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How To | Cost Reduction

5 tactics to reduce clinical costs and improve performance

How To | Cost Reduction

5 tactics to reduce clinical costs and improve performance

  • There are five proven tactics healthcare providers can deploy to improve clinical cost and reliability performance.
  • Leadership commitment is integral to demonstrating a desire to transform the organization.
  • Directly addressing the ever-rising costs of clinical care delivery is the only way to boldly attack “the last frontier” of true performance improvement.

Making a clear impact on clinical cost — the costs of care delivery associated with clinical decision-making — requires tackling complex, difficult issues, such as clinical variation, service rationalization and clinician productivity (see the sidebar below). This work is most challenging as it directly involves long-held provider practices and behaviors.

To generate organizational support for change, these efforts must be balanced with delivery efficiency, respect for the roles and expertise of the care team and assurance that providers will be paid for the care delivered. An organization-wide effort brings into focus clinical delivery, physician engagement and cultural change management, which are essential to achieving and sustaining meaningful results.

There are proven tactics healthcare providers can deploy to improve clinical cost and reliability performance. The following are five of the most effective tactics, along with clinically driven examples of how the tactics apply:

1. Reduce unwarranted variation in clinical decision-making through implementation of well-established clinical practice standards. For example:

  • Manage high-use/high-cost patient cohorts through standardization and adoption of clinical protocols.
  • Address variation to reduce length of stay for episodic and elective cases, such as knee or hip replacement.
  • Decrease supply costs through standardizing instruments and implants for common case types.
  • Reduce pharmaceutical costs through a standardized formulary and enhanced pharmacy and therapeutics protocols.

2. Optimize care teams and operational processes to eliminate unnecessary duplication and ensure a positive patient and provider experience. For example:

  • Streamline data collection and communication through modifications to the electronic health record (EHR) and/or inter- and intra-departmental processes.
  • Deploy defined models for advanced practice providers (APPs) to effectively expand capacity.

3. Boost service distribution and access through better care management and capacity management across the continuum. For example: Optimize sites of service across ambulatory, inpatient and post-acute.

  • Utilize urgent care to expand ambulatory access and decrease emergency department (ED) overutilization.
  • Establish effective follow-up processes to reduce ED readmissions.

4. Consolidate services based on centers of excellence, service-line operations and access, and clinical quality standards. For example:

  • Move toward fewer sites or a single site of care within a system for more complex cases (e.g., neurosurgery, open heart) or where case volumes might be diminishing (e.g., obstetrics in rural areas).
  • Utilize telehealth services to leverage or provide access to key specialist providers where appropriate.

5. Manage performance with reliable data and reporting mechanisms. For example:

  • Generate and review monthly reports with the appropriate level of detail on capacity utilization, operating costs and provider utilization.
  • Establish forums for bilateral communication on operational barriers to be addressed.

The areas of potential opportunity described in the five tactics above are highly sensitive in most organizations and typically challenging to address. Achieving significant and sustainable change in these areas is no small feat. And, it will require unwavering leadership commitment, organizational discipline and determination and broad buy-in and support from physicians, administrators and staff across the organization.

See related sidebarExample from the field: Managing clinical costs at a large, academic health system

How to successfully deploy tactics

Implementing these strategies is dependent upon the following:

  • Set the stage for change by clearly articulating: “Why?” and “What’s in it for me?”
  • Demonstrate a desire to transform the organization through leadership commitment that is shared by governance, leadership, management and clinicians.
  • Focus on enhancing the provider experience and improving clinical care delivery through physician engagement and leadership.
  • Establish a process for broad participation, collaboration and engagement of physicians, management and staff across the organization.
  • Manage projects by adhering to work plans with timelines, defined accountabilities and forums for problem solving and performance measurement.
  • Reinforce a culture of continuous improvement by attending to the multiple aspects of change management, including acknowledging accountability for addressing systemic issues, while simultaneously increasing stakeholder participation and commitment to the effort.

Starting a clinical cost reduction program

A high-level assessment that begins broadly, then quickly dives deep into areas of clear opportunity is often the most effective approach. The following steps can help to get a clinical cost-reduction program started:

  • Establish a comprehensive view of clinical analytics that includes cost and quality across multiple clinical cohorts (MS-DRGs, procedures, etc.) and supports a thorough understanding of the value of clinical care and surfaces opportunities for improved clinical variation management.
  • Conduct a broad, thorough review that considers all the different factors impacting clinical cost to identify your biggest opportunities.
  • Get the right people in the room, including physicians, administrators and staff, and identify champions who can effectively lead their colleagues and drive change in their departments and functional areas.
  • Collaborate with stakeholders to design solutions that are workable and sustainable within the day-to-day working environment.
  • Develop an implementation plan designed to reach stated objectives within required timeframes, with specific goals, accountabilities and deadlines.
  • Establish performance standards and a reporting/tracking system to monitor progress and maintain momentum.
  • Ensure sustainability of the new solutions through continued performance measurement and assigned accountability.

While challenging, directly addressing the ever-rising costs of clinical care delivery is a critical step in attacking “the last frontier” of true performance improvement and achieving the next level of financial performance required to thrive in today’s environment. 

About the Authors

Rob Gamble

is a director at The Chartis Group.

Pamela Damsky

is a director at The Chartis Group.

Mike Gart

is engagement manager at The Chartis Group.

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