As patient financial responsibility climbs and value-based payment models take root, revenue streams are becoming less predictable for healthcare organizations. In the transition from volume to value, expense reduction is the primary lever providers have to counter financial uncertainty.
In their 2017 Annual Health Care CEO Study, Health Care Advisory Board researchers found that identifying “innovative approaches to expense reduction” was a top concern among hospital and health system c-suite executives surveyed, with 57 percent of respondents citing it as a priority.
Here are three areas of cost control providers can focus on to maximize savings while delivering high-quality patient care.
Reduce waste in care delivery
Reducing waste is a core element in improving value in healthcare. JAMA research suggests that, even at low-end estimates, six categories of waste account for over 20 percent of total U.S. healthcare expenditures:
- Failures of care coordination
- Failures in execution of care processes
- Administrative complexity
- Pricing failures
- Fraud and abuse
Efforts to eliminate excessive and unnecessary testing and procedures with no demonstrated impact on outcomes are an initial step leadership teams can take to better control costs. Providers should (re)deploy resources to close care gaps among high-cost, high-risk patients and ensure proper care coordination protocols are established and adhered to.
Increasingly complex administrative processes warrant new approaches to organizational management that move beyond siloed structures. Collectively understanding payer-negotiated pricing versus actual care delivery costs is vital to avoiding pricing failures. Reviewing denial causes within the organization is one way providers can target improvement initiatives in this area.
Provide an accurate view of cost at the case level
To enhance healthcare organizations’ ability to accurately predict care delivery costs, episodic performance data should be used to quantify total cost of care for each patient. Leadership teams should analyze historical cost data to establish a baseline for projecting expenses for like-patients. Health-defining attributes as well as social determinants should be included in data analysis to accurately predict the risk each patient presents.
It is rare that an EHR is capable of supporting both fee-for-service and fee-for-value claims processing. Manual processes and secondary systems like a charge master and other financial systems will likely be required to aid data analysis efforts.
Maintain quality outcomes
Clinical outcomes are inextricably linked to reimbursement under quality-based and risk-based payment models. Healthcare organizations need to understand their patient populations and the outcomes of the care and services provided. Pragmatic clinical quality programs and population health management strategies, must take organizational characteristics into account, including:
- Geographical location, including urban versus rural status
- Ownership structure and ability to collaborate with other organizations
- Patient population’s predisposition to risk
- Ability to reach quality targets with the current care team operations and infrastructure
Clinical and financial leadership should seek to ensure the organization provides the most cost-effective treatment to the right patients at the right time. Leadership teams should identify new solutions (e.g. telehealth) and care partners for collaboration to reinforce areas that may not be a strength for the organization.
By focusing on these areas of cost management, healthcare organizations can implement an expense reduction strategy that also supports clinical outcome improvements. The next blog in this two-part series will dive further into the technologies and revenue cycle processes that healthcare organizations can use to further support value-based initiatives.
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