We may be about to see the sad fruits of so-called just-in-time (JIT) inventory systems applied to hospitals in the United States and elsewhere. Fourteen years ago I first wrote about the vulnerabilities of such systems across society including health care systems. (Other observers have more recently noted this problem in health care.) If the corona virus spreads rapidly around the world, those hospitals which have adopted such systems will be least able to cope.
Here's why: JIT systems are designed to minimize inventories in order to free up cash for other useful and profitable purposes. If you no longer have to store large inventories, you don't need to build and maintain substantial rooms and storage areas for that purpose. And, the money actually invested in those inventories, whether for auto parts or for medical supplies, can be deployed elsewhere to make a profit. With JIT, supplies arrive at your door as you need them. The "storage room," if it can be called that, is a delivery truck on its way to your loading dock.
The trouble is, a wave of corona virus victims showing up at hospitals could quickly exhaust lean inventories of medical supplies. And, the supplier providing those supplies may quickly run out as demand surges. After all, a smart supplier will be practicing JIT as well.
The JIT mentality has also crept into the area of bed capacity in hospitals. The number of hospital beds available in the United States has dropped dramatically in the past 20 years. The reasons are understandable: more outpatient procedures, earlier discharges, and more home care. Why have extra unused beds sitting empty? Get rid of the excess inventory of beds and all the resources needed to maintain them can be used elsewhere.
The elsewhere has, in many cases, been the pockets of hospital company management and shareholders. The spread of for-profit hospitals in the United States has resulted in the application of techniques borrowed from business to cut costs. And, JIT, a major tool for cutting costs, is chief among them. Reductions in staffing are also part of the cost-cutting regimen as anyone who is able to compare hospital visits 20 years apart can easily attest.
But, who will be responsible for handling the surge of patients that comes from a so-called "mass casualty event" or pandemic? For-profit hospitals won't want those patients after a certain point. Public and non-profit hospitals are likely to be swamped. In fact, every facet of the medical system will probably be overwhelmed.
To be fair, U.S. government agencies have been promoting preparedness plans for many years and have allocated money for the creation of those plans. How many hospitals have invested in such plans and tested them is unknown. Not surprisingly, a global survey of preparedness concludes:
National health security is fundamentally weak around the world. No country is fully prepared for epidemics or pandemics, and every country has important gaps to address.
The United States rates number one overall for preparedness. But viruses do not respect borders. China, the epicenter of the corona virus outbreak, ranks 51st. That's behind Albania which is 39th and Indonesia which is 30th. This survey, of course, considers a broad array of measures beyond medical inventories and manufacturing capabilities.
Of course, what happens at hospitals depends in part on what is happening far beyond their walls. Those people most likely to be affected by the corona virus include transportation workers who are a primary vector for spreading any infectious disease and upon whom we depend for our worldwide logistics system to function. Will these workers be out sick in droves, and thus unable to keep that system going? Will the remaining healthy transportation workers be unwilling to come to work and risk infection?
If the answer turns out to be "yes" to one or both questions, the wisdom of JIT systems will quickly be seen as folly, and their costs may eclipse all the savings accrued. The savings, of course, will be retained by the managements and shareholders who received them previously in the form of dividends, higher stock prices and bonuses. The costs will be borne by society as a whole, especially by those who are unable to receive supportive medical care.
Fourteen years ago, as shortages in key commodities appeared and prices soared, I asked whether just-in-time was nearly out of time. If the corona virus spreads worldwide, we may all be asking that question soon.
Kurt Cobb is a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Common Dreams, Naked Capitalism, Le Monde Diplomatique, Oilprice.com, OilVoice, TalkMarkets, Investing.com, Business Insider and many other places. He is the author of an oil-themed novel entitled Prelude and has a widely followed blog called Resource Insights. He is currently a fellow of the Arthur Morgan Institute for Community Solutions. He can be contacted at email@example.com.