Resource Allocation - Essay Example

?RESOURCE ALLOCATION There are two specific types of resources. These are financial and human resources, which can be further broken down into different categories: operating, capital, recruitment and retention resources, respectively. These categories, as listed below, will explain the nature by which they are sourced and allocated. Financial Resources It is important to underscore that no organization can function and produce outputs without financial resources. According to Frank Baker (2003), the logical justification of an organizational need for resources is depicted in the following set of objectives: 1) interest satisfactions; 2) output mix to; 3) efficiency; and, 4) investment. (p. 587) The financial resources are needed to be sourced either externally or within the organization or both. For example, those organizations that sell products or services traditionally acquire financial resources from their market. This is derived from the revenue or the sales output. However, there are other external sources which include the capital market and banks. The former provides resources through capital investment while the latter provides them through loans. This is not the case for nonprofit organizations such as a non-profit children hospital, which has to depend on donations if it does not earn enough commercial revenue. Ideally, wrote Frumkin and Imber (2004), a greater pool of funds will be available to provide social goods and services for which nobody is able or willing to pay, either because these are true public goods or the clients are economically disadvantaged. (p. 57) Today, however, donations are diminishing in contribution to nonprofit hospital revenues mainly because of increase in healthcare insurance coverage. The commercial revenue serves as leverage for donors to cease contribution or their philanthropic subsidy. Operating Resources Simply put, operating resources are the aggregate amount of available money to the hospital. Adequate financial resources is crucial in ensuring the provision of adequate service delivery and marketing capabilities or that the organization must have easy access to funding sources before some venture can be undertaken. (Williamson, Stevens and Loudon, 1996, p. 64) This is especially true when the hospital is at the early stages of its operations. There is a need for sufficient financial resources in order to cover the first few years as the organization struggles to sustain enough number of patients and sponsors that would generate the revenue that will cover high operating costs. Low revenue generation can lead to failure and therefore, the hospital’s current financial position in addition to its ability to successfully obtain financing directly influence its ability to pursue opportunities. (p. 64) The need for these resources is determined by the converted resources needed by other departments such as operational and human resources. Capital Resources Capital resources pertain to the entire material resources in the hospital. These include hospital beds, operating rooms, transportation units, medical devices and other facilities. Vissers and Beech (2005) identified two classifications of operating resources: “leading” and “following” resources. The former lead to the production of “following” resources. For instance, “a ‘leading’ resource for inpatient production of a surgical specialty is the operating theatre capacity allocated to this specialty, while beds or the nursing staff are the “following” resources. (p. 119) The mix of operations resources is an important factor in the efficiency of the delivery of medical services. According to Dyro (2004), physical plants and utility systems have an average useful life of 40 years and a similar percentage of deterioration. (p. 78) This, along with the need to keep up with the latest technologies, require high operating and maintenance costs. Adequacy or scarcity in operating resources is fundamentally credited to the amount hospital budget and the availability of these resources in the market. Human Resources Human resources is one of the most important hospital resources. The Joint Commission (2008), which accredits about 19,000 health care organizations in the United States, explained that the quality of the hospital’s staff will in large part, determine the quality of care, treatment, and services it provides. (p. 69) It cited a World Health Organization report that found hospitals provide quality care according to the level of knowledge, skills and motivation of the people responsible for delivering services. The case of clinical specialists depicts such importance best. Primarily, they are the ones who generate hospital production. Almost all hospital production, explained Vissers and Beech, involves specialist-time as a resource in the allocation procedure. (p. 119) It is important to remember that the human resources represent the hospital’s knowledge capital. While it does not deteriorate like the facilities and equipment, they tend to become obsolete as new technologies emerge. Financial resources are converted in order to satisfy the human resources requirements. These mainly go to salaries, wages, benefits, training, among other responsibilities given to the human resources department such as in the area of recruitment. Recruitment Resources As has been explained previously, the quality of the staff is the fundamental factor that leads to quality of care for the hospital. This is the reason why the recruitment resources should be allocated with sufficient budget. The responsibility in this area is assumed by the human resources managers, which oversees the process involved in the recruitment of the hospital staff and assists its various departments in their recruiting needs. Recruiting resources would collectively ensure the achievement of three functional areas: 1) attracting, interviewing and hiring employees; 2) maintaining employees’ records and programs after they are hired; and, 3) ensuring that the hospital complies with applicable legal regulations. (Griffin, 2011, p. 242) Budgetary allocations for recruitment initiatives are spent for advertising and recruitment initiatives. Retention Resources Programs and initiatives within the organization that are designed to retain employees constitute the hospital’s retention resources. This is especially true since there is a shortage of pediatric doctors and nurses today. Late in 2003, The Graduate Medical Education, a federal advisory board, announced an impending physician shortage. (Malladi, 2005, p. 174) Last year, New