Sunday, September 26, 2010

Take this job and shove it (Musings on process efficiencies in the blood system)

This blog was motivated by annual reports for Canada and Ireland's national blood suppliers included in TraQ's September newsletter:
Both reports emphasize the need for ongoing cost efficiencies. As well, TraQ's August newsletter featured cost savings in the UK NHSBT due to reorganization that decreased the number of testing and processing centres.

The blog's tongue-in-cheek title derives from the old Johhny Paycheck hit:

Before beginning, allow me to digress briefly and explain how the blog's monthly topics come about:

1. It's usually a last minute thing, during which inspiration comes (or not).

2. Besides current relevance, my main concern is to appeal to as many TM professionals as possible. This means that at least one aspect of each blog should be meaningful to all who work in TM, regardless of profession, e.g., serologic issues, no matter how fascinating to me as a lab technologist, are out.

3. Taking a contrarian view that goes against current established dogma is in. Everyone should have their beliefs challenged now and then.

4. Perspectives cannot be so controversial as to alienate cherished friends and colleagues. It's a tricky judgement call (see addendum below).

That said, this blog's topic focuses on how CBS (Canada's national blood supplier) treats cost savings in its latest annual report, specifically how it stresses process efficiencies that result in a decrease in "the number of labour hours" (i.e., staff reductions). I could have written about other aspects of the report such as the self-congratulatory tone typically pervasive in such documents, but what fun would that be? <8-)

How does the CBS report relate to you, given that you are probably (i) not Canadian and (ii) not a CBS employee? Some possibilities:
  • It may amuse you to see how saving people's lives via transfusion has become so business-oriented.
  • If you are employed as a TM professional in any capacity, learning how one employer views process efficiencies, and what achieving them usually means, may apply to your situation now or in the future.
  • There are interesting data on staffing and other costs that you can compare with costs in your own country.

The quotations come from CBS's 2009/2010 annual report

First, some musings on language. This year's report is called the "Annual Checkup" and extends the medical analogy with headings such as "healthy results"; "vital signs"; and "We're making surgical decisions" in its introduction. Most Canadians, if they read the report at all, are unlikely to make it past the 'cutesy' introduction apparently targetted to the public, not TM professionals.

Thereafter, the report takes on a distinctly business perspective and is replete with business jargon. Examples (my comments in brackets):
  • This financial report includes forward-looking statements. (Statements based on assumptions and projections that may not occur, made in the interest of transparency and butt-protecting so that investors do not unduly rely on expectations of a company's success)
  • CBS "operates four lines of business"....(An internal business unit, i.e., their main business activities)
  • There are threee "major drivers that impact our budgetary environment" (Cost driver = term associated with activity-based accounting: any factor that causes a change in the cost of an activity) (Gotta' love the bureaucratese: budgetary environment = budget).
  • The organization’s liquidity is largely affected by the timing of funds received. (Liquidity = ability and ease of an asset to be converted into cash quickly.)
  • Regarding purchase of plasma protein products from Canadian and international suppliers, which result in cost fluctuations due to changing exchange rates: "To manage costs more effectively we continue to hedge a portion of our currency requirements." (Hedge = An investment position taken to protect investors from the risk of an unfavorable price change.)
All of these terms stimulate musings on CBS as a business attempting to achieve ever more cost efficiencies. Since Canadians fund CBS through provincial and territorial governments, in a way Canadians are all shareholders, albeit indirect, non-voting ones and shareholders have the chance to question financial reports.

As background, the CBS report includes these tidbits on staff costs (paraphrased):

  • Staff costs make up ~59% of total 'transfusable products' expenses (components collected, tested, prepared by CBS)
  • Staff costs increased 0.9% (compared to 4.9% in the prior year)
  • Further efficiencies will come from more process efficiencies, i.e., the number of labour hours required to collect, test, manufacture and ship products will decrease.
As a shareholder, it would be interesting to see the average percentage increase in staffing costs for the 75% of CBS's unionized staff (clerical, laboratory, facility maintenance, IT, transportation, nursing), compared to non-unionized staff (managerial, medical, legal, and executive). Of course, since both staff groups are diverse, it may make more sense to provide a detailed analysis of staffing cost increases.

