Why resource allocation is important in managing hospitals

The pandemic illustrated the importance of resource allocation. As COVID-19 spread throughout the globe, hospital organizations faced difficult – and in some cases, impossible – choices in delivering healthcare in situations where the system was overwhelmed, with normal patient loads compounded by cases of the virus. There was insufficient equipment, many hospitals were short-staffed, and personnel experienced burnout.

This catastrophe illustrated that although many hospitals met the community’s needs before the pandemic, resources were unavailable in a serious situation. Resource allocation focuses on ensuring that regardless of the environment or circumstances, a hospital organization can deliver high-quality care and has the material, equipment, and staff to do so.

What Is resource allocation?

Resource allocation refers to the way organizations distribute resources, including funding, among competing groups, people, or programs. Allocation of resources is usually based on demonstrated need or the department or program’s ability to show a need for receiving resources such as funding, staffing, materials, or technology.

In healthcare, resource allocation occurs when governing bodies or an organization’s management allocate resources to healthcare needs instead of other social services, allocate resources within a sector, and allocate resources among individual patients. In the current climate, healthcare organizations have been faced with a few harsh realities.

First, healthcare costs have increased in the past century because of advances in medical technology. In addition, the population is getting older, with nearly 36 million Americans accounting for more than half of healthcare expenditures. Furthermore, many Americans live with chronic conditions, such as diabetes and disability. For all these reasons, hospitals must manage their resources strategically.

Why Is resource allocation important for hospitals?

Resource allocation is so important to a healthcare organization that universities have established programs that prepare hospital administrators to take on roles related to allocating resources in a hospital setting. For example, the DNP executive leadership degree at Baylor University is one of several degrees today’s academic institutions offer students who are pursuing careers in business, healthcare, and healthcare management.

Hospitals are the frontline of healthcare for everyone, which is why hospital leadership must steward the resources at their disposal. Here is a look at some of the ways in which resource allocation assists hospitals in delivering care.

Eliminating risk

In a healthcare setting, mitigating risk is essential in managing patient care. Because the business of the hospital is to deliver care, making sure that resources are available to adequately care for patients reduces the chances of exposing patients to care that does more harm than good and decreases liability risks that can cost hospitals millions of dollars if at fault. Resource allocation helps hospitals determine which programs and policies to establish and fund that protect the interests of the hospital and its ability to help patients.

Save money and Increase productivity

Resource allocation plays a valuable role in helping hospitals save money while increasing productivity. For example, imagine that a technology a hospital adopts makes it possible for a department to save $1,000 a month on a particular procedure. In one year, the hospital can save up to $12,000, which can be allocated to another department or program. In this instance, resource allocation helped in finding a technology that reduced costs and saved the hospital money.

Resource allocation is also a priority in healthcare, helping leadership to allocate materials, time, and resources in a way that boosts productivity. In this case, allocating resources includes scheduling staff to care for patients and placing staff members in positions around the hospital based on their strengths or hospital needs. Resource allocation also alerts healthcare leaders when staff members are overwhelmed, and additional help is needed.

Returning to the previous example, resource allocation’s impact on productivity includes purchasing equipment that makes work more efficient and maximizes time.

Technologies that deliver lab results faster than are needed for medical procedures allow hospitals to deliver better care (a primary goal of healthcare) and see more patients. It also allows them to determine how much time is needed to complete work.

For example, in the past, patients going in for surgery to correct back pain had to endure the operation and then rest for a considerable time to recover from their procedure. Minimally invasive surgery allows physicians to make small incisions in the back that reduce the trauma to the affected area. Most minimally invasive surgeries require just a few days of downtime for patients. This example illustrates how resource allocation positively impacts the physician and patient.

Strategic planning

Resource allocation is vital in the strategic planning that takes place in a healthcare setting. While the mission of most healthcare organizations is to care for people, strategic planning in a hospital focuses on how the organization plans to accomplish this goal. In setting goals, leaders must determine their budgetary needs and how resources are going to be used to meet objectives toward a goal.

For example, imagine that a hospital has aimed to improve its relationship with the community. Strategic planning might involve establishing outreach programs to get community members invested in the hospital. Allocating resources to achieve this goal might be an objective in connecting with the community. Hospital leadership would review existing resources to see how staffing, time, and funding might allow for the organization to implement such a program.

Time management

Time management refers to the ability of an organization to accomplish work on time. Resource allocation is a vital element in time management in hospitals because leaders must determine how much of their resources (human resources and funding) are needed to accomplish a project in a certain time.

The bottom line

How hospitals spend and use the funding and resources available to them is important because it is the foundation of the organization’s financial health, viability, and ability to deliver care. Resource allocation plays a significant role in helping leaders determine what works and what needs improvement, areas of inefficiency and unproductivity, and plans for the healthcare organization. Finally, responsible resource allocation means the difference between a hospital organization that can deliver high-quality care under any circumstance and organizations where providers are making difficult decisions regarding who gets care during crises.

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