Cost Containment: What is it & What are the Best Strategies

When focusing on the expenditures within an organization, healthcare is one of the highest costs for employers. Cost-containment is a term which employers frequently use, but what does it mean? Before we discuss strategies, we'll first want to discuss what cost-containment is.

What is Cost-Containment?

Cost-containment refers to the practice’s companies utilize to maintain the lowest expenditure levels possible for healthcare costs. A primary focus is placed on

  • Thoughtfully reducing unnecessary expenses
  • Prevention of unnecessary spending
  • And, focusing on quality or care while cutting costs

Cost-containment focuses on ways in which companies can reduce spending, without compromising the level of care their employees receive.

Employers... Why Should You Incorporate Cost-Containment Strategies?

The costs in healthcare today are taking an upward climb. The Centers for Medicare and Medicaid services project that by 2027 an increase in spending will hit 5.5% annually. And, by 2020, large employers can expect an increase in expenditures of 5 to 6%. This exceeds projected inflation rates in the US. So, how do companies keep up?

45% of employers indicate that controlling healthcare costs is imperative to their sustainability. The question is, what approaches can help reduce costs? The solution is to implement cost-containment strategies! Some strategies include

  1. Cost-shifting from employer to employee
  2. Harnessing the power of technology
  3. Modifying the practices employers are utilizing
  4. Offering higher deductible healthcare plans
  5. Incorporating telemedicine and virtual care

Companies might also utilize claim analysis or choose to provide health saving accounts. Changing coinsurance rules is another viable approach for some companies. Obviously, some strategies are more successful than others. By conducting an internal audit, organizations can best determine which approaches will be most successful.

Popular Trends in Cost-Containment

As detailed in the above examples, some strategies are superior to others and some will work better for one employer than the next. It's important for employers to consider all of these trends, to figure out which will benefit their organization. Implementing the right trend will allow employees to receive the same quality of care, without employers eating a huge bill in the process. So, which trends should you consider?


This form of treatment is one where doctors/patients have a virtual visit. It's cheaper than in-office visits, but patients still have the benefit of one-on-one consultations. Visits are convenient and some doctors are available 24/7. Plus, patients receive the highest standard of care, without stepping foot out of their house.

Telemedicine is beneficial for employers because they're cheaper than in-office visits. This cost-containment strategy helps prevent more expensive visits to the ER room, primary care, or medical clinics. Savings are only realized, however, if employees accept the transition to virtual care. If your employees aren't utilizing the virtual services, this cost-containment strategy won't save your company much.

Population Health Management

This approach looks at both demographics and claim data. This information identifies chronic conditions like heart disease, diabetes, and hypertension, amongst others. Case management strategies are then delivered to employers, to help fight high costs of treatment of these conditions. This strategy is good for cost savings in medium to long-term situations. Plenty of work is required to compile the data. And, when patient's needs are complicated, it's even more difficult. Patients have to be willing to cooperate as well, so cost savings can take years to realize, and hinges on the employees' willingness to cooperate.

Price Transparency

Healthcare today rests upon three parties/relationships which are

  • Employer-employee
  • Employer-insurance company
  • Employee-insurance company driven

Each relationship is dependent on the other two parties. Negotiated rates and discounts also play a part in a couple of these relationships. When pricing gets messy, these relationships become murky. Price transparency is partially due to the fact that insurance companies must negotiate individually with pay providers. The result is a system that isn't capable of managing its own costs. In turn, patients become confused, and end up overpaying for treatment/care.

As you can see, if cost-containment isn't properly monitored, no approach will work.

So, what are the Keys to Successful Cost-Containment?

For cost-containment to work, a couple of variables must come together. When focusing on employer-facing strategies, employers need to make sure employees will use the implemented strategies. As the above example highlights, telemedicine is great; however, it's only beneficial if employees use it. The utilization of services is critical for programs to work. Smoking cessation, health savings plans, and wellness programs, only save employers money when employees use them.

Employers need to find ways to get employees to change their attitude around benefits and programs being offered. It's tough, but working with employees to change their behaviors, is the only way to truly realize the benefits of cost-containment strategies.

A second primary key is to figure out what's working. According to TelaCare Health Solutions 2019 Report, about 79% of employers measure enrollment in HDHPs while only 1/3 of these employers measure their return on the investment. Although ROI is tough to measure, it's the only way to truly understand what's working and what isn't. How else would your company justify making room for different programs which might work better without understanding the ROI?

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