Liz Kirk

A strong central leadership model is the primary differentiator between successful healthcare cost improvement initiatives and ineffective ones. This principle has three accompanying elements required to establish and manage a successful cost improvement program.

In an era of mounting fiscal uncertainty marked by downward trending net revenue at hospitals, the need for cost reduction has never been greater. Yet, many cost reduction efforts fail due to a lack of understanding about "the how" of achieving real, measurable cost savings.

Cost targets that haven't been achieved, quality metrics that stay put, write offs that won't go away … sound familiar?

Facing threats to net revenue, most healthcare organizations have embarked on massive cost reduction initiatives. Unfortunately, the first tactic for many of these initiatives continues to be a "tried and true" approach which is often ineffective -- operational benchmarking.

Despite hiring consultants, assigning process improvement teams and redesigning workflow, hospitals across the country struggle with stagnant metrics. Not only is this frustrating, but having ineffective processes and roles is costly.

$40 million, $100 million, $220 million, $300 million. These figures do not represent recent Powerball jackpots or the contracts of star athletes. They are the annual cost reduction targets that CFOs of major health systems have recently shared with me.

All too often internal cost reduction initiatives fail to produce the level of savings required. Driving this level of change is not for the faint of heart and strong leadership is essential.

Reducing utilization will reduce the total charges on a patient’s bill, but it doesn't necessarily make cost of care less expensive for hospitals.