#1 Cost for Healthcare Providers Is . . . - Cover

#1 Cost for Healthcare Providers Is . . .

Sudden financial hardship or an extremely expensive unanticipated event often motivate people to look much more closely at their everyday expenses. For healthcare providers, regulatory changes, shifts in the insurance landscape with Obamacare, decreased reimbursements, and uncontrollable increases in operating costs combine to create an exceptionally challenging financial environment.

Hospitals are looking at their bank statements more closely than ever to determine how to reduce expenses, and it makes sense that they would tackle their top expenses first. The number one expense among providers is . . .

Clinicians and Staff
Since 2008, hospital operating expenses have grown about 10% annually. Salaries, wages and benefits represent 55% of total operating expenses in hospitals. According to Becker’s Hospital Review, when those costs are broken down by department, we see that clinical staff tops the list:

  • Clinical — 32% 
  • Nursing — 30% 
  • Non-clinical — 24%
  • Physicians — 14%

Understandably, since healthcare providers’ number one cost is their people, organizations have very high expectations of the systems they use to manage them. When KLAS compiled the interviews we gathered for our recently published human capital management (HCM) report, the theme that emerged was reflected in the report’s title: Just Efficient Is Not Sufficient.

The automation benefits that Staff Scheduling, Time and Attendance, HR/Payroll, and Talent Management products are supposed to provide are often a baseline expectation. Mounting cost pressures that motivate the need to do more with less are propelling providers to expect a lot more from HCM vendors.

KLAS spoke with many healthcare organizations that had high expectations but were unsure which vendors could deliver. One provider said, We are trying to understand who the strongest vendors in the market are to meet most or all of our needs.” Only one broad/suite vendor and a few focused/niche vendors earned the designation of Beyond Efficient in the KLAS report, meaning that customers see the vendors as standing out in delivering cost reductions and efficiency gains.

Many other vendors earned the Efficient designation for delivering strong value and efficiency, but they lack progressive development or market traction for one reason or another. A handful of others who demonstrated below average performance and/or impact were designated Idle.

The HCM broad/suite vendors in the report include GE Healthcare (API Healthcare), Infor, Kronos, McKesson, Oracle, and SAP. The HCM focused/niche vendors include Avantas, Cerner, Elsevier, Halogen, HealthcareSource, HealthStream, JBDev, OnShift, and OpenTempo.