Hospital bills that threaten to bankrupt families. Clinics struggling to keep their doors open. No matter which side of the exam table you’re on, healthcare costs are rising fast. Costs for everything from medical supplies to staff wages are on the rise—and it’s quickly adding up for hospitals and clinics around the country. 

In 2023 alone, healthcare spending increased by 7.5% to $4.9 trillion: the largest uptick since 2003. The result? Healthcare facilities are facing mounting pressure to balance rising costs with delivering high-quality care to their patients. 

That’s why effective healthcare administrators are crucial to the financial stability of healthcare facilities. 

In this article, we explore six smart strategies you can use to tackle and lower some of the typical healthcare costs that have increased in recent years. (Where there’s a will, there’s a way—and a few extra dimes to rub together!) 

Why Is Cost Management Important in Healthcare Facilities? 

If healthcare were a human body, healthcare management would be the heart that keeps the entire operation running smoothly. This vital function ties together several key components, including: 

  • Finances 
  • Operations 
  • Patient care 
  • Employee satisfaction 

When one of these elements is undervalued or neglected, the entire system is strained, like a body showing signs of illness. Healthcare administrators must ensure each part is carefully maintained, and cost management is one of the most effective ways to keep things in balance. Good cost management reduces expenses and creates and smoother, more effective operations. 

Not sure where to start? Here are six proven strategies to help you cut costs while maintaining quality care. 

#1 Optimize Available Resources 

Facilities are teeming with resources. The more organized and informed a healthcare admin is—from medical supply inventory to staff capabilities and equipment status—the less likely they are to overspend on resources they don’t need. 

Here are a few ways to make the most of what’s already available: 

  • Leverage data analytics: Predictive analytics can help you anticipate patient volume. This insight can guide decisions about how many supplies to order, which equipment to prep, and how to allocate exam rooms or beds efficiently. A clear forecast helps reduce waste, prevent shortages, and avoid unnecessary overstocking. 
  • Improve supply chain management: Streamline your buying procedures to avoid over-purchasing. Start by negotiating better contracts with your suppliers and using group purchasing, where multiple healthcare organizations pool their purchasing power to get bulk discounts. 

#2 Improve the Billing and Payment Process 

Whether you work in healthcare or you’ve been a patient yourself, you know one thing is true: Billing errors and insurance delays are all too common. But with the right systems in place, healthcare facilities can reduce these issues—and the headaches they cause. Here are a few ways to simplify the process: 

  • Automate billing processes: Invest in billing software that catches errors before claims go out. Automation can also speed up submissions, flag potential coding issues, and quickly follow up on denied claims. 
  • Offer flexible payment options: Patients are more likely to pay their bills when they have manageable options. Consider offering longer-term payment plans with low or no interest, especially for larger balances. 
  • Ensure accurate coding: Train billing staff regularly on the latest coding guidelines (like ICD-10 or CPT updates). Mistakes in coding can lead to claim denials or lost revenue from underbilling, so staying up-to-date is essential in maximizing income. 

#3 Support Staff Without Overspending 

When looking into ways for managing costs in healthcare, labor is one of the biggest pieces of the puzzle. According to the American Hospital Association, labor accounted for 56% of hospitals’ total spending in 2024. 

And while some facilities are cutting labor costs by reducing the number of employees (hello, nursing shortage), that can quickly lead to poor patient care due to burnout and understaffing. 

Fortunately, there are ways to support your team while still keeping labor expenses under control: 

  • Implement smarter scheduling: The data you gathered to anticipate patient volume? It’s a goldmine for managing staffing costs. Use it to schedule the right number of nurses, technicians, and support staff at any given time. This helps avoid unnecessary overtime and reduces the risk of burning out your core team. 
  • Cross-train employees: Sure, front desk staff can’t step in for nurses—but that doesn’t mean they can’t be trained to help in other areas. Cross-training employees to handle multiple tasks (like check-ins, phone triage, or supply restocking) builds flexibility into your team and helps bridge gaps during busy shifts without bringing on extra hands. 
  • Invest in retention: Hiring is expensive. Between recruitment fees, sign-on bonuses, onboarding, and training, the costs add up fast. But keeping the team you already have? That’s far more cost-effective. Retention strategies like professional development opportunities, flexible scheduling, and a competitive benefits package make employees feel valued and more likely to stick around. 

Other Tips for Managing Healthcare Costs 

In addition to the big-picture strategies above, here are a few simple yet effective ways healthcare facilities can keep costs in check: 

  • #4 Focus on Value, Not Volume: Instead of getting paid for each test or procedure (a model called fee-for-service), more providers are shifting to value-based care, where hospitals and clinics are rewarded for keeping patients healthy. 

    For example, a bundled payment for a joint replacement covers everything from the surgery to follow-up care, encouraging providers to focus on good recovery and fewer complications instead of racking up individual charges. 
  • #5 Concentrate on Small Fixes: Simple changes, like reducing supply waste or improving patient flow, can lead to significant cost savings over time. Even reworking how supplies are restocked or standardizing order sets can make a difference. 
  • #6 Be Smart About Tech: Don’t chase trends. Invest in technology that improves efficiency, reduces errors, or boosts patient engagement, like automated appointment reminders, digital intake forms, or clinical decision support tools. 

Ready to Lead Smarter Healthcare? 

Whether you want to drive change in your current healthcare facility or pivot into the healthcare field from another industry, UT Permian Basin offers two fully online bachelor’s degrees designed to help you take the next step in your career—on your schedule. 

We offer two 100% online programs for those interested in roles like healthcare administrator, operations manager, clinic supervisor, and more: 

Explore each program to see which one aligns best with your experience and goals. Still have questions? Contact us—and speak with a real person. Ready to apply? We offer year-round start dates, so you can jump in when the time is right for you. 

Sources: 
 https://www.ncdsinc.com/revolutionizing-healthcare-how-automated-medical-billing-reduces-burden-and-boosts-efficiency 
https://www.aha.org/costsofcaring