Blog | Cost of Care

Finding Cost Savings in the Era of Value

Blog | Cost of Care

Finding Cost Savings in the Era of Value

The transition to value requires healthcare organizations to control costs while maintaining quality and patient satisfaction.

Today’s healthcare executives must perform a balancing act—trying to make the transition to a fee-for-value model while operating in a fee-for-service environment. The cost conundrum intensifies when factoring in uncertainties around the future of the Affordable Care Act, razor-thin operating margins, and the shifting burden of risk from health plans to providers. With all these financial pressures, any small swing in payment or volume can create a big problem. Healthcare organizations must seek creative solutions as they work to control costs while maintaining quality and patient satisfaction and retaining talent.

The key to success is to remember value-based care is the destination, not the journey. Too many organizations rush to implement value-based care without taking a holistic approach to consider how to create operational efficiencies and achieve clinical excellence to become a value-driven care organization. To maximize cost savings in the era of value-based care, organizations should focus on three key areas of activity.

Creating Operational Efficiencies

Healthcare leaders should take a hard look at every corner of the organization to identify ways to improve its operating margin. Critical questions include:

  • Are we lean at the labor level?
  • Do we staff at the top of everyone’s license?
  • Are we properly managing resources?
  • Do we have standard processes and shared services?

When the answers to all these questions are “yes,” an organization can advance to the process of aligning operations with physical resources in order to have the right assets available in the right place at the right time. Identifying efficiencies that can be immediately addressed is a good way to start the process of redesigning care delivery.

Striving for Clinical Excellence

As an organization begins to achieve operational efficiency goals, leaders can begin to focus on the more difficult aspect of clinical transformation and care delivery redesign. Quality, safety, proper patient throughput, handoffs, and continuum care management become important as an organization aims to reduce clinical care variation and encourage standardized delivery of care across service lines. For some organizations, this will be a massive change management effort, requiring a cultural shift as clinicians are persuaded to reduce variation by adopting the same products that their peers are using and adhering to clinical pathways.

Becoming Value Driven

With operational efficiencies and clinical excellence in place, an organization can consider adopting new payment models, focus on becoming a high-reliability organization, and incorporate innovative new care delivery models. One can expect that the work will be an ongoing and vigorous cycle of learning, course corrections, and improvements, but the resulting benefits will be organizationwide.

Approaching value-based care by going down a path that first includes operational efficiencies and clinical excellence has benefits well beyond cost improvement. The efficient delivery of services, along with the right amount of resources in the right places and staff working at the top of their license, will improve employee morale, boost quality of care, and promote increased patient satisfaction. Then, the balancing act will evolve from a challenge point to a streamlined approach that drives success. 

Brian Flynn is a principal in the advisory health practice at Ernst & Young LLP, Boston.

Dana Alexander is an executive director in the advisory health practice at Ernst & Young LLP, Denver.

About the Authors

Brian Flynn
Dana Alexander


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