Healthcare Cost Control Rises to Top Hospital Exec Priority
Health system and hospital executives are focusing on healthcare cost control and expense reductions rather than revenue growth in 2018, a new survey revealed.
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By - Healthcare cost control rose to the top of hospital leader priority lists, bypassing revenue growth for the first time, according to the Advisory Board’s most recent Annual Health Care CEO Survey.
The survey of 146 C-suite executives found that that hospital and health system executives are most concerned with “preparing the enterprise for sustainable cost control.” About 62 percent of hospital leaders said they were extremely interested in this topic in 2018, more than any topic in the least four years and five percent more than any topic in 2017.
This is the first time healthcare cost control topped health system and hospital executive priority lists, the Advisory Board reported.
Besides healthcare cost control, hospital executives are also focusing on other cost reduction strategies. The second top area of extreme interest for hospital and health system executives was “innovative approaches to expense reduction.”
Fifty-two percent of survey respondents said they were extremely interested in this area in 2018.
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Rounding out the top five areas of interest in 2018 was “exploring diversified, innovation revenue streams” with 56 percent of respondents, “boosting outpatient procedural market share” with 50 percent, and “meeting rising consumer demands for service” with 50 percent.
“Health system CEOs recognize that any effective growth or financial-sustainability strategy must be built on a competitive cost structure in order for their enterprises to deliver high-quality, cost-effective care to the patients they serve,” stated Christopher Kerns, Executive Director of Research at Advisory Board.
The rise of other nontraditional provider organizations is also accelerating the push to reduce healthcare costs, Kerns explained.
“The entrance of nontraditional health care providers, such as retailers and consumer-focused imaging and surgery centers, adds to the urgency of health systems improving cost structures, sometimes radically so, such as redesigning staffing models, rationalizing service lines across their market, and even transforming their facility footprint,” he said.
The Advisory Board pointed out that this year’s survey results show a major shift in the priorities of hospital and health system executives.
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None of the top five areas of interest from 2016 ranked among the top five areas for 2018, the group reported. Top hospital and health system executive priorities in 2016 included engaging physicians in decreasing clinical variation and restructuring health system services for population health.
2018 priorities also significantly shifted since last year. In 2017, hospital and health system leaders were more concerned with improving ambulatory access than developing innovative strategies for expense reduction.
Although, establishing innovative expense reduction strategies and boosting a hospital’s or system’s outpatient procedural market share did appear on the 2017 priority list for healthcare executives.
The Advisory Board noted that the desire to increase the outpatient procedural market share and the push to explore diversified and new revenue streams have ranked near the top for the past two years. The two top areas of focus indicate that healthcare executives have a “sustained commitment to hospital and health system growth, albeit in new directions.”
The focus on diversifying revenue streams particularly also shows that healthcare executives are looking for nontraditional revenue sources to improve their bottom lines.
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“Health systems and community hospitals alike have expanded their ambitions for growth to now include nontraditional sources of revenue growth, such as contracting directly with employers, commercializing intellectual property and launching innovation hubs,” said Rob Lazerow, the Advisory Board’s Managing Director of Research.
“This interest contrasts with relying solely on conventional channels for securing market share, such as competing for referrals from independent physicians,” he added.
The Advisory Board also observed that hospitals and health systems are increasingly focusing on meeting consumer demands. Responding to healthcare consumerism was one of the fastest growing topics, rising from the tenth area of interest in 2017 to number five the next year.
A recent Kaufman Hall survey also found that consumer-centered healthcare was a top priority for hospitals and health systems. But despite 90 percent of organizations reporting that they highly prioritize consumer-centered care, very few said they actually have the innovative strategies to respond to consumer demands.
Only 8 percent of respondents ranked in the top tier for consumer-centered care success, according to Kaufman Hall. The majority of organizations (70 percent) fell in the bottom two tiers.
Responding to healthcare consumerism trends continues to be a top priority for health system and hospital executives as organizations develop and refine their current strategies. The advent of urgent care centers, retail clinics, and other nontraditional care settings will also spur larger organizations to offer more convenient services that patients demand.
