Preventive medicine for hospital costs

The reality of soaring health care costs has hospital administrators facing the prospect of mandatory state regulation or voluntary restraint on their financial expenditures. In either event, whether formulated and implemented through external rate setting or internal cost containment, managers should be preparing to adjust their hospitals' management control systems to the emerging requirements of tighter budgetary limitations. The authors discuss the implications such cost-containment programs have for hospital control systems, identify the five cost-influencing variables that must be monitored, and consider the critical importance of incorporating attending physicians into the management control effort.