Cost containment

From HMCwiki

As you develop a cost containment strategy for your organization, it's important to bear in mind the fallacy of a “best practice” as a single thing. Rather, a “best practice” cost position is best conceptualized as the result of many little things being done under the umbrella of running a tighter ship.

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Functional cost managment

Cost Management in a healthcare environment is a multi-faceted process. When approaching cost management from a functional cost review, costs are often managed in departments by department managers. These departments can be generally categorized into one of the following five cost categories: Overhead, Support, Supplies, Ancillary, or Nursing. Managing departments and the costs they incur varies a great deal by department. Although costs are ultimately managed by departments, it is important to remember that all hospital costs are incurred in a complicated process flow. Therefore, managing and streamlining process flows is critical to the success of every cost management improvement initiatives. Often, it is this cross-functional approach to cost management that proves to me the most successful.

Since more than 50% of hospital expenses are labor-driven, it is impossible to discuss improving healthcare costs without mentioning productivity.

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Clinical cost management

In addition to a departmental view, which is more silo-like in it's approach to cost management, it is also important to look at managing costs from a clinical point of view, which looks at inpatient costs across a vast array of hospital departments. More specifically, a clinical point of view approaches cost containment from a Service Line perspective, which allows you to analyze acute inpatient costs from the point of admission to the point of discharge.

Unlike a functional cost review, a clinical cost review strips away Support and Overhead costs from expense reduction planning. By focusing only on those costs which can be controlled clinically, this approach to cost containment is effective in engaging physicians in efforts to help the hospital achieve financial success. Since understanding internal physician variation is important to understanding external physician variation, identifying high volume physicians who practice patterns support lower cost positions is generally a good approach to clinical cost management.

Clinical comparisons are be made on a DRG basis and/or APR-DRG basis, the latter allowing for comparisons of inpantient acute care data to be severity-adjusted. For each DRG or APR-DRG, cost per case, which is driven by length of stay and cost per day, can be analyzed. In order to free the comparison from the extremes of medicines, outliers are generally excluded from a clinical service review.

One clinical service line that receives a lot of attention is Labor and Delivery. With recent increases in the number of C-sections being performed at hospitals across our nation, a renewed focus on clincal cost management across C-section DRGs is being made.