{"id":5980,"date":"2015-01-15T19:04:00","date_gmt":"2015-01-15T19:04:00","guid":{"rendered":"https:\/\/a6f61c8390.nxcli.io\/blog\/cutting-healthcare-costs-not-caregivers\/"},"modified":"2015-01-15T19:04:00","modified_gmt":"2015-01-15T19:04:00","slug":"cutting-healthcare-costs-not-caregivers","status":"publish","type":"blog","link":"https:\/\/a6f61c8390.nxcli.io\/en-gb\/blog\/cutting-healthcare-costs-not-caregivers\/","title":{"rendered":"Cutting Healthcare Costs, Not Caregivers"},"content":{"rendered":"\n

It\u2019s reported that Catholic Health Initiatives<\/a> will lay off up to 1,500 employees by the end of January 2015. To read full story click here. <\/a>Unfortunately, payroll costs are the first target when operating margin is in the red.<\/p>\n\n\n\n

But actually, that\u2019s No. 1 on the list of how not to cut healthcare costs according to a pair of Harvard academics.Writing in the November 2014 Harvard Business Review, Robert Kaplan and Derek Haas said their research indicates that \u201cdisproportionately cutting staff can be shortsighted when it lowers clinicians\u2019 productivity and raises the cost of treating patients\u2019 conditions.\u201d<\/p>\n\n\n\n

In an article aptly named, \u201cHow Not to Cut Healthcare Costs<\/a>,\u201d Kaplan and Haas wrote that \u201carbitrary constraints or cuts in personnel spending uninformed by an awareness of the underlying clinical and staff resources needed to deliver high-quality outcomes for a variety of medical conditions, can lead to long treatment delays, worse care and outcomes, and overstressed, frustrated caregivers.\u201d<\/p>\n\n\n\n

In other words, it\u2019s the Law of Diminishing Returns, only in reverse.<\/p>\n\n\n\n

That fundamental law of economics states that when all other factors remain fixed in a production process, an increase in one factor \u2013 more workers, for example \u2013 will eventually diminish the increase in productivity.<\/p>\n\n\n\n

In healthcare, the \u2018product\u2019 is a good patient outcome, and one might assume that reducing staff will diminish the likelihood of  that outcome.<\/p>\n\n\n\n

\u201cThe first port of call in a cost-cutting exercise is often the payroll,\u201d say Kaplan and Haas, \u201cwhich accounts for about two-thirds of a typical provider organization\u2019s costs.\u201d<\/p>\n\n\n\n

The authors claim the main effect of such \u201ctop-down spending mandates\u201d is to aggravate the already tense margin vs. mission tug-of-war between financial and clinical types.<\/p>\n\n\n\n

To balance the books, some hospitals shut down entire wards, diminishing their ability to provide needed services to their communities.  The \u2018hidden costs\u2019 of such actions are reduced competitiveness, loss of community goodwill, the loyalty of remaining staff members, and ultimately the real and perceived quality of care offered.<\/p>\n\n\n\n

Another mistake, according to Kaplan and Haas, is understanding the value of space.  Hospital leaders often conclude that idle space and equipment are much less expensive than idle clinicians and technicians.  But by under-investing in space and equipment, they lower the productivity of their most expensive resource.<\/p>\n\n\n\n

\u201cSome orthopedic surgeons perform seven to 10 joint replacements a day, while others do just two or three \u2013 even though the duration of the actual surgical procedure does not vary greatly between the two groups.\u201d  The difference in productivity results from the number of operating rooms available.\u201d<\/p>\n\n\n\n

The authors argue that adding an OR would be less expensive in the long run than allowing surgical talent to remain idle.  They make the same case for diagnostic equipment, siting the time lost during peak demand when not enough equipment is available.<\/p>\n\n\n\n

The crux of their argument is that \u201cproviders do not conduct the benefits analysis that would show\u201d that increased spending on equipment (or space) could be paid for by the savings from reducing the idle time of expensive staff members.<\/p>\n\n\n\n

Kaplan, the Baker Foundation Professor at Harvard Business School, and Haas, an HBS fellow, are urging hospital leaders to consider the value of time in healthcare<\/strong>.  That\u2019s something TeleTracking has been talking about for quite some time.  Our reason for being is to remove wasted time and resources from healthcare in order to cut costs and increase revenue<\/strong>.  To read our white paper, The Value of Time, click here to download it now.<\/a><\/strong><\/p>\n\n\n\n

By taking the time lags out of daily operations, we calculate that automated processes can remove $100 billion from U.S. healthcare every year.<\/p>\n\n\n\n

Isn\u2019t that worth a little time to consider before making cuts that may diminish the quality of care to be delivered?<\/p>\n","protected":false},"excerpt":{"rendered":"

It\u2019s reported that Catholic Health Initiatives will lay off up to 1,500 employees by the end of January 2015. To read full story click here. Unfortunately, payroll costs are the first target when operating margin is in the red. 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