Academic journal article Frontiers of Health Services Management

Editorial

Academic journal article Frontiers of Health Services Management

Editorial

Article excerpt

STORIES OF HOSPITALS in cost reduction mode have escalated since 2008. Staff reductions, closed units, service cutbacks, renegotiated contracts, reviews of purchasing practices, and cutbacks of construction projects are just part of the list of cost reduction strategies that goes on and on. The economic downturn; changes in reimbursement policies; and reductions focused on specific phenomenon such as those related to never events, readmissions, the recovery audit contractors (RACs) program, and so forth have driven the need to watch, control, and reduce costs with a new intensity.

The demand for cost reduction is pervasive among our provider organizations and yet reductions are difficult to accomplish because they portend pain. Nonetheless, the pressures of an economic downturn and changing reimbursement policies call not just for lowered operating expenses, but for a sustainable plan to continue driving costs down. We are in this for the long term. There is no option. This issue of Frontiers addresses the question: How do we reduce costs?

The answer to that question is not simple; the answer is not only about costs. When we flip the coin that says "cost" on one side, we find the face on the other shouting "improved quality." We are faced with what seem to be polar opposites: less payment on the one hand, higher quality on the other.

I like the term "cost optimizing" better than "cost cutting." It suggests strategic thinking behind what is being cut or reallocated - action, not just reaction. The authors of this issue of Frontiers walk us through their experiences in finding success and describe where improved operational financial performance is not found. Most are looking in new places, applying creativity and innovation. As feature author Chip Caldwell and his coauthors write, "Leaders are discovering that traditional methods for curbing expenses have largely exhausted themselves, and they seek fresh approaches to meet their strategic imperatives. . . . The urgency of cost reduction is compelling. Senior leaders who fail to act, hoping better times will come, do so ill-advisedly." He and his colleagues report compelling findings from their study of hospital leaders whom they ultimately describe as "starters" and "non-starters. …

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