Research

Infinite demand, finite resource – how to achieve sustainable efficiencies in public healthcare

How tailored solutions are the only way to deliver efficiencies in public healthcare systems.

With the seemingly limitless demand on public healthcare systems, delivering efficiency gains to protect the public purse may not be as straightforward as it seems at first glance.

  • Public healthcare demands continue to claim an ever-increasing share of GDP
  • In the UK in 2012, NHS spending accounted for almost 10% of public spending, almost double that spent on all forms of primary, secondary and tertiary education
  • Accordingly, considerable focus has been applied to saving money by driving efficiencies through the NHS system  
  • Analysis of length-of-stay savings shows that a wholly prescriptive formula may deliver short-term efficiencies, but the potential for longer-term cost rises are inherent in this approach
  • A major study concludes tailored and context-specific solutions are the only way to deliver durable savings and efficiencies in public health systems

Standardisation of procedures – a taxonomy for cost reduction?

With seemingly limitless and ever-increasing demands being placed on public healthcare systems, evidenced by 9.1% of UK GDP being spent on the NHS in 2012 while just 5.2% of the public purse was committed to education, the search for efficiencies in healthcare has never been more acute.

One focussed area of debate has been whether or not standardisation in healthcare procedures can deliver a durable decrease in costs. In a paper co-authored by Matthias Holweg of Oxford University’s Saïd Business School, a thorough analysis was undertaken to assess whether the use of standard, 'one size fits all' policies to reduce costs in healthcare systems stood up to scrutiny.

The authors note that spiralling pressure on healthcare systems have led to attempts to improve efficiency in hospitals. Standardising policies is seen as one way of achieving this. The premise the study investigated was whether longer hospital stay costs more over the patient lifecycle or whether sustainable savings can be achieved by bringing forward discharge timings.

Doctors perform surgical procedure

Hernia Cohort Study

The authors put to the test the notion that a reduced length of stay in hospital leads not only to reduced costs, but also to an improved outcome for patients based on an investigation 183,712,784 medical records from hernia patients in the NHS between 1998 and 2012. The conclusion the authors drew was that while a shorter hospital stay reduced procedural costs in the short-term, readmission rates increased significantly for vulnerable or elderly patients. The long-term costs for these groups therefore increased as a result.

We estimate...possible savings from reducing unnecessary stays alone to be US$565 per procedure, which equates to a 19.97% reduction in the average cost of the surgical procedure.

Flexibility is Key

The authors recommend that healthcare policies should be adaptable according to factors such as age and vulnerability. While hospital stay length reduction should be pursued for less vulnerable, younger patients, longer hospital stays should still be encouraged for older or at-risk patients. Less time in hospital for vulnerable patients means less time being exposed to the risk of catching infections and the benefit of additional monitoring by medical staff, reducing the chance of complications subsequently developing.

Having stress-tested the benefits of healthcare standardisation using the significant hernia cohort, the study’s conclusions pointed to tailored solutions providing the most efficient approach for healthcare systems. Blanket standardisation fails to contend with the individualised complexities of patient requirements and customised, adaptable policies provide more efficacious solutions for patients as well as greater overall cost savings. In the context of the authors' research, this means upfront investment in terms of the costs of a longer initial hospital stay for vulnerable patients, leading to a far-reduced occurrence of costly readmission to hospital.

Applicability

The research will strongly support the case for tailoring care plans rather than simply adopting sweeping policies, and show that the argument for selective customisation applies equally in other areas of healthcare operations management.

This piece is based on research from Catena, R., Dopson, S., & Holweg, M. (2019). On the tension between standardized and customized policies in health care: The case of length-of-stay reduction. Journal of Operations Management.