Hospitals get serious about operations

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Hospitals get serious about operations

The McKinsey Quarterly, 2001 Number 2

“The income statements of hospitals have been ailing. The cure? Serious attention to operating efficiency.”

Policy relevance:

Several EU Member States, among which the United Kingdom, experience real problems in the organisation of their healthcare sector. The EU is currently reviewing its pharmaceutical legislation, and is setting up initiatives that will make it possible for patients to “shop for healthcare” in other EU states. This will put great pressure on those Member States which perform poorly to increase the efficiency of their healthcare facilities. This article provides some insight into how hospitals can increase their efficiency and capacity.

Main conclusions:

  • Many hospitals experience big problems of overcrowding (such as admission delays, long waiting times and bottlenecks) especially in emergency departments. The average hospital runs its operations in the red, suffers from overcrowding in critical areas, and can’t expand without ratcheting up financial risk
  • These problems could be solved by giving detailed, day-to-day attention to logistics. Stocks and flows, queuing theory, just-in-time processes – all notions associated with the factory floor – are what modern hospitals sorely need.
  • To improve the process efficiency, hospitals must identify the main stages in a typical patient’s visit, and analyse, for each stage, the demand for services, the system’s ability to supply them, and the variations, measured in the number of patients per unit of time. Starting with this, you can predict the maximum patient flow throughout the day and identify bottlenecks under various assumptions. Potential bottlenecks must be identified and alleviated by balancing the components of the process, smoothing demand as far as possible and shifting capacity during peak periods.
  • One of the main causes of bottlenecks in hospitals is the insistence of semi-autonomous departments on optimizing their own throughput without considering how their actions affect the performance of upstream or downstream departments. It would therefore make sense for hospitals to hire a “traffic cop”: a person who has a good overview of the entire process and can quickly redeploy resources to solve day-to-day logistics problems. Another key employee is the process analyst: an operations expert who oversees the evolving computer model of the hospital’s end-to-end processes and continually recommends improvements.
  • Information technology, such as computer tracking of empty beds, can also help to smoothen the process and reduce delays and waiting times.
  • The prospect may sound daunting, but there is a lot to gain for hospitals, as a recent survey showed that patients are willing to drive farther, pay more and even switch doctors if it means getting faster service.

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