STRATEGIES FOR REDUCING PATIENT CARE COSTS 2

Strategies for Reducing Patient Care Costs

Rising costs of caring for patients is one of the main problems that healthcare
organizations such as hospitals face. High operating expenses means that healthcare
organizations are left with fewer resources that are linked directly to provision of healthcare to
patients. A significant portion of the operating expenses is avoidable with the right strategies. In
addition to reducing costs through cutting operating expenses, health-care organizations can also
increase their revenues through raising their reimbursements. This paper examines five strategies
that healthcare organizations can use to reduce operating expenses and increase revenues through
reimbursements while simultaneously ensuring that patients receive high quality care.
Accurate and consistent recording and classification of overhead costs
When cutting costs, none of the cut costs should include ones that go to actual clinical
care. Thus, it is important that when recording overhead costs, it should be clear which ones are
for clinical care and which ones are for non-clinical care. In that way, it becomes easy to identify
non-clinical care costs to cut. Money saved through cutting non-clinical costs can then be used
for direct patient care (Berwick & Hackbarth, 2012). Thus, this strategy helps to improve the
quality of patient care through increasing resources that go directly to care of patients.
Streamlining of bureaucracy
Bureaucracy is one of the causes of high operating expenses. Even for simple activities, it
is common for hospitals and other healthcare organizations to require that a patient goes through
so many people. Some of the roles performed by different personnel are even duplicated. By
eliminating unnecessary functions and personnel and centralizing operations to prevent

STRATEGIES FOR REDUCING PATIENT CARE COSTS 3
duplications, a lot of money can be saved (Berwick & Hackbarth, 2012). Apart from saving
resources, streamlining of bureaucracy also increases organizational efficiency. Thus, patients
are likely to get quality services within the shortest time possible.
Use of IT Systems
One of the challenges that healthcare organizations face is managing the large amounts of
data that they collect, store and use. The data is often unstructured and its growth exponential.
Even though most healthcare organizations have IT systems for management of this data, the
systems are often rigid with majority of them operating on stand alone basis. For healthcare
organizations to fully enjoy the benefits of IT, they need to have systems that coordinate with
each other rather than acting alone (Berwick & Hackbarth, 2012). The operations of such
systems should only be constrained by legal requirements of the country that the healthcare
organization is operating in. Proper use of IT systems in healthcare organizations has been found
to significantly reduce overhead costs and increase efficiency. Research done in Asia found that
use of integrated IT systems in hospitals led to positive financial performance of the hospitals
(Berwick & Hackbarth, 2012).
Eliminate overhead costs that do not improve patient care
Many overhead expenses play an important role in improving the quality of healthcare
services that patients receive. However, there some that do not make such contribution. Such
overhead costs need to be cut. Such cutting can be done through centralization, outsourcing, and
investment in efficient facilities (Berwick & Hackbarth, 2012). Centralization of non-
differentiated functions reduces staff and, therefore, costs as well. For instance, all matters
related to finance should be dealt with in a centralized place. Centralization can also happen at

STRATEGIES FOR REDUCING PATIENT CARE COSTS 4
the management level with one manager overseeing work of related functions rather than each
function having a manager. Centralization helps in saving costs by enabling the healthcare
organization to enjoy economies of scale (Berwick & Hackbarth, 2012). Outsourcing also helps
in reducing costs by having experts perform particular tasks in the healthcare organization when
needed. For instance, instead of the healthcare organization involving itself in food preparation
for its patients and staff, the services can be outsourced to a competent and effective provider.
Lastly, costs can be cut through investing in efficient facilities at the organization. For instance,
if the organization operates in a sunny area it may use solar panels for energy provision thus
significantly reducing electricity bills. It could also invest in power saving light bulbs. In
addition, it could ensure that urinals, sinks, and toilets that are inefficient or leaking are replaced
with more effective ones. These measures go a long way in saving the organization from
unnecessary overhead costs.
Eliminate unnecessary laboratory testing and diagnostics
Forms of imaging such as x-rays generate very large amount of data. Management of that
data is not cheap. Thus, to save costs hospitals should endeavour to use such equipment
sparingly. Unnecessary laboratory testing also significantly increase hospital costs. For many
hospitals, laboratory testing is often done without exploring available options (Berwick &
Hackbarth, 2012). For instance, a medical professional may offer services to a patient with back
pain without the need for a CT scan.
How the discussed strategies increase reimbursement
Reimbursement is one of the main methods that health-care organizations use to get
revenues. Thus, it is important that they maximize the amount of money they get from

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reimbursement. Most denials of reimbursements are due to billing and coding mistakes, incorrect
or insufficient documentation, and missing information (Porter & Kaplan, 2016). These problems
can be solved through having proper record-keeping systems and well trained and efficient
personnel dealing with documentation for reimbursement (Porter & Kaplan, 2016). The
personnel also need to be enough so that they can effectively handle their workload. With the
money saved from cost-cutting strategies that have been discussed in the article, the organization
can invest in these measures that guarantee maximum reimbursements.

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References

Berwick, D. M., & Hackbarth, A. D. (2012). Eliminating waste in US health
care. Jama, 307(14), 1513-1516.
Porter, M. E., & Kaplan, R. S. (2016). How to pay for health care. Harv Bus Rev, 94(7/8), 88-
100.