ABSTRACT
The potential application of organisational change to the service sector has another important implication. Many activities in the service sector fall under the ambit of government, and hence the productivity of this sector is caught within the government expenditure/tax nexus. Increasing productivity in these sectors may enhance the capacity to control government expenditure without reducing welfare. Within this, health sector expenditure looms large, since it currently consumes almost 10 per cent of total OECD GDP (Figure 18.1). This chapter describes the application of principles developed in the manufacturing sector to optimise the flow of work-in-progress to the organisation of patient flow in a leading Swedish hospital. It illustrates that the principles underlying organisational reform in manufacturing are generic, and when applied successfully to the health sector, hold the potential to reduce treatment costs in hospitals significantly. Since the evidence presented below suggests that hospital costs could be reduced by around 15 to 20 per cent through the application of these organisational principles, and since in most OECD countries hospital costs account for approximately 50 per cent of total health costs (58 per cent in Sweden), the overall impact of a successful programme of organisational reform in hospitals would be to increase total GDP by more than 1 per cent per annum, and to reduce government expenditure accordingly (although the significance of this budgetary savings depends upon the extent to which health care systems are socialised). However, as will be seen, these gains are not free, and involve complex social trade-offs.
