Cost Control Policy

1 Cost Control Policy The cost control policy under consideration, in this case, is the annual establishment of a dynamic team for cost containment through budget setting, review the utilization process, and tracking the key performance indicators, among other things. It was established in 2015 and has revolutionized all the aspects of the healthcare organizations' operations. The policy required the members to compare and review the budgetary allocations and the cost units in the facility that are supposed to be prioritized (Conway, 2017). The budgets should be set at all levels of the hospitals, and some specific doctors are supposed to be given fixed budgets, i.e., ambulatory care and in-patient care, among others. The fixed budget allocation of the different departments of the hospital has been an effective method for controlling unnecessary and wasteful expenditure.

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The policy was adopted in all departments. The heads of departments were given a major policy to play in overseeing the costs. The rationale behind this requirement is that all the consumption or utilization is done at the departmental level. The heads are expected to evaluate the usage and consumption of products, ascertain whether they are being used carelessly or incorrectly, and try to check on how they can be able to leverage the policy and avoid wastages in the respective units (Friedberg et al., 2014).

The policy addresses many aspects that have implications on how the costs are incurred at the hospital. Some of the aspects include checking on the utilization and consumption practices, ensuring that data is captured, and other performance indicators tracked for better decision making in cost control. Others included sensitizing the human resources on their role in cost control, instilling purchase practice that helps to contain costs, and recommending budgetfriendly practices that will sustain the healthcare organization up to the next level, e.g., energy conservation initiatives. This implies that the policy is tailored towards minimizing wastage in the health organization, while at the same time maximizing productivity.

There are ramifications for not following the policy at all levels. At the organizational level, it will be challenging for the organization to stick to the budget. It will be obliged to look for avenues through which it can finance the supplementary budgets. For instance, the policy compels the organization to purchase the medical supplies for all the departments in large quantities and obtain much lower prices as compared to when procurement is made at the departmental level. The organization may start operating at a loss. At the departmental level, failure by the heads of department to observe the metrics and call their staffs to action may lead to a situation where there is complacency in the department, i.e., poor workflows, wasteful use of

3 medicine, and inappropriate utilization initiatives. At the unit level, there will be a poor quality of services such as long waits by the patients, improper practices with regard to blood utilization, and failure to collaborate to ensure cost-effective utilization.

The policy affects the fiscal aspects of the organization in the sense that it creates a deliberate effort to stick to the annual budget. Having a fixed budget allocation is an effective method of controlling unnecessary and wasteful expenditure. It regulates the utilization initiatives, hence controlling how requisitions are made (Tiessen & Kato, 2017). All these elements ensure that the hospital has sufficient cash flow to meet its short-term debt obligations and operating expenses.

The policy acts as a cost control since it emphasizes the key performance indicators and efficiency. The indicators pinpoint how the costs are incurred in various units and departments compared to some benchmarks. This ensures that the units and departments are not deviating from the norm. The nurses and doctors are in a better position to regulate utilization in an attempt to meet certain targets.

The policy is premised on the need for good quality of healthcare. For instance, its goal is to ensure that there are no shortages in the medical supplies and equipment through proper utilization of the existing ones, and viable procurement practices. It indirectly impacts the staffing such that there is an acceptable nurse to patients ratio tailored towards that patients are accorded holistic care at all times (Conway, 2017). The quality of care is also achieved by tracking the patient wait times, the length of stay by the patients, liaising with the various insurers in an attempt to meet the cost of medication in the most appropriate manner.

The policy improves the efficiency as it is premised on lean production, i.e., minimizing wastes while maximizing productivity. The availability of indicators implies that there are targets

4 that need to be achieved in terms of efficiency, i.e., the utilization rates in the hospitals, appropriate supervision, the workloads of the healthcare workers among the other aspects. The ultimate goals are to improve care and reduce costs. With such a policy in place, the organization will be in a better position to serve more patients with less budgets, hence setting precedence on best practices in healthcare through cost containment.

The policy is the best way to address cost control because it can regulate all the departments, and its effectiveness can be ascertained through the key performance indicators. It ensures that the patients get quality care, inhibits burnout among staff, and ensure efficiency.

External audits can also be incorporated to address some gaps that may not be easily solved internally and align the metrics with the global standards.

5 References Conway, P. H. (2017). Factors associated with increased US health care spending: implications for controlling health care costs. Jama, 318(17), 1657-1658.

Friedberg, M. W., Chen, P. G., Van Busum, K. R., Aunon, F., Pham, C., Caloyeras, J., ... & Crosson, F. J. (2014). Factors affecting physician professional satisfaction and their implications for patient care, health systems, and health policy. Rand Health Quarterly, 3(4).

Tiessen, J. H., & Kato, K. (2017, July). Japanese healthcare: Fostering competition and controlling costs. In Healthcare management forum (Vol. 30, No. 4, pp. 175-180). SAGE Publications.