‘Skimpflation’ and the Dangers of Cost Cutting

Amid inflation and an exodus of healthcare personnel, practices reduce services, ultimately leading to decreased quality. This is called “skimpflation,” which happens insidiously, and you may need to recognize it is occurring in your practice.

While “shrinkflation” refers to products or offerings getting quantifiably smaller with no decline in price, the related “skimpflation” phenomenon focuses on businesses or practices skimping on the quality or availability of a product or service. Skimpflation is an issue that results in staff changes, like fewer employees to assist with patient care. This blog will describe strategies to manage it.

During and after the COVID pandemic, healthcare has become a victim of a great resignation. Since 2020, 18% of healthcare workers have quit their jobs, and one in five Gen Z healthcare workers plans to leave the industry in the next few years. As a result of these staffing shortages, practices are forced to cut back on the quality and availability of their services.

With a staff reduction, patient satisfaction decreases, staff morale erodes, and staff and physicians burn out. More leave. Meanwhile, practices are also skimping by spending less on services or materials to decrease overhead costs because of declining reimbursements and other economic concerns.

Broadly, skimpflation is an issue that can stem from and result in staffing changes, such as fewer employees assisting patient care.

Over-aggressive cost-cutting in a medical practice leads to unwanted situations that can impact patient care, staff morale, and perhaps even the sustainability of the practice. There is also the potential that cutting costs may increase the risks of litigation. Some possible consequences of skimpflation are:

Compromised patient care: Cutting spending on essential medical supplies, equipment, or medications can decrease patient satisfaction, impact reputation management, and negatively affect online reviews.

Decreased patient access: With fewer employees, patients cannot schedule appointments promptly. Patients with urgent needs may go to retail healthcare, with more patients using urgent care centers and retail health clinics. This situation may result in a decline in patient numbers and revenue.

Regulatory and compliance risks: Cost-cutting measures that lead to non-compliance with healthcare regulations and standards can result in legal issues and financial penalties.

Financial and operational impact: Practices must consider short-term savings versus long-term costs. While immediate savings might be realized, long-term costs such as increased employee turnover, higher patient acquisition costs, and potential lawsuits will outweigh these short-term savings.

Operational inefficiencies: Cutting costs on essential operational areas, such as information technology and maintenance, can lead to inefficiencies and system breakdowns.

Impact on innovation and growth: A lack of investment in new technologies and methodologies can stifle innovation, preventing the practice from staying competitive and offering cutting-edge treatments.

Growth limitations: Over-aggressive cost-cutting restricts the practice’s ability to expand services, locations, or patient base, limiting growth opportunities.

Reputation damage: Incidents of compromised care or medical errors due to cost-cutting can attract adverse publicity, damaging the practice’s reputation.

Loss of trust: Both patients and healthcare professionals may lose trust in the practice, affecting its long-term viability. Deterioration in online reputation management may occur, resulting in a decline in the practice’s “star” rating. Remember that 84% of consumers trust online reviews as much as personal recommendations. If the experience we offer worsens, the result is a deterioration of patient satisfaction.

The bottom line is, while overhead management is essential for the sustainability of medical practice, over-aggressive cost-cutting can adversely affect patient care, staff well-being, regulatory compliance, and the overall reputation and growth of the practice. It is crucial to balance cost-efficiency and to maintain high-quality care and operational excellence standards. My take-home message is that cost-cutting shouldn’t compromise patient care. Rather than defaulting to skimpflation, focus on optimizing processes, leveraging technology, and finding better ways to manage resources while maintaining quality service.

If you have any suggestions to avoid or resolve skimpflation, please share your comments below.

Neil Baum, MD, is a urologist in New Orleans, the corporate medical officer of Vanguard Communications, adjunct professor at the Tulane University School of Medicine in New Orleans, and the author of The Complete Business Guide for a Successful Medical Practice.

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