No one in health care will ever deny that there are high costs associated with it. Some of them are unavoidable; employees, utilities, etc.


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With that said, there are a lot of things that could be done to standardize processes or figuring out how to work more efficiently to save on those costs. It's not always the providers fault, though. Sometimes because of state and federal regulations, insurance company issues and, yes, patients, maintaining the cost of health care is more difficult than it needs to be.

Even though there are many ways to help reduce costs across the board, I'm "only" naming 9 of them. Let's take a look at these to see if anyone has suggestions on how to address them.

1. Too Many Tests

Why do doctors request so many tests? One of two reasons; worry about malpractice, or trying to make more money. Either way, it's costing us a lot of money.

They do this because of insurance companies. Most physicians contract with insurance companies to accept certain amounts of payment for services. Some try to get physicians to cut corners to keep expenses down.

The problem arises when insurance companies penalize physicians and patients for the tests the doctor's "didn't" do too often, or when something goes wrong and physician's are sued for malpractice because they didn't do enough. This means a lot of unnecessary tests are performed, costs go up, money is wasted and it hurts everyone... except the insurance companies.

2. Too Many Annoying Claim Forms

New York state put through a law years ago that stated all bills that went out to patients had to follow a certain format. That's worked well; now if someone would only institute a way to send all claims out the same way.

These days, a bunch of claims go out electronically, which seems fairly easy... except it isn't. Turns out that not all insurance companies accept receiving the information in the same format (I'm talking to you Medicaid). This means that in some states, software has to be modified to be able to send claims out electronically to Medicaid, or else Medicaid claims have to be outsourced to someone who'd already done it.

The rest of the claims have to go out on paper, and that's also an interesting process. In New York, Medicaid has multiple claim forms to send out depending on the type of service you've provided. We also can't bill most compensation carriers electronically; same with no fault claims. Each of them has their own form that has to be filled out. Do work for the state; they have their own forms. Contracts with businesses; invoice. Foreign claims; don't even ask!

There's a lot of paper work in health care; no wonder mistakes can easily happen.

3. Forms patients have to sign

Did I mention paperwork? Patient hate health care because of it. Medicare's a beast; sometimes there are 5 forms for patients to complete just for Medicare; often another 2 or 3 for the hospital. They might as well be buying a car or a house; it's messy.

Comp, no fault; more paperwork. Authorizations; don't get me started. Which parent's insurance is covering the child; depends. Are the parents married or divorced. Foster child; adopted, guardianship, ward of the state. More forms.

Why so many forms? Liability. We have to make sure patients know they have to pay the bill if insurance doesn't. We have to let patients know reasons their bills might be denied. We have to sometimes get patients to sign payment agreements. We sometimes have to get patients to sign forms telling them they have to leave the hospital. That's only the tip of the iceberg; did I mention that there are too many forms?

4. Using The ER As A Clinic

This is the main consequence of not having universal health care. Every ER in the country has to treat patients, whether they can pay or not, and it costs way more to do that than having them going to see a doctor. If emergency rooms only took care of true emergencies, they might not lose as much money as they presently do (most emergency rooms lose money), and there wouldn't be overly long waiting times.

Some people have no choice; that's an issue. Some people know the game and know they have to be treated whether they pay or not... ever, and that's another issue.

I have to admit that this is one area where I don't have an inking of a solution that I know would be cost effective. My mind says hospitals should have a clinic area near the emergency room where they could take care of non-emergent patients more efficiently. Most of those patients would be Medicaid or self pay, and arrangements might be able to help take care of some of their costs. I just don't know if it's feasible; I don't have any data on the possibility. This is one time where I know what the problem is, but someone else has to help solve it.

5. Medical "oops"

Why is the cost of malpractice insurance so high? Because no one's perfect. In health care, an imperfection can kill someone or seriously hurt them.

Who hasn't heard of stories of doctor's operating on the wrong side of the body, or performing the wrong procedure on a patient? It doesn't happen as often now because many hospitals put in safeguards against it, but it does still happen.

medical procedures

Unfortunately, this isn't the only problem. Pharmaceuticals are probably the biggest issue in hospitals. Patients are often given the wrong thing; I know this one first hand. When my grandmother was in the hospital years ago she seemed more lethargic than expected. I looked at her bedside medical record and noticed that the pharmaceutical the physician ordered wasn't the one the nurses were giving her. Not only that, but because she was lethargic and there were too few nurses, there were many incidences when they didn't give her any medication at all. There are lots of issues concerning pharmacy departments; way too many to mention. I'll just say that all of them unfortunately waste a lot of money.

