Hospital COVID-19 cost strategies don't have to affect labor: 5 things to know


The COVID-19 pandemic is intensifying the need for hospital executives to reduce costs and re-evaluate their approach to cost structures.

Some hospital executives have addressed this unprecedented pressure by furloughing workers and implementing layoffs. However, there are opportunities for executives to revamp their nonlabor cost savings strategy amid the pandemic, according to a June 15 webinar hosted by Becker's Hospital Review and sponsored by VIE Healthcare, a consulting firm that helps identify nonlabor cost savings.

During the webinar, healthcare margin improvement experts Lisa Miller, founder and CEO of VIE Healthcare, and Richard Dormer, COO of VIE Healthcare, discussed how to build a nonlabor cost reduction strategy, the importance of cost opportunity scoring and the "four Ps" of every good hospital cost strategy.

Here are five takeaways:

1. Multiple themes should characterize a hospital's current financial recovery strategy, including instituting a culture of cost awareness, continuous cost improvement and removing silos around areas of spend. "Hospitals are looking at areas where they never really wanted to look for cost opportunities before," Ms. Miller said. The CEO added that leaders' focus should be on pricing, utilization, internal supply chain sourcing and achieving department cost savings.

2. The building blocks of any cost strategy should include an understanding of where cost opportunities lie. VIE Healthcare calculates cost opportunity across six areas with a score of zero to 10, with zero being no opportunity to improve and 10 representing a large opportunity to reduce costs. The six areas are: the right pricing, the right utilization, systemized data analytics, culture of cost awareness, adoption of cost awareness and disciplined cost management. Under this method, how many points hospitals score out of 60 will indicate possible savings opportunities.

3. The next step is reviewing continuous costs that may have been charged regardless if services were canceled due to COVID-19. Some facilities management, biomedical and revenue cycle management contracts have a volume guarantee structure in place that may allow for negotiated rebates. Mr. Dormer provided several examples of reviewable term agreements within clinical purchased service agreements that have minimum monthly case volumes, such as perfusion services, nitric oxide services and diagnostic testing. 

4. It's up to hospitals to identify and address possible cost-savings within their vendor contracts, and the window of opportunity is short as pressures from the COVID-19 pandemic change. Hospitals that store vendor agreements in one system are better equipped to quickly review and re-evaluate those agreements, Ms. Miller said.

5. The presenters outlined "four Ps" that every cost-saving strategy needs:

Plan: A roadmap for success
Process: A repeatable proven system
Project management system: Tracking cost improvement initiatives
Performance: Exceed industry norms and measures.

To view the webinar, click here.

To learn more about VIE Healthcare, click here.

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