Strategies to Reduce Healthcare Costs

In 2018, Americans spent over $3.5 trillion on healthcare, as per Fitch Solutions report. It means that the average American spent over $11,200 per person on healthcare. Despite that, our medical situation is no better than that of comparable countries, and the country’s life expectancy is still falling off.

There definitely are strategies to reduce health care costs and better the quality of care overall. We’ll talk about them one by one.

1. Telemedicine

Telemedicine is one of the efficient ways to lower health care expenses as it gives employees faster and more convenient access to care. Both employees and employers can enjoy cost savings overall.

As per BenefitsPro, telemedicine visits involving common health conditions have saved employers an average of $472 per session. Also, the American Hospital association reported that companies who maximize a telehealth program have enjoyed cost reduction of 11%. Other forms of technology such as smartphone healthcare apps can also be beneficial if maximized accordingly.

Resorting to telemedicine also boosts overall productivity as a doctor’s appointment which is usually just about 15 minutes in front of a physician can already mean a lot of preparation time and wasted productivity hours. Another way to save both time and money is the next strategy.


2. On/Near-Site Clinics

Another way firms can minimize health care costs is securing an on-site clinic. It doesn’t only enhance care coordination but also improves primary care quality for your workers. The following are benefits employers can enjoy by establishing an on/near-site clinic:

  • Health risk evaluations

  • Wellness tests and screenings

  • Chronic condition management

  • Employee health & wellness coaching

The scope above helps employees understand their health conditions better and prevents them from getting worse. Receiving quality and timely care can promote overall workforce health and can be considerably cost-effective in the long run. Preventive care enables workers to stay health, reducing their need for pharmaceutical and medical treatments and promoting the alleviation of chronic conditions.

3. Treat hospitals as last-resort healthcare provider

Of each healthcare dollar spent in the U.S., 33 cents go straight to hospitals; 20 cents of which go to clinics and physicians; and 27 cents are allocated for non-physician providers like optometrists, nurses, and occupational therapists. If we’re dealing with hospital-owned physicians and clinics, that only means hospitals essentially control over 50% of the entire healthcare spending in the country.

But efficiency-wise, hospitals don’t necessarily have to be the only place for care, and treating it as such will only increase overall healthcare costs and diminish chances for more efficient and effective healthcare.

Instead of heading straight to the hospital, why not consider lower-cost imaging centers or day surgery centers. Many quality services can be way cheaper than the similar services hospitals offer. These alternative services have lower overhead, so you can expect more savings and just the same level of care quality.

4. Employee Education

Educating employees about their health plan options can also go a long way. Employee benefits education is important to maximize your benefit plan’s actual effectiveness. If you educate your employees, they’ll get to value their benefits plan more and perceive the workplace more positively overall. Communicating their benefits more effectively also boosts levels of morale, engagement, and loyalty within the organization.

5.  Take advantage of insights from data

This is an effective way of containing health care expenses. Gather and engage in health care data more effectively. One of the many pieces of data you can look at is the referrals as they can play a huge role in the total healthcare costs.

You can also track healthcare claims and other health records to discover quality and low-cost care providers who produce the best health outcome. The more detailed the data, the better you can decide which providers to steer workers to so that the overall healthcare is well-optimized.

6. Medical Case Management

Medical case management programs can help in coordinating employees care, monitoring ongoing medical treatments, and suggesting the best treatment options. Medical case management can also direct employees to high-quality and more cost-effective care providers. The objective is to give your staff the highest level of care at the most reasonable price.

7. Direct Primary Care (DPC)

DPC is a type of health coverage, but you can’t consider it health insurance. This coverage enables you to just pay a fixed monthly fee to receive convenient access to primary care providers without having to process claims with an insurance provider.

DPC can give your staff more time with a physician, cut down the hassle of dealing with insurance companies, improve care quality, and minimize out-of-pocket costs. Statistics show that DPC costs only an average of $77 per patient per month while usual PPO plans can cost around $251 per patient per month.

8. A Fiduciary ‘Pharmacy Benefits Manager'

A PBM or Pharmacy Benefits Manager is an organization whose goal is to contract with health plans in order to administer their pharmacy benefits. PBM produces drug formularies and designate the “preferred” drugs that insurance plans will cover. This puts your health plan in a strong bargaining position.

If a manufacturer’s drug is not in the formulary, insurers will not cover the medication and doctors also will not prescribe it. This will then cause manufacturers to pay rebates to the PBM based upon the quantity of drugs given out to health plan registrants. PBMs will usually share a portion of the rebates with their health plan partners, leading to more savings.

9. Reference Based Pricing (RBP)

RBP helps in limiting costs by setting a flat amount your health insurance pays for certain healthcare services. These healthcare services would have wide expense variations otherwise. This fixed rate is usually based on numerous industry benchmarks like Medicare’s reimbursement rate.

With RBP, employees can evade the traditional insurance company contracts and just directly pay the service providers. Avoiding these insurance carrier contracts help employees get more transparent and more cost-effective care. Here are some more advantages of using Reference Based Pricing:

  • Reduced healthcare spending for businesses

  • Less out-of-pocket spending for employees

  • Employee protection

  • Can be combined with other cost-containment strategies

  • More price transparency

10. Integrate Ancillary/Voluntary Benefits

Quality insurance plan is the foundation of any successful employee benefits program. Another great way to minimize healthcare costs is by incorporating ancillary or voluntary benefits into the general program.

Ancillary benefits include dental, vision, and disability coverage. These benefits support your insurance plan and helps you make the most out of every health care dollar spent. Also, combining ancillary and medical benefits into one program allows for a more extensive data range. This data can be used to enable more proactive clinical and outreach support for your staff. As mentioned before, the better the health plan data, the better you can direct your employees to high-quality yet low-cost service providers.


11. Incentives for Comparison Shopping

 This is a huge and simple way to reduce company’s spending on healthcare. Just encourage your staff to comparison shop for their medical treatment. According to a report from HealthMine, 70% of healthcare consumers fail to do comparison shopping.

The question is how can you encourage your employees to do comparison shopping? A good way is to incentivize them. Perhaps each time an employee does comparison shopping before they seek treatment, you can reward them with a set bonus or set aside a portion of the savings they brought in for lower cost procedures.

Health care quality and cost can greatly vary in a city or region. Thus, encouraging the use of mobile and online comparison-shopping tools to drive savings can greatly benefit both employers and their staff.

12. Financial Wellness

According to a report from Financial Fitness Group, more than 80% of employee respondents are financially stressed. 48% of the employees that are financially stressed are distracted at work. Employees’ financial stress has more harmful effects on your organization than you imagine. It negatively affects both healthcare costs and overall productivity.

Financial stress has cost businesses nearly $300 billion a year due to reduced employee productivity, unscheduled absenteeism, increased employee turnover, and more healthcare claims. A simple financial wellness program among organizations can already help in easing employees’ financial stress and secondarily reducing overall healthcare costs in the organization.


Healthcare spending is further expected to increase in the coming years. If firms don’t act accordingly, healthcare expenses will continue to be a burden-- and a substandard one at that. Be more proactive and put in the efforts to implement the cost-containment strategies discussed above. These strategies will overall boost employee morale, maximize the effectiveness of your chosen health plan, and lower healthcare costs for you and your employees.