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Cost Containment Under Healthcare Rules

Philip Betbeze, for HealthLeaders Media, October 13, 2011
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Maybe healthcare gets a bad rap in cost containment. Although it’s relatively new to the sector, most organizations are paying attention to it—to what level is debatable. Yet they do report significant results, although those results are incremental. Some 70% of respondents said their average annual savings over the past three years in cost reduction programs have ranged between 1% and 5%, while 29% of respondents reported even bigger gains.

The programs run the gamut. Yes, some do involve easy (and perhaps shortsighted) efforts that involve cutting staffing and other labor costs, but others are innovative, and take advantage of the largely untapped scale of many hospitals and systems and their formal relationships to each other. For example, with its GPO, Regional Health recently developed the Northern Plains Premier Collaborative, a purchasing partnership with a geographically close partner that pools purchasing power over 40–50 hospitals, Hart says.

“We began to put value analysis teams together to work on group purchase items, and it has been very successful over the past three years,” he says.

From the simple to the complex, the collaborative standardized gloves throughout all the hospitals, which saved Regional Health about $250,000 over the time period. “Where we see the biggest change is in capital purchases where we will spend about $110 million among the organizations next year,” he says. “You save 2%, 3%, 4%, which is a significant amount of money. Another example is we bought CT and MRI scanners together and we saved $30,000 per machine.”

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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!