Running a hospital in a recession
Although hospitals that have the fundamentals in place, weather the storm more easily, it is a myth to believe that healthcare is recession-proof. The socioeconomic environment has changed, and that requires an adaptation of management, process and even thinking.
Irrespective of the realities of a recessionary climate, or even the economist’s definition, people behave differently if they think (or know) they are in a recession. That would include the following rationalizations related to healthcare:
» A greater willingness to accept generics
» Wider latitude for service – a short wait is analogous to a luxury
» A decrease in patient compliance (skipping doses to save costs)
» Preventative care is perceived as more expensive (spending money to stop something that does not exist loses its value when money is scarce)
In addition to fixed ticket items, such as medical aid or medical insurance, the healthcare arena is not shielded from the vagaries of a recession, dependant on the maxim: “Your health comes first.”
With a recession comes an increase in knee surgeries, and then gums. These somewhat unusual indicators are the markers for the expectation of a recession – people are at greater risk of losing their jobs, so the reasons to delay elective surgery are countered. For many, the loss of employer sponsored health coverage is now a reality. They have a certain income, which is constantly challenged by their health – although hypertension may be relatively inexpensive to control (as may diabetes), these chronic conditions afford the patient one advantage – they know how much they will have to pay next month. It is the world of complications (due to hypertension and diabetes, for instance), the unforeseen slip off the skateboard or the dread disease that assails one on a quiet Tuesday afternoon, that can have a devastating effect on patients and families.
The degree of cover and support that people receive depends very much on the social infrastructure that the government has built up over time. It is not so much the poor person that suffers, but the poorly prepared. People get sick regardless of economic cycles, and the publicly funded safety net programs insure that people who need care get it.
The restructuring of private health insurance in the USA over the past decade have made the industry more recession-sensitive – exhibiting price and use sensitivity never seen before. Healthcare is dependent on market share revenue, just like any other business. However one thing that separates health care from traditional businesses is the fact that most patients can’t afford services without the help of a third party – insurance companies and/or the state. In the world of healthcare, hospitals are the middlemen, dependent not only on patients, but all the stakeholders in the distribution chain.
Healthcare organizations when faced with mounting financial problems, and without any long term plan to guide their short term actions do exactly what other companies do, they cut costs and begin experimenting to maximize revenues. But this is not the right time to experiment – you don’t have the buffer to learn as you go, but need to implement prudent practice that you have tailored over the years, or acquire the knowledge from others who have done what you need to do.