4 Means of Sustainable Cost Reductions

Karen Minich-Pourshadi, for HealthLeaders Media , April 9, 2012

Seven years after embarking on the Lean transformation, the financial results are enviable. Since 2006, Denver Health has uncovered a total of $70 million in savings or increased revenue. Of that, $17 million comes from the revenue cycle alone.

Denver Health consistently has the lowest cost per adjusted discharge in the 380-hospital UHC consortium of academic medical centers, which includes Denver Health. Moreover, Denver Health has increased cash collections per 100 discharges by 44%, from $1.036 million per 100 discharges in 2005 to $1.492 million in 2010. Bear in mind that cash collections have increased even as rates from Medicaid—the hospital's largest payer—declined significantly.

In seeking cost reductions, CFOs should ask themselves a key question: Are we going around the problem and looking for short-term savings only, or have we adopted an approach that hits the cost reduction problem head-on and will continue to uncover sustainable reductions?

"Although we're a public hospital, we have to stand on our own for financial purposes, and we put that message out to our staff," says Burnette. "We want to avoid haphazard cost-cutting, as it can hurt morale and patient care. We want to save costs by eliminating waste, and that resonates with our people and our leadership."

Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.
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