In a recent Becker's Hospital CFO Report article, Mariah Muhammad and Laura Dyrda asked hospital and health system leaders where their organizations plan to reduce expenses in the coming years. Advisory Board's Vidal Seegobin highlights the three biggest opportunities for cost management — and provides our best resources for sizeable and sustained cost savings.

3 major cost management opportunities for health systems

Ahead of its 14th annual meeting, Becker's asked 46 executives about their health system's biggest cost-cutting objectives for the next three years.

We took the liberty of synthesizing their insights to identify the three biggest opportunities for cost management and paired them with our best research publications on sizeable and sustained cost savings.

1. Labor cost management

The last year and a half underscored the importance of both clinical and non-clinical workforce stability.

Over the last six months, the average health system has achieved greater control over travel nurse expenses. However, there is still a lot of work to do — both to retain top talent and upskill early tenured nurses aiming to step into a more complex clinical environment.

Advisory Board's research points to a wider array of strategies than just aggressively hiring to staff roles. This summer, our survey analysis revealed three key findings:

1.       A more tailored retention strategy is key for early career nurses.

2.       Improvement on burnout mitigation can yield outsized returns.

3.       Technology and innovation can be a powerful ally in attracting talent (when deployed correctly).

2. Operational efficiency

Increasing efficiency, which boils down to doing more with less, is easy to say and hard to do. Since the global financial crisis, we have been looking at any and all opportunities for cost savings and management.

Again, the story for health systems is one of improving performance. But the best and most cross-cutting avenue for efficiency is on patient flow and operations — a hard battle fought in increments where dedication from leadership and a wide array of tactics are key.

We identified three clear choke points impacting operational efficiency:

1.       ED: Our projections show that "appropriate" presentations — patients with acute presentations that require time-sensitive interventions — will only increase, further driving capacity challenges, increased wait times, and burdens on clinician time.

2.       Expected date of discharge: Proper patient discharge is critical to reducing costs during post-acute care. We've seen backsliding in department-wide discharge standards and visibility.

3.       Operating room (OR) optimization: Higher patient complexity is disrupting OR scheduling. To overcome inefficiencies along the surgical pathway, stakeholders must prioritize collaboration across disciplines. 

3. Technology-enabled productivity

A persuasive argument can be made for 2023's term of the year to be artificial intelligence (AI). And as our research team continues to find, AI — like all previous technologies — is most powerful when applied to specific business problems.

Within the healthcare context, we have found two core application areas:

1.       Technology to improve productivity : These solutions offload work from clinicians to increase efficiency in clinical workflows.

2.       Technology to support clinical decision-making and performance: These solutions assist clinicians with care decisions to support the delivery of high-quality, effective care.

Cost management — while critical work — is rarely an exciting enterprise. Our research suggests that the key to success here is a comprehensive approach, built tactically through initiatives that provide incremental gains. 

In the coming years, health systems should capitalize on cost saving opportunities — especially those presented in labor, efficiency, and technology-enabled productivity.

Whether you're setting up those plans now or want to make sure you're examining all possible options, we've got you covered. Check out these 20 essential tactics that can help you create near-term savings and set the stage for long-term cost discipline. (Muhammad/Dyrda, Becker's Hospital CFO Report, 11/19; Advisory Board analysis)