Jacobson09-10From the Chair

Catherine Jacobson, FHFMA, CPA

For years, we've been working on traditional sources of cost savings like labor productivity and supply chain management. 

Healthcare systems have been moving from holding company models to true operating companies and forcing out costs by consolidating activities. Although these approaches have yielded gains, unsustainable industry trends make it clear that we need to do more. At the current pace, U.S. healthcare expenditures will reach 20 percent of GDP in five years. At the same time, a growing body of data show that there is no relationship between expenditures and quality outcomes. Pressures on revenue streams are intensifying. Health care has reached a burning platform, and we need to move beyond it.

At Rush University Medical Center, we have made operating excellence one of the six major strategies in our strategic plan and have developed a plan for "bending the cost curve" by $100 million in three years. This amount represents about a 7 percent reduction in projected controllable expenses by 2013. We're looking at opportunities to consolidate corporate functions among divisions and locations. We're finally looking at areas that just can't seem to hit their productivity targets. And we're going after those last pockets of supply standardization.

Clinical resource management and alignment between cost and quality are such important parts of this strategy that our CEO, a physician, is leading this effort. He has been working directly with my decision support leader to identify opportunity areas from financial data, using diagnosis and service benchmarking. He then works with physician leaders to identify the quality areas of concern to them and link those areas to financial data so we can quantify impacts. We know this is a tricky place to start. In our country's current perverse financing system, we will actually reduce our revenue, in some cases, by using fewer resources to improve quality. So we're targeting areas with the least revenue impact first. But other areas are still on our list because we know we can do better, and we know we must take them on.

Other healthcare systems, such as Michigan-based Spectrum Health, are also tackling the cost/revenue conundrum head on. Spectrum is currently working on an initiative to reduce hospital readmissions by 30 percent, knowing that all signs point to reduction and eventual cessation of payment for preventable readmissions.

As Spectrum Health and others know, the unsustainable trends in our industy are clear, even if the federal healthcare reform agenda is not. We can't wait for legislation to change what we do. We must move beyond the industry's burning platform and start taking cost management to the next level now.

For more information about Spectrum Health's initiatives and other innovative approaches to cost management, view Cathy Jacobson's presentation at HFMA's Virtual Conference, hfma.org/virtualconference

Publication Date: Monday, March 01, 2010

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