Mistakes Health Care Leaders Make in Cutting Health Care Costs

By Rose O. Sherman, EdD, RN, FAAN

Many nurse leaders feel today that some of the cuts being made in healthcare by organizational leaders are shortsighted. But it sometimes takes a team of researchers outside of health care to paint a clear picture of some of the missteps that are being made to cut healthcare costs. In this month’s Harvard Business Review, researchers Robert Kaplan and Derek Maas do an excellent job of doing just that. Hospital administrators, they contend, typically work strictly from the line items on their profit and loss sheets to trim their budgets. Those at the front line of care are often never involved in decisions about where to cut costs. From their research, they have identified the following five most common mistakes made:

Mistake One – Cutting Support Staff

In an effort to try to keep providers at the point of care, support staff are often the first positions to be cut. These researchers document that a specialist’s time is worth ten times that of support staff yet with the loss of support staff – they often take on clerical tasks that are time consuming and ultimately reduce their effectiveness. These researchers suggest that health administrators should build teams that allow every staff member to function at their highest scope of practice as much of the time as is possible. Arbitrary cuts in support staff results in professional staff becoming overstressed and frustrated – ultimately it is not cost effective.

Mistake Two – Underinvesting in Space and Equipment

In an effort to cut costs, capital budget items are often the first to go. Yet, this can ultimately result in much lower productivity as staff look for equipment and patient care gets delayed. In the article, they provide several real life examples of how this happens from OR room downtime to unavailability of portable x-rays in the Emergency Department.

Mistake Three – Focusing Narrowly on Procurement Prices

Hospital administrators, the researchers suggest, often focus too narrowly on the costs of equipment and supplies. Less attention is paid to the costs of having multiple options available and individual provider use of supplies such as joint replacements.

Mistake Four – Maximizing Patient Throughput

The researchers use an interesting analogy to make a point with this mistake. Would you ever, they suggest, ask musicians to play faster to increase their productivity. This happens too often in healthcare where this increase of productivity does not necessarily mean better outcomes and could even result in costlier care down the road. They advise that based on their findings – spending more time with patients could ultimately lead to much higher returns on investments in healthcare especially in the management of chronic illness.

Mistake Five – Failing to Benchmark and Standardize

The researchers report finding huge variations in practice and in cost. Consumers often have little awareness of this because of a lack of cost transparency in health care as an industry. Healthcare is unusual, they suggest, in that those who provide direct care rarely know what things cost or how their clinical decisions could impact a budget.

The path to solving the costs of healthcare will involve a better understanding of the current processes and their costs. Ultimately, those who deliver care are often in the best position to recommend how costs can be reduced but are rarely asked. They cite three large delivery systems (the Mayo Clinic, MD Anderson and Boston Children’s Hospital) that are doing just that with outstanding results. As you read this, I am sure that you are probably shaking your head and thinking I could have told them this without the research. But the reality is that it does sometimes take an expert outsider in a highly respected journal for people to sit up and listen.

Read to Lead

Kaplan, R.S. & Haas, D.A. (November 2014). How not to cut costs in health care. The Harvard Business Review.