Do you remember studying absorptive capacity in economics courses? I didn’t encounter the concept until graduate school, yet I have found it to be an essential foundation of operations analysis. Considering absorptive capacity is a key to efficiency and effectiveness—especially in a recession when accustomed growth has come to a halt. (You can quit reading this post if your organization has sufficient revenue and personnel to do everything that needs to be done…)
Absorptive capacity is a measure of an individual’s or an organization’s ability to take on a new task. As individuals, we effectively recognize the concept when we say—as we so often do these days—that we have no “bandwidth” for a new assignment because we cannot keep up with the work we’ve already got. However, we probably don’t give due recognition to organizational capacity to do one more thing.
Based on my frequent interactions with providers and payers around the country, I think health care executives need to assess absorptive capacity at the organizational level. The number of operational demands is unprecedented and growing. As if HIPAA 5010 and ICD-10 mandates aren’t enough to stretch resources to the limit, along come challenges to become Meaningful Users and Accountable Care Organizations while trying to understand the Affordable Care Act! Any one of these new demands can quickly become the “straw that breaks the camel’s back,” resulting in inefficiencies that can then break the bank (not to mention employee morale).
Health care executives need to evaluate two possibilities from the perspective of absorptive capacity:
- First, some things that seemingly must be done are not worth doing. (Decision-makers should also remember that anything not worth doing is not worth doing well.) My August 3rd blog post on the marginal utility of meaningful use illustrated negative economic consequences when economic costs exceed financial incentives. Additional consideration of absorptive capacity will suggest that some projects are not worth the human costs, even if the projects show a positive ROI on the balance sheet.
- Second, some “must do” tasks that cannot be done by one organization acting alone can be accomplished successfully by several organizations working together. Many health care delivery systems do not have available resources to own and manage today’s essential infrastructure of health information technologies. To use HIT productively, they need to assemble partnerships with an absorptive capacity that can be shared by all the stakeholders (including payers and vendors/outsourcers).
Health care’s “do-it-yourself” tradition is poorly suited to the new medical marketplace. Industry leaders need to realize that they simply to not have the economic or human capacity to do everything. Some “opportunities” need to be skipped or pursued with others. What do you think? Has your organization reached its absorptive capacity?
2 comments:
One area where absorptive capacity is most acutely felt is at the managerial level. This managerial bottleneck becomes the critical choke point for many projects. Sure, we can 'staff up' with line folks to get a project done, but the organization's capacity to properly manage the project, remain true to the initial goals (which are often tossed overboard in the rush to get the project done -- essentially negating the original benefits), and deliver the desired results founders on the shoals of lack of capacity to manage the project.
The management team (both middle and senior) who have the vision, the organizational history, and position (through title or recognition as a key influencer)to help the organization over the necessary change often become the barrier to doing the project well. Also, the culture of get it done, means that no one raises the question as to whether the project remains worth doing.
Very good blog Jeff and points well taken which I happen to agree with. Let's add another component to the picture around meaningful use-- provider ethnography! Everything in meaningful use is laid out in academics and theories. If we do X we’ll reap Y improvements and by the way you’ll get stimulus money. Very idealistic. …We forget that provider’s and their administrative staffs day to day work habits must change to make this work. Have you tried to quit smoking! Habits are hard behaviors to break--- stimulus money or otherwise. This is one that’s easier said than done.
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