Using Analytics to Strategically Cut Costs

By David Whitake, CEO; Ken Hopkins, CFO, and David Janotha March 31, 2014 Download PDF

Cutting or controlling costs is a top initiative for nearly every hospital CEO and CFO. However, while the majority of the healthcare industry chatter in the last 2-3 years has centered on cutting the cost of care, little discussion has taken place with regard to cutting administrative and operational costs not associated with the delivery of care. As the impact of 2010 healthcare reform legislation was becoming clear, Norman Regional Health System's executive leadership launched an initiative to optimize financial performance by strategically cutting organizational costs not associated with delivery of care.

Based in south central Oklahoma, Norman Regional Health System has multiple acute care facilities with 500+ beds, in addition to a range of other services including primary care, physician offices, psychiatric units and rehabilitation units. In response to the CEO and CFO's cost cutting initiative, Norman Regional Health System's Finance team stepped up to the challenge to help reduce costs across the organization. At the time, the Finance team was relying on a legacy process of cumbersome stand-alone spreadsheets for budgeting and planning that wasn't meeting their needs. The process was laborious for budget contributors and Finance alike and sometimes lacked the accuracy required. The Finance team addressed the issue by spear-heading a project to re-design the budgeting and planning process to improve both efficiency and effectiveness.

Finance's response was to procure a fully integrated budgeting, reporting and analytics platform from Axiom EPM to streamline budgeting processes and improve response times to financial and operational inquiries. Norman Regional Health System partnered with Axiom EPM in early 2011 to implement strategies, technology and improved processes in an effort to cut costs by accomplishing three objectives:

  • Streamline budgeting process and reduce time spent by budget contributors
  • Reduce costs associated with budgeting
  • Improve response times to financial and operational inquiries that may identify other cost savings

Norman Regional Health System was able to achieve these objectives by implementing improved budgeting and planning processes that leverage Axiom EPM's performance management solutions. To truly streamline the budgeting and planning process and reduce associated costs, Norman Regional understood that they needed the proper tools to support the new process in order to minimize time from budget contributors outside of finance. They also needed to establish workflow and approvals through the finance team to maintain control of the process and maximize analytical efforts.

Efficiency Drives Time and Cost Savings Under the new process, Finance establishes the workflow process, budget contributors are notified and then they simply populate a worksheet for their area of budget responsibility. Upon submittal, that information is automatically saved, business logic is applied systematically and each department's budget is consolidated with other budget contributor's information. In the past, the Finance team had to manually audit and consolidate each budget submission so this new process has improved accuracy and reduced the labor hours from both budget contributors and the finance team. Since implementing Axiom's software and new processes, Norman Regional has reduced the time spent contributing to and preparing budgets by 20%.

New capabilities also resulted in time savings and improved accuracy in some specific areas. Norman Regional now budgets for revenue by payor class so contractual estimates take less time and are more accurate. Additionally, they can easily create detailed comparison reports for all revenue and expenses within minutes, reducing time required to maintain and update detailed schedules. In addition to budgeting and reporting, Norman Regional has leveraged the tool to get a better understanding of costs and profitability within key service lines. This has proven beneficial to the organization in identifying and tracking areas that need further attention.

Like most healthcare organizations, the Norman Regional Finance team supports departments across the organization by providing data for decision making. In addition to the weekly and monthly reports they routinely prepare on a scheduled basis, they respond to ad hoc inquires related to financial and operational issues. With its previous solution, they manually consolidated data in spreadsheets and created reports from scratch each time. Moving to a true performance management system eliminated all of the manual effort. Ongoing reports are set-up once by the Finance team and then automated. For ad-hoc requests, the Finance team can easily import and consolidate multiple data sources into a single repository and create custom reports right in the platform within minutes. These closed-loop management reporting capabilities have eliminated the manual processes of integrating data, report writing and report distribution, saving hundreds of hours and leaving Finance more time to focus on analysis to support decision making and leveraging opportunities for improvement.

Cloud Solution Reduces IT and Capital Costs Another cost savings benefit of moving to Axiom EPM from their legacy budgeting solution was reduced IT and capital costs. Norman Regional chose to deploy the Axiom performance management system on the cloud to eliminate IT overhead costs associated with maintaining and upgrading hardware and to eliminate software needed to run the solution.

While nearly all healthcare organizations will continue to look for ways to cut cost of care for years to come, agile organizations, like Norman Regional Health System, will also look for ways to cut administrative and operational costs. Performance management solutions serve as a great way to bring efficiency and reduce costs associated with budgeting, planning, and reporting, in addition to forecasting and more strategic activities.

David Whitaker, FACHE, is president and CEO, Norman Regional Health System; Ken Hopkins is CFO, Norman Regional Health System; David Janotha, industry vice president, Healthcare Axiom EPM.