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Hospital Cost Cutting

6 Reasons Why Your Hospital’s Cost-Cutting Efforts are Failing

Hospitals and cost-reduction efforts often appear as a walk on the rope. It is more like a game of efficiency played while maintaining the perfect balance between the quality and cost-cutting measures. Like any other business, hospitals, as an industry, are too under extreme pressure to reduce their costs as their very existence is in line of risk.

Due to the increased operational costs and other factors such as global recessions, reducing hospital and other healthcare institutes cost has become necessity. The healthcare providers do not have to look at this phenomenon as a negative factor as many cost-cutting efforts open doors for innovations.

It is not uncommon to see both small scale and large scale cost-cutting initiatives and they all are welcoming as long as they don’t influence the quality of care. However only a few hospitals taste the success in reducing the costs and the rest either end up experiencing a deep dip in their quality of care or doubling up their operations cost.

If you are a healthcare provider who is looking to implement innovative ways to reduce your operations cost, this blog is for you. Continue reading to understand the major reasons why your cost-saving efforts tend to fail.

Why Do Cost Reduction Efforts Fail in Hospitals?

  1. Short-Term Cost Reduction Efforts:

Businesses thrive on the decisions that are made keeping long-term goals in mind. One major reason why most of the hospitals fail in cost reduction is because of the decisions made to gain on short-term needs. Making your efforts fail further, these cost saving efforts trigger higher costs in the long-term.

  1. Fail to Identify the Suitable Areas for Cost Saving:

The most successful cost-saving strategies and innovative ideas that worked for many may fail miserably for your healthcare facility. The success of a cost-saving measure depends on identifying the suitable operational area. No strategy or innovative measure would be tailor-made for you and you have to customize the measure based on the strengths and weaknesses of your organization.

  1. Reducing Headcount:

This, probably, is the most followed cost-cutting measures across all the companies and industries. But solely depending on this tactic may cost you dearly! Manpower could be your asset at any given time if you have the right resources. Identify the right people before hiring, invest on them keeping your long-term goals in mind and the results are just inevitable. Take help from the healthcare resource management  consultancies if you need any help in identifying the right candidates.

  1. Focus More on Senior and Middle Level Management:

Even though it is the hands of entry level and executive levels that get dirty. If there is no involvement of mid and senior level management in directing the manpower in the right direction, you are using your manpower for nothing. Ensure your hospital management and stakeholders understand your objective and long-term goals, they are all on the same page and all are heading in the right direction.

  1. Ownership and Respect for Each other:

The most successful hospitals did not get there because they use the most significant equipment and work in sophisticated facilities but because they have worked as a team with onus and respect in the system. Where is there no ownership for a task of activity in the system, you are wasting many resources that cause an impact that you could not imagine. Establish a healthy working atmosphere in your hospitals and nurture ownership and respect for each of your employees.

  1. Performance Measures and Tracking:

Designing Key Performance Indicators (KPIs) and working on them is one way to ensure the sure way to succeed. But the tricky part involves identifying these indicators. Define the roles of each stakeholder involved in a particular task, make them realize what impact they are making by performing a task and establish a transparent incentive and reward system that keeps them motivated in a healthy manner.


Healthcare administrative costs are increasing as you read this. Peer pressure, increased resource costs and increased patient expectations are a few reasons for this. Device your own hospital cost reduction strategy today or take help from a healthcare consulting firm  today to thrive in this trillion-dollar industry.