Strategies to Support Cost Containment in Healthcare
Healthcare organizations will face a number of challenges in the coming decades, ranging from the continued impacts of the COVID-19 pandemic, an increasingly strained talent market, greater competition from urgent care and telehealth providers, and more.
Cost containment in healthcare is essential for any organization's success as we all learn how to navigate developing and still-unknown challenges facing the industry. In this article, we’ll look at why cost containment is so critical, as well as three main strategies for cost containment.
What is Cost Containment in Healthcare?
Essentially, cost containment refers to the process of refining procedures, cutting unnecessary expenses, and increasing efficiency while providing quality care for patients.
Cost containment in healthcare is systems-focused. It hones in on improving the systems that lead to costs, rather than eliminating one-time expenses, which often prove negligible over time.
Done successfully, cost containment can give healthcare organizations valuable insight into their facility and staff’s productivity, areas plagued by inefficiencies, and help identify contributors and solutions to organizational costs.
Why is Cost Containment Important in Healthcare?
Between 2008 and 2016, primary care visits by insured adults declined nearly 25%. As competition from urgent care and the impacts of the pandemic are still being felt by healthcare systems everywhere and labor costs continue to rise, cost containment will prove pivotal in the coming years as the healthcare industry sees continued instability.
Three Key Strategies for Cost Containment in Healthcare
Each healthcare organization or system will be able to identify unique areas that can be optimized for cost containment. However, the following three areas will apply to essentially every healthcare system in the country, and are a great place to start.
Assess Your Labor Use
Without labor—the skilled physicians, nurse practitioners, physician assistants, and others—the healthcare system doesn’t function. Labor is absolutely imperative to the success of any healthcare system, but it’s also far and away the largest expense, accounting for well over half of all costs.
Any change to the labor your organization uses can have serious reverberations for your organization’s finances. With labor costs increasing by more than a third when compared to pre-pandemic levels, healthcare organizations are seeing their expenses skyrocket while their margins fall quickly.
Assessing labor efficiency can play a crucial role in containing the ballooning cost of labor. Your organization can assess data to learn where staff time is lost to low ROI activities that could be automated or handled effectively by part-time workers.
Of course, healthcare systems need to take a highly measured approach to assessing and making adjustments to their use of labor. Patient outcomes must be closely monitored as changes are made. If costs are being saved through labor management strategies, but patient outcomes are worsening, any savings could be lost to lawsuits or an increased need for follow-up care.
Identify and Monitor Inefficient Systems
Making systems more efficient is one of the best cost containment strategies healthcare organizations can follow. Indeed, nearly a trillion dollars are wasted, largely to inefficiencies, while providing no benefit to patients. Communication is a particularly egregious case, with as much as $12 billion lost each year due to communication inefficiencies.
Fortunately, healthcare systems have options for reducing these inefficiencies and burdensome costs. By turning to technology and the Internet of Things, healthcare systems reduce friction and eliminate wasted labor.
For example, remote monitoring allows physicians, nurse practitioners, and physician assistants to reduce the amount of time they have to spend monitoring patients, while also providing more accurate information.
In addition to improving communication, automated processes can help reduce medical errors and misdiagnosis. Misdiagnosis in healthcare is costly, with the average diagnostic-related malpractice claim payment exceeding $200,000. When it comes to cost containment in healthcare, reducing unnecessary expenses such as legal fees is a must. Thankfully, this can be achieved while improving efficiencies throughout your system by embracing technology’s helping hand.
Build a Strong Culture
After a healthcare organization has assessed their labor needs and can analyze data to verify their systems are optimally efficient, it might seem like there’s only so much that can be done to contain costs. However, one area primed for cost containment is staff recruiting and retention.
The cost of labor is hitting the healthcare system hard, and America is already facing a desperate shortage of medical professionals. Hiring is already highly competitive, but as staff shortages persist for the next decade at least, hiring will only become more competitive, and—you guessed it—expensive.
Recruitment costs can grow quickly, easily eclipsing two or three times a position’s salary. Having a culture that attracts healthcare professionals is crucial to reducing those costs. A strong culture bolsters retention and recruitment while mitigating burnout, but a weak or toxic culture will lead to attrition, burnout and medical errors, and more costs overall.
Additionally, building a strong culture is vital to cost containment, as your frontline healthcare workers will be your eyes and ears. Therefore, it’s essential for them to be as invested in cost containment strategies as you are. If there’s a system or process that’s chronically inefficient and wastes their exceedingly valuable time, they need to trust they can take that concern to you and be listened to, while also trusting that leadership won’t impose unilateral changes to their operations without notice.
Save Big by Recruiting with Continuing Education Company
When the recruitment costs to replace a single physician can reach nearly $1 million, healthcare organizations can’t afford to waste time or money on ineffective recruitment techniques that only produce unqualified candidates.
Fortunately, your organization doesn’t have to rely on traditional recruitment methods, or spend hours researching the best job boards for physicians, nurse practitioners, or physician assistants. Instead, you can simply turn to the Career Center from Continuing Education Company.
Through the Career Center, you can elect to have your openings enjoy priority in listing search results, be emailed directly to hundreds of qualified medical and healthcare professionals, and be highlighted to stand out from the crowd. Additionally, with our TalentBoost upgrade, your listing will be distributed to a comprehensive network of over a thousand national, niche, and local job boards, accelerating how quickly you find the right candidate.
To learn more about recruiting with Continuing Education Company, visit our products page today.
Continuing Education Company is an independent, nonprofit 501 (c)(3) medical continuing education company. CEC has developed and provided quality CME events and courses for over 30 years.