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Controlling continuum of costs has always been important in running a health care practice, but the pandemic has made reining in excessive operating expenses vital
Cost control measures are likely to take a more prominent role among healthcare practitioners because of COVID-19-driven economic disruption. The pandemic has raised the stakes for physician-owners, some of whom have been joining multi-service organizations to reduce their administrative burdens and pursue new avenues of growth, to take a more hands on approach to driving down costs and ensure their businesses are being run profitably.
According to a Woolhandler and Himmelstein report, the U.S. spends an estimated $1.1 trillion on healthcare administration, of which $504 billion is in excess of what is needed. In 2019, hospitals, physicians, and other care providers recorded an estimated $282 billion in expenses connected to billing and insurance.
As healthcare practitioners have lacked the same volume of patients as compared to before the pandemic and the cost of care continues to increase, providers are undoubtedly facing more financial pressures. Given the current challenging economic environment, there’s no time like the present for physicians to be more proactive in managing their costs and positioning their practices for future growth.
The good news is there are several areas where providers can implement strategies to better manage their billing, invoicing, reimbursement/insurance and supply chain costs.
This is where tech-enabled healthcare can help reduce costs and improve quality of care for patients, allowing for faster recovery times. The use of robotic-assisted surgery can significantly reduce the costs of healthcare companies because these types of surgical procedures are more precise and can be less invasive, thereby reducing the chances of errors from traditional surgery. Robotic surgery and other technologies that help streamline certain tasks such as retrieving medical supplies are helping to reduce the workload of physicians and nurses.
As a result, virtual healthcare practices for annual patient visits are expected to save $7 billion in economic value. Interestingly, the current pandemic has further strengthened the case for using virtual reality in healthcare in order to function more safely, train medical staff and empower their ability to work remotely.
Artificial intelligence (“AI”) and machine learning are changing the healthcare treatment area through algorithms designed to create better diagnostic assessment and targeted therapies. In 2019, the FDA acknowledged the potential of AI to reduce treatment variability and support next-gen clinical trials. Further, surgical tools can be 3D-printed and customized to a patient's anatomy, reducing the amount of space needed for performing a procedure. Use of 3D-printed models in surgical care has demonstrated a mean of 62 minutes saved per procedure (in other words, $3,720 per case saved from reduced time).
Additionally, digitizing repetitive tasks is one way technology can significantly reduce the time a physician spends treating a patient. As revenue loss caused by rising claim denial rates continues to rise, several healthcare organizations are actively shifting to revenue cycle management technologies, including automation and predictive analytics to avoid incorrect billing and reduce collection costs. Staffing costs can be further reduced by using scheduling apps to effectively allocate human resources and avoid overtime and temporary hires.
Advanced scheduling apps, meanwhile, are enabling nurses, physician and medical assistances to circulate schedules on mobile devices among fellow staffers in real time, as well as a diverse range of other tasks including the monitoring of open beds, emergency room capacity, and equipment status – all from a single technology platform.
Electronic health records (“EHR”) are another way provider organizations can reduce costs. As compared with an on-premise EHR, a cloud-based EHR system is more elastic and needs-based, which enables healthcare businesses to pay for only what they need and when they need it, without needing to make a significant capital investment.
That would explain why up to 96 percent of hospitals and 86 percent of physician offices have adopted EHRs.
The ability to offload non-clinical functions is measure healthcare businesses can take to control their costs. Hospitals have the ability to reduce operating costs by up to 20 percent through the outsourcing of nonclinical functions such as IT management, facility management, sterilization, meals, patient transport, procurement and security. In addition, a growing number of healthcare businesses are outsourcing clinical services such as laboratory procedures (pathology and microbiology), along with radiology, dialysis, mental and behavioral health, and in-home health.
Lastly, provider can realize additional costs by using shared equipment to reduce cost of ownership and improve their delivery of better patient care. Equipment such as lasers, specialty operating room beds and imaging machines are the most common types of modern treatment that can be shared.
It’s important to note that equipment sharing can be done in several ways such as conducting a “milk run”. What that means if the piece of equipment is rotated on a fixed schedule for each day of the week it will have a higher utilization rate.
Alternatively, practitioners can use just-in-time arrangements to use equipment based on changing needs in the operating room or purse a single-round trip use strategy whereby equipment is rotated in case of an exigency, such as breakage of a device at the borrowing facility, and then return the equipment shortly after its use.
In summary, tech-enabled healthcare and automated repetitive administrative tasks are a win-win for both patient outcomes and cost reductions. These steps can ease the burdens on clinical staff and physicians alike, reduce burnout and, most importantly, rein in excessive costs.
Jeffrey Stevenson, Managing Partner of VSS, a New York private investment firm.