Achieving and sustaining healthcare cost savings depends on trusted data and clinician engagement, but some organizations struggle to find the right mix.
The financial punch of the pandemic continues to depress hospital margins, demanding that healthcare organizations tighten their focus on cost reduction this year. But hospital leaders say they face internal barriers to cost reduction — and it’s holding them back from cost saving success.
Sixty-three percent of respondents to an HFMA/Craneware survey say their biggest barriers to achieving cost savings are physician resistance to change and lack of visibility into actionable data. Yet just 31% of organizations always involve clinicians in these discussions. Further, more than half are seeking to improve their cost analytics solution.
“Healthcare leaders can’t tackle cost reduction without support from clinicians, and they can’t engage clinicians unless they provide data that clinicians trust,” said Pietro Ferrara, senior vice president, Craneware. “To move the needle on cost reduction, leaders must seek ways to more actively engage clinicians in discussions around cost. They also must strengthen their ability to help clinicians visualize cost-savings opportunities and understand the action steps needed for improvement.”
Deepening relationships and data insight
The survey found that organizations that more frequently engage clinicians in discussions around cost reduction are better prepared to achieve their cost-reduction goals.
“Clinical and financial collaboration is one of the conduits to cost-savings success,” said Richard Gundling, senior vice president for HFMA. “When leaders take the time to obtain clinician input regarding savings opportunities, they come away from these discussions with a better understanding of why cost variance exists. They also build connections with clinicians that heighten engagement and lead to longer-term success.”
For example, consider a hospital where two physicians performing heart valve replacements at a large hospital achieve nearly the same margin per case. However, a deeper dive into the data reveals that Physician A’s patients have ICU stays that are 26 hours longer, on average. Meanwhile, Physician B uses more expensive drugs to treat heart-valve patients.
“While the math shows a similar overall margin per case, having a costing solution that adopts an activity-based costing methodology tells a different story,” Ferrara said.
At this hospital, leaders shared the analysis with the physicians, who were not aware that such differences existed. Physician A was targeted to reduce ICU time by 50% with small modifications. Meanwhile, Physician B learned that his colleagues used other brand-name drugs that were less expensive yet achieved similar outcomes.
“The hospital saved nearly half a million dollars with this process improvement project,” Ferrara said. “So many times, clinicians do not have access to this level of actionable information. It would have been easy for the hospital to look at margin alone. By using an activity-based costing system to examine where variances existed, leaders were able to share insights and data that the physicians trusted, and it led to decreased costs and better care.”
Eighty percent of survey respondents agree that cost reduction should be a strong focus for their organization this year, with nearly 58% saying they are equally focused on cost reduction and revenue enhancement (exhibit not shown).
However, one-in-three respondents say they are not well-prepared to achieve cost-reduction goals.
Further, 56% plan to make changes to their cost accounting solution within the next year, another indication that leaders aren’t satisfied with the degree of insight they currently receive. (See the exhibit below.)
These deficiencies — combined with the low percentage of organizations that always involve clinicians in cost-savings discussions — put organizations’ efforts to reduce expenses and bolster their bottom line at risk.
“Healthcare has been very late to the game in involving those who are directly involved in operations — from physicians to nurses to technicians — in expense reduction,” said Neal Peterson, CRCR, sales executive, Craneware. “In other industries, like manufacturing and the automotive industry, it’s intuitive to approach people on the production line to uncover opportunities to reduce costs.”
For cost reduction to happen at the resource level, clinicians need data they can relate to and trust — for example, clinical operational data rather than revenue cycle data. The data also should enable physicians to make comparisons to their peers, internally and externally.
Healthcare leaders identify biggest barriers to cost-savings success
When thinking about your cost reduction strategy, what is your organization's single biggest barrier to success?