(Second of two parts)
It has been said time and again that what we cannot measure we cannot improve. Measurements quantify results and give us the ability to compare these results against pre-determined standards or benchmarks.

This implies objectivity and cannot merely be dependent on personal judgment or opinions. The purpose is to provide feedback on performance so that hospital stakeholders will know exactly where they stand. Measurements also identify areas where inefficiencies exist, where improvements can be made and where opportunities for better results may be open.

Financial figures, if accurate and timely, will enable the hospital to take aggressive or corrective action in order to protect or improve profits. The importance of the financial and statistical reports, and the analytical exercise that goes with them, are potent tools in pro-acting or reacting to events and situations that can lead to either gains or losses.

Management can demand that the data analytics cover the smallest unit of the hospital, down to the patient level, but the potential and power of the information comes at a price. Whether the price paid is justified by the information generated is a decision management has to make based on its need and its benefits.

Cost savings, better customer service, simplified processing; less queuing, easy data access and centralized medical records can be the result of intelligent automation, which can certainly contribute to improved profitability.

It is wise for hospitals to look at its IT plan beyond the current technologies and applications. With the fast pace at which new technologies are developed, not only for backroom or support services but also in anticipation of more information-based medicine, it is prudent for hospitals to prepare their IT roadmap and plan the infrastructure to prepare for the increasing use of technologies in the future.

This will allow hospitals to develop and phase in its long-term acquisition of new technologies within its existing infrastructure. Logic and reason will always weigh cost versus benefits but making the right choices not only will enable innovation to be adopted more easily but also give the hospital first-to-market advantage.

Competing in values

The consequences of a bad economy on hospital operations are predictable: patient census will likely drop, patients and insurers will be more value conscious, there will be poorer absorption of fixed cost, profit margins will be slower, account collection period will lengthen.

These will cause weaker liquidity, smaller capex budgets and perhaps even scaled down research and clinical programs. Hospitals with sound balance sheets may fare better than those with weak financials, but all must adjust to the reality of the bad economic times.

The review of the direction, strategies and financial results of hospitals is a task the CEO and the management team normally do on a continuing basis, whether the economy is good or bad. It is possible that some hospitals may be forced to restructure themselves and start to focus on their more profitable service lines, where they excel in expertise and where their margins are wide.

They could also de-emphasize those that are in negative territory. It is but logical that investments are directed to clinical services that make economic sense.

This is not to say that profitability is the only measure in deciding what capabilities to build up. But the good results of this approach are reasons why we have seen the proliferation of standalone clinics specializing in one or a few clinical service lines. Examples of these are dialysis clinics, orthopedic centers, mini-surgi centers and the like.

Many hospitals, even full service hospitals, are choosing to set up select centers of excellence instead of pouring investments in a broad spectrum of service lines. Market forces may necessitate the move to this direction as a way to improve its competitiveness versus its more focused competitors who naturally have achieved, because of their concentrated offerings, economies of skill and scale.

The narrower range of clinical activities is a business model that has proven profitable to its proponents. By limiting its service offering and by promoting itself as a differentiated facility, zeroing only on very specific practice attracts more patients to the facility, easily achieving critical mass.

Naturally, this big practice entices physicians who believe that this career option provides them with more exposure to sharpen their skills in their field of expertise. If managed well and its clinical outcomes remain positive, this business model will continue to produce profits for its stakeholders.

Leveraging for profits

We are aware that equity is the most expensive source of capital and leveraging or "using other people's money" can improve the ROE of investors. Borrowing is often resorted to when owner's equity limits the capability of the institutions to take advantage of market opportunities.

Incurring debt could be a good financial strategy provided this is done with prudence and used to finance projects that will yield sufficient returns to cover debt service and add to the owners' rate of return.

Other than leveraging, there are other options worth evaluating to minimize the employment of scarce capital especially to non-core activities that can be better outsourced to outfits that specialize in offering these services.

Hospitals should consider outsourcing the following functions to independent BPOs who can perform them reliably and more cost effectively. Among these non-core functions, other than the traditionally outsourced security and janitorial services, are: payroll and benefits processing, accounts receivable collection, processing of PhilHealth, insurance and pre-need claims and reimbursements. Catering and dietary can likewise be given to food servicing outfits. Managing and maintaining of IT facilities can also be awarded to experts instead of relying on less experienced in-house IT personnel.

New business models for financing equipment acquisition through joint ventures with doctors and investors will enable hospitals to embark on modernization or upgrading moves that can speed up the hospital's modernization efforts.

Certainly, some benefits from outsourcing are obvious: working capital is reduced when task are moved out of the hospital, capital is freed for more productive uses, valuable space will be made available for revenue generating services, career growth and morale are boosted for career people engaged in the hospital's core services when non-core manpower are shifted to another organization.

Patient-centric culture
Earlier, I emphasized that all institutions, whether organized for profit or not, must aim to generate funding for sustainability and accomplishment of mandated tasks. Profit, by whatever name we wish to call it, is always good for the institution.

Hospitals are humanitarian institutions established to serve the public good. Capitalists who invest their money in hospitals do not really expect to make bundles of money from this investment. I believe they do so because they know they have social responsibility commitments to their God and country.

Notwithstanding motivations, hospital management is responsible for insuring that the hospital operates profitably so that it can meet its obligations to the patient. The patient is the center of its existence and his well-being and health are its mandated duty.

There is a reason why the services rendered by hospitals are collectively called HEALTHCARE. Hospitals must therefore cultivate, nourish and "flourish" a patient-centric culture that is anchored in rendering compassionate care that puts the welfare of the patient as the primary consideration.

I think that if we do right by our patients, we retain their loyalty and patronage and this will translate to better bottom lines.

I will end this by going back to the experiences shared by Dr. Shetty and his aspiration to make healthcare universally accessible. He has found so many ways of moving his vision forward and what is remarkable is that these programs are by themselves unremarkable.

His success does not come from one spectacular breakthrough--they are a series of small, doable things that were done extremely well, with passion, dedication and a sense of mission.

I believe there are many Dr. Shettys in the health industry who aspire to make equality and equity in healthcare a reality.

(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is an active academic and a knowledge management consultant. Feedback at map@globelines.com.ph. For previous articles, please visit map.org.ph)