Improving Hospital Care: Not easy when budgets are pressed

In the last News Blog the idea of hospital culture was discussed. This has generated a lively debate, as you can see in the correspondence section of this News Blog. The responses are broadly supportive of the idea that hospital culture is over-emphasised. One of the problems is that culture is a rather slippery concept; clever, well-informed people can fall out over its meaning, just as the early Christian theologians would argue bitterly over whether Christ had two natures, one human and one divine, or one nature, both human and divine. So let’s move on to something less nebulous – money.

The rich world is emerging uncertainly from a nasty depression. The dependency ratio is widening as fertility rates fall below the optimum threshold discussed in a previous blog. Money is in short supply relative to need. Inevitably, the consequences fall unevenly across health facilities, such as hospitals. However hospitals are reimbursed, whether by insurance payments, capitation payments or block-grants, there are likely to be winners and losers in relative terms. In addition, hospitals have differing estate costs, economies to scale and so on. At any moment in time, some may have healthy financial reserves, while others are accumulating debt. What can managers do to improve financial health while also improving (or at least not damaging) patient care?

It is possible to achieve efficiencies in health care. Operations research and ‘lean’ processes can reduce waste – increasing use of day-case surgery for example.[1] However, much of the low hanging fruit may have already been plucked. The spectacular gains that can be achieved in many industries by ‘re-arranging’ work processes are not easily replicated in labour intensive industries, such as health. Also, quality control processes, such as computerised decision support,[2] and feedback and audit,[3] reduce the costs of having to care for patients with adverse events. They are frequently cost-effective and sometimes save health service costs overall by reducing the need to care for patients who have suffered from adverse events.[4] [5] However, few of these measures are cost-releasing in services where demand exceeds supply and many require up-front expenditure.

The largest call on money is the wage bill – it accounts for around two thirds of hospital expenditure.[6] It is hard to collect valid information on staff-patient ratios and care quality, but such evidence as there is suggests that quality of care is sensitive to nurse-patient [7] and doctor-patient [8] ratios. This is hardly counter-intuitive.

Managers may try ‘skill-substitution’ – essentially allocating tasks traditionally carried out by doctors to less expensive staff. Clinical officers have provided front-line diagnosis and clinical care for nearly 100 years in Africa, and a cadre of physicians’ assistants is being created in richer countries, especially the USA. However, the scale of substitution will be limited by numbers for at least a decade, by which time the demand for physicians and their assistants will likely have increased.

The corollary is that managers’ hands are largely tied – their ability to improve their financial position is limited – at any moment in time their budgets are largely or totally committed before they receive the money. Small differences in the financial health of organisations can make large differences at the margin, given the scale of the operation over many years.

Hospitals with a financial advantage at the margin would have somewhat lower ‘production pressures’ in serving their local population. They would be able to innovate occasionally, increase their quality assurance efforts a little, and develop new services from time to time. Gradually they would develop a brand and become more interesting places to work. They would find it easier to attract staff of the highest calibre, all the way up to the Chief Executive. In short, they would generate a virtuous cycle.

If hospital culture receives too much attention, money is afforded too little. The hapless ex-Chief Executive of the Mid-Staffordshire hospital, which was the subject of a series of enquires for providing sub-standard care, was accused of putting “money before patients” by not employing sufficient nurses. One has to ask the question about the financial viability of certain types of hospital. It is fashionable to blame poor care on poor management, but it may be a myth that managers make much difference in a hospital. It suits the chief executives of successful hospitals to perpetuate this myth, and applicants for chief executive jobs must feed the myth to convince the appointment panel of their miraculous powers.

A systematic search across many countries of factors associated with successful services is needed. Throw culture in if you wish, but don’t forget the money. And for anyone serving on a hospital board, be leery of the slogan “put money before patients”; they may be synonymous.

— Richard Lilford, CLAHRC WM Director


  1. Cima RR, Brown MJ, Hebl JR, et al. Use of Lean and Six Sigma Methodology to Improve Operating Room Efficiency in a High-Volume Tertiary-Care Academic Medical Center. J Am Coll Surg. 2011. 213(1): 83-92.
  2. Nuckols TK. Smith-Spangler C, Morton SC, Asch SM, Patel VM, Anderson LJ, Deichsel EL, Shekelle PG. The effectiveness of computerized order entry at reducing preventable adverse drug events and medication errors in hospital settings: a systematic review and meta-analysis. Syst Rev. 2014; 3: 56.
  3. Cochrane Effective Practice and Organisation of Care Group. EPOC Website. 2014. [Online].
  4. Yao GL, Novielli N, Manaseki-Holland S, et al. Evaluation of a predevelopment service delivery intervention: an application to improve clinical handovers. BMJ Qual Saf. 2012; 21(s1): i29-38.
  5. Hoonhout LH, de Bruijne MC, Wagner C, et al. Direct medical costs of adverse events in Dutch hospitals. BMC Health Serv Res. 2009; 9: 27.
  6. Lafond S, Arora S, Charlesworth A, McKeon A. Into the red? The state of the NHS’ finances. London: Nuffield Trust. 2014
  7. Shekelle PG. Chapter 34. Effect of Nurse-to-Patient Staffing Ratios on Patient Morbidity and Mortality. In: Shekelle PG, et al. Making Health Care Safer II: An Updated Critical Analysis of the Evidence for Patient Safety Practices. Comparative Effectiveness Review No. 211. Rockville, MD: AHRQ; 2013. p. 372-84.
  8. Pronovost PJ, Angus DC, Dorman T, Robinson KA, Dremisizov TT, Young TL. Physician Staffing Patterns and Clinical Outcomes in Critically Ill Patients. A Systematic Review. JAMA. 2002; 288: 2151-62.

4 thoughts on “Improving Hospital Care: Not easy when budgets are pressed”

  1. A very good blog. Quality control and quality assurance are key to reducing costs but please do not follow the 6 sigma route.

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