Introduction and background
As an emergency department medical director and physician, a busy emergency department can be a thing of beauty to me. We work hard to set up systems that will provide the care our patients need. Despite our best efforts, almost daily, variables occur that throw the system into chaos and lead to inefficiency. The COVID-19 pandemic unveiled and exacerbated many challenges that affect our ability to provide the best care for our patients. Those issues are real and must be addressed. What I aim to do in this text is to outline what we face as health care professionals, then discuss solutions that could be introduced based on the theories of operations management as well as managerial accounting.
Challenges to efficiency
When developing a staffing grid for the emergency department, we study patient arrival patterns. We schedule physicians, nurses and support staff in a layered fashion where hopefully our greatest number of workers present will align with the busiest times of the day. The allocation of staffing resources is not generous but is sufficient. All personnel can easily be at 100% utilization depending on the number of patients present and their immediate diagnostic and treatment requirements. Given that workforce absenteeism occurs daily, it is rare that the staff is not totally occupied throughout their shift.
Additionally, many hospitals are dealing with severe nursing staffing shortages which have been made worse during the pandemic. As a result, the ED waiting room is usually a “bottleneck” to patient care. Patients end up waiting to be seen, as the necessary capacity does not exist to meet surges in patient arrivals and demand for noncritical medical services.
In addition to capacity challenges, the rate of arrival of patients, as well as the resources needed to service those patients, are highly variable and unpredictable. Prior to the pandemic, nationwide, emergency department volumes were higher than they are currently. Once the pandemic occurred and “stay at home” orders went into effect, lower acuity patients almost overnight ceased coming to the hospital. Due to the stay-at-home orders, patient volumes immediately dropped up to 50% at some hospitals and have persisted as such. Despite the decrease in patient volumes, staff utilization did not decrease; it increased. I will explain how in the next section.
This immediate drop in patient volumes directly threatens hospitals that operate on a for-profit basis. As discussed in the famous operations management novel, “The Goal,” the purpose of businesses, including hospitals, is to make money. “Throughput” is the rate at which money is generated by the system through the sale of medical services to patients. “Operational expense” includes direct staffing hours of physicians, nurses and hospital technicians. Operational expense could also include the purchase of supplies needed to serve patients as well as overhead expenses.
“Inventory” can broadly be thought of like all the things invested within the hospital that will be sold. CT and MRI scanners are purchased to sell imaging services to patients. Operating suites are built to sell surgical services to patients. Laboratories are built to analyze body fluid samples; hospitals charge for those services. The hospital itself is an investment that was built to facilitate the sale of medical services. When the hospital is operating efficiently, the hospital can profit from services rendered and most importantly, patients can receive high-quality medical care.
The goal in peril
The pandemic caused a direct threat to the “goal” of selling medical services while providing needed medical care. As patient volumes immediately declined due to stay-at-home orders, health care corporations responded by decreasing their operating expenses. Hospitals are usually only profitable when large volumes of patients are being serviced.
With patient arrivals being the main revenue driver, hospital corporations decreased staffing hours to protect their profit projections. Given the similar actions of hospital corporations across the country, hospitals seem to view direct labor hours as one of their main cost drivers; and may even assign their overhead costs directly as a portion to direct labor.
In any business, including hospitals, when revenue decreases and fixed costs remain high, if overhead expense is assigned as a proportion to direct labor hours, with a decrease in direct labor, this will lead to an increase in overhead expense. The overall cost of services will then become more expensive, causing hospitals to cut more operating expenses (staffing). Unfortunately, this undermines their ability to drive throughput.
With less staff, it is harder to serve the patients that do arrive at the hospital. This will lead to longer wait times, possible decreases in the quality of care received, and ultimately patients choosing to go to other hospitals, which decreases hospital profit. In Managerial Accounting, this situation is referred to as a “death spiral.” If not managed properly, some hospitals may be forced to close or forced to discontinue certain services offered to patients.
During the earlier days of the pandemic, some U.S. hospital corporations realized the error in cutting direct staffing hours of nurses. By decreasing the number of staff within hospitals, it pushes the staff that does work to always be at 100% utilization. When this situation persists, the overall hospital system has no ability to respond to increases in the demand for hospital services. During the delta-variant surge a few months ago, many hospitals nationally found themselves without the ability to increase their capacity at the time when it was most needed. What resulted was that patients waited, patient health outcomes were put at risk, and hospitals were not able to drive throughput. Hospital administrators lost focus of the “goal” when they dramatically decreased staffing.
Some respond, some cannot
The COVID pandemic exacerbated inequities that exist within our hospital system. Richer hospitals in more affluent areas that serve patients with more robust health insurance packages were able to respond and pay a much higher premium to obtain the needed staffing to expand capacity. Right now, a nurse can easily make 3-4 times more than usual by accepting a lucrative travel nursing contract to work at a facility with more financial resources. Hospitals that serve poorer areas are unable to compete for the needed staffing resources. This has happened all over the country during the pandemic and is still ongoing.
The national nursing shortage has created a capacity crisis in many U.S. hospitals, particularly in poorer areas. The goal of a hospital is to help patients, but this is accomplished through maximizing our ability to drive throughput. If U.S. hospitals care to decrease wait times, decrease queues, and increase the perception of the quality of care given, capacity must be increased. Given the increased operating expense required to obtain the needed staffing resources to expand capacity, I propose federal assistance be given to support U.S. health care and the patients we serve.
Federal grants could be given to support the operating expenses needed to hire qualified nurses and other support staff. The EMTALA mandate requires all U.S. hospitals that accept Medicare and Medicaid to perform medical screening exams and to provide stabilizing care to all patients regardless of their ability to pay. Given that mandate, the federal government must do more to protect U.S. hospitals as many are facing the harsh financial realities caused by the pandemic.
Last month, President Biden signed his $1.2 trillion dollar infrastructure legislation into law. I have not read anywhere online that his spending package does anything to address the staffing and capacity issues affecting U.S. hospitals. If true, this is unfortunate, and the federal government must act soon to address the concerns of patients and the health care industry.
Another suggestion for addressing the capacity issues hospitals face is for the federal government to help import nurses from abroad to come work in the U.S. There is a precedent for recruiting foreign nurses. Since the 1960s, many nurses have been recruited from the Philippines to work in the United States to address staffing and capacity issues. Given the severe current shortage of nurses in the U.S. and the projection that this situation will worsen over the next 20 years, we must revisit this solution to support our hospitals and our patients.
The U.S. health care industry has large challenges that can be overcome if we remember why our systems and services exist. We are here to help patients, and we must obtain the needed staffing capacity to drive throughput so patients can receive the care they need. Our system will cease to exist if hospitals are forced to close or begin to limit services offered due to financial concerns. As stated in the title of this paper, the “goal” is in peril. However, by remembering and instituting key principles from operations, accounting, and with federal assistance, we can overcome the challenges worsened by the pandemic and build a resilient health care system that will be in place in this country for years to come.
Vincent Roddy is an emergency physician.
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