It’s no secret that hospitals and health systems must ramp up efforts to improve performance given rising healthcare costs and an unstable political environment. For decades, hospitals and health systems have recognized the importance of managing costs and have routinely pursued unit-based cost reduction strategies with varying degrees of success. For the most part, these efforts have yielded some levels of success but there is more to do and the pressure to perform is significant.
When health system executives were recently asked about the greatest barriers to achieving sustainable cost reduction, the top answer by far was ‘lack of data on true cost of care.’ Other obstacles were also cited regarding the challenges to successful performance improvement, including: absence of a full understanding of the interplay between cost and quality, lack of technology to achieve goals, organizational culture, poorly defined goals, and lack of sufficient and appropriate resources.
In our experience working with hospitals and health systems, successful performance management must include:
- Leadership that is committed to and supportive of efforts to improve performance
- A culture of accountability for results
- A data-driven approach to assessing performance and setting improvement goals
- Access to meaningful and reliable information to support all levels of the organization in understanding performance and driving material improvement
- Organizational engagement and trust in the data and the process
- A rigorous process/tools to measure, track and report on results
Benchmarking is the first step in understanding cost position, variance and opportunity for improvement. Yet, even with tools available, impact has been inconsistent. I believe this is because:
- Leadership often does not have the information they need to understand their costs, or to identify the drivers of sub-optimal performance (e.g., operational efficiency, clinical variation)
- Legacy benchmarking does not sufficiently support organizational change and management imperatives
- Data collection processes rely on client interpretation and as a result, reduce the accuracy of the data
- The essential confidence and trust in the foundational data is lacking
- Leaders, managers and associates are not involved in the data validation process resulting in a lack of understanding of the data
- Lack of understanding of the data results in a lack of engagement
- Benchmarking alone, even if done well, is necessary but insufficient to drive meaningful improvement
Achieving meaningful, sustainable performance improvement is a function of two things: a deep-rooted culture of continuous improvement, and an integrated performance management platform that include credible and meaningful relative performance assessment; goal setting; initiative tracking and management; and a robust, experienced community to support and guide actions.
EXCLUSIVE MEDIA INVITATION: To learn more about what hospitals can do to rise to this challenge, register for a complimentary information session with us, “Actionable Insights: A New Approach to Healthcare Analytics,” on WEDNESDAY, AUGUST 16, from 1-2 pm EDT.
 Strategic Cost Control: True Cost, Process Redesign, and IT Integration, Health Leaders Media, June 2015, based on 324 respondents