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Reducing Costs - New Approaches to an Old ProblemMultiple factors are rapidly converging to push the current model for healthcare delivery to the brink. Demographic shifts, an increasing number of uninsured, and escalating treatment costs are challenging the financial viability of many healthcare systems. From a national perspective, even as the total cost of healthcare approaches the breaking point, payers continue to curtail reimbursement, steadily squeezing operating margins.
The new Administration in Washington has made it very clear that the industry has to start making some truly transformative changes. Better care at lower cost is the new bar being set. While cost reduction has been a constant pursuit for many years, what’s been tried often hasn’t been enough or hasn’t been sustainable. And now even more is expected.
There should be legitimate concerns and questions amongst healthcare governance regarding the adequacy of the strategic response many healthcare organizations are taking to these market pressures. It’s time to try some new approaches to reducing costs.
Categorizing Approaches to Cost Reduction
The range of typical cost reduction approaches can be categorized into four increasingly progressive levels, each increasingly more effective. Understanding these levels can be helpful in two ways: One is in realizing that healthcare organizations have probably gotten most of what they’re going to get from more traditional cost reduction efforts. And the other is identifying new, more effective approaches that haven’t yet been tried.
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