collection kits over-the-counter
      COVID-19 could dent hospital revenue by at least $53 billion in 2021, AHA says
      Mistakes were made in regulation of coronavirus serology tests, FDA officials acknowledge
      FDA says single-dose shot from J&J prevents severe COVID
    • Dr. Imran Andrabi
      Q&A: ThedaCare CEO says lessons from COVID-19 will inform new approaches to population health management
      The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      Hospitals confront water shortages in winter storm aftermath
      beaumont-hospital-royal-oak_i_i_i.jpg
      Beaumont says nearly 2,000 second-shot vaccinations canceled due to vaccine shortage
    • Blue Cross and Blue Shield of Oklahoma, OU Health Physicians mired in contract dispute
      Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
      Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways - Transcript
      Health insurance execs' salaries grew faster than company revenue in 2020
    • Becerra confirmation starting to look more likely
      Mistakes were made in regulation of coronavirus serology tests, FDA officials acknowledge
      States rush to catch up on delayed vaccines, expand access
      Becerra supports access to care, provider funding during confirmation hearing
    • COVID-19 could dent hospital revenue by at least $53 billion in 2021, AHA says
      deloitte GDP image chart graph going up
      Sponsored Content Provided By Deloitte
      Breaking the cost curve
      By the Numbers: Largest taxable not-for-profit bond issuances, 2021
      Dennis Dahlen
      Health systems aren't rushing to cut back on financial liquidity
    • man and woman looking at ipad wearing face masks stock image
      Sponsored Content Provided By Surescripts
      Improvements to benefits data can enhance ePrescribing and the patient experience
      Oscar Health's $1B IPO sets the stage for more health tech exits in 2021
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
      Google opens Rochester, Minn., office to be closer to Mayo Clinic
    • Walgreens to sell Labcorp COVID-19 PCR home collection kits over-the-counter
      angela karpf headshot
      Sponsored Content Provided By B. Braun
      Making patient safety a policy priority
      Michigan Maze Woman-main_i.jpg
      State of confusion: Michigan's mental health system has many layers for those in need to navigate
      Next Up Podcast: Educating patients on the COVID-19 vaccine with Tanya Andreadis
    • Michael Jordan, Novant team up to address health equity
      Former Ascension CEO, the first to lead the health system, passes away
      Biden's pick to head CMS would be first Black woman to hold post
      RAKESH SURI MD_i.jpg
      Cleveland Clinic creates president of international operations position
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
    • What's next for on-demand telehealth companies?
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
      A CalOptima PACE vaccination clinic.
      Will COVID-19 be the catalyst for creating a more sustainable healthcare system?
      Ascension’s St. Mary’s Hospital Surgery Center at Towne Centre and Allegheny Health Network’s Bethel Park surgery center
      Hospitals see opportunity, risk in ambulatory surgery centers
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • What's next for on-demand telehealth companies?
      Rising prescription copays drop adherence, spike mortality, research shows
      Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      Highmark Health inks six-year cloud, tech deal with Google
    • California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
      Healthcare was the hardest hit by supply shortages across all U.S. industries
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      Humana partners with in-home provider for 24/7 care
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
    • Coordinated payment policies could speed transition to value, experts say
      CMMI's geographic direct contracting model needs an overhaul, experts say
      Hospitals fight UnitedHealthcare policies over lab test, specialty drug payments
      Cigna eliminates prior authorization for coronary CT scans
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Dr. Alan Kaplan
      The risks, rewards of taking organizations 'where they haven’t gone before'
      Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
    • Dr. Stephen Markovich
      Making sure we're aligned along the path to achieving inclusion
      Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
    • In-person visitation must be part of the national COVID-19 response
      We've lost so much to the pandemic, but we've also made gains that will endure
      Medical groups key to meeting president's vaccine pledge
      We need a better social care referral loop, but it requires technology as well as the human touch
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Minorities in Healthcare
      • - Luminaries
      • - Top 25 Minority Leaders
      • - Minorities to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • podium march webinar logo lockup
      Sponsored Content Provided By Podium
      Webinar: Critical Touchpoints for Every Patient’s Journey — How Technology Plays an Important Role
      scp health logo lockup march 2021
      Sponsored Content Provided By SCP Health
      Webinar: COVID’s call to action — Reset for success in 2021
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Healthcare Transformation Summit
    • Leadership Symposium
    • Virtual Briefings
      • - Hospital of the Future
      • - Mental Health
      • - Patient Safety & Quality
      • - Strategic Marketing
      • - Virtual Health
      • - Workplace of the Future
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Next Up Podcast: Educating patients on the COVID-19 vaccine with Tanya Andreadis
      Dr. Joseph Cacchione
      Next Up Podcast: Educating patients on the COVID-19 vaccine with Dr. Joseph Cacchione
      Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next four years
      Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
    • Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
      Beyond the Byline: How residents' stories shape our coverage of the vaccination rollout in nursing homes
      Beyond the Byline: Regulators aim to boost value push with fraud and abuse law updates
      An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
    • Outreach during COVID-19
      Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      The Check Up: Tanya Blackmon
      The Check Up: Tanya Blackmon of Novant Health
      The Check Up: Dr. Patrick Hwu
      The Check Up: Dr. Patrick Hwu of the Moffitt Cancer Center
      The Check Up: Suresh Gunasekaran
      The Check Up: Suresh Gunasekaran of the University of Iowa Hospitals & Clinics
    • ivana naeymi-rad one on one intelligent medical objects
      Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
October 16, 2018 01:00 AM

Hospital execs fail to reduce costs where needed, report says

Tara Bannow
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    A new report suggests health systems are being too conventional in their approaches to cutting costs, which might be why they aren't making much headway.

