Cost Saving Ideas for Hospitals: 4 Ways to Reduce Healthcare Costs

In the past, hospitals were reimbursed at a line-item level—so there was a charge associated with each item used or service provided that was billed to either the patient or the insurer. This incentivized performing procedures and tests, as each of them were billable.

Fast forward to today’s healthcare climate, and you’ll find that hospitals are now paid a certain amount (by the insurer, insured, or government) for each defined diagnosis-related group (DRG). It is then up to the hospital to determine how to spend that fee, keeping in mind that the desired outcome is improving the patient’s health status. This payment method began with government programs such as Medicare but has now expanded into the private insurance market.

With this in mind, there are a number of ways hospitals can save money today, ranging from proper resource utilization to strategic organization. We’ll address four of those hospital cost reduction ideas below.

4 Hospital Cost Reduction Ideas & Strategies

1. Examine appropriate labor use in different scenarios.

This is not a reduction in labor but a close examination of how labor is used in different situations. For example, use nurse practitioners or physician assistants (physician extenders) instead of physicians in urgent care clinics. Extenders can perform services at a much lower cost in situations where an MD is not warranted—for example, tending to patients who have minor healthcare issues like a cold. In medical research, laboratory assistants can be used to prepare specimen and manage quality control functions, allowing the more expensive technologists to focus on evaluating the data and ensuring quality results.

2. Re-evaluate supply costs for hidden savings.

• Blood is an expensive, limited resource that can cause complications, and the American Association of Blood Banks (AABB) published recommendations in 2016 to lower the thresholds for which blood is given. Adoption of these new standards can have significant cost reductions and patient outcome effects.
• Create an antibiotic stewardship program. Using the correct antibiotic at the correct time can reduce the length of time the patient is in the hospital, which decreases labor, supply, and drug costs. Another hospital cost reduction idea is to consider evaluating high-cost pharmaceuticals against generic (or less expensive) drugs.
• Negotiate with the supplier to lower the price of surgical implants. A single hip joint can be in the tens of thousands of dollars—so savings in this area can be significant.

3. Assess procedures performed for possible cost reductions.

Doing repetitive, duplicate, or daily laboratory or radiology testing can be very costly. To cut back on these costs, consider ordering multiple-day orders at a single session.

Furthermore, examine your hospital’s use of “convenience testing”—i.e., performing a test or procedure during a hospital stay rather than in an outpatient setting simply because the patient is there. This can increase costs related to inpatient care (supplies, room, support staff, and scheduling delays).

To find opportunities for savings here, you need an effective tracking system. Be sure that all tests given can be seen by the physicians or extenders responsible for treatment and be sure you can track why a test is given (as sometimes an inexpensive or effective convenience test is warranted).

4. Track quality measures and take steps to improve deficiencies.

Improving the quality of processes that lead to issues like catheter-associated urinary tract infections (CAUTI) and central-line-associated bloodstream infections (CLABSI) is not only critical for patient health and safety—it’s also a hospital cost reduction strategy. Additionally, improving the identification and rapid treatment of sepsis and reducing readmissions for such issues are critical for cost saving. These initiatives are tied to government reimbursements from federal programs. Better quality measures in this area will result in higher reimbursements.

Don’t forget about your healthcare strategy!

To successfully achieve these objectives and others, you need a unified strategy in place. Creating a Balanced Scorecard strategy map is one of the best ways to achieve that. It allows you to communicate your organizational goals and engage your team in a clear way.

FAQ:

What are the biggest challenges hospitals face in reducing healthcare costs?

The biggest challenges hospitals face in reducing healthcare costs include:

- Rising Operational Costs: Increasing expenses related to staff, equipment, and technology.
- Regulatory Compliance: Meeting stringent regulatory requirements and standards can be costly.
- Patient Demand: Balancing high-quality care with cost containment.
- Inefficiencies: Identifying and eliminating inefficiencies in processes and resource utilization.
- Technology Integration: The cost and complexity of implementing and maintaining advanced healthcare technologies.

How can hospitals use data analytics to identify and address areas of high cost?

Hospitals can use data analytics to identify and address areas of high cost by:

- Collecting Data: Gathering data from various sources such as electronic health records (EHRs), billing systems, and supply chain management.
- Analyzing Trends: Using analytics tools to identify patterns and trends in spending and resource utilization.
- Identifying Outliers: Detecting unusually high costs or inefficiencies in specific departments or services.
- Implementing Solutions: Developing targeted strategies to address identified high-cost areas, such as optimizing staffing levels or improving supply chain efficiency.
- Monitoring Outcomes: Continuously tracking the impact of cost reduction initiatives and adjusting strategies as needed.

What are some innovative approaches that hospitals are taking to reduce healthcare costs?

Some innovative approaches that hospitals are taking to reduce healthcare costs include:

- Telemedicine: Expanding telehealth services to reduce the need for in-person visits.
- Value-Based Care: Shifting from fee-for-service to value-based care models that focus on patient outcomes.
- Predictive Analytics: Using predictive analytics to anticipate patient needs and prevent costly complications.
- Lean Management: Implementing lean management principles to streamline processes and eliminate waste.
- Collaboration: Partnering with other healthcare providers and organizations to share resources and best practices.

What are the potential benefits of reducing healthcare costs?

The potential benefits of reducing healthcare costs include:

- Improved Patient Access: Lower costs can make healthcare more affordable and accessible to patients.
- Enhanced Quality of Care: Cost savings can be reinvested in quality improvement initiatives and advanced medical technologies.
- Financial Stability: Hospitals can achieve greater financial stability and sustainability.
- Competitive Advantage: Cost-efficient hospitals can offer competitive pricing and attract more patients.
- Resource Optimization: Efficient use of resources leads to better allocation and utilization, improving overall operational effectiveness.

What can policymakers do to help hospitals reduce healthcare costs?

Policymakers can help hospitals reduce healthcare costs by:

- Regulatory Reform: Simplifying and streamlining regulations to reduce administrative burdens.
-Incentives: Providing financial incentives for hospitals that achieve cost reductions while maintaining high-quality care.
- Support for Innovation: Funding and supporting research and innovation in cost-reduction strategies and technologies.
- Promoting Value-Based Care: Encouraging the adoption of value-based care models that focus on patient outcomes rather than volume of services.
- Collaboration: Facilitating collaboration between hospitals, payers, and other stakeholders to share best practices and resources.