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Cost Containment Under Healthcare Rules

Philip Betbeze, for HealthLeaders Media, October 13, 2011
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This article appears in the November 2011 issue of HealthLeaders magazine.

Generally, as services and retail products get broader distribution, as competition kicks in and as those services get democratized, they get cheaper. Healthcare doesn’t follow those economic rules. It gets more expensive every year—and usually outpaces the rate of inflation, salaries, and everything else. That clearly can’t continue ad infinitum.

The challenge of cutting costs under one reimbursement system while preparing for the advent of another adds a degree of complexity as well. That’s reflected in the 2011 HealthLeaders Media Cost Containment survey, where eliminating excess cost and waste is seen as a top priority, but where progress is seen as difficult to achieve. In what areas is it most challenging? The emergency department and surgery top the list, where 65% and 48%, respectively, say it is very or moderately difficult.

Why doesn’t healthcare respond to the economic rules that drive other industries? For one, the relationship between the patient (the end user) and the healthcare entity (the producer) is muddled by the presence of regulatory and payer bodies. A Byzantine reimbursement system prevents—or at least discourages—the type of competition and quality improvement techniques that define so many other industries.

But that landscape is rapidly changing. It doesn’t mean that healthcare will get less complex—indeed, probably the opposite—but various changes in the way healthcare is evaluated and paid for are causing healthcare senior leaders to focus as never before on cost control. In a future that seems dominated by declining reimbursements and clouded by uncertainty, costs are one area that healthcare leaders feel is a clear goal that can be attacked with zeal. However, in many cases it seems as though healthcare is still going through the experimental stage in this endeavor, and that is reflected in the new HealthLeaders Media Intelligence Report: Cost Containment: Overcoming Challenges.

 

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1 comments on "Cost Containment Under Healthcare Rules"


jlauer (12/2/2011 at 2:03 PM)
I liked this article and insight into reasons cost containment, while recognized as important, does not always make the shortlist among other pressing priorities. One point not mentioned: While cost containment through reductions in utilization present a challenge due to the "schizophrenic reimbursement environment", reductions in indirect spending[INVALID] boring stuff like office supplies, energy, and other overhead[INVALID] go directly to the bottom line, regardless of payor mix. The ROI of such expense reductions is guaranteed; it's just not exciting!