5 ways health systems can get creative with cost cutting

It has been one of the worst financial years for hospitals and health systems, and few are immune to tight budgets. Even large health systems have made cuts to their workforces, and entire states have reported sinking into the red.

Costly contract labor often is among the first to go when financial pressure hits a boiling point, but with staffing shortages plaguing the industry and morale suffering, this is not necessarily an ideal fix. As cash reserves plummet and a recession looms, organizations are finding new ways to get creative with cost cutting. 

These five less-conventional cost-cutting methods have been reported by Becker's since September: 

1. Augusta (Ga.) University Health Medical Center formed an online "internal staffing agency" to cut back on contract labor costs and premiums paid to external agencies. Its system, generated with software company HWL, brings candidates from job boards, social media and search engines to a single landing page. Its talent acquisition screening serves as the "front end of a central staffing office," funneling qualified candidates to the internal hiring team and reducing the health system's contract labor costs by 30 percent, according to HWL. 

2. Health systems can save by being crafty with their real estate, according to JLL's Healthcare and Medical Office Perspective Report. It can consume up to 40 percent of costs, though lease restructures, strategic location analytics, portfolio optimizations and divestments of non-core assets can reduce real estate's budgetary impacts. For example, the steady demand for healthcare as the economy ebbs and flows keeps medical office buildings a defensive investment choice, the report said. 

3. Investing in telehealth or transferring some patient care to non-acute centers can help cut costs, especially because it cuts back on the need for front-line workers. Somerville, Mass.-based Mass General Brigham is employing this strategy and expects to see $5.3 million in annual savings, The Boston Globe reported. 

4. Prioritizing employee wellness saved Cleveland Clinic $180 million over the last few years, according to the clinic's emeritus chief wellness officer. The clinic's Global Wellness Institute aims to help employees achieve normal blood pressure, LDL cholesterol, stress, blood sugar, body mass index and smoking levels, and when all six areas are regulated, the risk of chronic diseases decreases 80 percent to 90 percent. The clinic later added two more targets: immunization status and yearly visits to a primary care physician. Healthier on-site dining options, fitness centers, smoking cessation programs and stress management classes helped employees hit their targets, and this is saving Cleveland Clinic 30 percent of workers' premiums, which it sees as returns averaging $1,600 per family. 

5. Rather than laying off nonmanagement workers to cut costs, some systems find success in restructuring executive teams. Streamlining leadership can be an effective way to save without causing the widespread morale hit mass layoffs do. Providence and Bend, Ore.-based St. Charles Health System are among the health systems that began cost cutting from the top. 

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