8 Effective Strategies for Reducing Costs

With the increasing need for complex and quality medical care in hospitals, it is necessary to adopt innovative strategies to reduce the burden of financial pressure along with maintaining quality medical care service. It is found that the following categories are directly related to hospital costs:

  • Unhelpful clinical testing and treatments

  • Excess administrative expenses

  • Improper waste management

  • Coordination issues among care providers

  • Preventable medical errors and hospital-associated infections

  • Staff turnover rate

  • Procurement of medical supplies from varied suppliers

  • Inadequate technological infrastructure

Control of the costs in health systems is a challenging process since many health costs are unavoidably compared to a few listed above that are avoidable. This can be attained by the collaborative efforts of the healthcare leaders in the organization. without compromising the quality of care by applying the effective strategies given below:

1. Budgeting according to patient volume

  • While designing the budget, price variances for equipment, supplies, and patient volumes should be considered.

  • Patient conditions, treatment type, and insurance options are some of the factors that increase expenses in health systems. Standardizing treatment plans as per these factors helps in controlling the costs.

  • These could be done by comparing the expenses of the same patient groups. This means designing an evidence-based care plan for the same type of patient conditions which would help standardize and reduce the cost burden.

2. Controlling purchasing decisions

  • Some expenses like electricity, facility maintenance, and medical equipment are fixed costs whereas some are variable costs like supply costs, infrastructure expansion, salaries, etc.

  • Identifying and grouping these types of costs accurately and timely is crucial for taking appropriate decisions on cost control.

Outsourcing supplies/services is one of the best practices for reducing costs. It allows a supplier or service giver (third party) who is specialized to manage a particular department at a lower cost than the hospital can. For instance,

  • a. Food management

  • b. Waste management

  • c. Medical consumables and equipment management

  • d. Facility management

  • e. Lab management

3. Health Information technology (HIT) best practices

  • Transitioning to digital mode from the traditional mode of data transfer is the need of the hour and may help reduce costs drastically.

  • For example, electronic health records give visibility to medical staff on the medications and treatments prescribed by the clinicians and will help in delivering those supplies accurately without any kind of supply or billing errors

  • Further, patients’ length of stay can be accessed so that availability can be highlighted for the patients in need.

  • Furthermore, if the records are collated and converted to statistics, clinicians could take evidence-based decisions in the future. Not only these but also duplication in test procedures and orders can be identified easily by installing the alert system.

4. Enhanced insurance management

  • Understanding the rules and regulations related to insurance reimbursements to make sure of the timely turnaround of the documents that may help in ensuring faster payment by the insurance companies for the rendered services https://nha.gov.in/PM-JAY

  • Concerning hospital equipment, a major breakdown in machines may increase financial pressure on the hospital. This should be managed by timely insuring the high-end equipment..

5. Adopting the PDCA method

  • Implementing the Plan, Do, Check and Act method in various processes in the workflow of the hospitals can highly impact the expenses incurred.

  • This can be implemented by finding a process that needs improvement, forming a team expert in that process, understanding the current status of the process, learning the reasons for deviations in the process, develop options and opportunities to enhance the process. This method will help in reducing costs as well as improve the quality.

  • For example, benchmarking clinical pathways may ensure definite treatment plans and reduce the length of stay or readmissions which will allow flexibility in staff management.

6. Employee development activities

  • While designing the budget, price variances for equipment, supplies, and patient volumes should be considered.

  • Health coverage and training are the two factors for employee work satisfaction. Health coverage safeguards the employee and training professionally develops confidence in an employee. These employment benefits help in retaining employees and save costs and time in hiring skilled professionals.

  • Training is also significant to prevent errors and increase efficiency. This is a best practice to reduce expenses caused by medico-legal issues.

7. Deploying referral technique

  • E-referral system should be integrated with the system so that general practitioners can refer the patient to the specialists and health services (like diagnostic and lab tests) within the hospital thereby adding revenue to the hospital and reducing patient leakage

8. Recruiting consultants/advisors

  • Consultants will be an important asset in evaluating the factors retarding the promotion of the hospital in the market

  • They play an important role in promoting the quality health services provided by the hospitals and creating a trustworthy environment for the hospital in the market.

  • Many quality improvement activities and accreditation activities are easily managed by the consultants.

Strategy implementation model:

The model represents how the external factors influence the strategies implemented. When there is an increase in strategy implementation, the factors increase efficiency value to lower the costs and the factors decrease inefficiency value to lower the costs increases.

Taking the first step towards implementing these strategies as per the need will reduce costs and increase profitability in a hospital