To the Editor:
Resnick et al1 “hypothesized that … significant variation in margin contribution exists between specialties.” After reporting these results 5 years ago,2 we and others showed the additional steps needed to use them in rational tactical and strategic decision making:
Incorporate other bottlenecks such as limited intensive care unit beds.3
Combine results with professional reimbursement,4,5 to explain differences in tactical and strategic decisions between hospital administrators and medical groups.6
Assess sensitivity of results to cost accounting.7
Measure standard errors for the contribution margins per operating room hour.8
Use the standard errors to exclude outlier patients whose data would otherwise cause spurious management decisions.9
Combine the financial information with assessments of competition10 and its impact on market share,11 as well as shorter-term operational decisions, to form a rational tactical decision-making policy.12
Combine6 results with assessments13,14 of what differentiates one hospital from another for strategic decision making.
Slides are available at www.FranklinDexter.net/Lectures/FinancialTalk.pdf.
The authors “question … how generalizable these data are to other institutions …” Based on our having applied these methods at more than two dozen facilities, the spread of contribution margin per OR hour among subspecialties is consistent among facilities. However, which subspecialties are highest or lowest is consistently inconsistent because of the vagaries of reimbursement versus implant costs.6 That is why understanding how to use the observed data for good decision making is so valuable.
Franklin Dexter, MD, PhD
Departments of Anesthesia and Health Management & Policy
Division of Management Consulting
University of Iowa
Iowa City, IA
Franklin-Dexter@UIowa.edu
REFERENCES
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