Executive Summary

Incumbent health systems face a changing business model as care migrates out of the inpatient setting. They must also address increasing cost pressures as a tight labor market drives wage inflation. Improved performance within legacy operations and cost transformation to support needed investments in new strategic initiatives are critical as health systems position themselves for the future. And these initiatives must be modeled to ensure their chance for success, based on reliable data, enhanced by external perspectives and benchmarking, supported by engaged clinicians, and monitored through clear lines of accountability.

These are among the takeaways from Kaufman Hall/Axiom’s third annual survey of hospital and health system leaders on the state of performance improvement and cost transformation efforts within their organizations. For the first time this year, Kaufman Hall/Axiom has partnered with the Healthcare Financial Management Association (HFMA) in fielding the survey and developing this report’s findings.

The good news in this year’s survey is that respondents indicate their organizations are taking cost transformation more seriously. Last year, we asked respondents to identify what percentage cost reduction goal their organizations had established for the next five years: 32 percent said no cost reduction goal had been established. This year, we asked a similar question, requesting that respondents identify what percentage of current costs their organizations has targeted to remove over the next three years. Only 4 percent of respondents say their organizations have no need to remove any current costs. Yet the good news of targeted cost reductions is offset by respondents’ honest assessment of their progress thus far. Fewer than 1 in 4 respondents say they have achieved “most” or “all” of their cost transformation goals. Targeted cost reductions remain modest, with 40 percent of respondents saying their organization’s targets are between 1 percent and 5 percent of current costs, far below what most health systems will need to break even on Medicare payments.

The survey indicates several clear performance improvement needs, including:

  • Improving data and insights, including comparative insights into peer organization performance
  • Providing physicians better information to improve engagement
  • Creating a culture that supports achievement of performance improvement goals
  • Establishing greater accountability for results

To address these needs, this report recommends that health system leaders pursue four key performance improvement strategies:

  1. Refine and improve their understanding of costs
  2. Deploy external perspectives and benchmarking to identify and drive sustainable cost restructuring efforts
  3. Engage physicians with accurate and actionable data on quality and cost
  4. Establish greater accountability for achieving performance improvement goals

Supported with successful practices that combine performance improvement tactics and technology, these strategies will position health system leaders to overcome obstacles to performance improvement, establish clear and sustainable performance improvement goals, and more fully tap major opportunities for cost transformation throughout their organization.

The Big Picture

Pressures on Revenue and Expenses

Falling inpatient volumes and rising wage inflation are putting pressure on health systems’ top and bottom lines. The most commonly cited pressure on revenues was declining inpatient volumes, identified as the most significant force by 30 percent of respondents (Figure 1). Following in second and third place were downward pressure on commercial insurance rates, cited by 27 percent of respondents, and an increasing percentage of Medicare and Medicaid patients, identified by 19 percent.

Figure 1: Revenue Pressures

Figure 1: Revenue Pressures

 

Reflecting tight labor markets in many areas of the country, rising salaries and wage inflation were by far the most common bottom-line pressure, identified as most significant by almost half the respondents (47 percent; Figure 2). With labor representing up to 60 percent of a health system’s costs, this poses a significant threat to cost transformation efforts. At a distant second (23 percent of respondents) was capital required to fund strategic growth initiatives. The ability to access this capital will be vital as health systems work to adapt to emerging competitive threats in the marketplace and growing consumer demand for more convenient, lower cost healthcare services.

Figure 2: Expense Pressures

Figure 2: Expense Pressures

 

Required Investments

Capital projects and new facilities are cited by 34 percent of respondents as the area requiring the greatest investment of organizational resources over the next three years (Figure 3). This is followed by expansion of primary and outpatient services networks (24 percent of respondents) and health information technology (17 percent).

Figure 3: Investment Needs

Figure 3: Investment Needs

 

Almost 75 percent of respondents indicate that they will be investing in technology to help in their cost transformation efforts during the current calendar year (30 percent) or in the next one to two years (43 percent; Figure 4).

