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Healthcare Industry Challenges for 2008--An Insider's Perspective

Barry Calogero, for HealthLeaders Media, January 25, 2008

Rapidly increasing levels of uninsured patients. Unsustainable costs. Demand for services outstripping capacity. Welcome to 2008--a "Perfect Storm" in healthcare is about to hit. At no other time in the history of the U.S. healthcare system have we reached this point--one where all of the fundamentals of our system will be stressed to the breaking point. In the very short term, hospital administrators will be asked to start examining their processes in light of these pressures and will be looking for innovative approaches to providing service. Here are a few of the most significant issues for the coming year:

  • Emergency Department. The front line of the battle will be played out in the Emergency Department. As the point of entry into most institutions, this is where the combination of capacity constraints and uninsured patients meet. With wait times exceeding six hours for many patients, EDs will need to create capacity via process improvement.

    EDs today suffer from significant serial processing, whereby patients wait in beds while tests are performed. This serial processing, coupled with major variation in patient care processes, results in significant waste in care time, bed capacity, and clinician time. With uninsured patients hitting the EDs, most institutions lack non-urgent, "Fast Track" capabilities to quickly process these patients to unclog the patient funnel. It is a public imperative that hospital EDs implement best practices in order to utilize specialized treatment centers for non-urgent patients, while improving the flow of urgent and emergent patients through parallel processing.

  • Performance Improvement Methodology. In order to drive enhancements, 2008 will see hospitals aggressively utilize performance improvement methods developed in the manufacturing industry--Lean Operations and Six Sigma. The war on waste and variation will move rapidly into the executive suite discussions at hospitals around the country as they seek new ways to improve patient access, while improving quality and reducing the cost of service.

    As operational experts have learned in manufacturing firms, the proper application of these techniques can have profound impacts on the efficiency and effectiveness of all clinical and ancillary services. Hospitals in 2008 will begin to seriously leverage these principles to transform their cultures while adopting high-performing processes.

  • Aging Population. Hospitals will, for the first time, feel the effect of Baby Boomers in 2008. As the cusp of this mass of 78 million Americans enters retirement, demand for healthcare services is starting to rapidly rise. In specialty areas of cardiology and oncology, hospitals will need to create greater delivery capability to support these patients. At the same time, this will be a major catalyst for healthcare costs reaching almost 18% of GDP by the end of 2008.

    Hospitals will be expected to be more transparent and accountable for their expenses. Issues including Performance Improvement and No Pay for Poor Performance will begin to become part of the lexicon in hospitals. Hospitals that seize the initiative to improve quality and performance levels will be the early adopters in 2008, as these forces hit the mainstream of the industry by year's end.

  • Obstetrics. Obstetrics is the best example of the impacts of defensive medicine and changing practice patterns. With the cesarean birth rate expected to rise to near 35% by the end of 2008 and inductions becoming the rule while spontaneous labor is the exception, virtually every OB practice will face severe capacity constraints during the year. In order to gain control of this situation, it is necessary for two changes to be vigorously pursued.

    First, alternatives to the current tort system will become part of the dialogue for industry change in 2008. Reducing the impacts of defensive medicine and establishing mechanisms like Health Courts will allow practitioners to actively pursue best practices and standard protocols for birth methods. This second initiative will begin to be more prevalent, whereby institutions and physicians will be held accountable for performing within a clinically accepted benchmark for all services, using their training and experience coupled with best practices instead of performing unnecessary procedures.

  • Political Impact. The political debate during the election cycle will continue to make healthcare reform a major issue. Coverage for the uninsured, price transparency, competition, and healthcare technology are just some of the reforms being discussed. This year will mark the first time the combination of political will and patient unrest join together to catalyze the industry to seek a new path into the future. The challenges facing the healthcare industry would be insurmountable by virtually any other American enterprise.

    Hope or Despair?

    So, why should anyone be optimistic with all these pressures? The answer is contained in the nature of the major stakeholders: dedication. Physicians, nurses, technicians, administrators, and executives share the same passion for healing, patient care, and excellence. It is this dedication that will enable the industry to change from the inside out. Anything short of this could threaten the system, resulting in legislative moves to adopt socialistic medicine. The major players have the will and desire to make serious changes. Now the hard work of implementing these capabilities will prove successful in 2008.


    As the president of Tefen USA, Barry Calogero brings more than 20 years of management experience to the company. He directs all activities within North America as well as Asia in all manufacturing and service industries, including life sciences, general manufacturing, semiconductor, hospitals/healthcare, and federal government. Barry has an extensive background in all aspects of product and service optimization with significant operations management consulting solution delivery in both manufacturing and product development environments.

    Tefen USA, a subsidiary of international management consulting firm Tefen, works with hospitals and health organizations to make sustainable improvements in the areas of business strategy, operations excellence, project management and organizational development by applying LEAN, Six-Sigma, and related operations strategies to improve the cost, quality, and access performance of healthcare organizations.

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