Using #Leadership in Health Care Organisations to reduce care cost I #business #management #healthcare

In developing economies, non-profit organisations play a vital role in social marketing and in the provision of key services like health and education.

Because of lack of financial resources and know-how, the public sector cannot provide essential services like health and education to all the people that many citizens in the developed countries take for granted. This lack of provision is visibly acute in remote rural areas where public services have not necessarily been decentralised or organised for. Lack of infrastructure makes it difficult for multinationals and the local private sector companies to reach the people in rural areas. As most of the amenities are centralised in big cities or in the capital, in many cases rural people are left to their own devices. Because of the low literacy rate, unemployment and low economic conditions, they are not ‘traditionally’ profitable enough to the private sector unless there is a paradigm shift in marketers’ understanding of the attractiveness of the bottom of the pyramid (BOP) consumers and the very low income group market (Prahalad, 2005; Prahalad & Hammond, 2002).

Leveraging diversity to successfully influence business operations is a business imperative for many healthcare organizations as they look to leadership to help manage a new era of culturally competent, patient-centred care that reduces health and healthcare disparities.

As healthcare providers cope with pricing pressures and increased accountability for performance, they should be rededicating themselves to improving the value they deliver to their patients: better outcomes and lower costs. Time-driven activity-based costing offers the potential for clinicians to redesign their care processes toward that end. This costing approach, however, is new to healthcare and has not yet been systematically implemented and evaluated.

The greatest opportunity for lower­ing costs without sacrificing quality, safety, or outcomes is gained from helping clinicians intelligently reengi­neer their clinical and administrative processes (Hoffman & Emanuel, 2013; Berwick, 2012). Some clinicians, how­ ever, resist top-down pressure to assume responsibility for cost reductions (Tilburt et al„ 2013). Others may recognize that cost considerations should be incorporated into physician treatment decisions and clinical process designs (Brook, 2011) but lack the information or organizational support to institute significant changes. The existing cost systems in healthcare impede clinician-driven cost reduction and process improvement initiatives.

These systems rely on inaccurate and arbitrary cost allocations and provide little transparency to guide attempts by first-line care providers to understand and modify the true drivers of their costs (Kaplan & Porter, 2011).

One tool with significant potential to fill this gap is time-driven activity- based costing (TDABC) (Kaplan & Anderson, 2007). Activity-based costing has been widely adopted and used in industries outside of healthcare to improve operational processes and help managers make better decisions about resource allocation, product and service mix, and pricing. But applications of TDABC to healthcare have been limited (Hennrikus, Waters, Bae, Sohrab, & Shah, 2013; French et al., 2012). In this article, we describe how clinicians at several leading healthcare organizations in the United States and Europe have begun to apply TDABC to identify multiple opportunities to improve the value they deliver to patients.

The simplest way to reduce a provider’s costs is to impose across-the-board spending cuts to all departments. But such arbitrary reductions could adversely affect access and healthcare outcomes. Sustainable cost reductions and better capacity utilization should be the result of bottom-up reengineering that enables the provider to maintain and improve its healthcare outcomes and serve a larger patient population with the same resources. Such sustainable reengineer­ing must be based on valid calculations of the total cost of delivering care over complete treatment cycles.




Dotson, E, & Nuru-Jeter, A 2012, ‘Setting the Stage for a Business Case for Leadership Diversity in Healthcare: History, Research, and Leverage’, Journal Of Healthcare Management, 57, 1, pp. 35-44, Business Source Premier, EBSCOhost, viewed 31 July 2015

Kaplan, R, Witkowski, M, Abbott, M, Barboza Guzman, A, Higgins, L, Meara, J, Padden, E, Shah, A, Waters, P, Weidemeier, M, Wertheimer, S, & Feeley, T 2014, ‘Using Time-Driven Activity-Based Costing to Identify Value Improvement Opportunities in Healthcare’, Journal Of Healthcare Management, 59, 6, pp. 399-412, Business Source Premier, EBSCOhost, viewed 31 July 2015.

Rahman, M, Haque, S, & Rashid, A 2012, ‘Nonprofits’ engagement with the private and public sectors: The case of providing essential healthcare in rural Bangladesh’, Marketing Review, 12, 1, pp. 5-16, Business Source Premier, EBSCOhost, viewed 31 July 2015


About the Author:

Dr.Hisham M Safadi (Hisham Safadi ) BDS & MSc Leadership and Management in Health Care Practice from the University of Salford where his Master dissertation subject is the effect of Emotional Intelligence on improving Dentistry care in Middle East. Born and raised in the Emirates of Ras Al Khaimah, United Arab Emirates. Dr.Safadi had start his professional career as a dentist then turn to the field of managing medical facilities and reforming delivery of health care services. His main interest is business consultancy, leadership and entrepreneurship.

Twitter: @hishamsafadi

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