Health systems are struggling with their operating margins, forcing leaders to consider cost-cutting moves. However, undertaking cost-saving projects can be a minefield if projects are not carefully assessed by multifunctional internal teams and supported by data analytics partners.
During a March Becker’s Hospital Review webinar sponsored by Strata Decision Technology, Steve Moore, senior manager, Strata Decision Technology, and Dawn Orwick, director, finance decision support, Intermountain Health (Salt Lake City), discussed how automated data tools can help organizations realize cost savings and why internal stakeholder alignment is essential.
Three key insights were:
- Margin management is a top concern for health leaders. Although health system operating margins have stabilized compared to the COVID-19 pandemic years, they are still precarious, ranging between 1.6% and 2.3% in 2024.
According to a Strata poll of healthcare CFOs, margin management is a top concern (55% of respondents), followed by labor expense (52%), payor rates and negotiations (42%) and labor recruitment and retention (30%).
To address these challenges, leaders are planning to increase their organizations’ investments in analytics and comparative data capabilities. But better data and tools “won’t recognize cost savings on their own,” Mr. Moore said.
To move from analysis to action and sustain momentum for true cost stewardship, organizations need to organize their work around three pillars: 1) determine the priority case for savings and create a “burning platform” around it; 2) put in place a governance and accountability structure to ensure that everyone is rowing in the same direction and 3) designate project resources (“boots on the ground”) to lead the projects.
- Intermountain’s partnership with Strata centered around a $4 million savings goal. In 2022, Intermountain merged with SCL Health and embarked on a three-year optimization project to identify cost savings while reducing clinical variation across the newly merged organization.
In 2023, Intermountain partnered with Strata to leverage automation to help achieve that goal. Intermountain established a cost stewardship team, which worked closely with clinical leaders throughout 2024 to evaluate cost-saving opportunities within each clinical specialty as part of an Intermountain-Strata Continuous Improvement (Strata CI) pilot.
The result of the pilot surpassed expectations. “While the initial goal was to identify $4 million in savings — not necessarily realize it — we did realize $4.6 million in savings by the end of 2024,” Ms. Orwick said.
- Competent change management is key to effective cost-stewardship strategies. To set up the pilot for success, Intermountain ensured that all key internal stakeholders — including clinical program leaders, finance leaders and the cost stewardship team (supported by the Strata CI team) — were aligned. This alignment encompassed the vision of opportunities for cost savings and the feasibility of carrying out relevant cost-saving initiatives without hurting care quality.
To thread that needle, Intermountain emphasized clear communication and regular updates about the value of the project and its ongoing progress. Because the clinical program leaders’ buy-in was crucial to the success of the project, those leaders were designated as the chief liaisons between the finance team and the cost stewardship/data analytics team. Intermountain already had an established culture of trust between clinicians and other functional teams, which contributed to effective collaboration.
“When we’re working on challenging cross-functional initiatives that span multiple teams, work can’t be done in disjointed silos. It can help build off an organization’s existing culture,” Mr. Moore said. “The sum of the parts has a multiplier effect on ideas and initiatives.”
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