News Feature | September 8, 2014

Cost-Reduction Plan Raises Operating Surplus 55%

Christine Kern

By Christine Kern, contributing writer

Healthcare Cost-Reduction Plan

SSM Health Care likely to benefit this year and in future years from lower health information technology costs.

Last year, SSM Health Care initiated a short-term plan to reduce excess spending by $150 million. So far, the strategy is paying dividends for the St. Louis-based health system, which recently released its second-quarter results.

The cost-reduction plan included consolidating administrative functions and improving the system's collections and billing departments, spokesman Steve Van Dinter said. “The year is pretty much panning out as expected, and we feel pretty good for the rest of the year,” he said.

One place SSM is likely to continue to benefit is in lower health information technology costs. Since implementing an Epic Systems Corp electronic health record system at a cost of $300 million, SSM has seen a reduction in overall technology costs. Such investments have not been uncommon, and while they require an initial outlay of capital, they also provide a great ROI over the long run.

SSM executives said in their financial disclosure they anticipate “a much lower level of EHR spending,” which will shift more to maintenance and IT staff costs.

For the first six months of fiscal year ending June 30, 2014, SSM posted an $82.3 million operating surplus, a marked improvement over the $1.3 million operating loss in the same period of 2013. Including investment income, SSM's total surplus rose approximately 55 percent, from $72.2 million in the first half of 2013 to $111.7 million this year.

Revenue soared 40 percent in the first six months, totaling $2.4 billion. The large upswing almost exclusively came from SSM's acquisition last fall of Dean Health System, a large multispecialty physician group and health plan based in Madison, WI. Same-hospital acute admissions declined 1.3 percent year-over-year, but outpatient visits and emergency room visits on a same-facility basis increased 1.6 percent and 4.9 percent, respectively.