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Cost Containment in Healthcare: How to achieve it?

Healthcare costs keep climbing for doctors and patients alike.

For doctors, the price of new technologies, drugs, and treatments rises every year. At the same time, patients face increasing insurance premiums and out-of-pocket costs that many struggle to pay.

Patients, meanwhile, face insurance premiums and out-of-pocket fees so high that 50% can’t afford their premiums and 25% have skipped needed care due to the cost, according to recent reports.

Sadly, these rising healthcare costs create ripples that disrupt the whole healthcare system in the USA.

In this guide, we’ll offer some practical tips for cost containment in healthcare.

Cost containment has become critical to provide stable, quality care in today’s environment. With some diligence and innovation, it’s possible to do more with less.

What is Healthcare Cost Containment

What Is Cost Containment In Healthcare?

The idea behind cost containment in healthcare is straightforward: deliver good care without breaking the bank. It’s about being judicious, eliminating needless spending, and improving how efficiently things run. In plain speak, it’s how doctors can treat patients without putting them in the poorhouse.

Healthcare organizations roll out organization-wide plans, actions, and procedures tailored to cut costs over the long run. Containing costs means leadership must make comprehensive efforts an integral part of how things work.

For instance, cutting waste and duplication can yield massive savings. When hospitals use one system to order supplies and medications, they can buy in bulk at lower prices. They also avoid paying twice for the same tests and procedures. These kinds of initiatives benefit providers and patients alike.

Do you know? Over 80% of healthcare finance professionals say cost containment is mandatory for their facility’s fiscal health.

Why Is Healthcare Cost Containment Important?

➜ Healthcare costs rising too fast for people to keep up.
➜ Government health plans struggling with costs.
➜ Many patients are skipping or delaying care due to high costs.
➜ Need to slow the rise of costs for meds, hospitals, doctors.
➜ Make the system sustainable and affordable or it will collapse.

Healthcare cost containment has become a pressing issue as of late. With medical expenses rising ever higher, patients have started delaying or avoiding care altogether. The costs of drugs, hospital stays, doctor visits – all climbing, climbing, climbing.

Even federal health insurance programs such as Medicaid and Medicare are at risk of being unable to cover the high costs.

Therefore, containment of healthcare costs has become mighty important. The idea is to figure out ways to lower costs across the board so people can get the care they need without going broke or avoiding the doctor altogether out of fear of the bill. The hospitals and insurance companies need to find ways to cut costs too, else they’ll price themselves out of business.

⚠️ The facts don’t lie. 6 in 10 patients without insurance say cost has kept them from getting medical care they needed. That just ain’t right!

Cost containment comes down to finding ways to cut spending on meds, hospital stays, doctor visits and the like. The healthcare bigwigs need to hunt for savings and smarter ways of doing business so they can slow down how fast costs rise. With costs going up all the time, and the way medical bills can be unclear as mud, cost containment isn’t just about money anymore. It’s mandatory if the system’s going to work at all.

If healthcare costs aren’t reined in, and soon, things are only going to get worse. More patients will go without care. Insurance premiums will continue to rise. Medicare and Medicaid could buckle under the strain. The whole system needs balance, where people can get quality care they need and a bill they can pay without hardship. Cost containment is the only way to get there from here.

Why Providers Fail To Contain The Costs?

The costs of healthcare have been rising steadily over the years with no signs of slowing down. There are many reasons why healthcare providers struggle to reduce costs.

➜ Healthcare providers struggle to contain costs due to expensive revenue cycle management.

It’s true that hospitals struggle constantly to control costs these days. The whole business of charging patients and insurance companies, collecting payments, and appealing denied claims has turned into an expensive monster to feed. Many hospitals spend a sizable chunk of their budget just keeping the billing operation going. All the people, computers, and procedures required to bill insurance, get money from patients, and follow up on refused claims cost a small fortune.

The solution?

The best solutions are for hospitals to invest in technology and education to make the billing process more efficient. They might implement billing software to reduce mistakes and staff time. They should train their billing staff well so they know how to handle claims efficiently and spot ways to improve. Hospitals could also outsource some of the routine billing work to specialized companies that can do it for less. By streamlining the billing process and cutting out waste, hospitals can tame the beast and lower their costs.

