Strategic Planning of Healthcare Delivery Centres

Role of operations management

Shakti Kumar Gupta

Shakti Kumar Gupta

HOD, Hospital Administration & Medical Superintendent All India Institute of Medical Sciences Dr. R P Centre for Ophthalamic Sciences New Delh, India.


Operations management is the strategic implementation of programmes, techniques, and tools for reducing costs and improving quality. It focuses on the effective management of the resources and activities that produce and deliver goods and services of a business. In healthcare, effective use of operative management tools outcomes into improved quality of care, reduction in bottlenecks and waiting times, reduction in medical errors, better utilisation of existing beds, reduction in staff overtime and increase in staff satisfaction and finally improves the financial performance of the hospital.


With healthcare costs rising faster than general inflation, cost containment is a theme that resonates throughout the healthcare field today and receives increasing attention of policy makers, academia and industry. The healthcare sector all over the world is experiencing tremendous pressure to not only control the escalating costs but also improve the quality of care it provides to its consumers.

The four major areas where principles of operations management are deployed are facility design and layout, cost analysis, process analysis and information systems development and implementation.

Every day, one uses a multitude of physical objects and a variety of services. Most of the physical objects are manufactured and most of the services have been provided by people in organisations. Just as fish are said to be unaware of the water that surrounds them, most of us give little thought to the organisational processes that produce these goods and services for our use.

The study of operations deals with how the goods and services that one buys and consumes daily are produced. Operations management is concerned with the design, management, and improvement of the systems that create the organisation's goods or services.

The significance of OM principles to organisations outside the manufacturing sector is a conviction shared by OM researchers and practitioners .Generally, hospitals face challenges in healthcare operations management in the absence of a mechanism to capture, analyse and present real-time performance about clinical and financial processes. It is a challenge to improve and integrate the quality of healthcare, for optimal clinical and financial outcomes and real-time performance optimisation. From the view point of operations management (OM) academics, it is evident that there is a strong resonance between the need to deal with the issue of sustainability in hospitals.

The Planning for healthcare delivery centers would be incomplete without suitable and sufficient application of the five objectives of Operations Performance objectives:

  1. • Cost: The ability to produce at low cost
  2. • Quality: The ability to produce in accordance with specification and without error.
  3. • Speed: The ability to do things quickly in response to customer demands and thereby offer short lead times between when ordering a product or service and when they receive it.
  4. • Dependability: The ability to deliver products and services in accordance with promises made to customers.
  5. • Flexibility: The ability to change operations. At the core of operations management are the topics of process flow and capacity management, process design and layout, technology choice and management, quality management, lean manufacturing, supply chain management and operations strategy.

Operation management is diffusing in healthcare in the following areas:-

Process reengineering

The knowledge of Process design could be greatly used while deploying better process technologies or to use process technologies more accurately. In healthcare, this is directly proportional to Patient Safety.

“Patients should experience healthcare processes that are more reliable than manufacturing processes. Regrettably, that is not yet the case”

Process design is fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance. Fundamental and radical change is not a concept that appeals in the healthcare environment. It emphasises small and measurable refinements to an organisation's current processes and systems have been more widely adopted. Process analysis has been a useful technique for pulling apart the relationships between clinical and managerial tasks. Hospitals could learn how to solve systemic problems systematically, and that to do so will require not the wish lists of strategic planning and structural reorganising, but tangible changes in their collective behaviour. This perhaps explains why less formal methods of process mapping that engage a full range of process participants are more successful, as they create a mandate for change.

Technology management

An effective IT infrastructure supporting key operational processes and management reporting is now seen as essential. Hospitals around the world are embracing internet and information technology to improve their client interface, as well as to reduce the overall cost of providing quality care. IT has great potential to improve primary care in many areas including medical records, communication between physicians and patients, information sharing among healthcare providers, and rapid access to reliable information for both physicians and patients.

Operations strategy in healthcare

According to Zelman and Parham (1990), there are four strategies for hospitals in defining what business they are in: (i) a generalist strategy (ii) market specialist strategy where the hospital caters a wide range of services to specific markets, (iii) service specialist strategy which relates to a hospital providing specific services to a wide range of target groups, and (iv) super specialist strategy that refers to hospitals providing narrow range of services to a limited market.

Hospitals would require different operational capabilities to support their mission and positioning in the market. It is important for hospitals to procure and allocate resources for the development of those operational capabilities which are aligned with the corporate mission. The hospital operations strategy should be developed to support the hospital mission and business strategy, and help to gain competitive advantage. Operations strategy in the context of a hospital can be defined as a plan that configures and develops business processes which enable a hospital to serve and deliver quality care to their patients as specified by its business strategy.

Total quality management (TQM) and six sigma in healthcare

Implementation of any quality initiative should embrace a participatory management style; address the issue of changing attitudes and culture, employee involvement and empowerment together with investment in training, development and learning. But these characteristics have not been evident in the quality improvement programmes implemented in the healthcare environment contributing to sustaining the TQM efforts and, thus, to achieving organisational excellence. The system requires the explicit and active involvement of all stakeholders and to certain extent it forces a holistic and integrated approach.

