For 2025, Are We Still Maintaining the Cost-Cutting Mindset?
Author: Hanif Nu’Man, PhD
Adapted from A Nickel an Hour: Caring for a Health Care Business by Irv Rubin in The Physician Executive, March-April (2007)
Date: 12/23/24
Executive Summary
As a member of the home care industry, we most humbly pose this question to fellow business owners as a way to collectively think about the challenges that are ahead. In the article, A Nickel an Hour: Caring for a Health Care Business, Irv Rubin delves into the critical yet often overlooked relationship between employee morale and the financial health of health care organizations. Rubin argues that the prevailing cost-cutting mindset in the health care sector frequently sacrifices employee engagement, leading to diminished quality of care, reduced efficiency, and financial instability. Through compelling examples and strategic insights, Rubin demonstrates that nurturing an organization’s human capital is essential for long-term success and profitability in the health care industry.
Introduction
Rubin opens with a stark observation: health care executives frequently prioritize cost-cutting over employee well-being, often viewing human resources as a liability rather than an asset. This approach, Rubin warns, risks undermining the very foundation of health care businesses, which rely heavily on dedicated and motivated personnel to deliver quality patient care. Rubin emphasizes the importance of treating employees as valuable stakeholders rather than expendable resources.
Key Challenges in Health Care Management
1. Cost-Cutting Pressures
Rubin highlights the pervasive culture of cost-cutting in health care, where the focus on reducing expenses leads to staff layoffs, reduced training, and higher workloads for remaining employees. This cycle creates burnout, low morale, and decreased efficiency.
2. Employee Morale and Patient Care
Low morale among health care workers directly impacts patient outcomes. Rubin cites research demonstrating a correlation between employee engagement and patient satisfaction, retention, and overall organizational performance.
3. Leadership Blind Spots
Many health care leaders underestimate the long-term costs of high turnover and low engagement. Rubin argues that these leaders fail to recognize the link between investment in employees and sustained profitability.
Strategies for Success
Rubin offers actionable strategies for health care executives to address these challenges and create resilient, high-performing organizations:
1. Invest in Employee Engagement
Develop programs to recognize and reward employee contributions.
Provide ongoing professional development and training opportunities.
Foster a culture of respect and inclusion at all levels of the organization.
2. Align Organizational Goals with Employee Well-Being
Ensure that leadership decisions reflect a commitment to employee satisfaction.
Create transparent communication channels to involve employees in decision-making processes.
3. Measure and Track Morale
Utilize regular employee surveys to assess morale and gather feedback.
Benchmark employee satisfaction against industry standards to identify areas for improvement.
4. Long-Term Thinking Over Short-Term Cuts
Shift the focus from immediate cost reductions to sustainable investments in staff.
Consider the financial and reputational impact of high turnover and burnout.
Case Studies and Examples
Rubin illustrates his points with real-world examples of health care organizations that successfully balanced fiscal responsibility with employee engagement. These organizations achieved better patient outcomes, lower turnover rates, and improved financial performance by prioritizing their workforce.
A Small Hospital’s Big Win
Rubin describes a small community hospital that faced financial struggles and high employee turnover. Initially, the leadership focused on aggressive cost-cutting measures, including staff reductions and reductions in employee benefits. While this approach temporarily improved the hospital’s financial metrics, it resulted in a disengaged workforce, higher absenteeism, and increased patient complaints.
Recognizing the negative trajectory, the leadership shifted focus to employee engagement. They introduced measures such as regular recognition programs, staff wellness initiatives, and professional development opportunities. Over time, these changes transformed the hospital culture. Employees reported feeling more valued, which led to improved teamwork, reduced turnover, and ultimately, better patient care metrics. Financial performance stabilized as well, driven by lower recruitment costs and enhanced patient satisfaction.
A Large Health System’s Bold Leadership Initiative
Rubin highlights a large health care system that implemented a leadership development program across its network. Facing a competitive labor market and growing operational demands, the system’s executives invested in training mid-level managers to be more empathetic and proactive in addressing employee concerns.
The program included regular one-on-one check-ins with staff, leadership workshops on communication, and training on conflict resolution. Within two years, employee engagement scores rose significantly. The organization also observed measurable improvements in patient satisfaction scores, which were directly linked to employees’ improved morale and their ability to deliver quality care. The health system’s financial performance reflected these gains, with fewer staffing shortages and a more stable workforce.
Cost-Cutting Gone Wrong
In contrast to the positive examples, Rubin recounts a cautionary tale of a health care organization that ignored the importance of employee engagement. A large urban hospital cut back on staffing, training, and benefits to reduce operating costs. While short-term financial gains were achieved, the organization soon faced a surge in employee turnover and an uptick in medical errors. Patients reported poor experiences due to delays in care and unprofessional interactions with overburdened staff.
This example serves as a warning: the cost of disengaged employees—manifesting as turnover, absenteeism, and lower productivity—can outweigh the savings generated by austerity measures. Rubin uses this case to illustrate the long-term financial and reputational risks of neglecting employee morale.
A Rural Clinic’s Holistic Approach
In a rural clinic serving a low-income population, leadership recognized that burnout and stress among health care providers were negatively affecting patient outcomes. Instead of scaling back, the clinic’s management invested in holistic employee support, including flexible scheduling, mental health resources, and community-building events. These initiatives created a sense of belonging and commitment among staff, even in the face of limited resources.
The clinic saw a noticeable improvement in employee retention and community reputation. Rubin explains how this example demonstrates that even small-scale organizations can benefit from prioritizing their workforce.
Takeaways from the Case Studies
Rubin’s case studies highlight several critical lessons:
Cultural Transformation Is Possible: Whether in small hospitals or large health systems, investing in employee engagement can reverse negative trends and foster a more productive, satisfied workforce.
Leadership Plays a Pivotal Role: Empathetic and proactive leadership drives engagement and directly impacts organizational outcomes.
Short-Term Cost-Cutting May Backfire: Organizations that sacrifice employee well-being for immediate savings often face long-term repercussions, including increased turnover, diminished patient satisfaction, and reputational damage.
Engagement Pays Off Financially: The financial benefits of improved employee morale—lower recruitment costs, fewer errors, and higher patient satisfaction—can offset the costs of engagement initiatives.
Conclusion
Rubin concludes with a call to action for health care leaders: to abandon the short-sighted practice of viewing employees as mere expenses and instead embrace a paradigm where workforce investment is seen as a driver of profitability and quality care. He asserts that "a nickel an hour" invested in employee morale can yield significant returns, both financially and in terms of patient satisfaction.