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)