Description
This week, the final paper on organizational change through leadership is due. Revise the rough draft based on your instructor’s feedback and submit the final paper.The final paper should be of 10-12 pages, providing the following:A detailed and in-depth description of the problem. Your description should include actual evidence supporting that the issue exists.A detailed description of all interventions utilized till date to resolve the challenge the organization is experiencing. Your description should include actual evidence supporting that the interventions mentioned have been implemented by the organization.A proposal to correct the issue. Your proposal should be based on evidence from current literature that supports your idea. Include a minimum of ten credible citations from current literature.A reference list citing all sources in APA format.PLEASE NOTE PROFESSOR RECOMENDATIONS IN RED ALSO FROM MY INSTRUCTOR Sabina, the paper does not really meet the assignment criteria of leader directed change. The assignment uses the weekly topics about leader development to identify a problem and apply leader attributes to plan a change in an organization. Financial topic would work for a business course rather than a nursing leadership course. As a future DNP leader, learning about application of change theory is to help you prepare for the practicum project which is implementation of a change to resolve a nursing problem.
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Addressing Financial Strain at Ouachita Medical Center-great title
Sabina Thomas MSN, APRN, FNP-C
South University
NSG 7000
Dr. Mary
10/15/2023-date format not correct
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Addressing Financial Strain at Ouachita Medical Center
The American healthcare system faces-conversational numerous challenges and many
healthcare organizations struggle to remain in the industry amidst financial and other challengescitation. The COVID-19 pandemic worsened what has been a tough-conversational decade for
many hospitals and especially small and rural hospitals have faced significant-conversational
challenges. Healthcare leadership can be used to assist such hospitals in regaining their-remove
or replace with specific noun stance-conversational and stabilizing to continue providing safe
and quality care to the population. Healthcare organizations across the country have been facing
financial challenges and this which has affected many small and rural hospitals-citation. With the
numerous challenges facing healthcare organizations, managerial decisions have to be made to
meet the demands of care while addressing the main challenges.
The healthcare industry has been facing challenges and it has been fragile in the last few
years. More than 600 rural hospitals have been on the brink of closure in the last three years due
to financial challenges and many clinics and rural health centers have been closed (Robertson,
2023). All across the nation, small hospitals have been facing a cash flow problem with reducing
revenues and increasing costs. This has significantly reduced the operating revenues with many
hospitals operating at losses. This financial problem is not only an organization-level problem
but also an industry-wide challenge. This paper focuses on Ouachita Medical Center in Arkansas
as a case study of the financial challenges rural hospitals have been facing, solutions
implemented, and recommendations to deal with the problem. Financial topic is a business
topic; a better choice of a topic for nursing leadership NSG7000 course would be an employee
problem-employee burnout, employee morale, hand washing, communication
Financial Challenges at Ouachita County Medical Center
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Ouachita County Medical Center (OCMC) is a healthcare organization in Camden,
Arkansas and serves the people of Ouachita County. It is an independent 80-bed rural hospital
located in the county seat and one of the major healthcare organizations in the state (OCMC,
n.d.). The healthcare organization is committed to providing a host of services to the residents of
the county and has been offering services for more than three decades. The services provided at
OCMC include ambulance, cardiopulmonary, gastrointestinal, laboratory, physical therapy,
nutrition, nursing, pharmacy, sleep care, and wound care (OCMC, n.d.). The main branch is in
Camden but the hospital operates other clinics throughout the county. The healthcare
organization has been facing financial challenges since the 2010s and is in a dire crisis with the
risk of hospital closures.
Rural healthcare organizations have faced a reduction in revenue and increase in costs in
the past few years. The unique challenge of rural healthcare hospitals is that they often have
small operating margins due to the people they serve. Many rural hospitals have a relatively
smaller target population and hence lower reimbursements compared to urban hospitals.
Additionally, in the last few years, there has been high inflation rates leading to poor
compensation and increased operating revenues (Eti et al., 2023). This has made it challenging
for many healthcare organizations to provide adequate services while maintaining the budgets on
which they have worked before. These income and revenue problems make it challenging for
smaller hospitals to maintain services as needed.
Other than inflation, the COVID-19 pandemic worsened the financial challenges of rural
hospitals. With the COVID-19 pandemic, the influx of patients, demand for services, and
operating environment were worsened. Sicker patients meant more utilization of healthcare
services, longer hospital stays, and high acuity, demanding healthcare services in the hospitals.
