This article was written by Lisa Miller.
Albert Einstein gave his students at Princeton the exact same final exam every semester for twenty years. After just a couple of years, his students figured out the predictability of the questions, and so did his fellow professors. One of his peers asked him why he continued to use the same final exam questions year after year. Albert’s reply? “Because the answers keep on changing.” He was so smart!
Here it is on a bumper sticker: The reason companies lose relevance, go broke, or fade into the sunset is because they continue to grow, but fail to evolve. They rely on the wrong questions and old answers. Great questions, an open mind, flexibility, and a healthy dose of paranoia are your best friends in business. No business is safe: 435 of the Fortune 500 (87%) from 1955 are now gone…disappeared…kaput. The business environment kept on changing-requiring a different set of answers-and they didn’t come up with a better question. Stupid! Excerpted from The Road Less Stupid By Keith J. Cunningham
Over the last three weeks, I have discussed with several hospital CFOs, their new aggressive focus on non-labor cost savings due to the financial losses brought on by COVID-19.
The theme of all of these calls was two-fold; one – they know that what worked two years ago (even a year ago), will not work today. In fact, financial recovery from COVID-19 means taking a hard look and an intense assessment of your costs and cost structure and assumptions made about these costs. One good example is assessing the value of your GPO and how your hospital may or may not depend on them for vendor pricing agreements.
This is a great time to ask questions like:
- Have we had an external independent benchmarking analysis of our pricing for supply and purchased services spend other than from our GPO? If we haven’t, why not? Do we think our GPO is the sole source to achieving the best pricing and cost structure for what we spend?
- What if better pricing, cost savings opportunities and cost management tools exist outside of our GPO? How would we know?
- How does our organization seek industry best practices in cost improvement and cost savings?
The second theme and one that is very critical, is that hospitals will need a specific strategy dedicated to a new cost savings strategy that includes these six areas of assessment:
- Is our pricing right?
- Is our utilization right?
- Do we have a culture of cost awareness?
- Have we adopted cost innovation?
- How do we utilize spend analytics each month to eliminate unnecessary costs and protect the cost savings we have achieved?
- Do we have a discipline of cost management throughout the hospital?
This is the time for people on the business side of healthcare to protect our heroes on the front lines of healthcare. Click To Tweet
What has worked in the past; the tendency to cut people without aggressively seeing where other obvious and unnecessary costs are; should not be the solution for today.
The solution for today is a war on unnecessary non-labor costs which can be reduced or eliminated while improving patient care.
Your challenge for this week is to carve out an hour of your week and consider these questions. Schedule a meeting or Zoom call with your team and work through creating a new cost savings strategy for your hospital or health system.
Two ways VIE Healthcare can help you is to:
- Collaborate with your hospital/health system to create a customized non-labor cost savings strategy.
- Provide an independent cost savings assessment that identifies and achieves non-labor cost savings.
If you want to discuss how VIE Healthcare can help, please get in touch.