Exploring risk pooling in hospitals to reduce demand and lead time uncertainty

Gerald Oeser,Pietro Romano

doi:10.1007/s12063-020-00171-y

Gerald Oeser, Pietro Romano

Open Access

https://doi.org/10.1007/s12063-020-00171-y

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Abstract

Nearly every eighth German hospital faces an elevated risk of bankruptcy. An inappropriate use of inventory management practices is among the causes. Hospitals suffer from demand and lead time uncertainty, and the current COVID-19 pandemic worsened the plight. The popular business logistics concept of risk pooling has been shown to reduce these uncertainties in industry and trade, but has been neglected as a variability reduction method in healthcare operations research and practice. Based on a survey with 223 German hospitals, this study explores how ten risk pooling methods can be adapted and applied in the healthcare context to reduce economic losses while maintaining a given service level. The results suggest that in general risk pooling may improve the economic situation of hospitals and, in particular, inventory pooling, transshipments, and product substitution for medications and consumer goods are the most effective methods in the healthcare context, while form postponement may be unsuitable for hospitals due to the required efforts, delay in treatments, and liability issues. The application of risk pooling in healthcare requires willingness to exchange information and to cooperate, adequate IT infrastructure, compatibility, adherence to healthcare laws and regulations, and securing the immediate treatment of emergencies. Compared to manufacturing and trading companies, hospitals seem to currently neglect the variability reducing effect of risk pooling.

Highlights

The economic situation of German hospitals is difficult due to a decline in the number of inpatients, outpatient/inpatientbased rather than holistic remuneration systems, consolidation processes, unwillingness of hospital groups to compensate losses of individual members, and managerial mistakes (Augurzky et al 2019; Telgheder 2019)
Most research on risk pooling in healthcare seems to have been conducted outside Europe and we found no study in Germany
Four scientific studies on risk pooling methods in healthcare focus on their variability reducing effect. This paper complements this fragmented body of research, as it adopts a more holistic view exploring the application and applicability of ten risk pooling methods in German hospitals to medications, capital goods, consumer goods, examinations, and treatments as well as their interrelationships and restrictions

Summary

Introduction

The economic situation of German hospitals is difficult due to a decline in the number of inpatients, outpatient/inpatientbased rather than holistic remuneration systems, consolidation processes, unwillingness of hospital groups to compensate losses of individual members, and managerial mistakes (Augurzky et al 2019; Telgheder 2019). Gittell et al (2000) argue that the level of uncertainty they experience may be much higher than in manufacturing organizations. This uncertainty can lead to excess capacity and higher costs (Almeida and Cima 2015)

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