You know what the biggest issue in hospitals is these days? Infections. People end up staying in hospitals longer than normal sometimes because of them. Some are unavoidable; some aren't. Those that are end up costing hospitals a lot of money in multiple ways. It's easy to put plans in place to take care of it; it's harder for most hospitals to fully implement the plan so that avoidable infections don't occur.

6. Re-admissions To The Hospital

This one is tough. Hospitals have to save money by trying to get patients out sooner. Insurance companies want patients out sooner. Rules only allow physicians to dispense so much medication to a patient who's being discharged. Patients also need to follow discharge instructions (take that medication even if you feel like a million bucks). And Medicare's rules are that if a patient isn't getting better, they should be discharged, and most inpatients are Medicare patients.

If this is the case, why is Medicare saying they want to penalize hospitals for discharging patients too soon and possibly having them come back? Because of costs, that's why.

Patients admitted to the hospital costs more than patients who have outpatient services. If a patient is readmitted, Medicare's not paying any more money for the same issue. If it's for a different but related issue, they're supposed to pay again; but they don't like it. Even if they don't pay anything more, hospitals will try to recoup some of the money when cost report time comes around; Medicare hates that also because it's more money coming out of their coffers.

It's not just Medicare; all insurance companies hate re-admissions. Sometimes there's nothing that can be done about it. No matter the reason, it still wastes a lot of money.

7. Supply costs

Ah, inventory. Like most businesses, there's a lot of stuff that has to be kept in inventory. Unlike a lot of other businesses, hospitals often order things that might not be used more than once every few years or so... possibly never again.

Hospital inventory control is tough to keep up with. There can be anywhere from 5,000 to 20,000 items that need to be tracked depending on the size of a hospital or the types of services they provide. Items are cheaper if purchased in bulk but things are discontinued all the time, as well as the whim of physicians changing what they want to use.


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One way to help reduce costs in this regard is to get physicians together with the staff and agree on what's needed and how much of it's needed. That sounds good in theory, but once a vendor shows up with the latest thing all bets are out the window. What a physician wants, a physician gets, and since no one comes close to getting back what supply items cost... major waste of money.

The problems are more pervasive than this but it's a start to explaining the problem. By the way, hospitals aren't the only medical entities that do this. Physicians have some issues with supplies, as do clinics and FQHCs.

8. Creating unpayable revenue

I'm going to explain this one with a couple of examples to show why they're money wasters.

Let's start with supplies, since that's where I left off on #7. Suffice it to say, the overwhelming number of supply items are not only unpayable but, by definition, unbillable. The terminology we use is "routine", which basically means you need these items to do the job at hand.

What happens in a lot of places is that either the supply (materials management) or the department that's using these items decides to bundle them into a package of some sort, price the heck out of them and charge them to insurance companies and patients.

The problem here is... it's actually illegal to charge for items that aren't payable... at least the way it's normally done. Most hospitals end up using revenue code 272 for these kits or sets (usually what they call them) which means they're representing them as sterile supplies, when in actuality they should be charging them as 271, or non-sterile supplies. These are things like gowns, hypodermic needles, drapes, IV tubes, suction tubes, etc. This is actually fraudulent, and could end up getting the hospital penalized at some point in the future. Sometimes they'll throw in an actual sterile supply with these other things so they can inflate the price; that's sneaky as sin.

The next example involves a hospital that one day decided to shut down most of its neurology department because they felt it wasn't generating enough revenue (because administration hadn't been proactive with it) and decided to turn the space into a neonatal recovery room area. The problem here is that, though it generated a lot of revenue, no insurance companies pay for recovery room charges. Who pays for them... self pay patients! This means that instead of working to maximize a revenue generating department where there was an easy fix, they decided to add an area that not only could they bill anyone for, but it made their receivables look even worse.

9. No charge master position/legitimate person in the position / regular charge master/revenue review

This one might seem self serving since it's what I mainly do as a consultant, but it's probably one of the most crucial areas that gets ignored way too often. It's actually more about losing money than wasting money, but it seems appropriate to add it here. Instead of writing a long paragraph, let me make specific points instead:

* stop putting accountants in charge of charge master. If you do, it proves you have no idea what its purpose it;

* stop putting nurses without any knowledge of billing or charge capture in the position; nurses know a lot but your charge master needs a technician who knows at least a little bit about finance;

* make sure all your services have prices. I've seen them missing more often than one would expect;

* make sure your charges have the correct revenue codes; there's a major difference between implants and transplants, or an operating room vs an ambulatory surgery center;

* the reason you need to review your charge master every year is that sometimes an entire group of charges for a department gets changed or moved (which happened this year in radiology)

There's more I could add but I believe I've made my point. In any case, these are 9 ways hospitals, physicians and all other medical organizations are wasting or losing money. As I've said previously, it's hard being 100% perfect, but closing the gap can only make everything more efficient and profitable.