Jersey has already enacted a legislation that will specifically address the problem of pediatric doctor shortage in the state. The case is worse in the nursing field. The United States Department of Health and Services Administration projects that existing nursing shortage will increase in severity within the next 20 years and that by 2020, the registered nurse workforce will be twenty percent below the predicted need due to the aging of the nursing workforce. (Terry, 2011, p. 197) Thus, the hospital needs to allocate funds in order to attract employees and retain them. Retention programs and strategies are undertaken at both the institutional and professional levels. Besides competitive wages, benefits and rewards programs, retention resources are also spent on the improvement of the workplace, which entails the broadening of staff through diversity, building an organizational culture that values, improve and rewards staff, among other initiatives. Issues in Resource Allocation Each hospital department is important - operations, human resource, security, information technology and so forth. From allocation perspective, this is aggravated by the fact that many resources in a hospital are shared by specialties: beds, nursing staff, operating facilities and diagnostic services, among others. (Vissers and Beech, p. 119) It is, hence, challenging to divide resources among them especially if it is scarce as with the case in most non-profit organizations. The hospital management needs a systematic strategy in order to navigate the difficulty in the process. A way to do this is for the hospital leadership to collaborate in the allocation of resources. Collaboration Collaboration means that the governing body, the chief executive and other executives such as the middle and department managers should participate in resource allocations. By doing so, it is expected that the outcome is appropriate: budgets are proportionate to the importance and requirement in order to achieve efficiency and quality in the healthcare delivery. The collaboration would ensure adequate representation so that data and needs are gathered and interpreted correctly. This also leads to opportunities for flexibility. According to Frumkin and Imber, nonprofit hospitals are slower than for-profit hospitals both to grow to meet demand and to contract in response to changes in the environment as well as in the declines of demand. (p. 56) Collaboration appears to be the only way by which this children hospital can avoid wastes in resources as it the leadership is more in the position to change resource allocations. This is called a team effort, which should also reinforce shared values, which, for its part, lead to a positive organizational culture. Several senior management study show how this type of resource allocation could lead to higher-performing hospitals. (Johnson, 2008, p. 128) Ethical Issues An important issue in resource allocation is ethics. The most fundamental ethical decision involves the dilemma of balancing cost containment and institutional survival with the quality of care. Morrison (2011) suggested that “if it is the responsibility of the hospital to fulfill its stated mission, philosophy, identity and image, then particular judgments regarding allocations should be appropriate discussion matter for relevant administrators, staff and community members.” (p. 255) This supports the collaborative approach to resource allocation that was previously cited. Another ethical problem could emerge out of the fact that the position or the department that has control over the financial resources has the power over other departments. This is based on the dependency principle. In the case of this organization, the financial resource is primarily sourced from sponsors. Say, a Catholic institution contributes a huge amount of money, enough to make a difference in the survival of the institution, the resource allocation could be influence directly or indirectly with what and how things got done or prioritized within the hospital. All in all, resource allocation is crucial for the hospital as a nonprofit organization. The way financial and human resources are sourced and allocated determines the survival of the institution as well as the quality of healthcare it can deliver. The most important element in this process is the financial aspect. This is because it is translated in different resources needed by the hospital: funds are required for quality capital resources or highly trained and satisfied specialists. For many nonprofit organizations, this area is particularly challenging because product output is not for sale. It cannot depend on the market for funds to cover high operating costs especially when most of its patients cannot afford healthcare. Sponsorships and donations have to be sought so that the institution could survive. These variables dictate how resources are allocated. Scarcity and emergent ethical issues require effective allocation strategies such as the collaborative framework cited by this paper in order for the organization to fulfill its mission. In the end, the organization, particularly the hospital leadership, should bear in mind that correct and efficient allocation of resources creates the optimum social value that the hospital can provide to the community. References Baker, F. (2003). Industrial organizations and health, Volume 1. London: Tavistock Publications. Dyro, J. (2004). Clinical engineering handbook. Burlington, MA: Academic Press. Frumkin, P. and Imber, J. (2004). In search of the nonprofit sector. New York: Transaction Publishers. Griffin, D. (2011). Hospitals: What They Are and How They Work. Sudbury, MA: Jones & Bartlett Learning. Johnson, C. (2008). Small rural hospital chief executive officers differ in prioritization and resource allocation toward quality initiative. Ann Arbor: ProQuest. Malladi, N. (2005). So You Want to Be a Doctor? Hollywood, FLA: Frederick Fell Publishers. Morrison, E. (2011). Ethics in health administration: a practical approach for decision makers. Sudbury, MA: Jones & Bartlett Publishers. Terry, A. (2011). Clinical Research for the Doctor of Nursing Practice. Sudbury, MA: Jones & Bartlett Publishers. The Joint Commission (TJC). (2008). 2009 Hospital Accreditation Standards (HAS). Oakbrook Terrace: The Joint Commission. Vissers, J. and Beech, R. (2005). Health operations management: patient flow logistics in health care. London: Routledge. Williamson, S., Stevens, R. and Loudon, D. (1996). Fundamentals of strategic planning for healthcare organizations. London: Routledge. Read More