Targeted changes in core hospital processes increase efficiency and reduce cost base.
One of Europe’s premier AMCs had operated at a financial loss for 3 years in a row, with deficits accelerating. The university hospital is a major institution for training doctors and nurses, treating 1.7 million patients annually and providing facilities for 2,500 researchers.
Several challenges needed to be overcome. First, the hospital had been created from the merger of two large AMCs and territorial thinking continued. Second, there was change fatigue from recent attempts to improve performance. Finally, the strong academic medical center culture held teaching and research paramount, while cost reduction and efficiency were a low priority. How could the hospital excel on its three-part mission—clinical care, education, and research—and still eliminate budget deficits?
In phase one, the McKinsey team began by identifying hospital services that offered the highest potential for improvement. Areas of care where the hospital was losing money and patients were not getting satisfactory access to care were proposed for deep-dive analysis.
For phase two, the deep-dive analysis, the team understood the importance of partnering with clinicians—ensuring they could share their point of view and act as champions for change, right from the start. To uncover inefficiencies, representatives from all staff groups helped create “problem inventories,” which identified productivity bottlenecks such as too many patients scheduled for the morning and staff underutilization in the afternoon. From these inventories, the McKinsey team quantified patient wait times and identified typical sources of delay, such as nursing staff spending time looking for attending physicians.
In phase three, the team used this analysis to implement three new integrated and transformative initiatives. A central program office was created to oversee productivity improvements and cost reductions and was tasked with continuous monitoring. Second, cross-cutting purchasing improvement and performance management efforts were implemented across all departments. Finally, the team piloted process changes in each department to test and refine potential improvements.
Successful operational changes were rolled out as soon as the evidence base was clear, with strong follow-up to ensure new procedures took hold. Typical changes included improvements in staffing, scheduling, communications, processing, and monitoring. For example:
- The same operating team stayed together for morning and afternoon procedures, minimizing schedule disruption.
- Drop-in procedures were introduced for some outpatient visits, such as radiotherapy.
- Anesthesia preparation was performed adjacent to the operating room.
- Standard procedures were instituted for patient ownership and information handovers, clearing up bottlenecks and freeing up staff resources.
Throughout the process improvement phase, respected staff acted as change agents, helping colleagues understand and see the value in new standardized approaches. The program built on the hospital staff’s strong sense of duty, inspired by evidence of success.
After years of losses, the hospital produced savings of approximately $35 million in its first year under these new procedures—and the first positive results since the merger.
Hospital departments met new performance targets and were able to sustain behavioral changes without harming morale. Despite continued cost-reduction measures, the hospital’s recent employee satisfaction index rose 15 points to 80 percent in the first year of the transformation.