This research report was compiled by Lisa Miller.
Health systems are facing losses of an estimated $50 billion per month in the midst of the COVID-19 pandemic. As revenues declined sharply, costs increased at an unparalleled pace.
The events and pace of disruption are forcing all healthcare leaders to consider the implementation of a financial recovery plan to establish firm foundations for the future and ensure the survival of their organization. A structured approach that embraces all functions across a hospital is essential.
The 10 high performing strategies for cost savings and financial improvements that follow in this report encompass a number of areas, including:
- Supplies: Medical, Surgical and High Cost
- Purchased Services
- Charge Capture
- Inventory Optimization
- Physician Service Agreements
- Joint Venture Agreements
Strategy 1: Zero Based Budgeting (ZBB)
One of the principles which we operate on at VIE Healthcare® is analyzing best practice found across other industries and applying those lessons to the healthcare sector.
Zero based budgeting (ZBB) is one example of this approach. It is a system rarely used in hospitals that has enjoyed significant across other industries.
ZBB is defined by Investopedia as “…a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a “zero base,” and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether each budget is higher or lower than the previous one’’.
This approach enables a hospital to review its budgeting process from a different perspective, rather than an annual or monthly basis.
Rather than basing your budget forecast on last year’s numbers and increasing or reducing it by an agreed percentage, zero-based budgeting requires each hospital department to start from a zero budget and justify their purchases and spend. From that zero base, every cost function within an organization is analyzed for its needs and use.
ZBB’s secondary benefit is the habit of making thoughtful spending decisions for on-going cost management.
Our process: Collaborating with each department leader, VIE Healthcare® analyzes the line item cost and validates their need.
In this report, we offer nine other performing cost savings strategies that can place your hospital firmly back on the route to financial profitability. Each one is proven and supported by the expert team hear at VIE Healthcare®. Each one is a sustainable solution.