When a hospital finds itself in financial crisis, the simplest and most intuitive response is to downsize. Cut costs, cut staff, limit activities, postpone development. This seems like a rational management decision, especially in a context of limited resources.
But when we analyzed the transformation of a hospital in the United States, which was experiencing a deep financial downturn, something else struck me: cuts there were not the solution. They were a temptation that could ultimately destroy the system.
By the time the new management came to the hospital, it had already accumulated significant losses and was under pressure – both financial and managerial. And the most obvious step seemed to be to cut costs, in particular, to reduce the medical group that was generating losses. This decision lay on the surface. It even looked right. But it was not adopted.
Instead, a more difficult and less obvious choice was made: not to shrink the system, but to understand why it was not working. And it is at this point that the fundamental difference between short-term survival and long-term sustainability begins. For the hospital’s financial problem was not that it was spending too much. It was that the hospital was not in control of how it was making money. The losses were not due to “redundancy” but to inefficiency: money was not being received, services were being undervalued,
Contracts were not working optimally, processes were not set up. Cutting back in such a situation would only mean one thing – fixing the problem without solving it.
When the hospital began to work with revenue as a system – changing approaches to billing, classification, contracts, there was an opportunity for a real turnaround. Not a quick one, but a sustainable one. This is a very important lesson, especially if you transfer it to the Ukrainian context.
Today, Ukrainian hospitals are working in difficult conditions. The workload is growing, the human resources are limited, the financial model is still being formed. And in this situation, the logic of reduction seems to be a natural reaction. But the problem is that this logic can become systemic.
If cuts become the main management tool, the system begins to change not towards efficiency, but towards narrowing. It gradually loses opportunities, reduces the range of services, loses people, and at some point can no longer recover. While the model that is laid down through the financing of the National Health Service assumes otherwise. It assumes that the hospital does not simply “survive”, but works with patient flows, develops directions, optimizes processes and builds income. And here a very subtle but critical moment arises. The state sets the financial architecture. But it also sets signals. And if the main signal becomes “survive through cuts”, the system begins to degrade. If the signal sounds like “build efficiency through management”, a different dynamic appears. This does not mean that cuts are never needed. This means that they cannot be a strategy. Because a hospital cannot be saved by reducing it. It can only be saved when it begins to understand how it works as a system.
And it is this transition, from reaction to understanding, that is key for Ukrainian medicine today.