For example, on average costs for "group A" increased by x%, for "group B" by x%, etc. Even though there are significant differences between staff in any one category, thinking as a shareholder, such a breakdown could be informative.

Since its creation in 1998, transparency has been a key CBS goal. The report states that

  • Staff costs constitute a significant expense and is influenced by product demand and collective agreement obligations and goes on to note:
  • "While it is difficult to influence our labour rates (nearly 75% of our workforce is unionized) and demand for our products, we do have the ability to improve our process efficiency."
But what about the 25% of staff who are non-unionized? Since the report brings up the unionized workforce in the context of cost efficiencies - by CBS's own logic - the 25% of its non-unionized staff could be a open to cost scrutiny, yet no mention is made of it in the report. Although there are fewer of them, one quarter is not insignificant. (I know, I could have used significant but not insignificant is used as a litote.)

Addendum (28 Sept. 2010): I've had feedback on the blog since it was written and would like to clarify that the blog's discussion questions the reasoning behind the following statement from the CBS report and is not meant as a comment on anyone's compensation: "While it is difficult to influence our labour rates (nearly 75% of our workforce is unionized) and demand for our products, we do have the ability to improve our process efficiency." I have also altered some examples that may have suggested otherwise. Thanks to those who took the time to write.

As an aside, the Internet has all kinds of unexpected information. Just like contracts for unionized staff that outline salaries and negotiated increases (available on union/association websites), many of the salaries of non-unionized CBS national staff are publicly available on provincial government websites if you know where to look.
The first time I saw my fees as a contracted supplier of services on a health region's website, I flipped, thinking (incorrectly) that the information was private. The applicable freedom of information and protection of privacy act states,
  • A disclosure of personal information is not an unreasonable invasion of a third party's personal privacy if the information is about the third party's position, functions or remuneration as an officer, employee or member of a public body or as a member of a minister's staff.
Process efficiencies also include such strategies as CBS's proposed Donor Care Associate role:
  • "... multi-skilled workers will work in blood donor clinics to assess donor eligibility. Nurses will continue to be present in all our clinics, in leadership roles better aligned with their skills."
This approach (known as de-skilling) aims to replace health professionals (nurses) with less well skilled workers who can be paid less. It fits with strategies such as outsourcing as an attempt to pay less for workers, but only those on the front-lines in the trenches.


Just as cost efficiencies should apply to all staff and even executives should be fair game for cost-cutting, so should demand for products. Influencing product demand is no simple task (another litote) and time intensive, but CBS has a mandate to help educate health professionals "to ensure our blood products are used wisely".

CBS educational efforts are extensive and include
Although mentioned in the report, why did the report not more directly link existing and future educational efforts to potential cost efficiencies, instead of the almost sole emphasis given to process efficiencies (de facto synonymous with reductions of staff in the trenches)?

The report makes it seem that product demand is 'what it is' and cannot be affected.
  • Is it because process efficiencies that reduce staffing needs are quicker and easier to achieve than physician education on blood utilization (no doubt true)?
  • Does it reflect a mind-set and corporate culture that equates savings with reductions in staff costs because staffing typically accounts for so much of the budget?
  • Is it because Lean and the concept of staff optimization (cousin of right-sizing, ubiquitous in the 90s, generally resulting in staff reductions) is the new religion?
Such thinking, once entrenched, often discourages creative problem solving that goes against or falls outside current dogma. Who wants to question those in power, often a career limiting move?

Regardless of the cause, more emphasis in the report on educational efforts to reduce demand and promote better blood utilization seem appropriate, given that
  • Blood components and plasma derivatives are regularly transfused inappropriately (a huge waste that potentially threatens patient safety)
  • Plasma protein products such as IVIG and albumin (as a 'business line') account for the largest percentage of CBS's expenses (48.2% compared to 45.6% for fresh blood components) and costs increased by 14.7% in 2009-2010.
Highlighting the fact that reducing product demand is achievable and will result in cost savings would also validate the too often unsung efforts of CBS staff who go the extra mile to educate colleagues on effective blood usage and best practices.

Just for fun, enjoy Dolly Parton's mega-hit, Nine to Five

As always, I alone am responsible for the blog's content. Comments are most welcome BUT, due to excessive spam, please e-mail me personally or use the address in the newsletter notice.