Workplace Reengineering, Reorganization, and Redesign From Nursing Management: Principles and Practice

Patricia Stanfill Edens, RN, MS, MBA, FACHE

September 13, 2005

In This Article

The Driving Force for Workplace Reengineering, Reorganization, and Redesign

No business can be stagnant and expect to survive. An ongoing transformation process is the norm, and when business does not evolve with the environment, failure results. Hospital business activity is influenced by a variety of internal and external forces. Factors may include changes in reimbursement, a shortage or excess of labor, changes in the political landscape, the economy, and others. Managers must be cognizant of the environment in which they function in order to anticipate andrecognize the need for change and for facilities to remain viable entities.

Organizations are currently analyzing trends in the healthcare environment as external factors come to bear on facilities. The current hospital environment can expect a flat-to-obvious decline in inpatient volumes over the next 5-10 years because of less invasive technologies and surgeries anda smoothing of demand, too, as more seniors maintain a healthy lifestyle, including prevention and screening measures leading to early detection and lower acuity interventions. The transition from inpatient- to outpatient-driven strategies will keepthe higher acuity patient in the inpatient setting with a need for more intensive care beds and fewer traditional inpatient accommodations. Consumer cautiousness related to cost of insurance, co-pays, and pharmaceuticals leads to fewer voluntary admissions in both inpatient and outpatient areas (Advisory Board, 2003).

The outpatient areas can expect a surge in volume as inpatient admissions are averted, but the reimbursement to the facility is significantly lowered. Emerging technologies have the potential to drive more change as technologies such as positron emission testing can avert surgical interventions by indicating malignancy in advance of or in place of biopsy prior to surgery. A continued rise in physician- or company-owned specialty hospitals and outpatient centers will siphon patients from the traditional hospital setting, leading to a decline in both census and revenues as patients in the hospital facility generally become more acute and provide lower margins. Mergers, acquisitions, and closures of facilities also impact both inpatient and outpatient volumes as patient duplications or absence of services result (Advisory Board, 2003).

Changes in reimbursement are external factors with significant implications for volume shifts in the traditional hospital facility. With their higher overhead costs, hospitals often lose managed care contracts to outpatient imaging centers or physician offices or to other better-managed organizations willing to provide care at a lower price. Managed care organizations (MCOs) are influenced by the purchasers of their product to deliver a lower cost of care. Business, the underwriter of health care for much of the population, demands that the MCO negotiate lower rates to keep down the business premium cost. Business also is offering to its employees graduated payment plans based on services selected. Many employees are selecting lower premiums leading to higher co-pays, which may be more difficult for the hospital to collect. Coupled with changes in managed care costs are the dramatic fluctuations in government-sponsored reimbursement, such as Medicare and Medicaid. Annually, the centers for Medicare and Medicaid attempt to drive down the reimbursement to both hospital and nonhospital settings. Of recent note has been the move to restructure physician office reimbursement (lowering reimbursement) that may lead to an influx of chemotherapy patients from the physician office outpatient setting back into the hospital outpatient setting. This type of movement would require a significant change in the hospital, as most do not have sufficient infusion center capacity to handle this influx.

Being sensitive to the external forces that may influence a facility is important, but these same forces may translate to internal impacts, which are equally important. For example, there are influencing factors that are difficult to segment into external or internal forces on a consistent basis. Cultural impacts external to the facility can come from a shift in demographics in the market. A large foreign or indigent population shift may cause internal forces that necessitate the need for translators or accommodations to the cultural needs of this population. Societal needs in the community may influence hospitals both externally and internally. A hospital losing money on obstetrics may not be able to close the service if they are the only provider in the community. Although the internal need is to close the service in order to save dollars, the external need is greater to keep the service. External forces may lead to internal influences or may stand alone as a rationale for change. Once external forces are considered, the nurse manager should consider internal forces.

Probably the most influential internal force impacting facilities is lowered margins, as reimbursement has steadily declined over past years. Arguably, lowered reimbursement is external to the facility in most instances, but the use of dollars can be determined as an internal factor that must be managed. As wages increased because of staff shortages and technology costs increased with price increases from vendors, profits in the hospital were consumed. The use of dollars in service delivery decisions (e.g., cardiology versus oncology) has significant internal ramifications. Coupled with weakened infrastructure in the facility and sociopolitical factors within the management structure of the organization, these declining fortunes of the hospital industry beg for redesign. Drucker (1993) described the incongruous economic realities of industry that translate well to health care. In most industries, when volume grows, profitability also grows. It is hard to understand why rising demand does not always equate to enhanced performance of the healthcare entity. Looking from the most obvious financial impacts, whether internal or external, to less obvious influences supports the need of the organization for change.

The culture and history of the organization can influence responses to factors interpreted as threatening within the facility. The internal climate that exists within a facility can determine the ability of the staff to accept change in a positive manner. Poor morale, lack of trust, and a feeling of disengagement with the organization are internal factors that influence the organization's ability to reform and succeed. If staff reductions are the immediate response to internal threats without a clear plan of action, staff may not trust the organization to appropriately handle future events. Downsizing, whether through eliminated positions, department outsourcing, or layoffs, is an unfortunate trend in health care and often leads to more detrimental effects than it prevents. A secretive senior management also may lead to distrust on the part of employees as opposed to an open communication model in which staff are kept apprised of events that may impact their future.

A thorough and ongoing assessment of external and internal factors exerting an influence on the organization is expected of senior leadership to define a proactive plan of action in anticipation of strategic threats. By developing and implementing a plan of action in advance of anticipated negative events, corrective measures may be initiated. Whether it is the development of a strategic plan or a process improvement study, forward-thinking organizations are defining an action plan to respond to their environment in a positive manner, which is designed to accomplish their goals. Strategic planning follows a well-known process of setting goals and defining implementation plans based on previous activities, a next step, so to speak. In contrast, reengineering is radical redesign implying a major upheaval within the facility. By carefully defining a strategic approach to workplace reengineering, reorganization, and redesign and incorporating the influences of external and internal factors, the process may be better managed, leading to a more positive outcome on the facility and employees.