NEWMARK KNIGHT FRANK

A Cost Reduction Story

Article Commentary by: John Cobb, Global Healthcare Services

Imagine having financially prepared and discovering that instead of covering your expenses in the coming year, you would fall short for the next two years and the only solution was to cut 2% off of your annual budget? In the case of a recent cost reduction article, that 2% equated to $50 million.

Starting in 2016, Brigham and Women’s Hospital in Boston, MA has undergone a major cost-cutting drive. Staff buyouts, operating room schedules, new performance metrics, and medical supply spend reductions are among the steps described to reduce expenses while protecting quality of care. One surprising cost reduction came through mattress pads, where a simple change saved $400,000 per year. As of late September 2017 the Brigham, as they call it, has found $41 million in savings.

An oft-overlooked expense category is a hospital’s 3rd largest expense category – real estate. Many perceptions contribute to this omission… “There are just too many moving parts to move the needle” or “Leases have expiration dates that can’t be impacted” or “Owning something is the only way of controlling it.”

However, a proactive and strategic real estate plan can absolutely reduce costs for years to come. The keys are to look holistically at all the moving parts, ask the right questions, leverage data and technology, and apply meaningful metrics. It’s entirely possible… give us a call and we’ll share a few real-world stories and help you apply them.

Article Written by: Ron Winslow, Stat News, September 28,2017

Boston - In only 18 months on the job, the chief operating officer of Brigham and Women’s Hospital had weathered relentless and unforeseen events that battered the elite Harvard-affiliated medical center.

A record snowfall had paralyzed Boston and stanched admissions for a month. Installation of a $400 million electronic health record system had obscured a fall-off in patient volume. And the hospital had lost $24 million preparing for a threatened nurses strike.

But by July 2016, with the hospital’s finances improving, Dr. Ron Walls was upbeat. “I had this moment,” he recalled, “when I said, they can’t possibly throw anything more at me now.”

Read the full story here

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2017 Healthcare Real Estate Outlook