Volume Flexible Strategies in Health Services: A Research Framework

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Volume Flexible Strategies in Health Services A
Research Framework

• Written by Eric P. Jack
• and Thomas L. Powers
• Paper 16
• Presented by Leslie Van Gessel

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Purpose

• To develop a research framework that describes
  four volume flexible strategies
• Design ways for the hospital to meet their
  uncertainty of demand, while keeping their high
  quality service

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Previous Work

• Gutierrez (1998) Analyzes an elective surgical
  procedure to estimate the relationship between
  hospital procedure, specific volume, and average
  hospital treatment costs. Results were that
  cost savings were associated with the hospitals
  volume level and size.
• Birkmeyer (2002) Provides evidence that
  higher-volume hospitals had lover operative
  mortality rates for six types of cardiovascular
  procedures and eight types of major cancer
  resections.

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Previous Work (cont.)

• Carey (2003) Alerted the health care community
  to the strong relationship between hospital
  volume of service and quality of care outcomes
  and it also suggested minimum volume levels of
  cardiovascular procedures that hospitals should
  perform in order to maintain quality standards.
• Smith-Daniels (1988) provided a research agenda
  and suggests that responses to demand and
  capacity management in health care involves
  decisions related to the allocation of three
  types of resources facilities, equipment, and
  workforce.

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Previous Work (cont.)

• Upton (1994) stated that volume flexibility is
  concerned primarily with an organizations
  ability to efficiently manage it output level in
  response to fluctuations in demand for its
  current products or servies.
• De Groote (1994) suggest that any flexibility
  strategy must incorporate three important
  aspects technology, uncertainty, and
  performance.

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Previous Work (cont.)

• Vissers (2001) suggests four underlying
  dimensions of demand uncertainty in health care
  to include
• Size of the population
• Demographic changes in the population
• Changing professional standards
• Technological developments

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Methodology

• Interview 10 health care administrators from
  Carnegie I research and teaching hospital because
  that facility has different levels that include
• Level of acuteness
• Transplantation
• Multi-organ diseases
• Level 1 trauma care
• Cardiology
• Gastroenterolgy
• Urology
• Oncology
• Primary Care
• Ambulatory services

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Four Volume Flexible Strategies

• Shielding Strategy low range of flexibility with
  a high level of demand uncertainty
• Absorbing Strategy low range of flexibility with
  a low level of demand uncertainty
• Containing Strategy high range of flexibility
  with a low level of demand uncertainty
• Mitigating Strategy high range of flexibility
  with a high level of demand uncertainty

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Volume Flexible Strategies Framework
  High           Range of Flexibility        
  Low   Low High Demand
Uncertainty
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Volume Flexible Framework

• Organizations will selectively choose a volume
  flexible strategy based on the level of internal
  flexibility desired in response to a given level
  of demand uncertainty.

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Demand Uncertainty

• 3 ways to remove demand uncertainty
• Pricing Rationing
• gtDifferential pricing strategies
• gtProduct and service rationing
• gtCreation of dual markets
• gtReservation system
• gtDenial of admission to non- emergency
  patients
• gtRelocation/Discharge of patients
• gtForfeit revenues of transfer patients
• Interviews showed that administrators werent
  able to use price and rationing to stabilize
  demand.

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Demand Uncertainty

• 2) Demand Management Models
• gtStates that demand for health care services
  is influenced by several factors including size
  of the population, demographic changes in the
  population that drive disease incidences,
  technological advances, and changing professional
  standards.
• gtSuggest to use the Shielding Strategy
• Interviewees didnt think the demand management
  model was very important

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Demand Uncertainty

• 3) Managed Care Control
• gtTo manage excess demand, organizations may
  use demographic factors such as geographic
  distance, HMO membership, competitor location,
  and the availability of different service
  offerings in a given location.
• Interviewees say that managed care control has
  the potential to stabilize demand.

