Cost Saving Measures in Healthcare for Financial Recovery
March 15, 2021
As hospitals head into a new financial recovery phase of the pandemic, leaders will need an arsenal of cost saving measures in healthcare to tackle what lies ahead. A key focus will be revenue recovery for hospitals. To execute successful healthcare revenue recovery, organizations can leverage key plays that make use of their health care planning, advanced cost accounting and performance improvement strategies. Read on to learn more about four key cost saving measures in healthcare that can assist in revenue recovery for hospitals.
Cost Saving Measures in Healthcare: Optimize Time Spent on Healthcare Planning
During the healthcare planning process, organizations can spend more than 20,000 hours each year developing a budget that becomes out of date and inaccurate within the first fiscal quarter. This financial healthcare planning process is often rigid and lacks flexibility to adapt to the rapidly changing healthcare environment.
In the past, organizations may have shown resistance to change and been comfortable with low visibility to financial performance outside of the Finance team. But in a new, post-pandemic world, it’s imperative for healthcare organizations to focus on visibility and accountability. As one of the cost saving measures in healthcare, organizations will want to reassess their planning process. The focus will be on driving efficiencies that improve accountability and agility of the overall team and healthcare planning process. This will lead to time saved and eventually, will help develop data-driven decision making in areas like long range planning, equipment replacement planning and holding service line leaders accountable.
To optimize healthcare planning, healthcare delivery systems will need to start by assessing their current planning process. Is there a lack of financial accountability? Minimal service line leadership? Overall resistance to change? Lack of clarity and understanding of actions needed to improve performance? These barriers can be overcome with advanced financial planning processes like Dynamic Planning, or a rolling forecast like the one Mission Health adopted in 2014 and that John Muir’s CFO leveraged in response to COVID-19.
Cost Saving Measures in Healthcare: Improving Performance Management
Last year, healthcare organizations discovered how unforeseen challenges could have a significant financial and operational impact. Hospitals quickly discovered that they would need to quickly adapt their use of resources like supplies, drugs, medical equipment and – perhaps most important – labor. The complexity of COVID-19 cases caused many hospitals to see a decline in nurse staffing ratios and an ongoing increased labor need.
One of the cost saving measures in healthcare is developing a clear, consistent financial review cadence. While this may not seem like an obvious tactic for cost saving, implementing this type of review can unify teams and improve financial acumen across the organization. As a result, organizations can empower managers to identify and analyze root causes in target variance, leading to closes in target gaps. Creating visibility between service-line, entity and executive leaders can drive accountability and results. This will become increasingly important as many organizations are having to rethink their labor strategy in the ongoing care of COVID-19 and returning outpatient volumes.
Cost Saving Measures in Healthcare: Drive Action with an Advanced Cost Accounting Tool
Alongside optimizing healthcare planning and improving performance, one of the cost saving measures in healthcare involves leveraging accurate, accessible data via an advanced cost accounting tool. But beyond just investing in an advanced cost accounting tool, organizations need to be able to trust and leverage the data inside. It will be imperative for organizations on the road to financial recovery to get data into the hands of leaders and physicians. They will also need to ensure leaders and operators are aligned on KPIs, targets and expectations for results.
In the past, organizations may have been overwhelmed by common barriers like poor data governance, failed communication between financial and clinical leaders and limited engagement or trust from clinical leadership. A well-structured effort to educate managers and clinicians will be the key to your organization’s success. Hospitals can perform cost accounting boot camps, present cost data at the point of care and work to institute a margin growth-focused governance structure and accountability process.
As one of the best cost saving measures in healthcare, using an advanced cost accounting tool to drive action can drive a deeper understanding of targets and how to achieve them. It’s important to invest in a process to educate and inform leaders, as well as to educate them on how to use the advanced cost accounting tool and understand the data. This will build trust with stakeholders and enable better decision making using real, trustworthy data within contextual reports and dashboards.
Cost Saving Measures in Healthcare: Develop High Impact Cost Savings Project to Grow Margin
Perhaps the most obvious of the best cost saving measures in healthcare is to develop a cost reduction program for your organization. However, while most health systems have a significant cost reduction goal, fewer than 20% of them ever achieve their targets. Moreover, after twelve months, ninety-five percent of health systems report that costs creep back in. Cost reduction has always been a priority for leading health systems and hospitals, but without clear ownership, focused resources, or results tracking, there can be little accountability or execution.
Especially in light of COVID-19, hospitals and health systems are actively planning for when they can begin to execute their healthcare revenue recovery. To build a successful recovery program, organizations will need to brand the program and identify a dedicated owner to ensure accountability. To gain buy-in and commitment to savings goals, they need to make sense to the rest of the organization. The cost reduction program needs a dedicated team and resources. For high impact, organizations should institute a margin growth-focused governance structure. This means cost saving measures tie in with organization-wide savings or growth targets, and that the program is communicated as a clear, branded cost reduction program. As a means of boosting cost saving measures in healthcare, developing a high-impact internal cost reduction program can also save organizations millions on outside consultants.
Cost Saving Measures in Healthcare for Your Organization’s Recovery
Cost reduction strategies and cost saving measures in healthcare will only continue to be important as organizations make their way on the road to recovery. It will be imperative for hospitals and health systems to leverage cost saving measures in healthcare not only to drive revenue, but to boost accuracy of data, efficiency in planning and stronger performance.
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