Figure 4: Planned Technology Investments to Support Cost Transformation Efforts

Figure 4: Planned Technology Investments to Support Cost Transformation Efforts

 

Putting It Together

Falling inpatient volumes are an indicator of the ongoing shift in business models for incumbent health systems, as an increasing percentage of services and revenue migrate beyond the hospital’s walls. Although health systems are not yet seeing significant pressure on revenue from lower cost competitors, they are seeing the need to invest in expansion of their primary and outpatient care networks. This is the tip of the iceberg. Health systems must invest in strategies that radically reform their cost structure and enable them to compete on access, convenience, and price in a rapidly changing healthcare market.

The pressure to invest in strategic initiatives is acknowledged, but rising labor costs are putting significantly more pressure on the bottom line. This underlines the need to push beyond traditional focuses on labor, productivity, and supply chain initiatives. True cost transformation and operational innovation opportunities, which have remained relatively untapped at many health systems, include unwarranted clinical variation, service line distribution, and portfolio rationalization. With three of four survey respondents planning to invest in technology within the next two years to help achieve their performance improvement and cost transformation goals, the need to dig deeper and deploy more sophisticated analytics to identify cost saving opportunities is recognized. But health systems also need guidance to develop a clearly articulated vision of the future and identify the steps required to make that vision a reality.

Steps Taken Toward Cost Transformation

In comparison with last year’s report, there is both good news and bad news.

The good news

The good news is that far more respondents indicated that they have set cost-reduction goals for the next three years to help fund their investment needs and remain financially sustainable. In last year’s survey, when asked what percentage cost improvement goal their organization had established for the next five years, 32 percent of respondents said they had set no cost-reduction goal. This year, when asked what percentage of current costs their organization had targeted to remove over the next three years, only 4 percent of respondents said they had no need to remove any current costs (Figure 5).

Figure 5: Targeted Cost Reductions

Figure 5: Targeted Cost Reduction

 

The greatest number of respondents, 44 percent, say their organization has set reduction targets of between 6 percent and 10 percent of current costs over the next three years, while another 40 percent are targeting between 1 percent and 5 percent of current costs. Approximately 11 percent of respondents are targeting reductions in excess of 10 percent of current costs. No respondents have targeted cost reductions in excess of 20 percent of current costs.


How Much Is Enough?

While more respondents in this year’s survey report that their organizations have targeted cost reductions, more than 80 percent of respondents indicate that these targets do not exceed 10 percent of current costs.

As shown in Figure 1, downward pressure on commercial rates and an increasing percentage of Medicare and Medicaid patients were identified by respondents as the second and third most significant pressures on revenue. Kaufman Hall/Axiom and HFMA recommend that organizations establish a “break even at Medicare” target to address these pressures.

The magnitude of the effort required will vary from organization to organization, based on such factors as current margins on Medicare and prior success in removing costs, but will certainly exceed 10 percent of current costs for most health systems. For example, the CEO of a multi-state health system interviewed for this report said that even though they had continuously generated cost improvements of approximately $75 million per year for the past several years, they had calculated additional needed cost reductions of between $350 million and $400 million to break even at Medicare. With annual operating expenses of just under $2.5 billion, this computes to reductions of 14 percent to 16 percent of current annual operating expenses.

The importance of Medicare as a payment source will only grow as the population ages. Combined with new competitive threats from organizations unburdened by the costs of legacy inpatient services, this makes break even at Medicare a “no regrets” strategy for health systems. It also prepares organizations for the prospect of even more significant cost reductions as the healthcare business model shifts in a rapidly changing competitive environment.



The bad news

Targeted cost reduction goals are complicated by respondents’ assessment of how successful they have been in achieving their goals. Fewer than 1 in 4 respondents (23 percent) say their organization has achieved “most” of their cost transformation goals; the greatest number, 66 percent, say they have achieved only “some” goals (Figure 6).