Lean production

Toyota Production System forms the basis for much of “lean production”. Taiichi Ohno, who has been hailed as the founder of TPS, describes the goal of TPS, “All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash, and we are reducing that time line by removing the non-value-added wastes”. The hospitals can deliver to patients exactly what they need, when they need it, every time, error-free, in a safe environment, at the lowest cost and without waste by application of lean principles.

Supply Chain Management

Tremendous opportunities exist for delivering significant improvements in the ability of hospital facilities, networks and other healthcare organizations to optimise the processes and work flows associated with materials management, and reduce the costs related to inventory and supply chain management (SCM). The healthcare value chain is plagued with many problems, including outdated and inaccurate data, laborious manual processes, and lack of visibility into important order information. Rearrangement of storage areas can generate substantial savings.

Process flow and capacity management

The type of resources required for an admission include beds, operating theatre, surgical team, nursing care and potentially an intensive care bed. However, the need to coordinate resources to manage capacity is not adequately understood in the decision making process of allocating resources to specialties. The result is peaks and troughs in the workloads of departments that are difficult to manage.

Hospitals can achieve substantial improvement in patient flow and throughput and reduction in unit costs through the application of techniques such as process mapping and simulation modelling. An important point for understanding and improving patient flow is to look at the whole system of care, rather than the individual units in isolation.

Some of the most commonly used tools used in mistake proofing, and performance enhancement in healthcare processes include operations research tools such as queuing theory, quality tools like root cause analysis, failure mode & effect analysis, six-sigma and statistical process control.

While these tools are quite adaptable to many processes, in healthcare, they are to be deployed after duly assessing the compatibility of the process with the tool. Thus, while statistical process control could be used in logistic errors, six sigma could be used to identify and quantify medication errors, both in dispensing and drug administration. Root cause, FMEA are very well used in medical audits - a specific process to understand the accuracy of patient care processes - an inseparable element of healthcare operations management.

Measuring demand & capacity while planning for healthcare facilities: 

The planning for healthcare facilities in a free market is generally decided or rather encouraged by the market size. In healthcare facility designing, this would mean the expected volume of patients, the economic status or the purchasing power of patients and the availability of inputs that enable healthcare delivery. One basic component of social up gradation and disease protection that a healthcare facility could perhaps provide is based on the initial assessment of the burden of disease in the catchment area, where a healthcare facility has been planned for. It is therefore obvious to find starring hospitals in shiny areas of city. However, even while accepting a business model approach, the principles of operations management would justify that a healthcare establishment would flourish quite well, if planned on the outskirts of the city or in lower tier towns.

For a health facility planning, which happens to be a small but important element of any health system, the following must be given due consideration:

  • • Ageing population
  • • Growing demand on health services
  • • Chronic disease
  • • Mental health
  • • Population health
  • • Impact of distance
  • • Impact of climate change and seasonal and economic changes
  • • Community expectations

When these aspects are assessed with respect to the population in the catchment area, the outcome leads to strategic and organised planning of the healthcare facilities.

It would also be essential for the planners to focus on the needs of patients and their families utilising a holistic care approach. The focus on these would mean:

  • • Having the health of patients and communities as the primary objective of all health service planning.
  • • Developing models of service delivery that identify and support careers and families.
  • • Enabling patients, careers and their families to understand and be partners in the planning and delivery of their healthcare by providing information as to where and how to effectively access required support.
  • • Facilitating access to services as close as possible to patients’ support networks (family and friends).
  • • Providing culturally sensitive services based on the needs of Aboriginal people.
  • • Recognizing the needs of people from culturally and linguistically diverse backgrounds.
  • • Encouraging greater self-responsibility for healthcare.
  • • Improving the coordination and integration of services so as to present a complete system of healthcare to the patient.
  • • Achieving an appropriate balance of in hospital/out of hospital primary and preventive healthcare services.
  • • Increasing the focus on well-being and the development of primary healthcare strategies.
  • • Improving the level of population health initiatives such as early intervention and illness prevention services.


The field of application of Operations Management is enormous. The application is dependent on recognition of the fact, that by using the principles of operations management, the outcomes of healthcare delivery can be improved along with its quality and efficiency.

These principles need wider understanding among healthcare and hospital administrators. The models which have shown effective implementation, not only during planning stage but also in improving the day to day operations of healthcare activity and service delivery, need to be understood by all. This would enable an institution to demonstrate a greater ability of Enterprise Resource Planning that is a centralized framework for all processes in an organization, focusing on all aspects of a business. This includes planning to inventory control, finance, manufacturing, sales, marketing and human resources, and last but not the least, a level of patient care with highest level of satisfaction for the patient as well as care givers.

Full references are available at magazine

Author BIO

Shakti Kumar Gupta is the President of Academy of Hospital Administration, New Delhi. He has been awarded “PRATIBHASHI SAMMAN–2002”, “CHIKITSA RATAN – 2010” and SHRAM SREE-2010”. He has been appointed as the expert consultant by Ministry of External Affairs, Govt. of India for establishment of National Referral Hospital at Thimpu & Regional Referral Hospital at Monger, Bhutan. He is the Programme Director of various capacity building programmes notably amongst which are “Healthcare Executive Management Development Programme” (HxMDP) for senior healthcare professionals and “National Initiative for Patient safety” (NIPS).