Strategies for Reducing Hospital Administrative Costs
There is an ever-rising population of patients that is increasing exponentially as various new diseases manifold themselves. This poses an interesting challenge to Heath Care Providers (HCPs), who not merely have to handle voluminous numbers, but are also forced to contain healthcare costs as related expenses soar. Therefore HCPs are currently on pressure to tackle this concern effectively more than ever and ensure cost-effective delivery of patient care.
Interestingly, in Healthcare Operations Management (HOM), Overhead Expenses (OHE) attribute to a significant portion of the Total Operating Cost (TOC) and that is rising at an unsustainable rate. Thus, certainly it manifests itself as a viable target for cost reduction. Hospitals which successfully minimize their operating expenses have an immediate competitive advantage over others who don’t capitalise on this. Handling cost reduction is imperative though it may be complex and stressful.
Interestingly, in Healthcare Operations Management (HOM), Overhead Expenses (OHE) attribute to a significant portion of the Total Operating Cost (TOC) and that is rising at an unsustainable rate. Thus, certainly it manifests itself as a viable target for cost reduction. Hospitals which successfully minimize their operating expenses have an immediate competitive advantage over others who don’t capitalise on this. Handling cost reduction is imperative though it may be complex and stressful.
Some known contributors to Operating and Overhead Costs in Healthcare
Like any other domain, HCPs have certain operating expenses that are inevitable for maintaining continuum of their business. This includes regulatory compliance, governance, documentation of all patient records, billing, medical supplies, energy, rent/property charges, transportation, capital charges, maintenance of hygienic standards, appropriate waste disposal methods, and other non -medical staff expenses. These overhead categories certainly form a substantial portion of total healthcare costs though they may be unavoidable.
In order to retain their competitiveness, HCPs have to minimize avoidable overhead costs while simultaneously investing in high-value overhead expenses. It is noteworthy that the share of administrative and overhead costs varies significantly worldwide.
Strategies for enhancing Hospital Cost Reduction Efforts
• Clear Identification, Categorization and Tracking Mechanisms for all operating expenses - This is crucial for estimating accurately medical versus non-medical overhead expenses. Unless this is ensured, intervention measures deployed for cost reduction will be impeded. Also, making focused investments in overhead expenses for ensuring value-added service becomes intrinsically complex.
• Incorporating cost reduction ideas in administration: Minimizing operating expenses that don’t contribute to better patient-care though not all overhead costs are financial burdens, administrative expenses should necessarily be reduced as far as possible. This may be achieved by deploying centralization of non-medical functions, outsourcing facilities such as Information Technology, Staffing, Finance and Catering and using automation techniques.
• Making better use of Information Technology(IT): Administrative transactions and health IT initiatives should be digitised and integrated so all stakeholders can communicate in real time This along with latest IT methods as Cloud Computing, Telehealth, Telemedicine and systems as Hospital Management Systems(HMS), Patient Management Systems(PMS) enhances care delivery, efficiency and eliminates errors in cumbersome manual operations.
• Benchmarking and deploying efficiency practices from other industries: Best practices as good Inventory Management, Waste Management and Just in Time (JIT) techniques used in other service industries as Manufacturing may be utilized in hospitals also. This enhances cost efficiency for managing both overcrowding during peak times and declining ward occupancy rates.
• Streamlining operations: This can be achieved by carefully handling required intricacies of healthcare tasks by electronically recording and billing services and standardizing quality/safety initiatives of patient safety for better tracking.
• Diminishing redundancies in diagnostic testing: Adopting selective usage of laboratory testing and utilizing diagnostic equipment effectively to eliminate redundancy, lessen data volumes and ensure optimum medical equipment utilization.
• 360 degree involvement of concerned staff: Aligning cost reduction strategy with the hospital goal of ‘patient- centricity’, ensuring continuity of preventive healthcare programs and engaging all clinical/administrative personnel to collaborate fully in this endeavour.
Conclusion
By deploying smarter healthcare IT, minimizing redundant non-medical expenses and enhancing medical-staff involvement, hospital administrative costs may be reduced significantly without compromising on quality patient-care.