Figure 6: Success in Achieving Cost Transformation Goals

Figure 6: Success in Achieving Cost Transformation Goals

 

Organizations continue to rely heavily on traditional cost-saving opportunities, especially in labor cost and productivity, which was ranked as having the greatest potential opportunities for savings by almost 40 percent of respondents (Figure 7). This was also the area where respondents report the most success in achieving their goals (Figure 8). But almost as many respondents cite difficulties in achieving labor cost and productivity goals (31 percent) as those who claim success (Figure 9).

Figure 7: Areas with Greatest Potential Cost Savings
Figure 7: Areas with Greatest Potential Cost Savings


Figure 8: Areas of Greatest Cost Transformation Success

Figure 8: Areas of Greatest Cost Transformation Success

Figure 9: Areas of Greatest Cost Transformation Difficulty

Figure 9: Areas of Greatest Cost Transformation Difficulty

Another area of high potential and low success is unwarranted clinical variation (i.e., variations in clinical practice that add cost without improved outcomes). Sixteen percent of respondents selected unwarranted clinical variation as the most significant area of potential, second only to the percentage who ranked labor costs/productivity as the area of greatest potential. Yet only 4 percent of respondents have seen their greatest success in addressing unwarranted clinical variation, and it was named as the area of greatest difficulty by 25 percent of respondents.

Performance Improvement Needs

With two-thirds of respondents managing to achieve only “some” of their cost transformation goals, clear needs exist for more reliable processes and better tools in performance improvement. The survey findings indicate that these needs include:

Better data and insights, including comparative insights for peer organizations. Lack of data and insights again emerged as the greatest impediment to achieving cost transformation goals (Figure 14). The biggest frustrations with financial benchmarking expressed by respondents include:

  • Difficulty integrating data from different sources
  • Too much manual work needed to normalize data
  • Limited ability to access comparative data for peer organizations

With respect to costing data, fewer than half the respondents agree that their organization has access to reliable, trusted costing data. Accordingly, fewer than half are using costing data consistently to guide decision making at their organizations.

Better information for improved physician engagement. Physicians will respond to data, but only if they believe the data is trustworthy and they have access to data that is actionable. Survey results indicated that just over 20 percent of organizations have a trusted single source Performance Improvement Needs of data for the data and reports they share with physicians. And even fewer respondents agreed that clinicians at their organizations would say they have access to actionable information that helps them address unwarranted clinical variation and other cost-related quality concern (Figure 16).

Stronger culture of support for achievement of performance improvement goals. While the good news in this year’s survey is that most organizations have targeted specific cost reductions, less than 25 percent of respondents report an ability to achieve “all” or “most” of their cost transformation goals. This suggests a culture lacking in the ability to unite around and achieve common goals.

Greater accountability for results. The need to improve accountability was a major theme of last year’s report. In this year’s survey, the failure to hold leaders accountable was again one of the greatest impediments to achieving cost transformation goals (Figure 14).

Strategies and Successful Practices for Effective Performance Improvement

To address the needs identified in the survey, health system leaders should focus on four key strategies:

  1. Refine and improve their understanding of costs.
  2. Deploy external perspectives and benchmarking to identify and drive sustainable cost restructuring efforts.
  3. Engage clinicians with accurate and actionable data on quality and costs.
  4. Establish greater accountability for achieving performance improvement goals.

Strategy 1: Refine and improve understanding of costs

The business case

As survey respondents indicated, inpatient volumes are declining, while expansion of primary and outpatient services networks are the second greatest area of investment identified over the next three years. Growth will likely occur outside the hospital’s wall, where incumbent health systems face the prospect of increased competition—in part on the basis of price—from new market entrants. These new competitors do not bear the burden of costs for providing acute inpatient care, nor are they burdened with legacy assets, delivery models, and culture. They often have significant reserves of capital at hand, either through private equity backing or the scale and resources of national competitors such as CVS Health or Walmart. Health plans are also positioning themselves to be the organizers of healthcare networks and will use unit price as a key factor in selecting preferred network providers. And as the federal government pushes for price transparency, pricing pressures likely will intensify.

