Should Health Care Providers Downsize their Operations by closure of satellite clinics in the wake of Covid-19 Pandemic?

I reacted with surprise the other day when Nairobi Hospital, one of the largest Multi-specialty practice organization in Kenya, announced closure of satellite clinics  and recalled all staff to be based at the main facility  in a bid to consolidate resources to fight Covid-19. Is it really downsizing or temporary restructuring? Is closure of satellite clinics a panacea to financial and operation challenges of the main Hospitals in the wake of Covid-19?

Organizational downsizing is a proven technique for restructuring a hospital’s organization in response to a severe decline in occupancy. This process involves the traditional microanalysis of staffing used in productivity studies, with a macroanalysis of the hospital’s organization and operation (Van,1986). Organizational downsizing is designed to assist hospitals to identify and achieve substantial reductions in staffing. Therefore, it is most appropriate for hospitals that have experienced such severe occupancy declines that traditional productivity methods are not sufficient for achieving necessary staffing reductions.

How could it be for healthcare organization to close satellite Clinics during the worst public-health crisis since 1918? I believe that the answer can be found in the complicated, dysfunctional way we pay for health care services in this country. The health care system, and hospitals, underwent considerable restructuring and downsizing in the early to mid-1900s in several countries as governments cut costs to reduce their budget deficits. Studies of the effects of these efforts on nursing staff and hospital functioning in various countries generally reported negative impacts. Health care restructuring and hospital downsizing was again being implemented in North America in 2009/2010 as governments struggled to once again reduce deficits at a time of worldwide economic recession. From a public health ( Population health) perspective, cutbacks and disruptions  seems to occur at precisely the wrong time.

From my experience in healthcare operations, I know  that only a small portion of the healthcare revenues come from a traditional fee for service (FFS) reimbursement system. Fully 80 percent of Healthcare organization’s  revenue comes from insurers and government payer, NHIF, who provide a fixed payment per capita (or for a particular patient population, and patient condition) for a given period. This capitation approach (a type of risk-bearing contract) would seemingly ensure that a health care organization would not run short of cash during a crisis, at least in the short term. So why?  I wondered; would health organizations be facing a cash-flow crunch in the early stages of the Covid-19 epidemic?

I posed this question to a colleague in the office  and  in response, was told; “Right now the issue is cash flow because revenue is paid on  FFS (Fee-for-service) model which  covers the volume of patients, severity of illness or number of diagnostic and treatment visits. With Covid-19 being declared a pandemic by WHO, the fear that other illnesses associated or attributed to Covid -19 might not be honored for payment by insurers hence a caution trigger. Again, it is too hard to predict what total medical expenses will look like through the peak and recovery of Covid-19 patients. The costs, after all, are lower than usual because most hospitals  essentially have eliminated elective surgeries.  Even those ICU cases related to the virus are lower cost than much ICU care. Plus, many routine specialty consultants’ visits have been postponed or replaced by telehealth. Could we then say that the benefit of satellite clinics is outweighed by cost of infection control and supply of PPEs to frontline staff? Could Satellites clinics still breakeven in the era of curfews and movement cessations?

Kenya’s Private hospital’s dilemma is just one piece of a much larger problem, of course. In a recent HBR article Sean Nicholson and David Asch noted the inadequacy of the current health care insurance framework in a situation like the Covid-19 epidemic, when overall health care revenues plummet. Arguing that health insurers should also direct excess revenues to the front lines of private healthcare organizations to ameliorate this health crisis.

How much more so in this case? Who ends up being at risk in this form of risk-bearing contract when we consider a private healthcare organizations’ restructuring approaches ? As we now see, it is the doctors and nurses and allied health professionals. Among all the things that Covid-19 has taught is that the current risk-sharing arrangement is a perversion of finance and purpose, simply a way for payers to shift financial responsibility to those who can least afford it. Closure of Satellite clinics is not a panacea to the financial and operational challenges of the main hospitals.

Aquinius Mung’atia, former Head of Facilities & Support Services at Aga Khan Hospital Mombasa in Kenya, is Currently Head of Projects & Security, and a strategy enthusiast.