➜ Many healthcare providers use expensive billing software with features they don’t need.

One of the main reasons why healthcare providers struggle to control costs is because many of them use costly billing software with features they’ll never use. Expensive billing software is a double-edged sword. On one hand, it streamlines the billing process. On the other, it costs a small fortune. Medical billing and coding software to host your own system runs from $3,000 to $8,000 or more.

Aside from the high price tag, this software comes loaded with excess features you’ll likely never need. The end result is medical billing software that costs an arm and a leg for capabilities you’ll never use.

The solution?

The best solution is to outsource your billing to a full-service medical billing company. Many offer their billing software for free as part of their services, like electronic health records, practice management systems, and connections to clearinghouses.

Outsourcing billing is important for containing costs. Some billing companies will even work with your existing software and integrate important functions into your current billing workflows. Therefore, for practices looking to curb costs, outsourcing billing to a service that provides software and expertise may be the most prudent option.

➜ Medicare and insurance reimbursements are declining.

Many providers are struggling to contain costs due to declining reimbursements from Medicare and insurance. According to a report, the American Medical Association found that physician reimbursement by Medicare has dropped by 26% from 2001 to 2023 and continues to decline. This has caused a ripple effect, impacting everything from staffing and equipment to supplies and medication.

The solution?

To combat this issue, there are several solutions that providers can implement. One such solution is increasing their patient ratio. By increasing the number of patients they see, providers can generate more revenue and offset the declining reimbursements. However, this solution requires careful consideration of staffing levels and the ability to manage an increased workload.

Managing finances is another key solution. This involves closely monitoring expenses, negotiating contracts with suppliers, and taking a proactive approach to revenue cycle management. By doing so, providers can ensure that they are maximizing their financial resources and minimizing waste. This solution requires a strong understanding of financial management principles and the ability to make data-driven decisions.

➜ MIPS reporting adds administrative burden.

The Merit-Based Incentive Payment System, or MIPS, was designed to reward high-quality, efficient care.

But the truth is, all that reporting adds a ton of administrative work for doctors and hospitals. They have to collect data and submit it to Medicare, which takes time away from actual patient care. Of course we want physicians to provide good care – that’s the whole point. But the paperwork is out of control.

The requirements of the Merit-based Incentive Payment System are costing physicians a pretty penny these days. Each doctor has to shell out close to thirteen grand per year ($12,800) out of their pocket just to stay in compliance with the program. On top of that, physicians end up sacrificing a whole work week, fifty-three hours (per year) to be exact, filling out forms and jumping through administrative hoops for MIPS.

This research was based on the year 2019, before MIPS was completely rolled out, so today’s costs are surely even steeper. For small practices especially, the cost of compliance is bound to far outstrip any rewards, turning the program into a way to escape punishment rather than actually bettering quality.

So while MIPS aims to lower costs, the administrative burden means it sometimes does the opposite. Quality reporting is still important, though. We just need a less complex, time-consuming system. There has to be a way to get the data we need without driving doctors crazy.

The solution?

The best solutions are simple. First, reduce the number of measures providers have to report. Focus on a few meaningful metrics rather than overwhelming doctors with dozens of measures, many of which do little to improve care.

For example, reporting on how many patients received flu shots or blood pressure screenings tells you little about a doctor’s real ability or quality of care.

Second, invest in technology and staff to help with reporting. Electronic health records and billing software can automate much of the reporting process. Outsourcing some reporting tasks to billing consultants and other professionals would also help. Doctors should focus on practicing medicine, not paperwork.

➜ Providers feel they must offer the latest treatments to attract patients, driving up costs.

The problem with the rising cost of healthcare is that doctors and hospitals feel obligated to offer the latest and greatest treatments to stay competitive. They believe that if they don’t have the latest cutting-edge technologies and treatments, patients will go elsewhere. So they spend huge amounts of money on new equipment, facilities, and training.

For example, if a hospital down the road buys a new multi-million dollar radiology machine that provides higher resolution imaging, the other hospitals feel they have to match it or patients might switch to the hospital with the fancier machine. It’s an arms race of medical technology and facilities that ultimately drive costs higher and higher.

The truth is, many of these new treatments are marginally better, if at all, than older, cheaper options. But in the competitive healthcare market, hospitals and doctors feel they can’t risk not making those investments. Patients also often demand the latest options without understanding the costs. It’s a vicious cycle that leads to an escalation of costs far beyond general inflation.