Effective competition in emerging healthcare business models will depend on a more granular understanding of the actual costs required to offer a service or perform a procedure. Health systems will need to know which services are truly margin positive, and which are not, as they make decisions on where they have a competitive advantage. Health systems also will have to increase scale as they face new, national competitors. A clear understanding of cost structure and competitive advantage will help determine where health systems should pursue growth, or what assets they could bring to a partnership with another organization.

Survey findings

Fewer than half (47 percent) of survey respondents say they have access to reliable, trusted costing data (Figure 10). Accordingly, a similar percentage (48 percent) consistently use costing data to help guide decision making (Figure 11). Yet the survey results also indicate that more than 60 percent of respondents are using technology to gain a better understanding of costs (Figure 12), a sign that the need for better costing data is being pursued.

Figure 10: Access to Reliable Costing Data 

Figure 10: Access to Reliable Costing Data


Figure 11: Use of Costing Data to Guide Decision Making

Figure 11: Use of Costing Data to Guide Decision Making

 

Figure 12: Role of Technology in Cost Transformation Efforts

Figure 12: Role of Technology in Cost Transformation Efforts


Successful practices

Adopt a tiered approach to costing. Improving costing data is a process of gradual improvement, and the benefits of more granular costing must be weighed against the intensity of effort required. Organizations pursuing a more detailed understanding of costs should adopt a tiered approach that matches intensity of effort with items that have the highest impact on decision making. The most resource-intensive method— time-driven activity-based costing—is used at the highest tier for high-cost, time-driven activities such as operating room utilization. At the lowest tier, a traditional ratio of cost to charges approach can be used to allocate expenses in areas such as non-chargeable supplies or miscellaneous costs that have little impact on decision making (Figure 13). 

Figure 13: A Tiered Approach to Costing

Figure 13: A Tiered Approach to Costing

 

Adjust calculation frequency. As finance leaders adopt more detailed costing methods, they should also consider the calculation frequency and costing time period. A move from year-to-date to monthly or quarterly period costing will improve opportunities for trending. It also will ensure that early months are not reprocessed with each costing cycle, thus making the process more efficient.

Improve the cost accounting system. The need for a better understanding of costs may identify a need for an improved cost accounting system. The end goal is a cost accounting system that enables reporting across the care continuum and across multiple financial functions, and that produces information that health system leaders can stand by and act on.

Key elements of an effective cost accounting system include:

  • Flexibility. As care moves from inpatient to outpatient settings, the system must have the flexibility to adapt to changing business models and sites of care, with the ability to draw costing data from across the care continuum.
  • Efficiency. Easy-to-use costing models and built-in process management tools should enable an integrated end-to-end costing process that is easy to use and maintain.
  • Sophistication. The system should be able to apply sophisticated costing methodologies based on the tiered approach to costing described above to improve cost accuracy.
  • Transparency. Visibility into how costs are calculated and assigned down to the encounter level builds trust and confidence in costing data.

Strategy 2: Deploy external perspectives and benchmarking to identify and drive sustainable cost restructuring efforts

The business case

Competitive positioning requires not only beating competitors on price, but also on performance. Without an understanding of how processes can be done differently, or how peer organizations are performing, it is difficult to implement new initiatives or gauge whether they are setting the bar too low or too high. Comparative analytics also help prioritize efforts to seek a competitive advantage, identifying areas with the most potential gain. Data on the performance of peers, both external and internal, can be an effective tool in overcoming a top-cited impediment to not achieving goals because they are too politically sensitive (Figure 14). If a department or service line is demonstrably underperforming against its peers, attitudes about the need for performance improvement can change quickly.

