Cost Containment Strategies for Healthcare Organizations in 2024

It goes without saying that 2024 will be yet another tricky year for healthcare providers. 

The fallout from the COVID-19 pandemic, the continued effects of inflation and a sea of rapidly changing patient expectations are just a few entries in a long list of factors, many of which are compounding to make patient care even more expensive than it’s been in recent years. 

According to projections from PwC’s Health Research Institute, medical costs for both group and individual markets are expected to rise by a whopping 7% compared to last year. That’s higher than the projected cost increases for both 2023 and 2022.

The bottom line: In 2024, the most successful healthcare organizations will be the ones that quickly and creatively navigate these challenges through savvy cost containment strategies. Each provider’s plan of attack will differ based on their location, size and more, but we’ve outlined three macro-level solutions below. 

Leaning headfirst into digital healthcare

If there’s one thing we’ve learned from the pandemic, it’s that digital healthcare is not going anywhere. The COVID-19 pandemic not only accelerated the adoption of patient portals and video calls, but it also created an expectation that any trusted provider would offer these services. 

The good news, though, is that leaning into digital healthcare is a tremendously cost-effective move. As recent research shows, the average telehealth appointment costs patients $110 less than an in-person visit. These savings are often transferred to the providers, too, with organizations often spending less on administration, facility needs and personnel. 

What’s more, they can reduce strain on doctors, nurses and administrators by reducing wait times — especially when coupled with an efficient, high-tech online portal or app that allows for information to flow quickly and easily between patient and provider. 

A 2022 study shared by the National Library of Medicine found that nearly 50% of patients use some kind of health app, which is further evidence that the average patient both trusts and relies on a mobile, digital-first system for receiving information about their well-being. As wellness apps grow in ubiquity — along with popularity of wearable fitness trackers — it will only become easier for providers to affordably work with these programs or roll out efficiency-increasing ones of their own.

Of course, the even more recent change has been the rise of generative AI, which has the ability to transform healthcare in its own staggering way. Early use cases for programs like ChatGPT show that AI could lift major administrative burdens, freeing up employee time, increasing efficiency and cutting costs in the process. 

There’s also evidence that AI may soon be used to take over some labor-intensive tasks — like post-visit documentation — completely. It’s a future that’s coming ever-faster for all industries, and one that healthcare organizations need to prepare for in order to utilize the benefits. 

Embracing the rise of value-based care

There’s plenty of reason to believe that value-based care (VBC) is experiencing just as much of a boom as telehealth and digital medicine. In fact, a recent McKinsey analysis estimated that 90 million patients will be using VBC models by 2027 — more than a twofold increase from 2022. 

In VBC, providers are paid based on patient outcomes rather than the amount of care given. This disincentivizes potentially costly decisions, like ordering an excess of tests and procedures, in favor of a preventive and comprehensive approach to wellness. 

Much like digital healthcare, VBC can simultaneously improve patients’ experiences and cut costs for their providers. Value-based care encourages doctors to communicate with labs, consultants, specialists and more, all of whom share full knowledge from appointment to appointment.

In this model, even something as simple as sharing records across appointments can be revolutionary for cutting costs. Patients often work with a “coordinator,” who ensures that all of their providers have the information they need — thus removing the need for repeated tests and lab work. 

As research has shown, this patient-first approach can have a significant impact on productivity. What’s more, the focus on “value” (i.e., the quality of care each organization provides) ensures that doctors and nurses work to get the best result for their patients, which in turn also reduces long-term costs by helping patients stay healthier in the first place. 

VBC programs have long been present in Medicare and Medicaid, but McKinsey expects major growth in the public sector, as well as increased adoption by specialists. In the long run, organizations that embrace VBC early will be able to establish the relationships and best practices that will make it even more cost effective in the long run. 

Optimize, optimize, optimize

It may not come as a surprise that American healthcare providers spend a staggering amount on administration costs. According to a study by the Commonwealth Fund, 8% of all U.S. healthcare spending goes toward admin, more than basically any other highly developed country. 

Optimizing administration — from paperwork to scheduling to record keeping and more — can go a long way toward cutting an organization’s overall costs. This form of discipline is crucial for programs like digital healthcare and VBC, but it also extends to even the most straightforward of processes.

Training is an easy example. Crafting a straightforward, road-tested system for onboarding staff makes all the difference down the line, since it has an effect on patient care, staff turnover and employee satisfaction. 

As research from CHG Health shows, healthcare’s real turnover problem isn’t doctors leaving the field — it’s doctors leaving their current jobs for better, more comfortable and more flexible situations. In fact, between 2020 and 2022, a full 43% of doctors made some kind of major career move. 

2024 is already shaping up to be a year where pockets will feel especially tight, so it’s as good a time as any for providers to audit every part of their organizations — from administration to training to food to waste management — and see what can be optimized. It’s a broad step to take on, but finding even a few inefficiencies could make all the difference in a difficult landscape.