Survey: Hospitals Overspending on Corporate Services, Could Reduce Costs Without Impacting Quality

As corporate services spending increases faster than net revenue, providers will need to maintain or decrease corporate budgets, suggests Navigant, a Guidehouse company analysis of HFMA survey

Washington – March 12, 2020 – Seventy-five percent of provider executives believe their corporate services spending could decrease – 36% suggesting reductions of 10% or more – without negatively impacting quality or efficiency, according to an analysis by Navigant, a Guidehouse company, of a survey conducted by the Healthcare Financial Management Association (HFMA).

Accordingly, more than half of the 114 hospital and health system executives surveyed say they’ll be held accountable for reducing corporate services budgets (29%) or, at a minimum, holding them flat (26%) over the next year. To do so, providers are targeting revenue cycle management (23%), the supply chain (20%), and information technology (19%) as priority areas for reducing corporate services expenses this year.

“Revenue growth remains a constant challenge for hospitals and health systems due to such aspects as stagnant reimbursement and meager inpatient growth, prompting many providers to grow inorganically via M&A while targeting corporate services for meaningful cost reductions,” said Robert Green, partner at Guidehouse. “This economic reality requires providers explore creative opportunities to simplify and streamline a complex organizational structure while consolidating, automating, and outsourcing functions to drive more efficient and effective corporate and shared services delivery.”

Survey results also suggest providers lag other industries in leveraging technology and automation of back-office corporate services functions through robotic process automation (RPA) and enterprise resource planning (ERP), shown to reduce costs and improve accuracy and efficiency. Specifically:
• Just 15% of providers have automated their corporate services functions.
• While one-in-three providers have deployed an ERP system, only 12% have optimized these systems. Moving forward, 51% of providers predict they’ll deploy or optimize an ERP over the next 2 years.

“New technologies leveraging RPA, ERP, and machine learning have unlocked significant opportunities to drive back office efficiencies,” said Jeff Palmieri, associate director of robotics automation at Guidehouse. “As many providers have learned the hard way, overlaying technology as the ‘solution’ without first reengineering the processes and concurrently embedding a change management program has proven to be frustrating at best, and value-degrading at worst.”

Benchmarking data is also essential for identifying improvement opportunities, but providers must look outside their organizations – and sometimes the industry – to reveal a true snapshot of performance and improvement potential, Green suggests.

“To uncover potential efficiency and effectiveness opportunities, providers must look beyond their facility’s four walls and leverage benchmarking data that compares their corporate services performance against that of comparable peers,” said Green, who also leads Guidehouse’s Corporate Services Peer Network and Database, comprised of 55 health systems nationwide.

Navigant was acquired by Guidehouse, a portfolio company of Veritas Capital, in October 2019. Navigant will fully rebrand itself as Guidehouse in April 2020.

Guidehouse’s Health segment is comprised of consultants, former provider administrators, clinicians, and other experts with decades of strategy, operational/clinical consulting, public health, managed services, revenue cycle management, and outsourcing experience. Professionals collaborate with hospitals and health systems, physician enterprises, payers, local and federal government, and life sciences entities, providing performance improvement and business process management solutions that help them meet quality and financial goals.

About Guidehouse

Guidehouse is a leading global provider of consulting services to the public and commercial markets with broad capabilities in management, technology, and risk consulting. We help clients address their toughest challenges with a focus on markets and clients facing transformational change, technology-driven innovation, and significant regulatory pressure. Across a range of advisory, consulting, outsourcing, and technology/analytics services, we help clients create scalable, innovative solutions that prepare them for future growth and success. Headquartered in Washington, DC, the company has more than 7,000 professionals in more than 50 locations. Guidehouse is a Veritas Capital portfolio company, led by seasoned professionals with proven and diverse expertise in traditional and emerging technologies, markets, and agenda-setting issues driving national and global economies. For more information, please visit: www.guidehouse.com.

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