University Hospitals' 'Medicare Breakeven' initiative cuts expenses by $250M

Cleveland-based University Hospitals launched its "Medicare Breakeven" project in August 2022 to reduce expenses, grow revenues and develop a model that allowed the health system to bend its cost curve. 

UH argues that the economic, staffing and payer mix environments demands that health systems are flexible, resilient and can prosper under a Medicare payment structure across all care provided for all patients.

The project delivered significant reductions — in excess of $250 million annually — "in fixed and indirect costs while delivering the highest quality of patient care," UH said in its third-quarter earnings report, published Dec. 12. 

The $250 million reduction in operating expenses was tied to various administrative functions across the health system. A total of 450 budgeted administrative positions were eliminated in 2022, including 117 positions from reductions in force. Through the second quarter of 2023, UH outperformed its budget, an indication of improved performance related to Medicare Breakeven, according to the 18-hospital system.  

"This journey to Medicare Breakeven is not a traditional cost-cutting exercise," UH said in its financial report. "Rather, it represents a change to how care is provided and designs a structure that will deliver the best value to patients and payers while operating within an evolving healthcare market." 

UH is working with an independent advisory firm to support its analysis of patient volumes, staffing and community needs, with the Medicare Breakeven project becoming a key component of the system's strategic financial plan. 

The system is currently evaluating its next round of optimization opportunities to boost its finances by a further $175 million in 2024. Initiatives include revenue growth in key service lines and cost reduction. 

UH is also working to improve operations across the system as a result of its implementation of Epic, which went live Sept. 30.

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