Involving physicians in cost reduction strategies

Healthcare Financial Management, April, 1994 by Daniel J. West, Jr.

COST CONTAINMENT

One of the major complaints often voiced by healthcare organization administrators is that physicians do not seem to cooperate when it comes to reducing costs. This article presents several techniques designed to involve medical staff more actively in the financial management of a healthcare facility.

Efforts to involve the medical staff of a healthcare organization in cost reduction efforts traditionally have involved educational programs or verbal appeals in medical staff committees. These two techniques, although effective in some institutions, usually fail to bring about attitudinal and behavioral changes needed to achieve significant changes in the financial status of an institution. Often times, management's effort to secure cooperation amounts to begging and cajoling the medical staff to facilitate change.

There are several techniques that, when employed strategically, can involve the medical staff more actively in the financial management of a healthcare facility. While some of these new strategies may require modeling, one-on-one consultation, coaching, or education as part of a skill training process, there are several strategies that have been successfully employed in healthcare settings.

Form a value analysis committee.

Value analysis is a management technique that has been in use in industrial settings for several decades. As a cost-reduction strategy, value analysis examines the rationale behind the selection of materials, supplies, and products used in a facility. When participating in the process, physicians can offer advice regarding how and why technology and equipment is utilized, thereby making cost-saving modifications possible. Physician members of a value analysis committee can be especially helpful with respect to areas requiring high-tech equipment and supplies, such as the emergency department, cardiac care unit, and intensive care unit.

Form a cost containment committee. Many facilities have used this type of committee with varying degrees of success by selecting committee members from the ranks of administrative management. But while a cost containment committee usually can show success in the initial reduction of costs, as time passes committee members may run out of ideas, and cost-reduction programs can stagnate. If physicians are made members of the committee, they usually can identify unique opportunities to achieve strategic cost savings.

Broaden the focus of the product standardization committee. Historically, physician involvement in product utilization review has been limited. Product standardization efforts tend to focus on specific areas, and medical staff opinions are sought only in those instances where technical expertise is required to understand changes in equipment and technology. If the functions of a facility's product standardization committee can be expanded to include other areas of the hospital, it may be possible to involve medical staff in a broader approach to product standardization.

Form a DRG cost analysis committee. Many facilities use DRG committees as a way of examining quality and utilization. Profiles can be developed by physician, by sub-specialty, or by hospital, and decisions then may be made to optimize reimbursement in designated areas. Data on average length of stay, discharge diagnoses, and ancillary test utilization also can be used by cost analysis committees.

Conduct focus group research with physicians. A technique used extensively in marketing research now is being successfully employed to reduce healthcare costs. An understanding of the needs, wants, and values of a facility's medical staff is essential for efficient and cost-effective planning. The use of focus groups also can be helpful in the development of physician practice plans and physician-hospital organizations.

Incorporate financial data into grand rounds. The grand rounds process has been the traditional clinical teaching tool for educating residents and fellows. Some organizations now are now adding financial data to the clinical data of the grand rounds process. The intent is to sensitize physicians to the economic impact of the tests, procedures, and ancillary services ordered as part of the clinical treatment process. Nursing staff and business office personnel can be included in grand rounds as well.

Present financial data at medical staff meetings. Facilities that are serious about reducing costs will find ways to incorporate key financial reports into the meetings of their organization's standing medical staff committees. The rationale is that each committee is composed of members of medical staff who can effect financial conditions if they are aware of key statistical information. Standing medical staff committees can develop policies with financial implications throughout the entire institution. One note of caution, however, is that senior management and select middle management personnel should be trained in how best to provide meaningful and relevant information to the committees.