In these days of skyrocketing healthcare costs attributed to a combination of labor shortages, rising inflation, supply chain disruptions, low surgery volumes, higher equipment prices, and more, the traditional C-suite response is to implement organization-wide budget cuts, stop expansion projects, and put recruitment on hold. While this may seem fair and equitable at first blush, this simplistic approach can have unintended, rippling consequences across the organization.
It may sound counterintuitive, however there is sound reasoning for continued investments in surgical services, technology, and personnel, even during economic downturns.
In fact, even while working under tight budgets, healthcare leaders should strive to maintain OR funding or even increase investments, if possible.
Reason 1: The OR is the Economic Powerhouse of Every Hospital
Making flat cuts across all departments may seem logical on the surface, but it has negative consequences in the long run. It is wiser instead to take a more strategic approach by taking a step back and doing a back-to-basics economic analysis of the organization at the department level. This analysis will help to identify where budget cuts can be made without sacrificing the integrity of patient care, reducing vital revenue, or losing valuable leaders to competitors. It also positions the organization to maintain profitability in the future, once economic recovery does begin.
According to Healthcare Financial Management Association (HFMA) studies, operating rooms generate up to 70% of a hospital’s revenue and some 35-40% of hospital expenses. Additionally, each empty but open OR suite can cost up to $1,000 per hour. Even just one minute of OR downtime can cost well over $100.
The value that each OR brings to the entire hospital’s margin cannot be understated. Slashing costs to save a buck in the short-term can cripple the OR’s ability to generate large amounts of revenue in both the short and long term.
Reason 2: The OR’s Impact Goes Well Beyond the Perioperative Department
The OR is the most complex part of every hospital and needs to consistently run like a well-oiled machine to maintain cohesion among other departments. According to the American Hospital Association’s (AHA) Quality Center,
“Because the OR is a primary source of admissions, it is virtually impossible to streamline hospital‐wide flow without first streamlining patient flow through the OR. Smoothing patient flow in the OR will help eliminate ambulance diversions, reduce overcrowding in the emergency department (ED), decrease the number of patients who leave the ED without being seen, and improve staff morale.”
Thus, an inefficient OR — which will result from non-strategic budget and personnel cuts — can lead to a decline in overall hospital performance.
The OR requires highly trained leaders, clinicians, and support staff as well as state-of-the-art equipment to maintain a competitive edge and provide high-quality care to patients. Reducing spend, cutting staff, or tolerating leadership vacancies will have negative impacts on the bottom line and leave the C-suite scrambling to play catch-up. It is always easier to maintain than it is to recover. When the stakes are 70% of the hospital’s revenue, the choice to maintain has never been clearer.
Reason 3: Quality Perioperative Leaders and Staff Are in Short Supply
Staff are only as effective as their leaders allow them to be. This is especially true in highly specialized sectors such as the OR. It’s no secret that healthcare leaders as a whole are in short supply, and this shortage is felt exponentially in specialized sectors, such as perioperative services.
When organizations make the error of cutting OR spend, they often see an exodus of highly trained staff as a result, including perioperative leadership. Moreover, organizations that maintain stability or even continue to invest in the OR are making great strides to attract qualified talent that has become disenchanted with their previous employer.
Continual investment in perioperative services goes a long way in recruiting clinicians and attracting leadership talent and is an essential element of overall organizational health and growth.
Kirby Bates Can Help You Find Qualified Perioperative Leaders
Through executive search services, interim leadership services, and executive advisory services, Kirby Bates has helped hundreds of healthcare organizations find the talented, experienced leadership that they need for the past 30 years, throughout all kinds of economic conditions. We’ve spent our entire careers in healthcare so we know what it takes to lead organizations forward.
To learn more about how we can help you find the leadership talent you need, get in touch today!