Cost Containment Starts with Cost Clarity

Jonathan Bees, June 16, 2015

Cost Containment Starts with Cost Clarity

Healthcare leaders are recognizing the need to understand the true cost of care they provide if they hope to control costs while maintaining quality outcomes.

This article first appeared in the June 2015 issue of HealthLeaders magazine.

Cost containment and revenue cycle activities help shape a healthcare organization's financial viability, driving down costs through thrifty spending and process improvements on one hand, and maximizing revenues by ensuring that funds owed are actually received using sensible practices and IT-based capabilities on the other. While cost containment has traditionally focused on purchasing and supply chain efficiencies, an increasingly productive and sustainable strategy involves process redesign. Revenue cycle has remained relatively consistent in its focus on minimizing denials and improving clinical documentation, but a growing number of organizations are looking to leverage IT in new ways.

What is abundantly clear, however, is that organizations that are unable to determine the true cost of providing care will be hard-pressed to navigate the changing and less forgiving financial landscape that is coming. Faced with the prospect of declining reimbursements, the adoption of risk-based business models, and the move to value-based care, it is imperative that leaders have a better understanding of their costs. Organizations with a deep knowledge of costs have the ability to operate in more strategic and sustainable ways when it comes to cost containment; those without this knowledge are operating in the dark and relying on more conventional cost containment and revenue cycle activities that are approaching the point of diminishing returns.

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