This article appears in the May 2012 issue of HealthLeaders magazine.
In our annual Industry Survey, healthcare leaders place cost control and process improvement as their third-highest priority for the next three years (behind patient experience and satisfaction, and clinical quality and safety). They also cite labor, government laws and mandates, and information technology as their top healthcare cost drivers. How difficult will it be to be to achieve significant, sustainable spending cuts, and which line items present the best opportunities?
COO, MemorialCare Health System,
Fountain Valley, Calif.
The degree of difficulty will depend upon how far along healthcare organizations are in this endeavor already. For those that are beginning today and trying to achieve the 20%–25% reduction in overall expenses in order to thrive on Medicare margins, it will be very difficult. For those that have a culture of financial discipline and rigorous cost control in place already, it is doable.
MemorialCare is very far along in this journey. We started in 2009 immediately after the financial crisis of 2008. We established a goal of reducing our expenses to be able to thrive at Medicare margins. We have had a plan that we have been chipping away at ever since then.
Where are the greatest opportunities? We believe they are in rigorous labor and productivity management. It's using Lean to identify waste and to eliminate it. It is utilization management and partnering with physicians to ensure that the right things are done for patients—not more, not less. And it is care model redesign—looking at the levels of care, where patients are receiving the care, and making sure they are getting the proper care at the right level.