Productivity: the magic work pays off Essay

The old Groucho Marx show, “You Bet Your Life,” had a
profitable gimmick. If a contestant said the magic word, a duck would
drop down from the ceiling and the contestant would win some money.
Ducks don’t drop from the ceiling in health care institutions, but
administrators 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 costs
through higher productivity, and the laboratory is a prime target. In a
recent survey of 450 hospital administrators throughout the country, six
out of 10 hospitals reported a lower average daily census during the
last 12 months. The survey showed declines in 46 per cent of hospitals
in the West, 82 per cent in the upper Midwest, 75 per cent in the
Midewest, 52 per cent in the Southwest, 63 per cent in the Southeast,
and 42 per cent in the Northeast.

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These figures represent a growing trend as we move toward a more
competitive health care system. Hospitals are acting like businesses
and demanding effective management skills from their department heads.
Keen price-based competition in the next several years will make
productivity, rather than increased revenue, a top priority.

As the Federal prospective payment system spreads to other
third-party payers, it will become very difficult to generate operating
revenues through price or volume increases. And since personnel account
for more than half of a typical hospital’s operating costs, better
productivity has the greatest potential for cutting those costs.
Productivity goes beyond the cost of labor, though. It is the ratio of
work input–labor, capital, and material–to work output in a given

The accounting firm of Arthur Andersen & Co. recently asked
more than 1,000 hospital and other health care administrators,
physicians, legislators, suppliers, and insurance firms what they
considered the major target areas for improving productivity. Here are
the top four responses: 1) compensation tied to productivity, 2) better
automated information systems, 3) improved employee training, and 4)
better productivity measurement and monitoring. Participants then
listed ways to achieve these for goals.

These recommendations make valuable reading. Implementing them,
however, will require some changes in traditional laboratory operations
and 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 and
objective data, and monitor them regularly. This is impossible without
goal-oriented, competency-based position descriptions and measurable
standards of performance. You will also need an accurate work
measurement system to assess productivity. If you use the College of
American Pathologists workload recording system, be sure that the units
accurately measure your methodologies and that you calculate paid,
worked, and specified productivity. Calculation of specified
productivity helps identify many variables that can drag down lab

* Establish incentives and disincentives for employee and
departmental performance. These catalysts should apply to quality of
work and other long-range concerns as well as immediate output. Merit
pay systems are growing more popular as administrators seek ways to tie
a reward system to measurable performance. Remember, a successful merit
pay plan requires a goal-oriented performance appraisal system linked to
position descriptions, as described above.

First-line supervisors are the key to making such a system work,
and they must have appropriate authority, accountability, and
supervisory skills in addition to technical expertise. Managers must be
evaluated on their ability to manage a cost-effective operation while
still maintaining efficient, high-quality service.

* Reward employees for contributing to the laboratory’s
quality and cost-effectiveness. Many institutions have incentive
programs for cost-cutting suggestions. Such programs depend on
management willingness to involve all employees in decision making.

* Enhance communication by holding more frequent supervisory and
general laboratory meetings. This helps dispel uncertainty about the
future and frustration at being powerless to change it–factors that can
be devastating to productivity. Keep meetings short and meaningful, and
allow open discussion if you want to do more than waste precious time.

* Consider retaining and job sharing to develop a more flexible
staff. The age of extreme specialization is on the wane. Technologists
or technicians who can move from one department to another or share jobs
on a part-time or part-shift basis will be the core of most laboratory
staffs. This kind of arrangement lets you schedule for peak times while
maintaining a lean staff.

* Create tight purchasing and inventory control systems to make the
most of volume discounts. Take advantage of any shared-service
arrangements at your institution.

* Get an in-house industrial engineer, if there is one, or a
consultant to evaluate the department’s performance and work flow
systems. An outside objective view can identify areas in need of
improvement that are not apparent to laboratory insiders. Analyze any
functions and transactions that cross departmental lines; you may find
opportunities to improve productivity in your own and other departments.

* Restructure schedules to focus on peak volume periods and reduce
idle time. This may mean abandoning the traditional three-shift system
and rotating day, night, and weekend personnel to make best use of staff
expertise. These changes will encounter varying degrees of employee
resistance. If you have a good information system and involve employees
from 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. If
your institution has a mainframe system that will provide appropriate
data, you are in luck. If not, a laboratory microcomputer can perform
most of the basic calculations.

* Encourage pathologists to begin an educational program that will
improve physician ordering patterns and lab service utilization.
Laboratory managers can help by pointing out unusual or obviously
unnecessary orders. Document the impact of inappropriate physician
practice patterns on productivity by keeping careful records, using the
CAP specified productivity formula.

* Start strategic planning now. Examine the laboratory’s
services ruthlessly. If a test cannot be cost-justified, then it should
probably be sent to a reference laboratory. The days of performing
tests for public relations value–or to satisfy a particular
physician–are over. The laboratory in a non-teaching hospital can no
longer afford the luxury of new test development and research projects.

* Evaluate the possibility of extending your services to the
ever-expanding ambulatory market. All the alternative health care
facilities need lab services: birthing centers, freestanding outpatient
clinics, ambulatory care centers, surgery centers, and hospices. Why
shouldn’t they use yours instead of developing their own?

As productivity pressures grow, managers must realize that their
survival depends increasingly on the support of their staffs. The
success and efficiency of a hospital will hinge not just on the number
of employees, but also on their competence, flexibility, and dedication.

Reaching the optimum level of staff concern and commitment will
require a laboratory management system that gives top priority to human
relations. Successful managers will take more business risks, but they
will also take care to preserve the personal side of health
care–respect for employees and quality care for patients.


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