Ensuring Operational Efficiency and Effective Cost Cutting in Healthcare Settings – Best Practices

Operational efficiency has become paramount in healthcare systems with the ever increasing patient base, and the challenge inherent in rising up to the demand for unique patient care services. Healthcare organizations looking to cut down administrative costs find it to be a really testing task and are constantly on the lookout for potent cost cutting strategies. The efforts to cut costs should not prove detrimental to care providers’ vested objective, i.e. ensuring patient and employee satisfaction. Another vital consideration is that no strategy can be successful unless the administrative as well as clinical staff in an organization works in coordination.Using outsourced services has proven beneficial for many healthcare and other businesses looking to save valuable dollars. While it is a known fact that cost cutting is the primary spur for the rise of outsourcing, at present outsourcing has moved much beyond a mere cost saving strategy. Outsourced services such as medical billing and coding services, medical website design and medical website optimization are provided by BPO companies that work side by side with their client healthcare providers. Apart from ensuring cost savings in the range of 20% to 30%, outsourcing is also a way of achieving easy scalability within a short period of time.The Banner Health ModelA recent HBR (Harvard Business Review) blog highlighted how Banner Health, a prominent health system in the US successfully achieved efficiency as well as cost reduction through a successful strategy. Banner Health had lost hundreds of millions of dollars as a result of plummeting patient volume and reduced reimbursements during the recession. However, they were able to secure $70 million in savings during 2012 – 2013. It is expected that by the year 2017 Banner Health will have $256 million contributed each year to its bottom line by this savings. How did this $5 billion nonprofit system achieve this?They assiduously followed a sensible cost reduction policy, while always keeping in view their core values.Banner Health avoided adopting industry benchmarks in their cost-cutting endeavor and focused on a savings target based on their own performance.
They educated employees of the inevitability of cost cutting measures and the need for a process redesign across the system to improve patient care. They were able to remove the fear of impending layoffs from the employees’ minds. They also convinced the employees how cost cutting would help them invest in new constructive initiatives aimed at better coordinating, standardizing and integrating care provision.People from across the health system were asked to collaborate in cost reduction efforts. This definitely helped them to identify tens of millions of dollars in savings and at the same time ensure support of staff and frontline leaders. Banner’s team invited recommendations from the team to reduce the general and administrative (G&A) costs.
The senior leadership reviewed 123 recommendations, of which 116 (valued at $104 to $133 million annually or 18 – 24 percent of Banner’s G&A expense) were approved. These recommendations included opportunities to save at least $8 million through insourcing second physician reviews of inpatient charts, $4 million in human resource administration by implementing more self-service technology in collaboration with a shared services organization, and $3.5 million by creating an internal facility for drug compounding and packaging. This strategy was successful since by the latter half of 2012, Banner Health could recover $31 million in G&A savings.The team went on to work on its clinical operations as well, beginning with Banner Good Samaritan Medical Center in Phoenix. The physicians at the hospital were included in the team and they were asked to contribute their ideas. Banner Health’s strategy was effective because physicians are a necessary component of any team working to ensure optimum patient care and at the same time bring about significant cost reduction. Clinicians are knowledgeable in clinical functions and operations; they can drive revenue generation and are directly involved in patient care services. Here again the health system could reduce the cost structure by 15% and secured $15 million in direct savings over the next 12 months. Banner North Colorado benefited from the same strategy that was set in motion there as well, capturing more than $13 million in annual savings the first year itself.Banner Health implemented a system-wide optimization program covering all of its 23 acute care hospitals and healthcare facilities. Their success lies in the fact that they were able to create an awareness regarding the significance of cost control throughout the workforce.A Case for OutsourcingWith the healthcare reform and related requirements, healthcare providers and health plans are finding it advantageous to outsource information technology, business processing and call center tasks. Outsourcing will allow a more efficient and potent combination of capabilities and resources. Expert observers endorse the fact that third party collaboration will help ensure better performance, increased efficiency and of course cost reduction. While physicians can make use of an outsourcing service to handle medical billing and coding requirements, there are service providers that use technology to connect payer and provider in real time. With this, providers can check for patient eligibility, referral policies, limits on service and the financial responsibility of patients. Providers can also submit claims in real time.Outsourcing will prove to be a wise investment if it is assigned to a firm that follows the required standards for accuracy and turnaround time. Consider the references and talk to clients using the same company so that an informed decision can be made. It is true that outsourcing involves loss of control to a certain extent, and that is why it is vital to choose a reliable and reputable outsourcing partner.It is apparent that in these tough times, cost cutting has become a necessary measure for all businesses including those involved in healthcare provision. Banner Health’s example proves how all members of a healthcare system can be constructively involved in cost saving efforts. Identifying and implementing best practices in cost reduction, including the use of healthcare outsourcing services is the need of the day for health systems striving to bring about a sea change in the quality and cost of care.

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