Strategic Approaches to Mitigate Rising Healthcare Costs

Authors: Geoffrey Hopkins , MD Rich Maturi , MBA

Healthcare costs are rising rapidly, placing intense financial pressure on providers, payers, employers, and patients alike. This strain limits access to care, forces patients to delay essential treatments, and drives providers and health plans to operate on even-thinner margins. Addressing these issues requires clear, actionable strategies. ProNexus partners with healthcare organizations to implement tailored solutions that lower costs while improving patient outcomes.

Post-Pandemic Shifts in Healthcare

The COVID-19 pandemic and its aftermath are causing healthcare costs to rise at the fastest rate in a decade. Input cost inflation, exacerbated by disruptions to healthcare labor markets, has caused the cost of providing care to rise 8-10% per year. Medicare and Medicaid payment increases and the increases built into multi-year contracts with health plans lagged far behind these. Providers lost billions of dollars. While input cost inflation continues, provider systems have been re-negotiating multi-year health plan agreements, securing double-digit increases in commercial payment rates. As a result, health plans have passed on aggregate healthcare cost increases of 8% to employers for the past two years and the end is not in sight. Employers and health plans are now looking for more robust ways to control costs.

The pandemic also spurred new, more efficient approaches to healthcare, notably telehealth. Telehealth showed how technology can improve access and lower costs. Yet, integrating digital solutions requires careful planning to avoid disruptions and telehealth utilization has declined since the end of the pandemic.

To tackle the rising costs of healthcare effectively, organizations must address several critical areas. Below are the key factors driving these challenges and the strategic considerations essential for mitigating the impact.

Key Factors and Strategic Considerations

1. Labor Market Instability

• Challenges: High turnover and reliance on temporary staff increase costs and disrupt care.
• Strategy: Use innovative staffing and workforce development. ProNexus helps create supportive environments that improve retention and attract talent.

2. Administrative and Supply Chain Inefficiencies

• Challenges: Pricing disparities and supply chain inefficiencies add financial waste.
• Strategy: Standardize procedures and optimize inventory management. ProNexus helps streamline administrative processes and negotiate better supplier terms.

3. Pharmacy and Drug Costs

• Challenges: Rising specialty medication costs strain providers and patients, particularly for chronic conditions.
• Strategy: Form strategic partnerships with pharmaceutical companies. Increase price transparency and consider value-based purchasing agreements. ProNexus supports negotiation and pharmacy management program implementation.

4. Increased Denials

• Challenges: Growing claims denials reduce provider margins for commercial and Medicare Advantage patients while increasing provider administrative costs.
• Strategy: Reassess participation with all health plans. Optimize billing. ProNexus provides revenue cycle management support to improve outcomes for commercial and Medicare Advantage programs.

5. Behavioral Health Integration

• Challenges: Mental health spending increases, yet care remains fragmented, leading to higher costs.
• Strategy: Integrate behavioral health with primary care. ProNexus assists in designing collaborative models that improve outcomes and reduce expenses.

Opportunities for Cost Containment

Amid rising healthcare costs, there are significant opportunities for organizations to implement cost-containment strategies that not only reduce expenses but also enhance care delivery and patient outcomes.

• Technology Integration: AI and digital tools enhance operations, reduce administrative work, and improve decision-making.
• Value-Based Care Models: Incentivizing quality over quantity aligns provider goals with patient outcomes.
• Patient Engagement: Educating patients and improving pricing transparency encourage informed and cost-conscious decisions.
• New Benefit Design Models: Provide members with clear out-of-pocket cost differences for receiving care from different providers.

Challenges and Mitigation Strategies

While pursuing cost containment and improved care delivery, healthcare organizations face several challenges that can hinder progress. However, with the right strategies, these obstacles can be effectively mitigated to drive sustainable change.

• Implementation Complexity: New technologies and care models require planning and change management. ProNexus offers support to align changes with organizational goals.
• Regulatory Compliance: Healthcare regulations are complex. ProNexus guides to ensure compliance alongside innovation.
• Cultural Shifts: Integrated and value-based care models require a cultural change. ProNexus helps foster a culture of collaboration and improvement.

ProNexus’s Role in Sustainable Change

At ProNexus, we go beyond traditional consulting by leveraging a unique model built on real-world experience and a deep understanding of healthcare’s operational, clinical, and technical complexities. Our elite network of healthcare leaders has walked in your path, bringing decades of hands-on expertise to address financial challenges and elevate patient care. Our approach includes:

• Strategic Planning: We don’t just offer advice – we partner with you to develop tailored strategies that align with your organizational goals and the dynamic market landscape customizing strategies to fit organizational needs and market conditions.
• Operational Excellence: From optimizing staffing models to streamlining supply chains and enhancing revenue cycle performance, we focus on actionable improvements that deliver measurable results.
• Technology and Innovation: Our team helps you harness the power of AI and predictive analytics to drive smarter decision-making and operational efficiencies.
• Financial Performance Improvement: We identify and eliminate inefficiencies, unlocking significant cost savings while maintaining high-quality care.

What sets us apart is our commitment to delivering practical, sustainable solutions through close collaboration. Our team of seasoned healthcare leaders works closely with you, tailoring strategies that not only align with your organization’s mission and values but drive real measurable impact.

Rising healthcare costs present significant challenges, but with the right approach, they also offer opportunities for transformation. By taking proactive steps today, healthcare organizations can reduce costs, enhance patient access, and build a more sustainable future. ProNexus is here to partner with you on this journey, providing the expertise and support needed to turn these challenges into opportunities.

About the Authors:

Geoffrey Hopkins MD, MPA leads ProNexus's Behavioral Health Practice with over 20 years of executive experience in healthcare transformation. He excels in developing integrated care models and value-based strategies, tackling challenges in revenue cycle management, workforce development, and regulatory compliance. Dr. Hopkins has a proven track record of enhancing care quality and operational efficiency in managed care and hospital settings. Passionate about healthcare innovation, he mentors emerging leaders and contributes to industry discussions as a speaker and writer. His unique blend of medical and public administration expertise drives his commitment to collaborative, strategic healthcare leadership.

Rich Maturi is a Pronexus Advisor with over 40 years of experience developing relationships between healthcare providers and health plans. As senior vice president, of health affairs for the Blue Cross and Blue Shield Association he helped guide the early national rollout of PPOs and manage care programs. He then led business development for two innovative companies in the early days of disease management. As senior vice president at Premera Blue Cross, he had overall responsibility for provider contracting and value-based payment. In recent years he has continued to advise health plans and providers on provider contracting and works with health innovators to develop relationships with health plans.