The desire to gain a competitive advantage and attract more patients is a major reason why healthcare providers struggle to contain costs. The fear of losing patients to rivals with shinier facilities and fancier treatments leads to overspending and higher costs for the entire system.

The solution?

If providers worked together instead of competing, costs could be contained. One approach is for providers to form accountable care organizations where they can share information and resources. For example, several doctors and hospitals in a region can join together, share patients’ electronic health records and test results, and determine the most affordable way to keep the population healthy. This avoids duplication and encourages efficiency.

Another solution is for insurance companies to incentivize providers to control costs by offering bonuses when providers are able to keep patients healthy at a lower cost. For instance, an insurer can offer a bonus to primary care doctors if the number of expensive emergency room visits by their patients decreases over a year. This motivates the doctors to improve preventive care and chronic disease management.

Patients also need to understand that the latest, most novel treatment is not always the best or most affordable option. They should have honest conversations with their doctors about lower-cost options that may work just as well for their condition. A fancy new drug or procedure may seem exciting but is often not worth the high price tag.

➜ More salaries must be covered as regulations increase.

The standard way of paying doctors and hospitals is called fee-for-service. The problem with this reimbursement model is that it rewards quantity over quality. It means the more treatments and tests and operations they do, the more they get paid. This encourages them to do more and charge more instead of focusing on what the patient really needs.

For example, say a patient comes in with a sore knee. The doctor orders an MRI, physical therapy, pain pills, and knee surgery. He gets paid for each of those things, even if rest and ice would have healed the knee. Fee-for-service turns healthcare into a business centered around sales instead of a service centered around patients. It’s why costs keep rising higher and higher.

The solution?

The best solution is to change how providers get paid by rewarding value and outcomes. Programs like the Medicare Incentive Payment System, or MIPS, aim to do just that by evaluating doctors based on quality of care and costs. If we pay doctors and hospitals for keeping people healthy instead of just treating sickness, costs will decrease as providers focus on prevention and only provide necessary care.

➜ Many providers fail to negotiate higher reimbursement rates with the insurance networks/payors.

The rising costs of healthcare have long been a concern. The insurance companies and government programs have tried various methods to curb the increasing expenses, but most have failed. The primary reason for the failure is the inability of the insurance networks to negotiate reasonable reimbursement rates with the healthcare providers.

Many doctors and hospitals have been able to demand higher payments from the insurance companies. The insurance companies, in turn, have had to increase the premiums charged to customers to account for these higher costs. It’s a vicious cycle that continues to spiral out of control. If we want to make healthcare more affordable and sustainable, the providers will have to come to the table willing to accept more reasonable rates.

The solution?

To negotiate higher reimbursement rates with the insurance payors, compare your current rate with the market rate for in-network providers, your service fee schedule, and your insurance rate for each service.

Now, to negotiate for better results, collect your practice’s value proposition data in the healthcare industry to substantiate your proposal for higher rates.

Another important step is to consider shifting from fee-for-service to value based payment where you can focus on quality as well as cost of the service.

Since your medical staff already has enough on the plate, therefore, worrying about the reimbursement rates adds to their duties negatively influencing your care delivery. It’s time you consider outsourcing to a billing company that can actively and effectively negotiate with the payers about higher reimbursement rates while taking over your added burden.

Best Cost Containment Strategies in Healthcare

Best Cost Containment Strategies Healthcare

Cost Containment is a comprehensive strategy that involves a number of non-conventional strategies to progressively address the rising cost of healthcare.

With the constantly escalating healthcare costs of medications, equipment, and other healthcare facilities, etc it’s not easy to provide all sorts of treatment and procedures anymore. This is where cost containment strategies come in.

These strategies are more like tools in a toolbox. Each tool helps healthcare providers find ways to manage their spending without compromising the quality of care they give you. Here are some of the most viable ones:

Do you know? Healthcare expenses have risen by almost 7% in 2024, and that makes cost containment strategies vital to the financial sustainability of healthcare organizations.

1). Prefer Using Telemedicine for Non-Emergency Care.

