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Cost Containment Under Healthcare Rules

Philip Betbeze, for HealthLeaders Media, October 13, 2011
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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.

What gives?

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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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!