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Need to reduce costs? Who doesn’t - healthcare payer organizations should look beyond traditional methods

Jeff Cameron and John Konczyk | Becker’s Hospital Review | 2 October 2017

This article first appeared in Becker’s Hospital Review

Cost reduction in healthcare has taken center stage as a national priority.

With ACA efforts stalled and uncertainty looming over federal and state funding, many healthcare payers are looking for additional ways to drive cost savings across their operations. In fact, most healthcare payers have already implemented a wide range of strategies, from workforce reduction and business process outsourcing to reducing their IT footprint and cost structure across their organizations. While these efforts have helped reduce and/or stabilize administrative and medical cost ratios, in order to continue driving additional cost efficiencies, here are several strategies for identifying additional cost reduction opportunities in your payer organization.

Determine the IT capabilities you already have and are NOT using

You have probably already examined and realized efficiencies in optimizing IT contracts spend, IT staffing, and on premise vs. Cloud. However, can you easily list out features and capabilities you are not using in their current applications?

Often vendor version upgrades are applied without the time to activate or modify processes to take advantage of new and enhanced features. Common examples include newer CRM and Customer portal features that may provide opportunities for increased customer engagement and internal process efficiencies without large capital spend. Work with your strategic vendors to perform a no/low cost review of the capabilities your organization has purchased/ licensed but are not using to see if these capabilities offer benefit to the organization.

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Seek out redundancies in inter-department processes and between product lines

Driven by P&L structures, most start cost reduction efforts with a department-budget based view of processes when looking for cost savings. However, looking at processes that cross departments (enrollment for example) can reveal opportunities for efficiencies in the handoffs that occur between departments and are often missed in departmental based budget reviews.

Many of these core processes, such as enrollment, can be improved by comparing current process costs to industry cost benchmarks. The comparison can help organizations determine if their spending on a given process is in-line with industry averages. Benchmarks can assist in analyzing costs at both the core process level (enrollment etc.) as well as the sub process level (member ID card generation etc.). By analyzing cross departmental impacts in enrollment, a client was able to add data early in the process, saving 8-12 hours of work per Medicaid enrollment. When applied to the entire Medicaid population, the savings are significant.

Additionally, many have product teams that operate in silos due to differences in commercial and government product offerings. Often business processes and resources are duplicated between these silos “just because that is the way we have always done it.” By implementing increased transparency and challenging your product teams to work in greater collaboration across the organization, cost savings can be identified and used for innovative investments that fuel growth in the product lines.

For example, start with reviewing corporate services such as marketing and IT – are any functions duplicated across the product lines? Continue by examining areas where there is product line differentiation (Care Management, Medical Policy, etc.), while it’s valuable to have product specific subject matter experts in these areas, many organizations can benefit from greater transparency and awareness of requirements across their product lines.

Manage your pipeline of capital projects

An additional cost savings opportunity, especially for smaller to medium size healthcare payers, is to closely monitor your efficiency and resource utilization in managing capital investment projects.

This could mean controlling the pipeline of capital projects by leveling or smoothing out your resource utilization to operate as efficiently as possible on large capital projects. Add resources to your capital projects at the specific time they are required for project activities, adjusting for onboarding, transition and knowledge transfer as needed. In addition, sequencing projects starts in a staggered manner throughout the year so key resources can roll from one project to another can also help reduce the need for contracted resources and avoid the resource collisions that occur when multiple capital projects start at the start of the calendar or fiscal year. This level of portfolio management can mean a savings of 15% - 20% of your capital budget.

With many organizations beginning their budgeting processes for next year, now is the perfect time to look for cost reduction opportunities. Finding cost savings today can help fund new projects and innovative efforts next year.

Jeff Cameron and John Konczyk are healthcare experts at PA Consulting Group 

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