Productivity: the magic work pays off Essay

The old Groucho Marx show, “You Bet Your Life,” had aprofitable gimmick. If a contestant said the magic word, a duck woulddrop down from the ceiling and the contestant would win some money.Ducks don’t drop from the ceiling in health care institutions, butadministrators do have a magic word with dollar signs attached to it.That word is productivity.

Managers in every department are feeling the pressure to cut coststhrough higher productivity, and the laboratory is a prime target. In arecent survey of 450 hospital administrators throughout the country, sixout of 10 hospitals reported a lower average daily census during thelast 12 months. The survey showed declines in 46 per cent of hospitalsin the West, 82 per cent in the upper Midwest, 75 per cent in theMidewest, 52 per cent in the Southwest, 63 per cent in the Southeast,and 42 per cent in the Northeast. These figures represent a growing trend as we move toward a morecompetitive health care system. Hospitals are acting like businessesand demanding effective management skills from their department heads.Keen price-based competition in the next several years will makeproductivity, rather than increased revenue, a top priority. As the Federal prospective payment system spreads to otherthird-party payers, it will become very difficult to generate operatingrevenues through price or volume increases. And since personnel accountfor more than half of a typical hospital’s operating costs, betterproductivity has the greatest potential for cutting those costs.

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Productivity goes beyond the cost of labor, though. It is the ratio ofwork input–labor, capital, and material–to work output in a givenperiod. The accounting firm of Arthur Andersen & Co. recently askedmore than 1,000 hospital and other health care administrators,physicians, legislators, suppliers, and insurance firms what theyconsidered the major target areas for improving productivity. Here arethe top four responses: 1) compensation tied to productivity, 2) betterautomated information systems, 3) improved employee training, and 4)better productivity measurement and monitoring. Participants thenlisted ways to achieve these for goals. These recommendations make valuable reading.

Implementing them,however, will require some changes in traditional laboratory operationsand work attitudes. The stronger a group’s commitment to survival,the more likely it is to adopt new ideas willingly. Here are the recommendations on maximizing lab productivity: * Set up productivity systems based on established standards andobjective data, and monitor them regularly. This is impossible withoutgoal-oriented, competency-based position descriptions and measurablestandards of performance. You will also need an accurate workmeasurement system to assess productivity. If you use the College ofAmerican Pathologists workload recording system, be sure that the unitsaccurately measure your methodologies and that you calculate paid,worked, and specified productivity.

Calculation of specifiedproductivity helps identify many variables that can drag down labefficiency. * Establish incentives and disincentives for employee anddepartmental performance. These catalysts should apply to quality ofwork and other long-range concerns as well as immediate output. Meritpay systems are growing more popular as administrators seek ways to tiea reward system to measurable performance. Remember, a successful meritpay plan requires a goal-oriented performance appraisal system linked toposition descriptions, as described above.

First-line supervisors are the key to making such a system work,and they must have appropriate authority, accountability, andsupervisory skills in addition to technical expertise. Managers must beevaluated on their ability to manage a cost-effective operation whilestill maintaining efficient, high-quality service. * Reward employees for contributing to the laboratory’squality and cost-effectiveness. Many institutions have incentiveprograms for cost-cutting suggestions. Such programs depend onmanagement willingness to involve all employees in decision making.

* Enhance communication by holding more frequent supervisory andgeneral laboratory meetings. This helps dispel uncertainty about thefuture and frustration at being powerless to change it–factors that canbe devastating to productivity. Keep meetings short and meaningful, andallow open discussion if you want to do more than waste precious time. * Consider retaining and job sharing to develop a more flexiblestaff. The age of extreme specialization is on the wane. Technologistsor technicians who can move from one department to another or share jobson a part-time or part-shift basis will be the core of most laboratorystaffs. This kind of arrangement lets you schedule for peak times whilemaintaining a lean staff.

* Create tight purchasing and inventory control systems to make themost of volume discounts. Take advantage of any shared-servicearrangements at your institution. * Get an in-house industrial engineer, if there is one, or aconsultant to evaluate the department’s performance and work flowsystems.

An outside objective view can identify areas in need ofimprovement that are not apparent to laboratory insiders. Analyze anyfunctions and transactions that cross departmental lines; you may findopportunities to improve productivity in your own and other departments. * Restructure schedules to focus on peak volume periods and reduceidle time. This may mean abandoning the traditional three-shift systemand rotating day, night, and weekend personnel to make best use of staffexpertise.

These changes will encounter varying degrees of employeeresistance. If you have a good information system and involve employeesfrom the outset in designing the changes, cooperation will grow. * Implement computer-based systems to review financial data,monitor employee productivity, and analyze new systems or projects. Ifyour institution has a mainframe system that will provide appropriatedata, you are in luck. If not, a laboratory microcomputer can performmost of the basic calculations. * Encourage pathologists to begin an educational program that willimprove physician ordering patterns and lab service utilization.Laboratory managers can help by pointing out unusual or obviouslyunnecessary orders.

Document the impact of inappropriate physicianpractice patterns on productivity by keeping careful records, using theCAP specified productivity formula. * Start strategic planning now. Examine the laboratory’sservices ruthlessly. If a test cannot be cost-justified, then it shouldprobably be sent to a reference laboratory. The days of performingtests for public relations value–or to satisfy a particularphysician–are over. The laboratory in a non-teaching hospital can nolonger afford the luxury of new test development and research projects.

* Evaluate the possibility of extending your services to theever-expanding ambulatory market. All the alternative health carefacilities need lab services: birthing centers, freestanding outpatientclinics, ambulatory care centers, surgery centers, and hospices. Whyshouldn’t they use yours instead of developing their own? As productivity pressures grow, managers must realize that theirsurvival depends increasingly on the support of their staffs. Thesuccess and efficiency of a hospital will hinge not just on the numberof employees, but also on their competence, flexibility, and dedication. Reaching the optimum level of staff concern and commitment willrequire a laboratory management system that gives top priority to humanrelations. Successful managers will take more business risks, but theywill also take care to preserve the personal side of healthcare–respect for employees and quality care for patients.


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