In Brief: Takeaways from ECG’s Executive Roundtable at the Becker’s Healthcare Annual Meeting, hosted by Terri Welter and Michael Biggs.
Achieving sustainable health system operations requires consistency, objectivity, and the courage to make tough decisions. That’s one key takeaway from an Executive Roundtable session that ECG Management Consultants hosted last month at the Becker’s Healthcare Annual Meeting.
Terri Welter, ECG partner and leader of the firm’s Payer Strategy and Contracting Division, and Michael Biggs, partner and leader of ECG’s Health System Optimization Division, spoke with 30 hospital leaders during the session, with topics ranging from workforce shortages to reimbursement strategies to the evolving role of leadership.
At the center of the discussion was the fact that operating expenses at healthcare organizations have undergone dramatic changes over the past five years. Costs continue to rise faster than revenue, squeezing hospital margins. Further, many organizations have grown in size and scope, expecting cost efficiencies to follow. But health systems won’t benefit from the advantages of scale without periodically evaluating their infrastructure and operations
The good news is that organizations don’t necessarily have to take drastic steps to optimize revenue and promote growth. Michael and Terri identified 10 areas where hospital leaders can discover opportunities to improve efficiency. Here are three takeaways from the roundtable.
1. Don’t start with labor rationalization.
Scrutinize nonlabor categories. Some 3% to 7% of excess operating expense is trapped in areas such as supplies, purchased services, and lab. Many organizations are also reexamining benefits packages that may no longer meet the needs of a post-pandemic workforce. Is the package too rich? Does it offer benefits that today’s workers aren’t looking for? With a focused effort, organizations can unlock trapped costs within 9 to 12 months.
2. Focus on revenue optimization.
Take a more active role in your payer contracting strategy. Rate negotiations are a challenge for every organization, but providers have a growing array of tools to bring to improve their position with payers. Use pricing transparency and purchased claims data to negotiate market corrections. Negotiate aggressively against administratively burdensome payer policies that erode revenue. Poorly performing contracts and payer relationships will not improve without intervention.
3. Capacity is a new form of currency.
As ECG’s recent whitepaper on patient access demonstrates, patient wait times are at an all-time high. And patients are increasingly willing to “shop around” for care (i.e., they won’t wait for you to clear your backlogs). Organizations need to explore ways to improve access without adding costs. Start by identifying, tracking, and eliminating capacity misalignment. Also, take a good look at underutilized space. At many organizations, up to 30% of ambulatory space is not utilized. Evaluate, optimize, and redeploy this space for maximum throughput.
If you’d like a copy of our slides from the Executive Roundtable, or would like to learn more about the 10 impact priorities we discussed, contact Terri Welter and Michael Biggs.
Published May 2, 2024
