Cost Containment Under Healthcare Rules

While senior leaders reported that programs that eliminate waste and reduce cost had a positive or at least neutral effect on clinical outcomes and patient satisfaction—by an astounding 96% and 90%, respectively—more than 30% cited “reducing cost while also maintaining service and outcomes” as their biggest obstacle to successful cost reduction.

Part of the problem lies in the fact that hospitals must continue to operate—and operate profitably—in the fee-for service world, which does essentially nothing to incent healthcare providers to cut costs other than through the blunt tool of cutting reimbursements across the board. For at least a few more years, fee-for-service will continue to be the dominant payment model. At the same time, leaders must tool up for a reimbursement environment that includes incentives for lower costs.

“The schizophrenic reimbursement environment makes this extremely difficult,” says Charles Hart, MD, president and CEO of Regional Health Inc., a system of nine hospitals and an assortment of clinics, nursing homes, and assisted living facilities headquartered in Rapid City, SD. In adjusting to a different reimbursement environment, “I feel like I know where we need to go, but getting there is so difficult,” Hart says. “It takes your labor productivity standards and blows them up because you have to put extra resources in to address both reimbursement systems.”

He’s not alone. Throughput and efficiency are the top choice of senior leaders (at 32%) when asked which performance data measurement area represents their biggest need. Much of the waste exists there—not to mention problems with coordinating care, which will be a big factor under future reimbursement schemes. With an eye toward those future schemes, clinical outcomes (26%) and actual labor productivity (18%) are top priorities for data on which managers can act.

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