Three years ago, ProMedica, an integrated health system based in Toledo, Ohio, launched an ambitious cost-reduction initiative called “Transforming ProMedica.”
To offset inflation, leaders set a 3 percent annual-improvement goal, which translated to approximately $100 million each year. “Our approach was to be very steady—we did not want a ‘slash and burn’ mentality,” says Michael Browning, CFO. “A lot of organizations do that, and then they spend the next year trying to fix the problems that they created.”
Thanks to their steady efforts, leaders saw a $60 million improvement in 2017, and a $108.2 million improvement in 2018, exceeding their $100 million target. For 2019, their target is $102.4 million.
ProMedica’s 2018 Actual Versus Budget by Workstream
ProMedica’s 2019 Savings Targets by Workstream
For 2020, leaders will likely launch a cost-transformation initiative with HCR ManorCare, which ProMedica acquired in 2018, once the integration is complete. That acquisition created a $7 billion health network with 70,000 employees in 30 states, making it one of the country’s top 15 largest health systems.
Establishing Accountability Enterprisewide
Browning says one of the keys to the initiative’s success has been improving leader accountability. The leaders directly reporting to ProMedica’s CEO Randy Oostra are held accountable for all the cost-reduction initiatives in a particular workstream. Browning himself is responsible for two workstreams—revenue integrity and shared services—while other senior leaders manage three other workstreams covering the health plan, clinical, and physician services.
As part of this new accountability structure, leaders share updates on their cost-reduction progress with the entire board once a year and with the finance committee twice a year. “We’ve always had metrics, but we often didn’t hold people directly accountable for them,” Browning says. “Now, the [workstream teams] are accountable to me, and I am accountable to the CEO, and the CEO and I are accountable to the finance committee and the board. That accountability is important to see results.”
When launching the program, Browning and his colleagues developed an educational campaign to help leaders think differently about cost and efficiency. “It was not just our team members [employees] that needed to be educated, it was our board, our physicians, and everyone,” he says. “They needed to understand that this was not another flavor-of-the-day initiative to reduce costs, and then we would move on to something else next week. This was going to be part of what we were doing as an organization from this point going forward.”
During this leader education, Browning stressed that the focus of Transforming ProMedica was not just on cost reduction but also on patient-centered outcomes. He made the case that when leaders improve efficiency, they also improve quality and service outcomes in many cases. This made the initiative more meaningful for the front-line leaders and staff.
In 2018, leaders worked on 40 different cost-reduction initiatives. In Browning’s shared- services workstream, a clinical value analysis team saved $18 million in 2018 by working directly with physician leaders to identify standardization opportunities that would not compromise quality.
Healthcare IT was another focus area. ProMedica’s IT team led an initiative to terminate vendor contracts for unused software services related to their new electronic health record (EHR), saving approximately $11 million in 2018.
At ProMedica, leaders from finance, IT, and supply chain work as a team to support clinical leaders in their cost-reduction efforts. “Finance is there as a support function to help them ask the right questions,” Browning says. Finance leaders also are embedded in ProMedica’s hospital, physician practices, and post-acute business so they can partner with clinical leaders on cost-reduction initiatives.
Heeding Lessons Learned
Browning offers the following tips for organizations launching their own cost transformation initiatives.
Don’t be afraid to invest in expertise. “During difficult financial times, it is hard for organizations to add FTEs or costs,” Browning says. But such strategies can be fruitful if leaders are thoughtful about how they make their investments and track the return.
Browning says his organization invested in quick fixes as well as long-term cultural changes. One of the long-range investments was hiring a process improvement team that includes seven project managers and four project analysts who support the workstreams. Their charge: to establish a more disciplined approach to keep cost- reduction initiatives on track and help senior leaders monitor progress toward their goals. The internal personnel cost to manage the program is approximately $1 million annually.
In addition, they budget approximately $1 million of other operating costs (mostly for consulting and purchased services) to achieve their objectives. “CFOs often aren’t fond of using consultants, and I would probably fall in that category, but you have to look at it as an investment,” he says. Even though the health system had financial expertise in-house, ProMedica engaged an outside consultant to get the Transforming ProMedica initiative kicked off more quickly so they could reach the benefit faster, Browning says.
In Browning’s revenue integrity workstream, leaders also worked with another vendor to identify problems with avoidable write-offs and denials management and work on revenue-cycle-improvement initiatives. As a result of these efforts, the revenue cycle achieved revenue-realization gains and cost-saving improvements in excess of $48 million in 2018.
“Overall, the program has a very strong return on investment,” Browning says.
Choose the right tools. ProMedica also invested in a decision-support platform to identify organizational improvements across the system. The tool helps directors identify opportunities to close budget gaps, develop targets, and track data for each cost-reduction initiative.
Keep your eyes on the prize. “It’s easy to get off track in health care because there is always something coming around the corner, but you can’t let up,” Browning says, adding that patience and consistency are critical for cost transformation.
Celebrate the wins. “We have hundreds of people working on a daily basis to make improvements, so the staff deserve a lot of the credit for generating the results,” he says. “You have to be innovative with these celebrations to let people know that you appreciate the effort.” At the end of 2017, leaders celebrated their success by giving each employee a crisp $100 bill.
Moving from Incremental to Transformative Thinking
For the second year in a row, leaders at ProMedica have exceeded their profitability targets, and Transforming ProMedica’s focus on efficiency has been a big part of that, Browning says.
For the next three to five years, Browning anticipates that ProMedica will keep its cost-reduction goal set at 3 percent. “We feel confident that most people can find a 3 percent improvement in their departments on an annual basis,” Browning says. “What this initiative does is provide them with the tools and the resources to do it.”
Interviewed for this article:
Michael Browning is CFO, ProMedica, Toledo, Ohio, and a member of the HFMA’s Northwest Ohio Chapter.