Robert S. Kaplan

Derek A. Haas

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">Idea in Brief</h4>
 <div class="ideainbrief-contents">
  <h5>The Problem</h5>
  <p>Field research with more than 50 health care provider organizations, most based in the United States, suggests that many cost-cutting initiatives actually lead to higher costs and lower-quality care.</p>
  <h5>Why It Happens</h5>
  <p>Administrators typically look to reduce line-item expenses and increase the volume of patients seen. This may generate immediate financial gains, but if the cuts are made without considering what’s needed to deliver excellent patient outcomes, they lead to larger bills in the long term.</p>
  <h5>The Solution</h5>
  <p>Administrators, in collaboration with clinicians, should examine all the costs incurred over the care cycle for a medical condition. This will uncover multiple opportunities to benchmark, improve, and standardize processes in ways that lower total costs and deliver better care.</p>
 </div>
</article-ideainbrief><p>Health care providers in the United States and much of the rest of the world are trying to respond to the tremendous pressure to reduce costs. Many of their attempts, however, are counterproductive, ultimately leading to higher costs and sometimes lower-quality care.</p>

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<p><span class="reprint">Reprint: R1411G&#239;&#187;&#191;</span></p>
<p>Health care providers in much of the world are trying to respond to the tremendous pressure to reduce costs&#8212;but evidence suggests that many of their attempts are counterproductive, raising costs and sometimes decreasing the quality of care.</p>
<p>Kaplan and Haas reached this conclusion after conducting field research with more than 50 health care provider organizations. Administrators looking for cuts typically work from the line-item expense categories on their P&#38;Ls, they found. This may appear to generate immediate results, but it usually does not reflect the optimal mix of resources needed to efficiently deliver excellent care.</p>
<p>The authors describe five common mistakes: (1) Reducing support staff. This often lowers the productivity of clinicians, whose time is far more expensive. (2) Underinvesting in space and equipment. The costs of these are consistently an order of magnitude smaller than personnel costs, so cuts here are short-sighted if they lower people&#8217;s productivity. (3) Focusing narrowly on procurement prices and neglecting to examine how individual clinicians actually consume supplies. (4) Maximizing patient throughput. Physicians achieve greater overall productivity by spending <em>more</em> time with <em>fewer</em> patients. (5) Failing to benchmark and standardize.</p>
<p>Administrators, in collaboration with clinicians, should examine <em>all</em> the costs of treating patients&#8217; conditions. This will uncover multiple opportunities to improve processes in ways that lower total costs and deliver better care.</p>

How Not to Cut Health Care Costs

Reprint: R1411Gï»¿ Health care providers in much of the world are trying to respond to the tremendous pressure to reduce costs—but evidence suggests that many of their attempts are counterproductive, raising costs and sometimes decreasing the quality of care. Kaplan and Haas reached this conclusion after conducting field research with more than 50 health care provider organizations. Administrators looking for cuts typically work from the line-item expense categories on their P&Ls, they found. This may appear to generate immediate results, but it usually does not reflect the optimal mix of resources needed to efficiently deliver excellent care. The authors describe five common mistakes: (1) Reducing support staff. This often lowers the productivity of clinicians, whose time is far more expensive. (2) Underinvesting in space and equipment. The costs of these are consistently an order of magnitude smaller than personnel costs, so cuts here are short-sighted if they lower people’s productivity. (3) Focusing narrowly on procurement prices and neglecting to examine how individual clinicians actually consume supplies. (4) Maximizing patient throughput. Physicians achieve greater overall productivity by spending more time with fewer patients. (5) Failing to benchmark and standardize. Administrators, in collaboration with clinicians, should examine all the costs of treating patients’ conditions. This will uncover multiple opportunities to improve processes in ways that lower total costs and deliver better care.

How Not to Cut Health Care Costs

Summary.

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