“All Healthcare Organizations Can Benefit From A
Strategic Approach To Non-Salary Cost Management To Increase Their
Weak Margins”
Dr. Thomas R. Prince of Northwestern University gives
us a stern warning when he says that, “an annual return (total
margin) of more than 6 percent is necessary to
sustain… (a) healthcare entity’s mission” this is necessary for
increases in salaries and benefits, to keep up with technology
demands, to introduce new procedures and services and for the
replacement of old equipment and buildings. Yet, healthcare
organizations’ average total margins are running about 5.3%
or less nationwide. More importantly, if a healthcare organization
plans only to break-even annually (which many do today), they
will surely find that their financial infrastructure will erode to
the point that it will be impossible for them to provide needed
services for their community or worse yet slowly slide into
bankruptcy.
Hospitals Must Do Better Than Break-even Or Grind Out A Small Profit
Each Year!
Hospitals must do better than break-even or just
grind out a few percentage points each year that hit their bottom
line if they are to pay for future increases in staffing, equipment
and new technology. It’s not going to come from your patient
revenues either in the future because they will be flat or weak
at best. This is also true of non-patient revenues such as cafeteria
sales, gift shop sales, rentals of buildings, or investments because
their growth potential is limited in today’s healthcare marketplace.
Looking to the future, most experts envision even
deeper cuts in Medicare and Medicaid reimbursement, continued
skyrocketing pharmaceutical and malpractice cost, and increasing
demand for new technologies that will further negatively
impact hospitals’ margins for years to come.
This leaves only those time honored financial
resources of debt bonds, bank financing and accumulated surplus as
life preservers, and these have become more impractical,
non-existent or difficult to maintain without adequate margins.
So, where does your healthcare organization
go from here to survive and thrive in the 21st century?
6% to 9%
Improvement In Total Margins By Attacking
Your
“Invisible Costs”
There is only one area that is left in the
vineyard that represents about 45% of a healthcare organization’s
operating cost. I’m referring to an area that can easily be
harvested to improve a hospital’s total margins by as much as
6% to 9% and within 18-months if you know where to
look for these improvements and then become organized and structured
to capture them.
What I’m talking about are those “invisible
costs” or unnecessary non-salary costs in your healthcare
organization’s operating budget that are eating away at your
margins. To achieve these huge savings, healthcare organizations
have been so challenged with the identification,
classification and quantification of these “invisible
costs”, that they haven’t been able to decide what can be pruned,
trimmed or cut.
What healthcare organizations are missing in their
management toolbox to achieve these improvements is a strategic
and revolutionary
approach to non-salary cost management, which we call Strategic
Value Analysis™. This breakthrough approach would create new
behaviors, new organizational structures, and other
critical adaptations to improve their viability
to harness
and control their non-salary expenses, so that they can
dramatically increase their weak margins as opposed to one time
initiatives or the tightening of budget controls.
If you are doing the same things and getting the same
results in your quest to reduce your non-salary expenses, then you
need to think differently and do differently if you
want your healthcare organization to survive and thrive in the 21st
century.
Robert T. Yokl, President, The HCP Group, Ltd., has over 35
years of experience as a consultant and manager in the field of
Supply Value Chain Management and is one of the country's leading
healthcare experts in value analysis, value engineering, Non Salary
Expense Reduction and materials
management. He is the developer and program leader of the award winning
Certified Value Analysis Practitioner Training Program™. Mr. Yokl is also
the developer of the healthcare industry's leading ValueNetCentral™ Value
Analysis Software. Over the past two decades he has trained thousands of
healthcare managers in his patented Strategic Value Analysis™ and
Team-Based Project Management™ processes and has assisted scores of
organizations in developing their own value management programs. He has
published six books, videos and audios on supply/value chain management.
His latest book being, “ Strategic Value Analysis™: The #1 Smart Strategy
for Taking Cost Out of a Healthcare Organizations’ Healthcare Supply Value Chain”.
by
Robert T. Yokl, President