Reducing Back-Office System Costs for a Leading Healthcare System

Executive Summary

Facing cost pressures associated with uncompensated care, coupled with decreases in overall reimbursements and declining reserve values, a leading healthcare system organization sought major cost reduction efforts for its back-office services. With Everest Group’s assistance, this company developed a detailed operational and financial baseline of its current services, and identified and assessed a targeted set of optimization initiatives. It also modeled its total cost of operations impact, and developed and implemented an improvement roadmap. The strategy resulted in a set of initiatives that reduced in-scope sales, general and administration (SG&A) activity expenses by 30 percent within an 18-month period.

The Client’s Challenge

The healthcare company needed to overcome several in-place barriers in order to achieve the desired back-office service cost reductions. Key factors included:

• Increased cost pressures due to a rise in uncompensated care and decreases in overall reimbursements
• A large number of under consideration functions – including HR, F&A, facilities management, food services, security, transportation, environmental services, laundry, patient billing, mailroom, fleet services, medical transcriptions, purchasing, and document management – due to in-flight clinical systems initiatives
• Limited capacity for change, since the organization had recently undertaken a disruptive set of acquisitions

Insight to Action

Everest Group collaborated with the organization’s finance and operations leadership to quickly establish a baseline and identify and assess potential service delivery models to address each function’s operational outcomes. With a proven set of shared services and sourcing delivery constructs and research, the team prioritized opportunities and quantified and qualified the achievable impact. After developing the improvement roadmap, Everest Group provided a set of operational and governance mechanisms to implement, adjust, and track the solutions on an ongoing basis.

Impact

The strategies developed by Everest Group for this healthcare system organization resulted in an operational expenditure reduction of more than 30 percent. The Everest Group-designed solutions bridged functional areas that had previously been considered unrelated, such as laundry and facilities management. This engagement demonstrated how service agreements generally associated with IT services could be applied to medical dictation and transcription. Importantly, the engagement resulted in a well-crafted shared services construct with considerable room for services growth.