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Radical Cost Reduction: Four levers to help health systems thrive in a post-reform environment

Four levers to help health systems thrive in a post-reform environment


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One of the most important issues facing CEOs and CFOs of major U.S. health systems is the perceived need for dramatic cost reduction in response to health reform. By many estimates, the reduction must reach 20-30% of total cost structure by 2015 to be able to confront a lean, health-reformed environment.

There are a variety of factors suggesting that hospitals and health systems should dramatically reduce their cost structures. The imperative is real and the challenges are great. Even the largest, professionally-run systems are wondering whether Radical Cost Reduction (RCR) is indeed required, how to go about this type of radical change, and which areas can get them to the 20-30% reduction.

The confluence of events means that hospital and health system revenues are going to shrink, rapidly. Even with this bleak outlook, there are opportunities to respond with significantly reduced cost structures to confront these changes as stronger, leaner and ultimately profitable organisations.

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