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Expenses have also been rising across the board with increased labor and drug costs and
increased demand for personal protective equipment (PPEs). Therefore, operating costs of
hospitals have been increasing during the pandemic. Also, with many healthcare personnel
affected, the capacity to provide quality care also reduced as healthcare workers were in the
frontline and they themselves were patients too (Ardebili et al., 2021). The COVID-19 worsened
a problem that was already in existence and for hospitals that were already facing financial
instability, this was a huge blow.
OCMC has been facing financial challenges even before COVID-19 and they continue in
2023. In 2022, the hospital reported a loss of $1 million (Garza, 2023). According to the
president Peggy Abbott, the hospital has been operating in the ‘red’ for more than five years due
to increasing costs and that do not match revenue increases. This challenge was worsened during
the COVID-19 pandemic. In 2022, the hospital experienced a 4% decrease in year-to-year
revenue (Garza, 2023). This was largely due to a result of the COVID-19 pandemic impact on
the income and compensation for hospitals. In the year 2021-2022, the hospital also reported a
loss. This healthcare organization has been reporting losses like 600 other rural hospitals and is
at risk of closure.
Moreover, the hospital is experiencing increases in costs. In 2022, the hospitals in
Arkansas also experienced an increase in costs. By one report, there was a 20% increase in
supplies costs, 20% in pharmaceutical, and over 30% in labor costs in Arkansas hospitals (Garza,
2023). In OCMC, 12% increase in labor costs were reported despite the 4% decrease in revenue
(Garza, 2023). These changes have created financial constraints for the healthcare organization
and many other healthcare organizations similar to OCMC. The increase in costs and reduction
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in revenue are attributed to the labor market, COVID-19, and the costs of healthcare supplies in
the United States.
In addition to financial losses and reduction in revenue, OCMC has been facing a staffing
challenge which exacerbates the financial problem. Staffing shortage in the healthcare industry
has been affecting numerous healthcare organizations including OCMC. The staff shortages have
led to high labor costs due to the compensation of part-time employees and seeking other staffing
solutions. This has also led to increased operations costs due to the costs of hiring new staff. This
staffing crisis further worsens the situation through poorer health outcomes, increased cuts due to
penalties by the Centers for Medicare and Medicaid Services (CMS), and increased labor costs
due to high demand (Buerhaus, 2021). The staffing shortage goes hand in hand with the financial
challenges in the healthcare organization specifically because they are partly caused by poor
financing and also worsen the current situation. Staffing and financing, therefore, are the major
challenges facing OCMC and other rural hospitals.
The highlight of OCMC problems has had a huge impact on the hospital and the people
served. First, the hospital faces a challenge offering high quality services. According to Abbott,
the hospital has been operating on a week by week budget and this leads to a huge variation in
the services offered (Muoio, 2022). The impact is that the quality of care must be lower due to
insufficient support to provide high quality and safe care. Secondly, the organizational culture is
also significantly affected by the financial challenges and staffing shortage. The shortage leads to
poor morale in the healthcare organization and consequently low motivation to achieve the
desired quality of services. Employees are poorly compensated, have inadequate access to
facilities and resources needed to provide care, and experience high levels of burnout due to
staffing shortages and financial challenges (Muoio, 2022). A financially-struggling healthcare
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organization automatically leads to struggling healthcare staff. These adverse outcomes and other
problems in the organization can be solved by solving the financial and staffing problem at
OCMC.
Missing leader attributes, the organizational change through leadership assignment is
about leader directed change.
Interventions Implemented to Solve the Problem
One of the interventions implemented to help OCMC is the use of relief funds to address
the financial challenge. After COVID-19 pandemic and as part of the recovery, the Biden
government has allocated funds to hospitals to help in their financial recovery. OCMC received
$6 million in September 2022 as part of the American Rescue Plan funds targeting rural hospitals
to prevent closure (Garza, 2023). Abbott confirmed that the funding did help in alleviating the
problem but this was a drop in the ocean as it was a temporary solution to a chronic problem.
The allocation of funding to the hospital helped reduce the risk of closure and gave the hospital a
lifeline in the backdrop of COVID-19 challenges and recovery.
Additionally, the closure of some clinics operated by the healthcare organization was a
challenging but seemingly necessary decision for OCMC. Early in 2023, OCMC ceased
providing services in two of its rural clinics: an urgent care clinic and a primary care facility
(Garza, 2023). The decision behind ceasing services was a strategic one in reducing the operating
costs of the healthcare organization. By stopping services in these clinics, the organization was
able to reduce operating costs and maintain revenue. However, stoppage of healthcare services is
not a permanent solution to the financial challenges. It is indeed a negative outcome because it
reduces access to care. Rural health clinics and hospitals often provide care to low-income and
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underinsured residents. The closure of rural clinics leads to poorer access to care and potentially
causes poorer health outcomes in the community. This was a heart-wrenching but necessary step
to reduce operating costs.
