Hospital downsizing and workforce reduction strategies: some inner workings

Abstract

Downsizing, manpower reductions, re-engineering, and resizing are used extensively in the United States to reduce cost and to evaluate the effectiveness and efficiency of various functions and processes. Published studies report that these managerial strategies result in a minimal impact on access to services, quality of care, and the ability to reduce costs. But, these approaches certainly alienate employees. These findings are usually explained by the significant difficulties experienced in eliminating nursing and other similar direct patient care-oriented positions and in terminating white-collar employees. Possibly an equally plausible reason why hospitals and physician practices react so poorly to these management strategies is their cost structure-high fixed (85%) and low variable (15%)-and that simply generating greater volume does not necessarily achieve economies of scale. More workable alternatives for health executives to effectuate cost reductions consist of simplifying prepayment, decreasing the overall availability and centralizing tertiary services at academic health centres, and closing superfluous hospitals and other health facilities. America's pluralistic values and these proposals having serious political repercussions for health executives and elected officials often present serious barriers in their implementation.