Maintaining operating costs in hospitals and medical clinics is becoming a harder task with each passing day. It was difficult even before the pandemic had hit the US, and now that Covid-19 truly has become a catastrophe, costs have skyrocketed, so much so that management are struggling to keep the business end sustainable.

Luckily, it is still possible to maintain order, provide care and reduce overhead costs with the right steps in place, implemented with dynamic planning. As to what those methods should be, the following discussions should be able to provide some clarity on that.

Track and List

It will take some time before sufficient data can be collected via the tracking and listing method, but it’s time well spent. The collected data about all overhead costs is going to be crucial to list down possible next steps that can be taken towards cost reduction.

One of the primary goals here is to determine and then compare the costs of clinical and non-clinical care, so that the distribution could be in line with the need of the hour. As the data collection remains continuous, changes can and will need to be made multiple times in the future as well, to make sure that all allocated funds are being spent where they should be spent during that specific period of time.

Dynamic Budget Allocation

This is not a time for static or standard solutions, therefore, dynamic budget reallocations can prove to be quite effective in countering the new and unprecedented situations, as they arise. Additionally, it provides the management with a clear view of what’s necessary now, and what isn’t, so that they can reallocate the funds from the latter to the former immediately and effectively, countering emergencies as they arise.

This step will of course be powered by the first, because without that steady tracking of overhead and specific expenses data, it would not be possible to allocate and reallocate budgets with the flexibility that this situation demands.

Lease Equipment Instead of Buying?

The lease or buy argument is an old one in the medical equipment industry, with there being points in favor of both sides. When launching a new hospital/medical practice/clinic, certain equipment will need to be bought for sure, but if it’s an expensive equipment, leasing will be the better option in most situations, especially during emergencies. The same logic applies to older establishments as well.

If the place does not have a particular piece of medical equipment that it needs right now, leasing the machine makes more sense because it saves the business a major expense in a time when expenses are already plenty. A short lease also guarantees that the hospital or clinic won’t have to pay for the equipment if it loses its regular utility in the near future, or a much more advanced version of it makes the machine obsolete.

Decreasing or Eliminating Costs, While Prioritizing Improved Care

Expenses that are currently not contributing to a hospital’s/clinic’s goals, or being effective in improving patient care in any way, should be eliminated completely where possible, and decreased in other scenarios. It is a simple, straightforward strategy for overhead cost reduction, which doesn’t impact the caregiving and treating capabilities of a medical establishment. However, it will require cutting jobs, which is where things can become extremely difficult.

This is a strategy that is easier suggested than implemented, given that it will require employees losing their jobs on many fronts. The principle idea is to strip or decrease as many of the non-medical expenses that the hospital is bearing currently.

The non-essential and non-medical services can be automated and maintained with a much smaller workforce, while others like IT, HR and finance can be outsourced to cut down on overhead costs. Difficult as it may be for well-established medical facilities, having a small, efficient and cost-effective workforce is a surefire way to reduce overhead expenses of running a medical establishment.

If it’s a new venture though, there will be no need to cut jobs where none existed in the first place. A strong technical infrastructure with automation in place to reduce unnecessary wastage of time and money is suggested from Day One. The workforce should be carefully selected before being put on the permanent payroll, while additional pressure can be handled cost-effectively by hiring temps.

Reducing overhead expenses is difficult in any setting and in any industry, so it’s best to take a cautious approach, rather than rapid, sudden steps. Planning is important and there should be multiple points or steps to implementing the plan in various stages, over a preplanned course of time. This is how the business end of medical establishments can be made more sustainable, without making it seem like a major and sudden change.

Cite this article as:
Editorial Staff, "Overhead Costs in Hospitals and Clinics Are Increasing at an Exponential Rate: How to Counter It Methodically," in Medicalopedia, May 7, 2020, [Permalink: https://www.medicalopedia.org/8839/overhead-costs-in-hospitals-and-clinics-are-increasing-at-an-exponential-rate-how-to-counter-it-methodically/].