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Absorbing Uncertainty

• Ways to absorb uncertainty
• Time Buffers
• gtReservations
• Interviewees didnt think reservations worked
  because doctors dont always go according to the
  schedules
• Slack Capacity
• gtCapacity needs to take into consideration
  factors such as
• -No-show rates
• -Early and late arrivals of patients
• -Confusion and crowding in waiting areas
• -Late arrival of physicians
• -Inadequate equipment for treatment
• -Emergency admissions

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Containing Uncertainty

• 3 approaches to containing uncertainty
• Workforce Flexibility
• gtDeployment of overtime and temporary employees
• gtInnovative shift schedules
• Creative use of existing employees through
  cross-training
• Interviewees commented a lot on how they are
  understaffed, especially in the nursing
  department.
• Efficiency Measures
• gtFocus on processes that enhance their efficiency
  and improve internal planning control systems
• -Utilization reviews
• -Standard Costing
• -Focus on improving labor productivity
• Interviewees had a negative response to
  efficiency measures.

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Containing Uncertainty

• 3) Information Technology
• gtWays to reduce uncertainty through technology
• -Deployment of new information technology
• -Online patient records
• -Electronic billing systems
• -Highspeed telecommunication systems
• Interviewees liked keeping up to date with the
  advancing technology.

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Mitigating Uncertainty

• Organizations need to improve coordination in
  every area of the supply chain, especially when
  demand is increasing.
• 3 approaches to mitigating uncertainty
• Restructuring (both internal and external)
• Interviewees found it hard for the hospital to
  acquire more facilities.

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Mitigating Uncertainty

• 2) Risk Pooling
• -Putting the product and service lines under
  one roof will help demand. When one is in high
  demand the other is in low demand.
• Interviewees viewed risk pooling as a
  potentially effective tool.
• 3) Outsourcing and Strategic Alliances
• -Outsourcing will lower cost, offer broader
  service mix, and give providers the opportunity
  for market share.
• Senior interviewees noted that there needs to be
  more emphasis on outsourcing.

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Propositions

• Volume flexible strategies may be deployed
  tactically at the service line or departmental
  delivery system level within the organization.
• Size of the health care organization may be
  positively related to the extent of deployment
  and use of the four volume flexible strategies.

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Dimensions of Volume Flexible Strategies

• 1)Time
• Short-term organizations rely on time buffers,
  workforce flexibility, inventory buffers,
  efficiency measures, demand management models,
  pricing rationing, and managed care controls.
• Long-term organizations rely on restructuring,
  risk pooling, outsourcing strategic alliances,
  investments, and slack capacity.

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Dimensions of Volume Flexible Strategies

• 2) Sources
• Internal sources organizations measure by time
  buffers, workforce flexibility, inventory
  buffers, efficiency measures, information
  technology, and slack capacity.
• External sources organizations measure by
  outsourcing strategic alliances, risk pooling,
  managed care controls, and pricing rationing
  strategies.

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Conclusions

• How to know what strategy to use
• 1) Use Shielding Strategy when the organization
  has a low range of flexibility and high level of
  demand uncertainty. Which results in the use of
  pricing and rationing, demand management models,
  and managed care control.
• 2) Use Absorbing Strategy when the organization
  has a low range of flexibility with a low level
  of demand uncertainty. Which results in the use
  of time buffers and slack capacity.

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Conclusions (cont.)

• 3) Use Containing Strategy when the organization
  has a high range of flexibility and a low level
  of demand uncertainty. Which results in the use
  of workforce flexibility, efficiency measures,
  and information technology.
• 4) Use Mitigating Strategy when the organization
  has a high range of flexibility with a high level
  of demand uncertainty. Which results in the use
  of restructuring, risk pooling, and outsourcing.

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Volume Flexible Strategies by Service Lines
       High         Range of Flexibility    
      Low   Low High Demand
Uncertainty
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Any Questions?