Q&A: Banner CEO on 'Getting the Cost Out'

Philip Betbeze, for HealthLeaders Media , December 13, 2013

In a wide-ranging interview, Banner Health president and CEO Peter Fine details the executive team's role in nearly half the $70 million in savings the organization achieved between 2012 and 2013, and lays out a prescription for success in a dynamic future for healthcare.

Peter Fine

Peter Fine, President and CEO of Banner Health

Since he arrived at Banner Health in 2000, president and CEO Peter Fine has preached the cost-cutting and expansion gospel as payers and government have first slowly, and then quickly started to squeeze healthcare organizations for efficiencies through the blunt tool of reduced reimbursements.

That resolve was never more needed than during the financial crisis, when Banner, similar to other organizations across the country, experienced substantial declines in patient volume combined with reimbursement reductions amounting to hundreds of millions of dollars.

In a state where Medicaid pays only seven cents on the dollar for the cost of care, Banner had to streamline itself using tools and tactics borrowed from industrial engineering, Lean, Six Sigma, and business process reengineering. As importantly, the case had to be made that the initiative was critical to the organization's mission and culture, engaging clinical and administrative staff across the organization to collaborate in the process.

In Banner's case, the executive team played a key role in its most recent drive to bring an additional $256 million to the $5 billion (revenue) organization's bottom line by 2017. Rules of engagement were as follows:

  • Cost-cutting would be done by empowered, cross-functional teams, whose recommendations would be respected and accepted whenever possible
  • Changes that could negatively affect care delivery or patient experience would be unacceptable
  • A soft landing would be provided for any employee whose job was eliminated

With these rules in place, eight cross-functional teams—each composed of middle managers, a consultant guide, and a sponsor from the leadership team—were formed. During an intensive eight-week pilot, each team was trained. Then they analyzed the cost structure of one function and recommended cost reduction tactics.

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1 comments on "Q&A: Banner CEO on 'Getting the Cost Out'"

Deborah Kimbell (1/6/2014 at 11:23 AM)
Do you mean $.70 cents on the dollar? The article says it's seven cents on the dollar, but I'm looking at this news report from 2011: "Arizona hospitals will now be paid 70 percent of what it costs to care for a Medicaid patient, said Pete Wertheim, a vice president with the Arizona Hospital and Healthcare Association. "We are very disappointed to learn that they have approved another 5 percent cut," Wertheim said. "The cumulative effect of all of these cuts have really begun to take their toll on hospitals." Read more: http://www.azcentral.com/news/election/azelections/articles/2011/11/25/20111125arizona-medicaid-cut-approved-by-feds.html#ixzz2pdV0RoQT




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