The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.


Faced with a health system or hospital budget shortfall?

Peer benchmarking could lead to the answer.

By Truven Staff

Tell us if this health system’s challenge sounds familiar: CHRISTUS Trinity Mother Frances Health System, located in Northeast Texas, was facing a staggering potential setback when a number of payer contracts changed. The difference amounted to a $25 million shortfall in their budget’s revenue.

The system’s first reaction might have been to issue an across-the-board expense reduction mandate to make up the budget difference. We all know that can happen a lot in the industry, but it doesn’t always produce the results healthcare organizations need, and quality of care can be impacted.

Instead, this system chose a data-driven, strategic savings approach as the path forward, with an eye on long-term financial independence from these types of shortfalls.

A look at the targeted expenses

Using a comprehensive comparative database, the system was able to benchmark costs, productivity and resource utilization against best-in-class facilities of similar size and demographics.

Leaders identified cost improvement opportunities in areas such as supply, labor costs, length of stay and purchased services — areas where the system was not at the same level as high-performing peers in terms of expenditures.

The benchmarking information from the database was also used as a call to action for staff to find methods of improving processes and cost management. CHRISTUS Trinity Mother Frances leaders formed teams and assigned financial targets. Teams then used the database to answer the question, “If another health system is able to keep supply costs at this level, what can we do to bring our costs to that level with no bearing on our patient care or satisfaction?” The health system also created a dedicated project management office to help guide the process. The results of these efforts (in box below) speak for themselves.

If you’d like more information on how the health system achieved this result, please reach out to us. You can also read the full case study here.



Doctors “Clocking Out?” Not So Fast

By Truven Staff
Mike Taylor imageRecently I noticed an article that projected drastic declines in physician productivity, increasingly fragmented care, and higher costs due to hospital-based care monopolies – all due to ‘ObamaCare.” Of course these are not the results we expect from healthcare reform and I wonder if the point of the article was simply to be provocative. 

It is true that employed physicians may be less productive, but in my experience this is often a temporary adjustment to new processes, new IT systems and other transition issues. Do hospital-employed physicians become hourly wage earners? Hardly. They are salaried, and they are employed to provide care to patients during standard office hours which typically are quite similar to the hours of their private practices. Nevertheless, becoming a hospital employee is attractive to many physicians who see their incomes shrinking in private practice – especially primary care physicians – or who find themselves spending increasing time managing the business side of their medical practice. 

The US healthcare system is dysfunctional and delivers fragmented care regardless of the employment status of the physicians. Hospital-based primary care physicians, also known as hospitalists, improve care (as do intensivists), and while the communications between inpatient and outpatient providers can be tricky, this has nothing to do with the ACA. I know, because I set up a hospitalist program in 1997, well before anyone knew who Obama was!

It is also true that procedures performed in the hospital setting are reimbursed at a higher rate than when performed in the the doctor’s office, and this has been a longstanding issue for all insurance plans. However, hospitals are buying practices to maintain and grow market share – and, yes, now to prepare for ACOs – as a matter of survival. This is not about getting paid more for procedures. In fact, in the ACO world, we will see even more shifting of services to outpatient facilities where effective care can be delivered more efficiently.

The tight association of physician compensation with volume of services has been described for decades as a ‘perverse incentive,’ and shifting payment from volume based to value based is exactly the sort of free market solution that we need. This will lead to  better quality – the right care, at the right time, in the right setting, by the right provider, for the right results  as we have seen at respected institutions with integrated delivery care systems. 

The good old days of unlimited spending for unquestioned healthcare services are over. The era of evidence-based decision making, measuring and rewarding quality, transitioning away from fee for service is approaching—as a country, we have every reason to embrace its arrival with open arms.