One of the best ways to lower costs in healthcare is through the use of telemedicine. Telemedicine allows doctors and patients to communicate remotely using technology like video chatting. Instead of having to travel to a doctor’s office and pay for an expensive in-person visit, patients can speak to a doctor from the comfort of their own home. Doctors can see and speak with patients, evaluate their symptoms, diagnose conditions, and prescribe medication if needed.

For example, if I woke up with an ear infection, instead of taking time off work to see my doctor, I could do a quick video call. The doctor could look in my ear, confirm it’s an infection, and call in a prescription to my local pharmacy. I avoid the time and money of an office visit, the doctor avoids the overhead of an office visit, and we both save money. For non-emergency care, telemedicine is an easy way to provide quality care at a lower cost.

2). Set Up Self-Funded Healthcare Plans.

Insurance companies have been bleeding companies dry for too long with their high premiums and lack of cost control. The smart move these days is for companies to cut out the middleman and set up their own healthcare plans for employees. These “self-funded” plans are when a company pays medical bills directly instead of paying expensive monthly premiums to some insurance outfit.

The way it works is simple. A company takes a look at how much they’ve been paying for employee healthcare over the years. Then they set aside at least that much money, maybe a bit more to be safe, to pay for all the doctor visits, surgeries, and prescriptions their employees may need that year. If there’s any money left in the pot at the end of the year, the company gets to pocket the difference. The key is the company is bearing the risk, not the insurance companies.

Say you run a factory with a few hundred workers. You’ve paid millions in premiums over the years to keep health insurance for your employees. One day, you’ve had enough of the price gouging and decide to set up your own self-funded plan. You put a few million in the pot to start. At the end of the year, you’ve got $500,000 left over. That’s half a million that would have gone to some insurance fat cat if you’d stayed on their plan. Your workers get the care they need and you get to control costs. Sounds like a win-win solution if I’ve ever heard one.

3). Healthcare Providers Should Favor Bundled Payments.

An ideal way to reduce costs in healthcare today is through bundled payments. Bundled payments are when hospitals and doctors come together to determine a fixed price for an entire procedure or medical issue. For example, if you need a knee replacement, instead of charging separately for the surgeon, the anesthesiologist, the hospital stay, physical therapy, and so on, bundled payments set one price for the whole shebang.

The idea is simple. The hospitals and doctors work together to determine the average cost of a knee replacement, including all the bits and pieces, then they charge that fixed price no matter what. If they can do the procedure for less than the fixed price, they make a profit. If it costs more for some reason, they take a loss. Over time, as they get more efficient, costs come down and quality goes up.

4). Launch Preventative Care Techniques for Patients.

The best way to cut costs in healthcare is through preventive care and managing long-term illnesses. Preventive care means screening patients to catch diseases early and encourage healthy habits to avoid getting sick in the first place. For chronic diseases like diabetes or heart disease, closely following patients with regular checkups, tests, and coaching them on diet and exercise can help avoid expensive complications down the road.

For example, if a 50-year-old man with high blood pressure and high cholesterol visits his doctor for routine checkups, the doctor might put him on medications to control those conditions. The doctor will also likely tell him he needs to lose some weight, eat better, exercise and stop smoking. If the man sticks to the plan, he’s less likely to have a heart attack or stroke in the next few years, so he won’t end up in the emergency room or hospital with huge medical bills. Preventive care and managing chronic diseases – that’s the most effective way the healthcare system can avoid wasting money.

5). Outsource Your Billing Operations to a 3rd Party Medical Billing Company.

The best way to cut costs in healthcare is hiring the best medical billing company like BMB to handle your billing. In-house billing teams often struggle with denied claims and end up costing the practice money. A dedicated billing company has the expertise to get claims paid the first time.

When a claim is denied, our billing company reviews it to find the error. We know the ins and outs of coding and can refile a clean claim to get it paid. In-house teams may not catch the issue and end up writing off the charges. Our billing company’s job is getting claims paid, so they stay on top of changing rules to avoid denials in the first place.

Not outsourcing billing is risky business. Staff have to wear multiple hats and may lack specialized training. They end up spending time reworking denials and chasing payments, costing the practice money that could be earned seeing patients. Outsourced billing gives staff freedom to focus on care while cutting accounts receivable days and reducing costs.

Have more questions about how we can help your practice implement the cost containment strategies?

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