Figure 14: Impediments to Achieving Cost Transformation Goals

Figure 14: Impediments to Achieving Cost Transformation Goals

 

Survey findings

Nearly all respondents (90 percent) are undertaking internally-led performance initiatives, and more than half have engaged consulting or data analytics firms (59 percent) or have implemented or optimized software technology (51 percent) as part of their cost transformation efforts (Figure 15). Half the respondents also are using technology to benchmark against peer organizations (Figure 12), With an “outside view” on performance, including the ability to compare performance against peer organizations, health systems have an easier time setting ambitious but attainable goals for the organization. They also have the data they need to overcome objections to performance improvement in politically sensitive areas of operations.

Figure 15: Tactics Used to Support Cost Transformation Efforts

Figure 15: Tactics Used to Support Cost Transformation Efforts

 

Successful practices

Bring in fresh eyes. While it is important to groom leaders internally, it is also important to be open to perspectives from outside the health system. The CEO of a religiously affiliated multi-state system notes that a key factor in selecting a recently hired regional president to serve on the health system’s transformation team was the individual’s prior experience with a for-profit healthcare company. This experience added new talents and perspectives to the team. Outside consulting firms or other external partners can also bring in new perspectives, or can provide an objective, consistent third-party view across a system. By defining and prioritizing opportunities and identifying organizational roadblocks, this third-party perspective can help accelerate change, overcoming organizational inertia and “analysis paralysis.”

Interviewees preferred to be selective in their use of external partners, focusing on areas where, as one interviewee noted, “there is juice to squeeze.” Interviewees stressed the importance of outside firms that act as true partners. External partners can identify opportunities and help set up new processes, but the work ultimately must be done by internal teams that understand and take ownership of the need for transformation.

Use external benchmarking to establish an outside view. The outside view provided by external benchmarking supports health system leaders in setting targets that push their organization to perform at the highest level but reflect an informed assessment of how much opportunity is realistically within an organization’s reach. It also provides actionable data to identify and address challenges as they emerge to ensure progress on initiatives is being made.

External benchmarking tools should be able to:

  • Define an appropriate peer group. What are the key factors that influence an organization’s outcomes (e.g., size of organization, market demographics, geography, etc.)? Peer organizations selected for comparative benchmarking should be defined by similar factors.
  • Ensure validity of comparisons. Leaders must be confident that they are comparing “apples to apples” when assessing data from peer organizations. This is important not only in determining performance improvement targets, but also in building trust within the organization in the validity of the target. This will require an analytics solution that classifies and standardizes data across and within common categories.
  • Regularly refresh comparative data for peer organizations. Once targets have been established, it is imperative that initiative leaders have access to timely information on a peer group’s ongoing performance, refreshed on a regular (e.g., monthly) basis. This will help determine, for example, whether challenges to progress are affecting the peer group as a whole or are unique to the organization and thus more likely attributable to internal factors.

Learn from experience. An organization’s own experiences can also provide an important reference point in benchmarking efforts. An effective analytics solution will extend a common set of key metrics and performance indicators internally and externally, both to track progress on internal initiatives and facilitate ongoing comparisons with external peer-group organizations. As an organization’s experience grows, so too will the value of data that demonstrates how often and how closely the organization was able to achieve its expected returns, and how consistently it tracked with the performance of its peer group as a whole. This knowledge may affect future target setting or indicate the need to identify internal factors that are creating obstacles to success.

Strategy 3: Engage clinicians with accurate and actionable data on quality and costs

The business case

The success of a health system ultimately depends on the value of the clinical experience it offers. The ability to generate consistently high-quality, cost-effective outcomes is a crucial differentiator for consumers and payers alike. Transformative change within a health system is simply not possible without clinicians engaged in the effort to enhance quality and lower costs.

Engaging clinicians in this effort is difficult, however, in the absence of data they believe is trustworthy and accurately reflects their practice patterns. And if the data they receive is not actionable, it will have little impact on efforts to improve clinical performance.

