Operations Management: the key to cost containment;

              OPERATIONS
MANAGEMENT:
The multiplicity of indictments relating to the "health
care crisis" have been publicized to the hilt and beyond.
It would serve no purpose to rehash them here. Nor
would it be useful to dwell on such factors as escalating
labor, research, equipment and construction costs or
frequent conflicts between the medical and administra­tive
professionals.
However, out of all the dialogue and monologues
emerge two hard unalterable facts. Whatever the under­lying
causes, health care costs continue to grow faster
than almost any other item in our economy. Concur­rently,
pressures for less costly health care delivery con­tinue
to build from powerful consumer, labor, employer
and government factions.
These facts lead the health care institution—sup­ported
largely by public funds—to the following man­agement
strategy: install an effective management proc­ess
to control costs.
Is such a management process achievable? The evi­dence
proves that it is. By introducing proven manage­ment
tools, health care facility and delivery costs can
be reduced, inflation or not, and the quality of service
can be improved.
OPERATIONS MANAGEMENT: THE CONCEPT
Management tools long used to control costs range
from budget analysis, rate restructuring and purchase
deferment to study committees, revamped services and,
in a highly labor-intensive industry, personnel reduc
tions.
Other modern management tools and strategies are
being employed such as work measurement, computer­ized
processing and record keeping, satellite clinics,
mer-gers and joint ventures, and regionalized health
care delivery. In some cases, costs are being better con
trolled. More often, efforts employing these tools and
strategies are fragmented and ineffective. Only infre­quently
has the integrated management approach—Op­erations
Management—been applied to the problem of
cost containment. Experience has shown that Opera­tions
Management can be a workable approach to cost
containment.
What is Operations Management? It starts with the
definition of the health care needs of individuals and the
community being served. With health care needs as a
springboard, meaningful health care delivery objectives
[are set. The target, of course, is quality health care
delivery at minimum cost. Operations Management em-j
phasizes the real environment in which change is to be
! effected. It does not attempt to propose cost contain-jment
approaches beyond the capacity or capabilities
: of those persons responsible for implementing them.
At the hub of Operations Management is the identifi­cation
of operating service levels required for the speci­fic
functions within the hospital operation. Traditionally,
service levels, while vaguely understood, are not ex­plicitly
defined. Service level definition is crucial if we
are to establish concrete goals and monitor milestones
in reaching them.
the
key to
cost
containment
by Kenneth G. Myers