Another intervention used by the hospital is reduction in wages through pat cuts. Pay cuts
are meant to reduce labor costs and hence save money through a shrunk budget. As a means of
cutting costs, Abbott reported that the healthcare organization staff have had to resort to
voluntary pay cuts and reduced working hours (Muoio, 2022). Pay cuts have been used across
the board but especially among executive employees and managers to reduce the labor costs that
the organization has had to endure. These pay cuts and hours reduction are of course voluntary
but also present a larger challenge. When employees are expected to take pay cuts, this may
affect their morale and motivation to provide quality services. Also, pay cuts cannot be sustained
in the long-term and are essentially a temporary fix to a larger scope problem. Overall, the pay
cuts and reduced hours have been temporary measures to reduce costs but cannot fix the revenue
and costs issue permanently.
In addition to pay cuts, OCMC has been laying off staff and consolidating services, a
strategic decision to reduce the organization’s operating costs. In the past one year, the
organization has been shrinking the workforce. This is especially through a strategy to reduce
labor costs through a leaner and more efficient way of operating its facilities. Other than layoffs,
the organization has also been consolidating services. For instance, some services are now only
available in specific locations and not in others (Garza, 2023). This consolidation seeks to reduce
operating costs and shrinking the budget. On the one hand, consolidation and layoffs may reduce
the organization’s budget and reduce the loss margins. This is through lower spending to match
the revenue. On the other hand, layoffs mean the loss of jobs to healthcare organization staff and
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consolidation leads to lower accessibility of services (Garza, 2023). Consolidation and layoffs
are essentially a temporary solution, similar to the pay cuts instituted in the organization. OCMC
will need adequate staffing and resources to provide high quality services without compromising
on quality and accessibility of services.
As a general assessment, the interventions implemented by OCMC have been crisisdriven but have not entirely solved the financial problems facing the organization. Closures, pay
cuts, and reduction in services offered all reduce operating costs. However, they are not
sustainable solutions to the recurrent financial problems affecting the hospital and many others
from even before the COVID-19 pandemic. Relief funds provided temporary relief for a hospital
that was on the brink of closure. However, it can no longer survive on relief emergency funding
and a more permanent and sustainable solution is needed. The next section outlines the proposed
approaches that OCMC and other similar organizations can use to address financial challenges.
Missing application of leader attributes to identify the problem and critique the past
solutions
Proposed Solutions
In the context of increasing operating costs and lower revenue, OCMC must consider
virtual and telehealth care as a possible solution to maintain high quality care. Virtual and
telehealth care are not going to solve the financial problems. However, they can strive to use
these technologies to maintain services to those populations affected by a shrinking budget and
closures. Telehealth solutions have been used and deemed effective in providing care access
especially in rural areas (Lum et al., 2020). In areas where primary and urgent care clinics have
been closed, OCMC can use virtual care options to ensure that the population maintains access to
healthcare services. This technology can also reduce the in-person visits and hence ensure
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adequate care provision even with staffing shortages (Baum et al., 2021). Telehealth is effective
in reducing the care gap by ensuring care provision even in the context of insufficient staffing.
The initial costs of telehealth are high but the long-term effects justify this high initial cost.
Investing in an evidence-based telehealth program can help reduce staffing costs and costs of
care while maintaining services access through remote consultations.
Another solution to the financial problems is using a creative health management
software to enhance efficiency while maintaining high quality services to the patients. A health
management software is used for administrative work and can reduce costs and increase
efficiency. According to Urbich et al. (2020), the high operating costs of many hospitals can
partly be blamed on administrative costs inefficiencies and hence an improvement in
administrative work can necessarily lead to cost savings. A healthcare management software can
achieve this goal and help OCMC in further cutting operation costs. First, the software can
expedite Medicare and Medicaid reimbursement and reduce claims denials (Powers et al., 2020).
This can increase cash flow and hence promote the organization’s efficiency. Secondly, the
software can increase point-of-service collections. A health management software increases
visibility in the healthcare processes and hence can enhance collections. Lastly, the software can
provide tools for non-clinical staff to work remotely. Remote working can help reduce operating
costs in the healthcare facilities while promoting care access.
