For more than half a century, provider organizations had a free ride. Unlike other industries that faced rapid disruptions in their markets requiring constant adjustment to survive, healthcare has been fairly stable and predictable. As provider organizations expanded services, governments and private industry paid the ever-increasing cost of supplying those services to their beneficiaries or employees. Now, as spending on healthcare passes 18% of GDP, costs matter.
Provider organizations that previously balanced budgets simply by raising prices or increasing the volume of services provided, face resistance to these revenue enhancing measures. As labor approaches 60% of hospital costs, many organizations look to decrease those costs to meet budgetary targets. These organizations are at a crossroads.
Zeynep Ton, a professor at the MIT Sloan School of Management, studied service industries to better understand the two labor strategies companies use to make money. In The Good Jobs Strategy (2014), she describes the “bad jobs” strategy as one that succeeds at the expense of employees. These jobs offer low wages, scant benefits, and erratic work schedules. Tey are designed to make it hard for employees to perform well or find meaning or dignity in their work. Companies that follow this strategy will do anything to keep prices low. Ton also describes a “good jobs” strategy where jobs provide decent pay, benefits, and stable work schedules. Employees can perform well, and finding meaning and dignity in their work.