Are Departmental Cost-Cutting Measures Costing Your Hospital More Than You’re Saving?

By Tim Brundage, MD CCDS

Health systems face pressure in today’s margin-compressed environment. Department heads are routinely called to justify their budgets, ensure costs are contained, and deliver on metrics prioritizing immediate departmental financial health. Yet, while hospitals excel at scrutinizing expenses, few have mastered connecting those expenses to the returns they generate—particularly when those returns show up in different parts of financial statements.

Hospitals may focus on short-term savings but unintentionally miss out on significant long-term value, sometimes to the extent that maintaining or even increasing investment could lead to better financial outcomes.

The result? Hospitals risk being “penny wise and pound foolish.”

Utilization Management (UM) and Utilization Review (UR) leaders are rewarded for keeping staffing costs under budget or maintaining low utilization percentages.  These department-level metrics, while important, often come with unintended consequences:

A clear, enterprise-level understanding of costs and benefits empowers hospitals to avoid unintended decisions that could negatively affect their financial health.

Well-implemented Physician Advisor services frequently deliver a 10:1 (or even better) ROI. For every dollar spent on Physician Advisor resources, hospitals can capture or retain $10 in compliant net revenue.  For instance:

Investing $100,000 monthly in Physician Advisor services could yield $1 million in monthly incremental net profit by reducing denials and facilitating compliant observations to inpatient conversions; these services typically offer higher reimbursement rates for equivalent care.

However, the 10:1 ratio can flex up or down as it is heavily impacted by the skill and experience of the Physician Advisors being utilized; in upcoming blog posts, we will dive deeper into the full economics of Physician Advisor programs to explore how hospitals can optimize Physician Advisor support.

Unfortunately, too many hospitals focus solely on the expense side of the equation, treating Physician Advisor services as a cost center rather than an essential component of the revenue cycle needed to ensure appropriate reimbursement. This perspective ignores the financial ripple effect of suboptimal or insufficient Physician Advisor utilization, including:

• Missed opportunities to overturn denials.
• Incorrect status determination leading to revenue loss and increased denials.
• Delays in identifying medical necessity issues that impact reimbursement.

At Brundage Group, we work closely with our hospital partners to factor both costs and benefits at an enterprise level- not just department silos. Our mission is clear: to empower hospitals to remain financially viable while continuing to serve their communities.

If you are evaluating your approach to Physician Advisor services- whether considering internal programs, third-party support, or a combination- ask yourself these critical questions:

Making decisions about Physician Advisor services is not just about managing costs—it’s about understanding the complete financial picture of the clinical revenue cycle and ensuring your hospital maximizes compliant revenue opportunities. As a trusted advisor, Brundage Group provides the expertise and tools needed to navigate these decisions competently and confidently.