How The Johns Hopkins Hospital uses financial, operational and clinical collaboration to achieve cost savings
As U.S. hospitals and health systems contend with the immense financial challenges created by the COVD-19 pandemic, they require a well-established infrastructure to manage cost and sustain savings. In a case study session at HFMA’s Digital Annual Conference on July 15, two leaders from The Johns Hopkins Hospital in Baltimore described how collaboration among finance, operations and clinical areas has been an essential component of the framework the hospital developed to manage performance improvement and identify cost savings across its enterprise.
With 1,154 acute care beds and about $2.5 billion in annual revenue, The Johns Hopkins Hospital is part of the Johns Hopkins Health System, which is one of two components making up the Johns Hopkins Medicine, the other component being Johns Hopkins University..
Marco Priolo, director of financial innovation, The Johns Hopkins Hospital
Marco Priolo, director of finance innovation, said this performance management framework, created before the onslaught of the COVID-19 pandemic has proven effective in helping the hospital manage through the crisis and enabled it to accelerate some cost-savings initiatives while putting others on hold. Priolo also noted that the organization’s efforts have yielded well over $200 million in cost savings since FY2016, while he acknowledged that some of these costs may have come back amid the recent financial turmoil.
John’s Hopkins environment
Priolo clarified that his organization’s reimbursement is governed by the unique approach and policies of Maryland’s reimbursement system, established under the state’s waiver from CMS that exempts it from participating in Medicare’s prospective payment system. Maryland’s reimbursement system includes a policy of global budget revenue, under which a hospital’s regulated revenue is subject to a fixed revenue cap, which ensures the hospital has a predictable annual revenue under which it operates.
“So there is tremendous focus on the expense side to be able to drive margin rather than growing volume to grow revenue, and thus margin,” Priolo said.
The Johns Hopkins Hospitals promotes collaboration through an eight-month planning process (September-June), which begins with core budget work and determination of a facility-level performance improvement target, Priolo said.
In the third month, targets are provided to clinical departments, and teams are formed to identify potential cost reduction initiatives and to brainstorm on how to meet mission imperatives. After departmental reviews and presentation of the final plan to the hospital’s executive team, the process concludes with an executive review of the final plan, a presentation to Johns Hopkins Medicine leadership and final implementation of the approved plans.
Multidisciplinary teams include — in addition to finance and operations — physicians, nurses, technical staff and staff dedicated to Lean Six Sigma, project management and analytics functions.
“It is really these multidisciplinary teams that identify all the barriers that could potentially be hit during these implementations and then to think though how to effectively get past them,” Priolo said.
When communicating targets, the hospital takes a blanket approach in some instances (e.g., giving all department a 2% cost-reduction target) and in other instances an approach where targets are more tailored to specific departments. Among the tools and regular reporting the hospital employs for managing these efforts, departments use a cloud-based Excel sheet tool to track performance toward targets.
“Finance cannot drive these decisions and operations,” Priolo stressed. “We certainly can set targets and be the scorekeeper, but without operations and the clinical side engaged, we can’t effectively implement these [plans].
“We really need to inspire our colleagues to think critically about how we can do things differently and save costs in a way that’s sustainable and best for our patients.”
A look at the initiatives
Lisa Ishii, MD, senior vice president of operations for the Johns Hopkins Health System, described some initiatives that the hospital has pursued using this process, including a supply chain-focused initiative with the following components:
- A clinically integrated supply chain
- Engagement of clinician leaders in clinical product decisions
- An enterprisewide value analysis process
- Spinal implant consolidation from 17 to three (for a 30% cost reduction)
Lisa Ishii, MD, senior vice president of operations, The Johns Hopkins Health System
Ishii commented that the initiative has produced a strong collaboration between the clinicians and their supply chain colleagues. “With our value analysis process, we have a structure that . . . spans not only The Johns Hopkins Hospital but the entire health system,” she said.
Under this structure, she said, value-analysis leads meet with clinician stakeholders, who share their views on various opportunities that the organization has for improving the supply chain. “The real ask from our end is that it’s our physician leaders who are driving conversations around clinical products.”
Other initiatives the hospital has pursued include:
- Vacancy review
- Radiology capacity
- Clinical care pathways
- Ordering wisely (to avoid unnecessary utilization)
- ·Venue of care (e.g., acute versus nonacute care, academic versus community hospital)