Cost Reduction: Shifting to a New Narrative

August 14, 2014

With the high cost of health care in the headline news almost daily, cost reduction is top of mind for healthcare finance executives, physicians, operational leaders, and even the patients they serve.

This diverse group of stakeholders is aligned on two key points:

• Solving the cost crisis is critical, because the cost associated with the nation’s current healthcare delivery system is not sustainable.
• “Cutting cost” is a scary idea, and is widely considered to be a bad thing.

The good news is that the perspective is beginning to shift from cutting costs to finding ways to delivering more value. Let’s consider the difference between these two approaches—or “narratives”—for reducing costs.

The Old Narrative: “Slash and Burn”

When it comes to cutting costs, there are a number of well-placed concerns. Patients worry that providers will skimp on care and quality, and staff worry that there won’t be enough skilled staff to serve patients. Physicians have many worries when it comes to cost, but their primary concern is about losing autonomy in clinical decision making. For many, the mere mention of cost reduction brings to mind low-quality care, low patient satisfaction, and low employee morale.

These negative perspectives are reasonable considering that cost reduction efforts of the past often took on a “slash and burn” mentality. Cuts were made without regard for the context and the downstream impact. To some degree, the adverse effects that were of greatest concern actually came to fruition—i.e., quality of care, patient satisfaction, and staff morale actually declined.

The intrinsic problem with this approach, however, was that in the cost- cutting initiatives focus on driving out costs without delivering value. It is a short-term approach and, in most cases, it fell short.

The New Narrative: Fix Broken Processes

Cost reduction today needs a different frame, and that frame should be delivering value (defined as cost per outcome) by fixing processes, because broken processes are expensive.

Think for a minute of all the process breakdowns in a hospital—delays in getting patients from the emergency department to a bed, level of care write offs, delays in discharging patients because the paperwork is not complete, adverse drug events, longer than necessary hospitalizations because services were not well-coordinated, and countless meetings to arrive at decisions.

Not convinced?  Just  think  of  how much time is spent cleaning up after broken processes—not just the service-recovery time spent apologizing for long wait times, but all the processes that have been created around the broken process to mitigate the impact on patients. Now think of how much time is wasted because roles, priorities, and authority are not well defined nor aligned—despite endless meetings, problems persist. Ambiguous goals and roles are costly.

Yet in the face of such opportunities for improving process and creating greater value, what do most operational and clinical leaders say every time they are asked to reduce costs? “There is nothing left to cut.”

The challenge is to defy this conventional way of thinking and to dig into these broken processes, ambiguous roles, and vaguely defined goals to understand why they are producing unfavorable results. The goal should be to figure out how to solve the problem, not just put a Band-Aid on it.

How do you identify what works? Challenge conventional wisdom: Start from scratch; design what would be ideal yet realizable—and then implement it.

For example, many hospitals have adopted a model in which the patient care technicians or nursing aides are responsible for drawing blood, rather than having a dedicated phlebotomy team. The idea for this model usually came from cost-savings initiatives and had the potential to streamline operations because the units would not have to wait for a phlebotomist to come to the floor to draw blood. But ask the lab how it’s going. Ask the patients. You are likely hear horror stories of patients being stuck, painfully, multiple times and the lab receiving unusable samples which result in re-sticks and excessive supply waste—not to mention delayed test results, which often cause duplicate orders for tests. Moreover, the night-shift nursing aides often have little to do other than draw blood, beginning at 4 or 5 a.m. By focusing the nursing aides on functions that they are good at, some hospitals have found they can reduce the hours worked per day by aide by five to seven hours, fund a phlebotomy team, and save thousands in lab supplies— while enhancing patient satisfaction.

The effort should begin in clinical and operational departments and then expand across the hospital and, eventually, across the health system. The cost savings—which are likely to be hard-dollar cost savings—will add up. Staff will be happier, patients more satisfied, physicians more engaged. As they begin to feel that their concerns are being heard, the problems that have caused headaches for years will become a thing of the past.

We all know we have cost crisis in health care. In the words of Winston Churchill, “Never let a good crisis go to waste.” This is your opportunity to delve deep into operations and make changes that impact not only quality and patient satisfaction, but also the healthcare system as a whole, by reducing the cost to provide care.

Liz Kirk, Strata Decision Technology
Liz Kirk is vice president, cost improvement solutions, Strata Decision Technology, Chicago.