The Unintended Consequences of a Focus on Productivity

 

"Productivity" is one of those concepts hospitals have borrowed from manufacturing because it works so well in that environment. But in hospitals, productivity presents a paradox. Most practitioners in hospitals don't understand the principles behind productivity. As a result, their efforts to be "productive" will likely adversely affect critical elements of the patient experience and potentially the hospital's financial health.

The problem is that productivity is a relative measure that, when used as a sole indicator, can be very misleading. The number of dollars expended per hour for a specific activity, for example, is a productivity measure. These relative measures are designed to give managers and leaders a tool to help guide analysis and exploration. They help navigate and provide perspective. But, allowing productivity to be a primary analysis tool and decision making driver can bring about an undesirable result.

In the interest of full disclosure, I am a manufacturing engineer by training and I think some of my brethren own some of this mess. The patient-to-nurse ratio, the most famous productivity measure, is a perfect example. The med/surg ratio in many hospitals is 6:1. As relative measures go, this makes some sense – for establishing budgets. But it is a poor tactical management tool.

Productivity measurements like this one are insufficient when used to drive daily performance. Armed with the staffing ratio, hospital managers make day-to-day and even shift-to-shift decisions. It happens every day in capacity-constrained hospitals where managers are armed with only experience and a productivity measure. They take steps in the interest of meeting a target, but the following scenario will demonstrate how negative these decisions can be – all in the name of productivity.

At 9 a.m. a nursing manager with a 5:1 ratio has six nurses on shift, but only 25 patients. So, she decides to send one of the nurses home or to another unit. Assuming the fully loaded cost of a nurse is $75/hour, this manager has just "saved" her unit $75 for each hour of the nurse's 10-hour shift, or $750. Since that "productivity decision" is usually not made with the discharge requirements in mind, the decision to reduce staff can result in poor patient flow, highlighted by bed constraints, excessive delays in the ED and PACU (potentially impacting quality), or even ambulance diversions (which translates to lost revenue).

The $750 saved slows the patient flow and eventually costs the hospital somewhere in the low five figures of lost revenue for that day. Worse, the attendant long-term effect of the loss of confidence among doctors and the community could easily translate into losses in the millions over the course of a year. Beyond that, the lack of consistency in schedules is often a quality-of-life issue that leads to chronic problems with staffing and retention.

So the unintended consequence of saving that $750 by managing to productivity measurements alone is multiplied on numerous fronts, all negative and much more costly. Be on guard against managing your hospital's operational effectiveness with only a productivity ratio. No one wants his physician to base a diagnosis and treatment plan solely on blood pressure measurements. The same goes for hospitals and one-dimensional approaches to effectiveness.

Contributing to this work is Kenneth P. Staresinic

 

Comments

[John Syron]

This is a solid article that shows how a myopic approach to productivity improvement may actually be detrimental to the overall profitability of the organization.

It's important in these endeavors to explain the 'CEO's Intent' behind measurement and metrics. In the purest sense, we need the front line employee to understand how their day-to-day actions can impact the profitability of the overall organization. Once established, the quality, cost, speed and accuracy measurements need to be balanced so that the right behaviors result.