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Identify Fixed vs. Flexible Costs in Hospital

3 Steps to Identify Fixed vs. Flexible Costs in Your Hospital Workflows

There is a rising tide of financial pressure on acute care facilities. Many facilities are struggling to remain profitable, while others are trying to improve patient satisfaction scores without increasing staff. Meanwhile, the next big wave is nearing its crest.

According to a Harvard Business Review report on rising healthcare costs treating Medicare patients, there will be a 48 percent increase in eligible Medicare beneficiaries by the year 2030. How is your facility going to support aging baby boomers, remain profitable, operate efficiently, and increase the amount of time your nurses spend at bedside treating patients?

As part of a Lean operations mindset, it’s time to start thinking about how to identify fixed vs. flexible costs in your hospital or facility’s workflows. By taking the time to investigate your workflows to find inefficiencies or hidden cost, you will help ensure that your facility is prepared to handle the upcoming big wave of patient needs.

Consider this strategy to identify weaknesses or threats that could be impacting your efficiency and impairing your team’s ability to treat patients.

Step 1: Review Costs In Each Area of the Workflow

Many acute care facilities already break down costs by workflow, which is an important first step in the process. If you need a refresher or need to conduct this cost analysis for the first time, consider taking the time to identify what is fixed vs. flexible in your workflow.

Look at the first quarter expenses compared to last year’s first quarter. Is there one particular cost such as employee salary that is fixed from year to year? Or, is there a significant increase or decrease in the cost of medical supplies that points to a flexible cost?

Be sure that you have the ability to separate each of these costs so that you can view and compare throughout the workflow. This makes it easier to identify the costs that are causing inefficiencies in one particular area, bottlenecking the entire workflow.

Step 2: Talk to Your Hospital Staff

Identify Fixed vs. Flexible Costs in HospitalAn important next step to confirm the fixed vs. flexible areas in your workflow is talking to hospital staff.

Now that you have the costs in front of you, you can talk to key staff members about what might be causing certain costs to increase or whether there are opportunities to improve efficiency that would reduce costs.

  • Pharmacy: Talk to the pharmacy manager to determine if there are inefficiencies in the process of dispensing medication.
  • Nursing: Spend time in the nursing unit, talk to the nursing manager, and observe nurses as they care for patients to identify bottlenecks.
  • Finance: Talk to the finance department to locate big expenditures, then strategize how to reduce those costs in the future.

Additionally, you should consider attending conferences to find out how other hospitals are identifying and addressing costs tied to inefficiencies in their workflows. The overall key is to talk to stakeholders and colleagues to gather more information.

Step 3: Conduct a SWOT Analysis of the Costs in Your Workflow

Now that you have identified and confirmed your fixed vs. flexible costs, you should consider conducting a SWOT Analysis to develop your plan to address the costs.

  • Strengths: Where have we achieved efficiencies in the workflow that can be applied elsewhere?
  • Weaknesses: Where are our inefficiencies in the workflow, leading to unnecessary or hidden costs?
  • Opportunities: Where do we have an opportunity to improve efficiency to reduce or remove costs?
  • Threats: Where are we at risk for even more costs if we do not address inefficient processes in the workflow?

The answers to these four questions will guide you on what actions to recommend that will address costs. Or, as part of a Lean operating mindset, you can return to Step 2 to gather additional information that will help you recommend the best plan for your acute care facility.

How Can Talon Support Your Plan to Address Costs?

Talon is committed to Lean principles of continuous improvement to achieve more efficient processes. We can partner with your facility to help identify fixed vs. flexible costs and uncover flexible costs that could be tied to inefficiencies.

Additionally, our acute care solutions such as the MedCab™ and MedCart™ products integrate with your hospital workflow to help improve efficiency. You can also calculate your long-term savings working with Talon over the next year or five years to prepare for the big wave of Medicare patients coming ashore.

We are committed to supporting hospitals prepare for the future and look forward to hearing from you to discuss your facility’s needs.

Learn Which Talon Solution Is Right for You

Tell us what workflow you want to improve and we’ll recommend the ideal mix of Talon medication delivery products.

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