5 Cost Reduction Priorities for CEOs

Rene Letourneau, for HealthLeaders Media , November 11, 2013

Three out of four hospital and health systems CEOs cite overall cost reduction and efficiency as one of their top two financial priorities, so it was no surprise to hear a robust conversation on this hot topic at HealthLeaders Media's annual CEO Exchange.


>>>View CEO Exchange Slideshow

Last week, I attended HealthLeaders Media's annual CEO Exchange, where nearly 40 top executives from hospitals and health systems discussed their largest concerns around reducing costs, as they work to redesign the way their organizations deliver healthcare.

In the pre-event survey, 75% of the CEOs cited overall cost reduction and efficiency as one of their top two financial priorities for the next three years, so I wasn't surprised to hear a robust conversation on this hot topic.

These top leaders are looking beyond tactics for shaving a few percentage points off costs; instead, they talked about the need to restructure healthcare delivery in order to lower costs significantly.

Tackling Physician Utilization
One of the biggest areas of concern for hospital and health system CEOs is the need to rein in physician utilization of tests, imaging, procedures, and expensive medications, particularly in instances when the use of these resources does not result in better patient outcomes.

Troy Thibodeaux, executive vice president and CEO at Covenant Health System in Lubbock, TX, says that although his organization is always looking at labor and supply chain costs for ways to reduce expenses, he knows they must also tackle physician utilization in order to make more substantial gains.

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4 comments on "5 Cost Reduction Priorities for CEOs"

Tom O'Brien, Sr VP Healthcare (12/12/2013 at 10:34 AM)
Two paths to success... 1) Cost must be at the transaction/process level. TDABC costing has been the best source for this (see Harvard Business Review, "The Strategy That Will Fix Health Care" by Michael E. Porter and Thomas H. Lee in the October 2013 - page 11) 2) Change management. EVEN if you have good data to share with the physicians a strong change acceleration process is key. Data alone will not get you to the finish line!

Rob Tholemeier (11/29/2013 at 11:56 AM)
One of the things I have been looking for is the use of activity based costing in HCOs, which seems to be almost unheard of. I do not see how you can effectively reduce costs unless you know them. In labor intensive industries, with high paid labors, it seems like the adoption of activity based costing is a pre-requisit. Rob Tholemeier Chilmark Research

Stefani Daniels (11/12/2013 at 1:39 PM)
Back on July 14, 2008 HealthLeaders Media published an article 'The Myth of Length of Stay." In it, I presciently entreated execs to stop their slavish focus on LOS and instead focus on cost per case...it is the last pool of untapped opportunities to drive costs down. The volume of excessive, wasteful, and duplicative interventions that physicians prescribed is well known to those of us who have been on the front line. I'm delighted that execs finally see the light - though not surprised it took so long.




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