Case Study | Cost Reduction

Setting Targets for Health System Leaders Garners Results

Case Study | Cost Reduction

Setting Targets for Health System Leaders Garners Results

Swedish American Health System found that leaders were able to identify labor and supply chain cost reduction ideas. The health system plans to achieve the same success in clinical variation.

In this interview, Patti DeWane, CFO and treasurer, Swedish American Health System, shares her organization’s successes in margin improvement. DeWane will present on this topic at HFMA Annual Conference in Orlando on June 25 during her session “Achieving Rapid, Sustainable Cost Performance Improvement Through Collaborative Leadership.”

What strategies did Swedish American Health System implement to improve its margins?

Dewane: We use benchmarking to determine our opportunities. From there, we set targets for vice presidents, directors, and managers. That was a critical basis for our successes. Everyone had targets and everyone was accountable.  

In addition, management completed cost intelligence training that shared the reasons for our margin improvement initiative, our long-range plans, and where staff could look for opportunities to cut costs. Informing our team of the reasons for this initiative was important.

To monitor and track our progress, we used budgeting and dashboard software developed by the consulting firm assisting us with the project.

What results did the team come back with?

Dewane: Labor and supply chain cost reduction ideas were clearly identified. One area that wasn’t as clearly identified was clinical variation. One reason is that there’s a longer window of time to get cost reduction results from clinical variation.

We developed a results management office that was very successful. We hired a director and created three VATs [value analysis teams] that focused on cost reduction. The VATs are ongoing and are a combination of operations and supply chain. In some cases, we have been able to get physician participation as well, and we want to increase their participation. The key is approaching them with ideas rather than inviting them to meetings.

What successes are you most proud of?

Dewane: One major success was the ability to track and monitor labor productivity standards. For example, we were able to analyze how overtime is being used and then reduce our overall overtime spend. We’ve haven’t had to reduce FTEs; any reduction in labor force has been through attrition. 

Another success was in purchased services and supply chain. We cut things that weren’t adding the value that we expected. In addition, we renegotiated and repurposed our supply chain organization. In 2015, we were acquired by UW Health out of Madison, so we utilized the same purchasing organization as UW Health, taking advantage of being part of a larger organization. 

Ultimately, to make these types of margin improvements, you have to keep your eye on the ball and take a critical eye against everything you are doing.

Interviewed for this article: 

Patti DeWane is CFO and treasurer, Swedish American Health System, and a member of HFMA’s First Illinois Chapter.

About the Authors

Betty Hintch

is senior editor at HFMA.

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