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Health care costs: saving in the private sector.
California Management Review
|February 6, 1980
Summary
Employers can reduce rising healthcare expenses by leveraging market power and implementing strategies like health maintenance organizations (HMOs) and claims review. Risk management departments are well-suited to lead these cost-containment efforts.
Area of Science:
- Health Economics
- Business Administration
- Risk Management
Background:
- Rising healthcare costs present a significant challenge for employers.
- Large organizations possess market power to influence cost containment.
Purpose of the Study:
- To outline strategies for employers to reduce healthcare expenditures.
- To evaluate various short-run cost-containment tactics.
Main Methods:
- Analysis of short-run cost-containment strategies.
- Comparison of strategies based on service demand, management effort, cost, and savings realization time.
- Examination of alternative delivery systems (e.g., HMOs), peer review, outpatient care coverage, and claims review.
Main Results:
- Health maintenance organizations (HMOs) offer cost-cutting potential but require employee buy-in.
- Peer review and claims review are effective cost-saving mechanisms.
- Implementing less expensive outpatient care coverage can reduce overall expenses.
Conclusions:
- Effective healthcare cost management necessitates a comprehensive plan analyzing alternatives, organizational goals, and resources.
- Risk management departments are ideal for overseeing cost-containment initiatives due to their expertise in insurance and negotiation.