On the edge: will the drive for productivity push hospitals over?

In 1984, the first year under the prospective payment system, the federal government's expenditures for hospital care were lower than budgeted. If the savings were the result of improved hospital productivity spurred by economic competition, can hospitals repeat this success as government continues to ratchet down on Medicare payments and as competition increases? Several "lessons" about productivity explain how hospitals improved their bottom line and give indications of what may happen in the future: Organizations move rapidly to improve productivity when they are fiscally imperiled. Reducing labor costs to improve productivity has limited application. Productivity goals are of secondary importance to personnel who give direct patient care. Productivity norms must reflect health professionals' quality-of-care standards. Enhanced efficiency is not the cause of the productivity gains achieved so far. Rather, a major shift to more outpatient care has occurred. Inpatients, however, are now sicker and need more costly care. In the long run, health professionals' concern for providing high-quality care will take precedence over concerns about productivity and efficiency.