Survey findings

Just 14 percent of respondents say that their clinicians would agree that they have access to actionable information that helps them address unwarranted clinical variations and other cost-related quality concerns. A slightly higher percentage (22 percent) say their organization has a single, trusted source of truth for the data and reports they share with clinicians (Figure 16).

Without access to trusted and actionable data, it is not surprising that addressing unwarranted clinical variation is the second most difficult area of improvement identified by respondents, nor that just 4 percent report success in addressing unwarranted clinical variation.

Figure 16: Indicators of Physician Engagement

Figure 16: Indicators of Physician Engagement

 

Successful practices

“Don’t let perfect get in the way of better,” said the CFO of a community hospital we interviewed. While the survey responses indicate that perfect is far away for clinical analytics at most organizations, there are many opportunities to get better at engaging physicians with improved analytics.

Involve physicians early. As a health system builds a disciplined approach to the collection and display of clinical data in outcome reports, physicians should be involved in the selection of systems and tools that will be used. They should also review, select, and define relevant metrics for their specialties.

Build trust in the data. Be transparent about data sources and what these sources do and do not provide. Acknowledge any known limitations in data sets and be clear about how data will be used. Seek consensus on data sources most relevant for different practice areas and specialties.

Anticipate and address common concerns. Physicians will want to discuss the adequacy and applicability of severity or risk adjustments within their patient populations. They will also want to be sure that patients are being appropriately attributed to the physician that made the largest contribution to the clinical outcomes of a case. Be prepared to address how these issues are resolved within the clinical analytics system.

Focus on developing a single source of truth for physician data. Different data tell different stories. Focus on developing a clinical analytics solution that can aggregate data from disparate sources and systems into a single analytics source for clinical cost and quality data.

Enable comparisons between internal and external peer groups. As trust in the data grows, enable physicians to compare their performance with peers, beginning with internal peer groups. Gradually extend comparative analytics to peers at other organizations, addressing any concerns about comparability of data. Physicians whose performance is falling below their peers will typically be eager to close the gap in performance.

Be consistent. If a physician leader fails or refuses to address performance issues, the health system must take a consistent approach. System executive leaders—including the chief clinical officer—must work with leadership on the ground to establish expectations for appropriate behavior and to ensure that necessary actions are taken when those expectations are not met.

Strategy 4: Establish greater accountability for achieving performance improvement goals

The business case

Forty percent of respondents are targeting cost reductions of just one to five percent of overall costs, and most respondents are achieving only “some” of their cost transformation goals (Figures 5 and 6). A mixture of moderate goals and moderate success in achieving them does not result in the transformative outcomes the current healthcare environment demands.

Survey findings

With fewer than one in four respondents saying that their organizations have achieved “most” of their cost transformation goals, most respondents likely are finding that the impediments to success that they have identified are significant barriers. A failure to hold leaders accountable was second only to a lack of good data and insights as the greatest impediment to success that respondents encounter (Figure 14).

Successful practices

Build a culture of accountability. Accountability is ultimately a question of culture, defined by an organization’s leadership through their ability to unite around common goals and by stakeholders organization-wide through their willingness to take ownership of and responsibility for performance results.

Building a culture of accountability begins with defining:

  • Specific objectives to be met in each organizational dimension, based on an informed analysis of available opportunities.
  • Initiatives that are in place or will be implemented to meet the objectives.
  • Specific metrics that are appropriate to the performance of initiatives.
  • Specific agreed-upon milestones of progress and accountable individuals.

Several interviewees noted that it is important that these definitions do not issue as a mandate from the executive team, but instead are developed collaboratively with leaders who will be accountable for the results. These leaders must feel ownership of the defined objectives, initiatives, metrics, and milestones. Accountability also must extend beyond achieving a specified objective. As one interviewee said, “Leaders must be accountable for financial performance or other defined objectives, but also for the happiness of their teams.”

Establish a results management office. One often-used tactic is appointment of a senior leader to serve as a performance improvement champion. This tactic can backfire, however, if others perceive that the champion is solely responsible for the success or failure of an initiative. A results management office (RMO) provides an alternative approach to accountability throughout the organization.

