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A New Era of Tight Capacity, Part 2 of a 3-Part Series

By Michael Donoghue

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In part 2 of this series blog, Mike Donoghue expands on the issues of capacity and utilization.

(Continued) Dr. David Butz: Mike, let me now ask you ... As clear as these fixed costs are to hospital and health system leaders, do those leaders seem to you trapped by the "fee-for-service" mindset? I'm curious, how do you redirect attention toward this capacity approach when the culture presently seems so focused on rationing of care and reductions in utilization? Aren't these leaders getting mixed messages?

Many hospitals focus process improvement efforts around reducing length of stay, more timely discharging of patients, turning over vacated beds more rapidly, and filling those beds with new patients from the ED and PACU. Improving these processes is not enough to optimize capacity utilization. Truly, many healthcare executives are operating in a complacent mode - or are just beginning to understand that they need to recognize capacity issues (both shortages and overhangs) and align capacity with demand in order to operate in this new environment of healthcare reform. Most hospital executives understand that census variability exists but are often unwilling to address the controllable causes of that variability - which is often due to politics - and ineffective governance. The politics involved with making difficult changes to the elective schedules (in the OR and Cath Lab for example) presents an enormous challenge. Furthermore the outcome of the changes is nearly impossible to predict without trial and error - unless of course - the changes could be modeled.

We use simulation modeling to provide a safe environment to test how changes made to processes and schedules affect the system as a whole. The output of the model can be a valuable tool to get buy-in for changes. Surgeons and administration can see that by changing the arrival patterns of elective patients can decrease congestion in the PACU, ED and Inpatient Units. They can see how these changes can improve throughput and reduce length of stay across the entire system (ED, OR, PACU, ICU, Med-Surg units, and discharge). It also helps to determine how much capacity is necessary to treat expected patient volumes. Armed with this information, staffing beds becomes more predictable and less risky to patients.

Overall, what organizations need is comprehensive capacity management plan that anticipates events and informs action - to manage expected growth. The airline industry recognized their capacity problems with utilization back in the 1990s and developed a strategic plan to improve their capacity utilization. Prior to 1993, the capacity utilization of US airlines hovered between 57% and 63%. Then, from 1993 to 2007, the airlines increased their utilization to 80%. In order to serve our communities and maintain financial health, hospitals must follow suit. Why does this matter? It matters because hospitals - like airlines and newspapers - are fixed cost businesses. Utilization is the most important determinant of financial success. The solution to our new era is that we need to: 1) decrease cost, 2) increase utilization, 3) reduce variability, and 4) increase efficiency in order to operate at Medicare reimbursement rates (healthcare reform) while still delivering safe and sustainable care.

"A New Era of Tight Capacity" Blog Links:
A New Era of Tight Capacity, Part 1 of a 3-Part Series
A New Era of Tight Capacity, Part 3 of a 3-Part Series

For More Information
White Paper: Management 201: A New Era Of Tight Capacity
Poll: Why Is It Difficult To Find Beds For Patients In Your Hospital
Self Assessment Tool: Capacity Optimizer Tool

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