Doing more with less - economic condition of the healthcare industry - Viewpoint

Healthcare Financial Management, Nov, 1991 by Richard L. Clarke

Most economists agree that the 1990s will be a decade of doing more with less.

Automobile manufacturers, airlines, banks, savings and loans, hotels, and many other industries already have learned this lesson. Stiff foreign and domestic competition, along with treacherous economic swings, have significantly affected them.

Managers in these businesses have learned (and continue to learn) that they must do more with less. They must focus on satisfying customer needs and meet or exceed customer expectations. They must accomplish these goals within a competitive, unforgiving environment that does not allow significant cost increases to be passed to customers.

In health care, we have yet to experience this situation to any large extent. From 1986 to 1990, healthcare expenditures increased from 10.7 percent to 12 percent of the gross national product. And although government payers have systematically underpaid most providers, many providers have shifted losses caused by underpayments to other customers.

To reduce this shifting of underpayment losses, most healthcare providers believe that Federal and state governments should increase their payments for services rendered to government-sponsored patients. They argue that government should not base payment decisions on budget constraints. They also argue that government should not promise more than what it can pay.

Government representatives contend that healthcare expenditures continue to consume an increasing share of their budgets. They state that healthcare expenditures are rising faster than tax and other revenue increases and that other social programs will suffer unless the healthcare Pac-Man is put on a diet.

Most healthcare economists believe that the system is adequately funded. They argue that Americans consume significantly more health care that any other industrialized nation. And they note that most health status indicators for Americans are poorer than other industrialized nations.

Health status, of course, is affected by societal issues, such as poverty, drug abuse, and the lack of effective gun control. But at a large and growing pool of uninsured persons and a lack of meaningful outcome statistics complicate attempts to quantify what Americans receive for their investment.

Although this issue is hotly debated, most health policy analysts agree that during the 1990s, the ability of providers to shift losses of one patient category to another will end. Increased state rate regulation, competitive bidding, or overall healthcare reform are among the actions expected within the next five to 10 years.

Given this assumption, what should healthcare organizations do to adopt a philosophy of doing more with less?

Perhaps the most important step for healthcare executives is to learn from the industries I mentioned earlier. They have learned to:

* Focus on customer needs and expectations;

* Continually improve processes used to produce products or services that meet or exceed those needs; and

* Develop a total management commitment to transform their organizations into lean, mean enterprises that recognize and rely on the talents of employees and others to achieve total quality and focus on the basics of getting the job done right the first time.

Focusing on meeting and exceeding customer needs, empowering employees, and eliminating rework are keys to doing more with less. These concepts sometimes carry the labels total quality management, continuous quality improvement, or just plain good management. To work, however, they must be applied to everyone at every level every day.