MINICASE: THE BULLWHIP EFFECT IN HEALTH CARE ORGANIZATIONS
Blue County Memorial Hospital (BCMH) is one of the largest health care organizations in eastern North Carolina. It serves the eastern one-third of North Carolina and maintains a 500-bed facility offering 24/7 acute medical and surgical care. The health care facility has over 30,000 patient admissions a year, and its average length of stay (LOS) is about four days.
The health care facility is organized by specialty and staffed with qualified MDs, physician assistants (PAs), nurses, and technicians. BCMH contains 12 operating rooms, all with state-of-the-art equipment, numerous wards for postoperative care, and related ancillary services (rehabilitation, testing labs, etc.). The operating room department has a large challenge in that it must manage and allocate equipment and staff so that surgeries can be performed effectively but also in the most efficient manner possible. In all, the assignment of equipment and staff is a difficult job.
State regulations require threshold levels for nurse-patient ratios, and not meeting these thresholds may lead to underutilization of available capacity. In turn, the size and mix of staff are critical decisions for the workforce planners. Overstaffing, understaffing, or unbalanced staffing leads to issues with quality of care and increased patient cost. BCMH meets its staffing requirements with a mix of permanent staff and an on-call group of part-time staff available on short notice. There is also temporary staffing that occurs for nurses with six-month to one-year contracts. Overall, the hospital’s staffing needs have been met by 60 percent permanent staff, 35 percent temporary staff, and 5 percent on-call staff.
BCMH provides services to patients, and in turn those patients, either through insurance or by direct payments, reimburse BCMH for services provided. Although many services are provided, surgery is one area where BCMH adds value and garners profits. However, surgery demands numerous resources, including equipment and staff (surgeons, nurses, technicians, etc.). BCMH is also responsible for preoperative care and postoperative care. Insufficient capacity in any area (surgery, postoperative wards, etc.) can lead to surgical procedures being turned away or to higher costs if accepted when over capacity.
Slotting is used for planning and scheduling purposes. Each area within BCMH is broken up in half-day slots, meaning there are 14 slots per week. Slot planning and scheduling is conducted about once a quarter (once every three months). A plan is developed in consultation with surgeons; demand for surgical procedures varies little from year to year, but the demand does have a seasonal component, making some quarters busier than others. In addition, some specialties have peak demands whereas other specialties have very stable demand.
The slotting and planning process also encompasses the staffing of nurses. The labor cost of nurses for surgery is one of the largest and most controllable operating costs. Nursing staffing plans are prepared each month for a month’s time frame and two weeks in advance. The nursing schedule is frozen one day in advance and then resource requirements are matched based on the upcoming surgeries. This type of planning is efficient for day-to-day operations but gives limited flexibility in terms of the permanent staff, temporary staff, and on-call staff. The nurse scheduler must many times rely on temporary staff or on-call staff when demand changes occur in the short term. Subsequently, BCMH must meet its nursing needs from outside, and in monetary terms the outside staff costs more, as higher rates are paid to the outside staff. In addition, the staffing in preoperative and postoperative wards is done in a similar fashion.
Is it possible that BCMH could experience the bullwhip effect? What items can be identified that would exacerbate the bullwhip effect at BCMH? How does variability from all areas impact BCMH? Can the use of temporary workers benefit BCMH but also be detrimental at the same time?