The top priority of health care provider organizations to drive more value from their health care services is reducing or managing their operating costs. That’s the consensus finding from three industry surveys of provider executives conducted by different organizations.
For other providers, pharmacies, payers, suppliers, manufacturers and other stakeholders, the message is clear. What they offer in terms of products and services to provider organizations must help them reduce their business costs, their clinical costs or both without sacrificing the quality and safety of the care they give to patients.
Top concern among provider executives are financial challenges
The first survey is from the American College of Healthcare Executives. The Chicago-based ACHE asked 383 hospital and health system executives to rank their top concerns. The respondents’ top concern was financial challenges. The ACHE then asked the executives what their specific financial concerns were. Their top five financial concerns were:
- Medicaid reimbursement
- Increasing costs for staff, supplies and other resources
- Reducing operating costs
- Bad debt
- Transition from volume to value
Managing costs through drug spend is another concern for provider executives
The second survey is from Premier. The Charlotte, N.C.-based health care group purchasing organization asked 63 health system executives what their five biggest priorities were in light of the political climate in Washington. The respondents’ top priority was managing costs with a specific focus on drug spending. Their four other top priorities, in rank order, were:
- Moving from meaningful use to meaningful insight
- Engaging and satisfying customers
- Shifting toward population health, risk and scale
- Continuing differentiation on clinical quality and costs
Cost reduction is another key challenge for provider executives
The third survey is from the Health Care Advisory Board. The Washington-based health care market research and consulting firm, asked 183 executives from a variety of provider organizations, including hospitals, health systems, academic medical centers and physician group practices, to rank 26 topics in order of concern to their respective organization. The No. 1 area of concern was “innovative approaches to expense reductions,” cited by 57 percent of the respondents.
Rounding out the top five areas of concern expressed by the Advisory Board survey respondents were:
- Improving ambulatory access
- Boosting outpatient procedural market share
- Minimizing unwarranted clinical variation
- Controlling avoidable utilization
The push to reducing operating costs clearly is a response to the accelerating shift from volume-based, fee-for-service medicine to value-based reimbursement tied to clinical and financial outcomes.
In the Advisory Board survey, the respondents expressed their intent to reduce operating costs by “minimizing unwarranted clinical variation” and by “controlling avoidable utilization.” That will require technical capabilities to collect, track, analyze and report practice patterns, outcomes and costs. That also will require population health and chronic-care management skills and other competencies to reduce unnecessary readmissions.
“First, it’s getting harder and harder to improve margins through familiar tactics like labor force reductions and group purchasing of supplies. That’s why so many executives expressed strong interesting in innovation approaches,” the Advisory Board said. “Second, we know that the next big wave of expense reduction opportunity will come from improvements in clinical processes and pathways themselves.”
Controlling care management costs as priority for provider executives
Provider executives expressed similar sentiments in their responses to the Premier survey. For example, 65 percent of the executives said they intend to increase efforts to control the cost of care management with 61 percent specifically targeting management of their pharmaceutical spend.
Additionally:
- 53% intend to increase efforts to integrate data from disparate sources and/or make investments in analytics
- 50% intend to increase efforts to improve the interoperability of existing health technology
- 47% intend to increase the use of technology to support risk-based contracts
- 45% intend to increase expansion of post-acute care services through partnerships
- 45% intend to increase investments in patient engagement initiatives
- 40% intend to increase the use of expanded health care team structures
The executives who responded to the ACHE survey also identified clinical care as the path to reducing operating costs and driving more value. Their top three clinical priorities were:
- Engaging physicians in improving the culture of quality and safety
- Engaging physicians in reducing clinically unnecessary tests and procedures
- Redesigning care processes
It’s clear from the three surveys that reducing operating costs is the consensus top priority of health care provider organizations in response to the transition to value-based reimbursement. Additionally, the research indicates that the source of operating efficiencies and savings will come from the clinical side of the house by managing supply costs, reducing unnecessary utilization and improving outcomes.
Other providers, pharmacies, payers, vendors, suppliers, manufacturers and other stakeholders that can assist provider organizations with those tactics will be sought after business and clinical partners.
Related: Learn about McKesson’s solutions to reduce drug spend