According to the present data the study explaining that the reporting; which making several suggestions for achieving 30-35% cost reduction without compromising; on the clinical outcomes or cutting corners to achieve the quality of services offered to patients. This include the cost optimization of the material procurement and consumption. Materials procurement constitutes 30-35% of healthcare costs.
As this showing that private hospitals may have to cut costs by 30-35%; to serve Ayushman Bharat scheme patients. Private hospitals may have to reduce their costs by around 30-35 percent to treat patients under the Ayushman Bharat scheme, according to a report by EY. Reducing the cost by 30-35% is not any aspiration, it can be achieving.
If they are able to reduce costs, they will be able to accept at least 30% of the Ayushman Bharat patients, when you get these patients, the occupancy rates will move to 80-85% from 65-70%, they also get the operating leverage, so that the beds get utilized, achieving a reasonable return on capital employing.
The clinical outcomes
Private hospitals are slowly losing their pricing power, earlier they used to respond to the rising costs by raising prices, but now they have to look at out of box to serve a large number of patients. The report also calls for manpower productivity improvement and redesign of organization structure. Manpower constitutes 20-25% of hospital costs. Reports saying manpower costs can be reducing by 20-40%.
However, the report suggesting the remodeling of doctor pay outs from existing fee for service to fixed salary and outcome based models; and limiting the system organizing around individual physicians to a team based approach that is focusing on patients. It also calls for the optimization of operational and capital expenditure.
They include cost optimization of material procurement and consumption. Materials procurement constitutes 30-35% of healthcare costs. EY suggesting strategic initiatives like price discovery, structured supplier model, sharp negotiation, and optimizing the cost of ownership will reduce the cost of material procurement by 30-40%. On the material consumption side; it calls for standardization of clinical pathways and treatment guidelines, and controls over billing materials.
However, this drive 35-40% optimization from current levels for major cost; heads given that pricing in tier 2 markets is 40-50% lower than that of metro markets. But concerning capex, the report talked about rationalizing the capital cost of building and medical technology; to Rs 25 lakhs per bed through 40-50% reduction in civil and mechanical; electrical and plumbing costs through. But the report noting that this can be done through an efficient layout, no frills design; specification rationalization and use of refurbished medical equipment.