    Labor costs/productivity and the supply chain were the areas 72% of respondents to Kaufman Hall's latest survey said they plan to target when it comes to cutting costs.

    But to succeed in a future that's sure to be marked by disruption, it's going to take a new mindset and a willingness to go well beyond the traditional areas of focus, the report said.

    That could mean shuttering rural hospitals, reducing clinical variation and attempting to integrate the physician practices they've accumulated in recent years.

    To truly reduce margin, health systems must brave tougher subjects, such as taking a hard look at which services they'll offer at each location, said Lance Robinson, a managing director with Kaufman Hall and an author of the new report.

    "We're trying to convince our clients not to try to be all things to all people," he said. "Drill down on the service lines you're good at or that drive good margins for the hospitals."

    The report released Tuesday is Kaufman Hall's second annual in-depth look at the priorities and progress healthcare executives are making toward lowering costs. Nearly 190 senior executives from hospitals and health systems took the 2018 survey, up from 173 in 2017. Of those, 21% were from health systems with 10 or more hospitals and 24% represented single hospitals.

    Overall, the authors found progress has so far been limited when it comes to cutting costs. Fewer than one in five respondents cited cost reductions of more than 5% in any priority area.

    Respondents have made the least progress in service rationalization, an area in which 61% cited no improvement. A prime example of that is health systems' resistance to closing critical access hospitals, even when they're operating at significant losses, said Lyndean Brick, president and CEO of the healthcare consultancy the Advis Group.

    "That's the next level of cost cutting: It's difficult and controversial," she said.

    Hospitals also need to examine their clinical variation, Robinson said. Before sharing utilization data with clinicians, he cautions systems to be sure it's real, actionable information, because they probably don't get the ears of physicians often. He said health systems also need to identify champions, key leaders within specific service lines, as they work to drive down overall utilization of services and supplies.

    Another problem area is when health systems acquire physician practices defensively to gain market share but don't consider how to properly integrate them into their practices, Robinson said.

    Seventy percent of executives cited the need to prepare for the transition to value-based care as their top cost transformation driver, down from 77% in 2017. Medicare's transition to paying hospitals under the diagnosis-related group system in the 1980s spurred a drop in hospital revenue that never bounced back, Robinson said. Similarly, hospitals must prepare for a new revenue landscape under value-based care, and repositioning themselves will be an ongoing journey, Robinson said.

    "It's not a one and done; it's a continuous process," he said. "You're always evaluating your cost and ways to do things better."

    Goal setting for cost reduction was absent in 32% of the organizations whose executives took the survey. Robinson said he found that surprising, as health systems should have established goals early on. Ideally, they can bake those into their budgets while they're being set, he said.

    The top cited impediment to cutting costs among survey respondents was a lack of good data. That doesn't mean there isn't enough data, Robinson pointed out. There's a ton of data out there, it's just siloed.

    "There is a little bit of paralysis around the information and what to do next," Robinson said. "How do you get to the actionable items from the data that's being presented?"

    Brick agreed. Health systems have data stashed in electronic medical record platforms, the cloud and data centers.

    "They've got data stored everywhere around the block and in Timbuktu," she said.

    The reason many health systems aren't gleaning insight from the data is because they hire analysts that don't have healthcare backgrounds, Brick said.

    Other impediments executives cited included political sensitivities that prevent the pursuit of certain savings opportunities and the difficulty of maintaining focus and realizing savings opportunities once they are identified. Another problem is health systems don't know their future financial needs, which hampers their ability to contextualize their cost transformation work.

    More than 70% of the survey respondents said they don't have a high degree of confidence in the accuracy of the results from their existing cost accounting solutions, a finding Brick said she found shocking.

    "That's so fundamental that it doesn't surprise me we have a problem," she said.

    Another 41% of survey respondents did not cite making care more affordable as important to their cost transformation efforts. Kaufman Hall's report said that's noteworthy, especially as Amazon, retail providers and other disruptors with lower fixed costs are able to pass along their operational efficiencies to patients in the form of lower prices.

    Making healthcare affordable doesn't just mean lowering prices, Brick said. It could also mean providing care in a different way, such as giving pharmacists more patient care responsibilities, opening urgent care clinics or offering virtual visits. But none of that can happen unless they're using data to learn about the costs of services, pricing and patient demographics, she said.

    "It's kind of a dirty little secret that sometimes business strategy in a healthcare system is guesswork," Brick said.

    Some of Kaufman Hall's findings mirror those of an August report from Moody's Investors Services that found not-for-profit hospitals' cost cutting initiatives aren't keeping pace with rising expenses. That report found hospitals' median annual revenue growth declined at a faster clip than expense growth between 2016 and 2017. Revenue growth was 4.6% in 2017, compared with expense growth of 5.7%.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Q&A: ThedaCare CEO says lessons from COVID-19 will inform new approaches to population health management
    Q&A: ThedaCare CEO says lessons from COVID-19 will inform new approaches to population health management
    The Check Up: Dr. Imran Andrabi of ThedaCare
    The Check Up: Dr. Imran Andrabi of ThedaCare
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Minorities in Healthcare
          • - Luminaries
          • - Top 25 Minority Leaders
          • - Minorities to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Healthcare Transformation Summit
        • Leadership Symposium
        • Virtual Briefings
          • - Hospital of the Future
          • - Mental Health
          • - Patient Safety & Quality
          • - Strategic Marketing
          • - Virtual Health
          • - Workplace of the Future
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing