Hospital operations management is facing unprecedented challenges
Operations management leaders in the US healthcare industry have been a harried lot as hospitals continue to struggle with historically low operating margins all through 2023.
Coming on the heels of two years of caring for millions of COVID-19-afflicted Americans, the financial instability across hospitals and health systems has been exacerbated due to rising inflation.
What is the reason behind the continuous increase in healthcare costs?
- Americans who put their regular treatment on hold during the pandemic came back to hospitals in one go. Hospitals had a sudden inflow of patients with high acuity conditions as they had deferred treatment for a long time.
- With a scarcity of professionals such as doctors and nurses, the total contract labor expense sky rocketed 257.9% from 2019 to 2022. This is when hospitals are already using up half the total budget on wages, as the labor shortage has been growing for decades.
- With longevity increasing, there is a rise in the number of aged patients seeking a wide range of healthcare services.
- Prices of medicines are also rising as the cost of R&D is high due to long approval cycles and huge margins retained by pharma companies.
- Expenditure on medical equipment and technology costs are carving out a bigger chunk of the capital budget across healthcare systems.
- As waivers and flexibilities linked to the public health emergency have ended, hospitals do not have scope to offset the increase in expenses. As there is an inadequate increase in government reimbursements, margins remain low.
Hospital operations urgently need an overhaul to improve margins Source
According to Kaufman Hall’s Operating Margin Index (see graphical representation), over half the hospitals ended 2022 operating at a financial loss. The trend continues in 2023, even registering negative median margins some months…clearly, this foretells the need for a disruptive change. Hospital operations management software holds the promise of that disruptive change.
Use hospital operations management software to handle imperatives
The hospital sector is significantly different from other sectors where business is run purely on a profit-and-loss basis. Healthcare is a social contract to provide effective, timely services to individuals and create equitable systems that safeguard society. To ensure there is no breach in their steadfast commitment to providing quality care, healthcare providers are giving importance to effective hospital operations management for cost control.
What is hospital operations management?
Hospital operations management is overseeing a hospital’s daily operations to ensure that it runs smoothly and efficiently so that the ultimate goal of patient care is met.
Imperative One: To deliver quality services while managing costs.
Meanwhile, the healthcare industry has become increasingly complex, with hospital operations encompassing a growing list of functions, both clinical and non-clinical; administrative, financial, and legal responsibilities; social and community goals; adherence to regulatory compliance and patient safety; access to care through technology and facility location; educational and research objectives, not to mention moral and ethical issues. Without a clear-cut hospital operations management strategy, it is impossible to have cohesive decision-making.
What is a hospital operations management strategy?
A hospital operations management strategy is a plan for the efficient use of resources and effective communication and collaboration among all members of the hospital team for higher productivity and smooth overall operations.
Imperative Two: Trifurcation of business, physician, and nursing leadership for a 360-degree real-time monitoring environment to enhance patient care.
However, the digitalization of healthcare records, the rise of telemedicine, and the need for real-time data analysis have significantly increased the reliance on technology in hospitals. Add to this standardization, agility in workflow processes, and the practice of evidence-based healthcare, and you will notice that hospital operations management software is unleashing the concept of operational effectiveness into the healthcare domain.
What is operational effectiveness in hospital operations management?
Operational effectiveness is the ultimate goal of hospital operations management: lower costs, higher productivity, and continuous process improvement. It frowns upon sub-optimization or local optimization.
Imperative Three: Application of evidence-based medicine principles to hospital operations management to weigh the systemic impact of any change.
Hospital operations management software that you can rely on
Many intelligent hospital operations management software solutions that are simple to understand and easy to use are already out in the healthcare market. They perform these three main functions:
- Automate repetitive and manual tasks.
- Improve processing of transactions.
- Provide data in the form of reports and analysis.
Let us take a quick look to understand how they help the core functions of operations management in hospitals: management of resources, control over quality, process improvement, and patient safety.
Management of resources: All software solutions that automate day-to-day activities, financial management, and streamlining of healthcare staff activities help to utilize resources fully. Typically, these solutions may handle one or more of the following activities: scheduling, forecasting, budgeting, inventory control, and supply chain management. For instance, a practice management solution is used to schedule appointments, track and store patient data, and manage billing cycles.
Control over quality: Solutions that set parameters for quality adherence, including government-mandated rules, and monitor performance are used to deliver quality care in hospital settings. These solutions are equipped to assess coverage and quality of care in terms of healthcare equity, test medical equipment, conduct patient satisfaction surveys, and suggest new evidence-based healthcare delivery policies. For example, a hospital may adopt the qualitative measurement tools of Six Sigma. They are typically tailored around reducing variations, defects, and costs.
Process improvement: Hospital operations management software solutions address many aspects of inefficient healthcare workflow and processes that may have crept into your hospital workings. The solutions may include management of patient records, appointments, billing, and insurance claims. An example is the electronic health record or EHR software. The solution collects, stores, and manages all data related to a patient in a secure manner to be accessed smoothly by authorized clinicians and staff within a hospital.
Patient safety: Patient engagement solutions are becoming very popular as they enable patients to participate in their own treatment options. Patient safety solutions help by educating patients on their conditions, the available treatment options, the likely side effects, pricing, and so on. They help reduce the mortality rate, hospital readmissions, and medication errors through reminders and alerts. Patient portals developed as part of clinical care management solutions also offer these features. Patient safety helps to build the reputation of your hospital, mitigates risks, and prevents expenditure borne out of accidents.
All these factors linked to hospital operations management adversely impact the cost of healthcare. You will be surprised that McKinsey & Company has predicted that non-labor costs alone could increase by $110 billion by 2027. It urges the industry to use technology-enabled levers to increase productivity and fight cost pressures.
Ready reckoner for hospital operations management leaders
Here is a handy checklist for operations management professionals on what they need to bear in mind for the remaining quarter of 2023:
- Adopt proven data analytics software to gain a comprehensive view of hospital-wide operations through the cost vs benefit prism.
- Adopt the hub-and-spoke model to centralize control and visibility of hospital resources, be it people or equipment assets.
- Adopt the latest AI and ML technologies to identify, reduce, and eliminate operational bottlenecks.
- Adopt HR technology tools that match the right person to the right tasks dynamically and optimize schedules.
- Adopt solutions that integrate with systems on-premise and promote end-to-end workflows with seamless interoperability.
- Adopt customized software to ensure secure access to patient data for better patient experience and a competitive edge.
One last word: prepare to win the battle in 2024: define operational efficiency goals and stick to them; focus on outcomes; involve end-users in the planning; and remember to train people to understand what is hospital operations management technology and how to use it!