For over two decades, healthcare delivery organizations have devoted extensive resources to cost management in response to shrinking reimbursement. They’ve used vendor consolidation and contract renegotiation to lower supply costs, and shared services to lower overhead. Combined with the wholesale consolidation of hospitals into larger systems with corresponding purchasing power, these actions have done much to make healthcare delivery less costly than it would have been otherwise. Nonetheless, most healthcare delivery organizations have managed to overlook what is arguably the largest category of costs with the potential for reduction — costs controlled by clinical decision-making.

Historically, most hospital cultures operated with a clear, if unwritten assumption: matters impacting physicians or their clinical decisions were the purview of other physicians, period. Despite the many changes that have occurred in the healthcare environment over the past twenty years, this assumption has changed minimally. Physicians are treated as rulers of their own practices unless they do something egregious, and even then, intervention was by other physicians. Reviewing variability across clinicians to understand differences in cost or outcomes is rarely the subject of inquiry. Forays by management into clinical decision-making are seen as taboo — even though the majority of costs in most delivery organizations result from these decisions.

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