A Guide to Cost Containment in Healthcare

September 23, 2022

A Guide to Cost Containment in Healthcare

What Is Cost Containment in Healthcare?

Cost containment in healthcare is all about finding ways to save money and reduce spending without sacrificing superior patient experiences. Providing patients with effective, accessible, and high-quality care is always the number one priority. Healthcare organizations around the country have found cost-effective, creative ways of lowering overhead while still maintaining a high bar for patient care and service.

Cost Containment and Understaffing

Cost containment should not come at the cost of effective coverage. Adequate staffing is key to ensuring low wait times, quality care, and positive patient outcomes. This, in turn, results in lowered costs due to fewer unnecessary tests run, fewer mistakes made, and less burden on already busy healthcare systems.

In fact, studies show lower staffing numbers result in an average of $90,000 lost in revenue per day for a 300-500 bed hospital. The same study shows an increase in medical errors and a decrease in patient safety when understaffing is an issue.

Why Is Healthcare Cost Containment Important?

Cost containment in healthcare benefits both healthcare systems and patients in a number of ways.

When medical costs escalate, patients are less likely to seek necessary help. High-cost hospital stays, medications, or doctor visits can decrease preventive care in patient populations. These can increase a hospital’s overall healthcare spend when those patients develop more serious conditions as a result of inadequate preventative health measures.

Increasing care costs also threaten funding for programs like Medicare and Medicaid because the allocated budget cannot stretch as far when covering medical procedures and expenses.

Benefits of Cost Containment in Healthcare

Cost containment means better access to preventative and other care for patients. When prices are more affordable, insurance coverage goes further, and it’s easier for patients to afford medication, treatment, and health services with less worry over expenses. Reducing unnecessary spending benefits health systems, providers, and patients alike.

Cost Containment Strategies

There is no shortage of innovative and effective cost containment strategies – including patient education or healthcare provider training. Maximizing productivity, utilizing mid-level providers, and encouraging telemedicine utilization are all great ways to lower healthcare costs across the board.

Integrated Tools for Cost Containment

Expanding access to virtual healthcare has proven to be a popular and effective way to combat rising costs. A large percentage of emergency room visits are determined to be for non-emergency medical treatment. Often, patients don’t know they can or should seek other 24/7 healthcare options instead of heading to the hospital.

These programs are generally much less expensive than in-person visits and are a great way to implement cost containment strategies that benefit health systems and patients alike. These services also help lower the burden on already strained emergency rooms with full hospital beds and overworked staff. This leads to lower wait times and better care when patients do have a genuine health emergency.

Of course, patients should always be encouraged to check with a nurse helpline when considering what type of care to pursue and follow up with their primary care physician afterward.


Who Should Be Involved in the Cost Containment Process?

  • Cost containment isn’t limited to hospital management. Everyone, from healthcare administrators to patients, has a role to play in the cost containment process. While a hospital or health insurance company’s role in reducing costs is more straightforward, patients may benefit from education surrounding cost containment.

  • Educational programs informing consumers of cost containment strategies can more than pay for themselves in lowered healthcare expenditures down the road. For instance, many patients may not know what constitutes a health emergency, and what can be handled by urgent care, telehealth, or their primary care provider. Patients who are aware of their options are less likely to use hospital resources for non-emergency complaints.

  • Healthcare facilities choosing health benefit offerings should also be made aware of policies that can decrease overall healthcare costs. Free preventative care pays for itself and encouraging employee health with gym reimbursements, or health programs can have similar benefits. Many companies are also choosing plans that offer low-cost or free 24/7 telemedicine in order to decrease costly hospital or in-person primary care visits. Offering these financial incentives to employees keeps the cost to all parties lower.

Healthcare facilities may also consider offering high-deductible plans or plans with increased price sharing. When patients have to pay a more significant portion of their upfront healthcare costs, it can discourage unnecessary office or ER visits. Patient cost sharing should be balanced with accessibility so that employees can still access care when needed.

What Are the Challenges to an Effective Cost Containment Strategy?

It can sometimes be challenging to balance healthcare cost containment strategies with quality care. While lowering healthcare costs benefits patients by making healthcare more accessible overall, education is needed to utilize cost-cutting strategies responsibly.

For instance, if a medical provider routinely orders unnecessary tests - they may be struggling to navigate conversations with patients who request extra labs or scans. Don’t just remind healthcare providers that ordering unnecessary tests can cause unneeded patient health anxiety, high costs, and ultimately overwhelm valuable resources needed for more complex or urgent patient cases. Make sure they feel empowered and able to explain to patients the benefits of conservative testing.

The average patient can see labs, testing, and referral orders as lower-quality care. Outreach and education are needed to help patients understand that conservative healthcare measures benefit the healthcare system, and benefit themselves personally. Make sure providers are able to explain to patients why they may choose not to run certain tests that are unnecessary and expensive. Proper public and internal outreach lead to higher patient satisfaction and overall cost-effectiveness for the health system and the consumer.

How Can Mid-Level Providers Reduce Rising Healthcare Costs?

Reducing workforce numbers has been shown to increase healthcare costs in the long run. So how can healthcare systems hire the necessary staff they need while managing labor costs?

One way to combat this issue while still ensuring adequate coverage and patient care is to evaluate current productivity and scheduling strategy. Many health systems have found they can reduce labor costs by employing more mid-level providers, such as Physician Assistants and Nurse Practitioners. Physician Assistants (PAs) and Nurse Practitioners (NPs)  are typically paid less than an M.D. or D.O.

PAs and NPs are highly skilled medical professionals that can step in, in place of a physician. While they don’t have the same level of education or experience, they are still well educated and more than capable of handling less complex patient cases. In many states, PAs and NPs can practice independently, eliminating the legal need for supervising physicians entirely. This reduces physicians’ workloads and, in turn, means fewer physicians are needed per shift - decreasing overall labor costs without reducing necessary staff numbers.

The key to effective cost containment for any healthcare system is multifaceted. Hospital administrators should utilize education, outreach, and resource management to maximize cost containment strategy effectiveness. Separate patient and professional-centered awareness efforts often highlight each other and work together to achieve success.

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