Approximately 25 percent of hospital and health system executives have no cost reduction goals for their organizations over the next five years, despite 96 percent of executives noting that transforming costs is a “significant” or “very significant” need for their organization, according to survey findings published by Kaufman Hall.
As hospitals and health systems face a myriad of pressures, including regulatory challenges, the rise of narrow networks and consumer demands, healthcare organizations need to reach a cost position that is equal or lower to competitors. For the majority of hospitals and health systems, achieving such a position will require a 25 percent to 30 percent reduction of costs over the next five years, according to Kaufman Hall.
The report, titled “2017 State of Cost Transformation in U.S. Hospitals: An Urgent Call to Accelerate Action,” presents the results of an online survey of more than 150 senior executives from U.S. hospitals and health systems to determine where the industry stands with transforming the cost of care.
Here are six insights from the report.
1. While almost all (96 percent) of executives identified cost reduction as a “significant” of “very significant” need, more than half (51 percent) of respondents said they have no cost reduction goal or a goal of only 1 percent to 5 percent in the next five years.
2. Only 5 percent of hospitals or health systems have a cost reduction goal of more than 20 percent over the next five years.
3. Seventy-five percent of executives indicated that their cost transformation success is average or below average.
4. Nearly 70 percent of executives acknowledged that they must close the discrepancy between their current operating performance and financial plan.
5. Almost 80 percent of respondents noted that they must proactively revise their cost structure with the industry switch to value-based care.
6. According to the report, a lack of accurate data, along with a lack of insight into costs and savings opportunities, may be the reason for limited cost reduction measures.