“Savings illusion” can become savings reality in the long haul: baby boomers to the rescue
Tory Wolff
December 20, 2011
A recent article in the NEJM argues that cost savings from quality improvements are illusory because of the lumpy nature of healthcare capacity. Quality’s impact on utilization is just too small to be captured in a heavily fixed cost environment. Any reduction in utilization results in a trivial savings of direct costs and, more importantly, unchanged fixed costs simply being reallocated across the smaller volume. Cost reduction in a high overhead environment is indeed difficult (ask any of the big process consulting houses). It can be done, though it will