The productivity slam dunk for healthcare providers

Healthcare players must double down on productivity to fight the upcoming storm and thrive in the $1.5 trillion economy.

What’s the dark mass on the horizon? It’s the impending storm of cost escalation in healthcare. What birthed this storm? The pandemic. It created a vortex of affordability and accessibility challenges, clinical staff shortages, and unsatisfactory population-wide progress outcomes, threatening to suck out nearly half of the sector’s profits.

Healthcare executives have traditionally looked for ways to increase efficiency, but incremental improvements are no longer the solution. Leaders must become storm busters by deploying bolder aspirations to raise productivity. They must improve not only the cost of care but also the quality, accessibility, and experience of patients. All this is within the framework of advanced technology driving healthcare outcomes.

A McKinsey study shows that downturns act as catalysts to boost productivity. Challenges become brass rings, and healthcare companies that grasp them faster move up the ladder. For example, during the last global recession (2008-2009), resilient firms read the warning signs quicker and cut operating costs by an average of 50 basis points at the start and 350 basis points following recovery. These companies gained a substantial advantage over non-resilient players, whose costs rose during the recession but fell only slightly afterwards.

How can providers be more innovative?

Healthcare providers are under a particular urgency to improve the bottom line. The standard model of productivity vs cost is seen through output (services delivered) versus input (cost of providing services). Productivity increases when inputs remain steady while outputs expand or when inputs reduce without a difference in outputs. Though this model retains its relevance, it must be reordered to suit the new healthcare environment.

Providers must strike a new balance between external spending, general and administrative costs, and clinical care delivery. The nuts and bolts of healthcare delivery are an investment in services, personnel and delivery, and technology that enhances these functions. These measures control waste of time and time, as we know, is money.

Productivity offers a two-sided view: for patients, the healthcare provider’s productivity measure lies in its efficiency and reliability in creating the desired health outcome. For the provider, productivity is the number of patients attended to, the time spent, and the result.

There is no conflict between the two: they are organic halves of the healthcare system. Yet, the sector’s productivity continues to be a battle, especially after the pandemic.

How to prune the healthcare landscape for results

Providers must factor in the one- to the two-year lag between the higher costs they incur and the chance to negotiate higher reimbursement rates from payers. In addition, providers are experiencing poor year-to-date performance and sour investment income forecasts, which boosted the health system’s finances over the past decade.

Is this entirely due to the pandemic? The truth is the pandemic has cracked an old façade. The healthcare model always emphasizes productivity based on metrics, and it must now rapidly shift to patients as the base for productivity. This redefinition will rearrange the puzzle pieces seamlessly.

The current labor shortages and increased competition for talent may also allow providers to innovate. For example, providers could implement innovative technologies (including automation), enhance methodologies of staff responsibilities, streamline scheduling, and redesign care models to help teams work in an integrated manner rather than in silos.

A core component in revamped care models is preventative care, an excellent trigger to cut costs due to its enabler philosophy of encouraging consumers to adopt healthier lifestyles.

Besides improving financial performance, such initiatives also improve access to quality healthcare, enhancing the patient experience.

How can payers contribute to reducing the cost burden?

The payer ecosystem is among healthcare’s most critical and complex elements, and the patient/consumer experience and outcome are directly related to the payer-provider equation.

Payers must reduce medical and administrative costs to prevent unsustainable price increases for purchasers. They play a leading role in transforming care, such as increasing the number of value-based care programs, enabling, and scaling up, new care models in lower-acuity and more convenient locations, such as remote areas, homes and virtual care, and reimagining care pathways.

Also, payers should improve their productivity by redesigning internal processes, deploying new technology (including automation), and focusing on performance management. They should look beyond their four walls to the larger picture in which they are participants and reduce the 25 percent of national health expenditures on administrative expenses. In their role as healthcare orchestrators, payers are well positioned to pursue interventions that could lower this to 18 percent.

Many performance improvement journeys are in progress in healthcare, but the complexity of this sector’s functioning leads to fewer success stories because all the elements are not in place.

According to research, 70 percent of performance transformations fail because the requisites are not coordinated. However, when an organization lines up its ducks based on strategic vision and implementation, it sets up an efficient cost-revenue model, increasing the odds of success to nearly 80 percent.

It is as urgent to fix healthcare’s escalating costs and lop-sided spending as it is to mend its relationship with consumers. The provider-payer balance needs a reset at the heart of this transformation.

Ultimately, productivity in healthcare is about investing in patients; it is the only kind that fetches lasting dividends.

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