Traditionally, the healthcare industry has been understandably conservative and has therefore lagged behind other consumer-facing industries in its adoption of new technologies to accelerate digital transformation. However, when optimizing the efficiency of utilizing core assets it is worth studying institutions renowned for their logistics expertise to learn from the approaches that have worked for them.
In some industries, asset utilization is fairly straightforward, because it is easy to accurately determine the uptime for manufacturing processes that are consistent and predictable. Healthcare, however, doesn’t work this way. Patient appointments are highly variable, and the exact services each patient needs and the specific time care will be delivered is difficult to predict. From a healthcare perspective, improving asset utilization requires matching a semi-fixed (and constrained) supply of resources with an unpredictable, volatile demand for those resources, In our case, these resources are individual healthcare services, from lab visits to medical treatments.
The ultimate goal is to make finding an optimal appointment slot as easy as booking a dinner reservation on OpenTable. How do we get there? Let’s explore three lessons the healthcare space can learn from other consumer industries in improving asset utilization.
Shipping giants have mastered the balance of supply and demand strategy
UPS ships over 21 million packages across the world each day, so it’s safe to say the company is an expert at managing a complex logistics chain. All this would be impossible without sophisticated demand-supply matching to ensure that the right number of parcel vans, semi-trucks and aircraft are positioned in the right place at the right time, every single day of the year, including and especially vacations and holidays—when the usual patterns change dramatically. Efficiency is considered a true science for UPS, so drivers follow strictly defined rules to stay streamlined and consistent. In fact, if every UPS driver were to add even one unnecessary mile to their daily route, that would cost the company an additional $30 million a year.
Just like the shipping industry runs on elaborate route-planning methodology, healthcare providers must consider the best ways to optimize each asset to prevent it from going into gridlock in the first place. Assets need to operate appropriately below the maximum utilization for as many hours of the day as possible. Although the finance and administrative leaders of a health system may be aiming for 90 percent utilization of their most expensive assets, this is unrealistic in a highly variable environment like healthcare since providers must retain the flexibility to be responsive to the emerging needs of patients as they arise in real-time throughout the day.
How Uber learned to master an inherently unpredictable environment
Rideshare companies like Uber also face significant logistical challenges, as the demand for rides and services customers require are highly variable and diverse, based on time, location, number of riders and other special requests. On the supply side, the number of drivers available can vary since they aren’t salaried employees and can drive whenever, and for as long as, they wish. To combat these challenges, Uber leans on artificial intelligence and machine learning technology to predict both demand and supply for every geographic market every minute of every day, while maintaining a real-time focus on any imbalance between the two. Imagine the results if Uber tried instead to handle this whole business model manually, as many healthcare providers now do.
Healthcare institutions that make the effort to deploy the advanced predictive analytics methods companies like Uber rely on will see remarkable improvements in operational performance, including shorter calendar waits for appointments and shorter stays in waiting rooms. Overall this leads to an improved patient experience and better competitiveness in the marketplace.
Airline companies are put to the ultimate logistics test
Airlines are masterful at solving the dual problems, matching and linkage, inherent in matching supply with demand. This industry mirrors healthcare in several key ways, including its need to adapt to the impact of Covid-19, so providers can learn much from air travel experts.
Delta Airlines, for example, has more than a thousand weekday departures from its Atlanta hub. The only way to possibly orchestrate this sheer quantity of service is by tailoring each service “node” (e.g., baggage handling, passenger boarding, fueling) to be operationally efficient, as well as coordinating all of the individual services with one another so they can be completed within forty-five-minute turnaround window. Accomplishing this requires a mastery of both matching supply with demand and linking connected services.
Besides scheduling volume, airlines have become extremely advanced in the mathematics of filling seats. This system, known as yield management, segments future seats on a particular flight into price bands that dynamically grow and shrink based on the actual bookings as compared to the projected ones.
From the passengers’ perspectives, meanwhile, booking seats is easier, more transparent, and more affordable than ever.
This is the kind of win-win scenario toward which healthcare organizations can aspire. Healthcare is additionally constrained by factors like the availability of the right room and equipment for a specific surgical case, the staff’s scheduled attendance and current workload, the specific skills required for each aspect of the appointment, and the utilization of shared assets such as procedure rooms or imaging machines. These shared assets are used by other providers in the area, much in the same way that runways at an airport are shared by all of the airlines or highway lanes are shared by all cars. Individual providers often have little or no control over the hour-to-hour availability of shared resources. In the case of operating rooms, capacity is typically reserved as “block time,” which is a bit like reserving airport runways by airline, hoping they will be used efficiently.
What’s the bottom line for healthcare providers?
Human beings individually lack the mental computing power, holistic perspective, and the sheer data necessary to make the kinds of decisions that lead to optimal system functioning in today’s technologically complex world. To even approach the level of sophistication at which package delivery, ride-sharing and airline companies operate, health systems must employ modern tools to help. The ability to strike the ideal balance between underutilization and overutilization of assets across an entire system requires not only a willingness to tackle this logistical issue with clear eyes but also a level of math calculations that simply cannot be performed manually, which is why technology will continue to play an integral role in healthcare organizations successes in 2021 and beyond.