Another approach to reducing the financial strife is increasing income for the healthcare
organization. OCMC is a healthcare organization whose revenue only comes from
reimbursement and financial allocations for hospitals to provide affordable care. The hospital can
increase income by investing in other opportunities for interest and capital gains generation
(Jeurissen & Maarse, 2020). The current model for for-profit hospitals depends on the payments
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made by patients and insurance organizations as the main source of income. However, hospitals
do invest in other businesses and opportunities either within or outside the healthcare industry.
This investment is a way of diversifying the revenue sources for the healthcare organization and
providing stability in the long-term. Revenue diversification and investments in other business
opportunities can help cover the losses for OCMC and provide operating incomes for business
stability and reducing the risk of closures.
Still on the issue of income increase renegotiation of reimbursement contracts is also
necessary for OCMC. Inflation and increasing industry costs have led to increased cost of
providing care to patients. The increasing costs within the last few years must be accounted for
in the reimbursement agreements with payers. Compensation agreements made before COVID19 can no longer sustain services in the post-COVID era and renegotiation of contracts can help
the organization inch reimbursements higher (Khullar et al., 2020). For instance, a service that
used to cost healthcare organizations $100 to provide in 2019 does not cost the same in 2023.
Therefore, reimbursements using 2019 rates hurt the healthcare organization. An increase in
reimbursements can be achieved through contract renegotiations with payers who may in turn
increase insurance premiums. Negotiating new contracts will increase OCMC income through
better and fairer compensation terms.
Moreover, cost-reduction strategies can be implemented through standardization and
bundling contracts in the hospital. There is currently an increase in market consolidation specific
to healthcare organizations and this produces an opportunity for standardization. According to
Borowska et al. (2020), outsourcing some of the services such as laboratory, IT, pharmacies, and
human resource management can reduce overhead costs for healthcare organizations. However,
having too many vendors for each of the outsourced services increases costs and is likely to
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reduce the quality of services provided. The solution, therefore, is standardizing and
consolidating these services under a single partner (Borowska et al., 2020). A partner that aligns
operationally and culturally with OCMC can be sought to provide a solid administrative and
governance model for the organization. By outsourcing standardized and consolidated services,
the healthcare organization can reduce costs in the long-term and hence alleviate the financial
challenges.
Another cost-reduction strategy is through optimizing scheduling and staffing. OCMC
especially struggles with labor costs and this can be alleviated through smart and responsive
scheduling and staffing approaches. A system audit is needed to identify the busiest and slowest
hours and months in the hospital. After identifying these fluctuations, digital smart solutions for
scheduling can be used to ensure that scheduling matches the demand and supply cycles in the
organization (Khodabandeh et al., 2021). Using this system, OCMC can ensure that staffing is
just adequate for patient flow in a true lean management approach. Matching scheduling and
staffing needs can help reduce labor costs while maintaining high quality services.
Lastly, OCMC can reduce costs through reduced utility costs in the hospital facilities.
There are many ways of reducing utility costs and one is through energy costs savings and
facility costs reduction. Energy costs make up a huge percentage of the healthcare organization’s
bills and costs for services provision. As such, saving on energy costs can help save costs and
reduce operating costs. To lower energy consumption, the healthcare organization can implement
more power-efficient appliances and utilities such as energy-saving lighting bulbs, automatic
temperature-adjusting thermostats, motion sensor lighting, and more effective heating,
ventilation, and air conditioning (HVAC) systems (Montiel-Santiago et al., 2020). Routine
inspection of all energy utilities and power audit can also help to significantly reduce costs
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associated with running the facility. Generally, reduced waste in terms of energy and utilities
such as offices can help cut costs beyond the simplistic pay cuts.
Missing leader directed plan of change, selection and application of change theory,
Conclusion
OCMC has been facing financial challenges and more sustainable income-increasing and
cost-reduction approaches should be applied in the organization. The rural hospital has been
struggling with financial challenges since before COVID-19 and the pandemic worsened the
situation. Interventions implemented include pay cuts, closures, lay-offs, and bailing out using
relief funds. The proposed approaches, however, include more sustainable cost-cutting
approaches such as IT solutions and better scheduling and income increase through diversified
investment portfolio. OCMC is not the only hospital facing this challenge and its case study can
be used by other small and rural hospitals to reduce the financial challenges and avoid closures
and maintain safe and high quality care provision.
The paper does not really meet the assignment criteria of leader directed change. Let’s
plan to talk by phone before you revise the assignment
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