Specific responsibilities of an RMO can include project management or process redesign support; assistance with data integrity, analytics, and reporting; change management; and facilitation of consistent, proactive, and constituent-specific communications. Under-performing teams can seek out the RMO’s assistance voluntarily, but if a team is consistently under-performing, leadership has the option of requiring that the team accept help from the RMO. While the RMO and its staff help facilitate change, they are not directly accountable for results. Accountability remains with the team and its designated operational leaders (Figure 17).

Figure 17: Role of a Results Management Office in a Performance Improvement Structure

Figure 17: Role of a Results Management Office in a Performance Improvement Structure

 

Implement a strategy management solution. The work of performance improvement teams, RMO staff, and executive leadership will be made easier by implementation of a strategy management solution that enables stakeholders throughout the organization to easily track progress on initiatives and drill down to investigate possible causes when progress stalls or begins falling behind targeted milestones.

Key elements of an effective solution include:

  • Structured and clean data. Performance improvement teams often will require data from multiple sources and systems. It is important that the strategy management solution is able to accurately classify and standardize data from multiple sources to provide a “single source of truth” for the organization.
  • Timeliness. An effective solution should provide detailed and up-to-date information, regularly refreshed, to ensure initiatives stay on track.
  • Appropriateness. The strategy management solution should offer multiple views of data as appropriate for end users—from broad views across the organization for senior executives to more focused and deeper views into specific initiatives for operational teams.
  • Accessibility. All users should be able to easily drill down into reports to identify progress on goals, execution risks, and accountable leaders.
  • Visualization. Data should be visualized in a way that enables users to quickly identify areas requiring attention. Simple examples are a dashboard solution that color-codes progress on initiatives as green (on target), yellow (at risk), and red (in trouble), or that uses arrows to indicate whether progress is trending up, neutral, or down.

Facing the Future

One of our interviewees summed up the future for incumbent health systems as follows: “Commercial prices are going down, and I don’t know how much longer we will have our current healthcare model.”

To prepare for this future, a commitment to continuous performance improvement is imperative. Opportunities will change and will vary from organization to organization, but the strategies presented in this report should be adopted across all organizations. They are designed to make health system leaders better informed, more accountable, and more able to drive change within their organizations. Supported by successful practices that combine performance improvement tactics and technology, these strategies will help leaders set appropriate goals and build a culture of accountability and engagement that optimizes the chance of achieving the desired results, regardless of the opportunity pursued.

“The basic mismatch between U.S. healthcare facilities and healthcare needs, and the unsustainability of healthcare spending to the U.S. economy, requires that legacy hospitals and health systems take on costs at a greater magnitude and with more permanence. That means taking a very hard look at the value being provided by each asset of the facility portfolio. Where assets are not contributing sufficiently to the healthcare needs of the community, and not meeting the strategic or financial needs of the organization, some very tough decisions are in order."

Kenneth Kaufman, Managing Director and Chair 
Kaufman Hall


 

About the Report

This is the third year that Kaufman Hall/Axiom has surveyed hospitals and health systems on their performance improvement and cost transformation efforts, and the first year that Kaufman Hall/Axiom and the Healthcare Financial Management Association (HFMA) have worked together to field the survey and develop the report’s findings.

The report findings are based on 169 responses to a survey fielded by Kaufman Hall/Axiom and HFMA in August and early September 2019. Survey responses were supplemented by interviews with selected respondents, focusing on those who indicated their organization had achieved “most” of their cost transformation goals and were targeting significant cost reductions in the coming years.

Respondents represented a wide range of organizations, from single hospitals (28 percent) to health systems with 10 or more hospitals (20 percent). Most respondents were executive officers, vice presidents, or directors (Figure 18). More than 70 percent of respondents were in finance or executive leadership.

Figure 18: Respondents’ Professional Roles

Figure 18: Respondents’ Professional Roles

 



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