Last week the American Hospital Association published an article about smart strategies to reduce costs. The article also includes a link to a 16-page report from Booz/PwC titled, “Health System Fitness: A Proven Approach to Transformational Cost Reduction.”

Five cost-cutting strategies discussed in the article are:

1. Team Up with Physicians – 80% of doctors say it’s possible to reduce costs without compromising clinical quality, although less than 20% of MDs say they have enough insight into their own costs per case.

2. Improve Efficiency of Clinical Utilization – Inefficient utilization involves inappropriate care or care that’s a mismatch for different types of medical staff; inefficient workflows and scheduling; the use of inconsistent treatment protocols; unnecessary variation in vendors and the supplies they provide; and unnecessary use of high-cost drugs.

3. Reduce Overhead – Consider centralizing activities involving human resources, marketing, finance and purchasing; consider outsourcing functions for HR, IT, finance, food services, labs and pharmacies; and investigate how automation can be used to streamline processes.

4. Organize Resources to Create Competitive Differentiators – Analyze the populations you want to serve and structure your services accordingly; consider offering services that complement (instead of compete with) other local facilities.

5. Implement Fundamental Changes – Consider collaborating with other facilities in the area; in a multi-facility network, develop a unified strategy that eliminates overlap.

Lastly, the authors advise executives not to overlook other opportunities to reduce costs, including in supply chain management, portfolio rationalization, new payment models and revised incentive structures.

The AHA article is available here:

Author: Jim Wiederhold

Jim believes his 39 years of experience--particularly his more than 26 years in healthcare--has prepared him well for what he does. His wealth of experience spans key areas, including finance, operations, management, leadership, sales and sales management, corporate, contingency, contractual and retained recruiting, outplacement and transition work and executive coaching.