How to Reduce Healthcare Costs Through Culture

Healthcare is changing, and change is hard.  This is a realty hospitals face every day.  In a time of uncertainty, many executives try to cope by continuing to exercise strategies that have “worked” in the past – or did they?

We all find comfort in doing what is familiar to us.  It’s human nature to shy away from things we have less control over.  For many hospital executives, this means retreating to the common practice of broad budget cuts.  Reductions in workforce, holding open positions and commanding departmental cuts across the board are all strategies that have been used forever.

Are these long term strategies for success?  How do these cuts affect patients?

Changing clinical processes is difficult.  It requires time, data and resources.  Physician participation is integral to its success.  This can be daunting for administrators who are not accustomed to functioning in teams with physicians.

Hospital administrators are under tremendous pressure to reduce costs, increase revenue and keep their doors open.  Their senior leadership often demands quick solutions, stemming in part from the short half-life of many c-suite execs.  In this environment, it’s difficult to justify a long-term plan of practical clinical cost reduction. The quick fix is budget slashing.

But what happens after budgets are slashed?

Sure, some of what gets cut is waste.  But without data and clinical expertise, many of the cuts are not in the best interest of patients.  Inefficient processes become even more inefficient.  Patient safety is compromised.  Doctors become more and more frustrated.  Then, 6 months down the road, the cut positions are reinstated and filled, the costs of inefficiency rise, and we’re worse off than where we started.

How do we safely reduce costs long term?

The answer is creating a culture where physicians and administrators work together to make sustainable changes in clinical processes.  This requires investment in quality improvement education and access to data.  Random improvements with no institutional infrastructure do not succeed.  Hospitals need to establish a framework for how improvement is supported on the institutional, departmental and division levels.  Once this is established, a clear line of accountability needs to be determined to keep projects moving in the right direction.  Once changes are deemed actual improvements, processes need to be put in place to sustain them and audit them continually.

Keep in mind that no improvement strategy is effective without creating a positive work environment where people are respected and encouraged.  This tone is set by leadership.  Creating and supporting a collegial, productive workforce is more important than any business acquisition or volume increase.  Without an intentional plan to create and maintain a healthy professional culture, improvement will ultimately fail.