Operations and Other Technology

Thinking About Robotization: It’s More than Efficiency and Costs Savings

August 10, 2017 10:25 am

The bottom line for healthcare finance leaders is whether robotics implementations will result in net losses or net gains in jobs.

Robotization is not new to society nor healthcare. Yet, against the backdrop of the discussion around job opportunities during the most recent presidential election and concerns about income inequality and underemployment, there appears to a renewed focus on creating good jobs. For the past few years, health care has contributed to continuous job growth, and sustained job creation in health care is likely in the future. Yet headlines such as “Robots’ next victims: white-collar workers: As machines learn to think, what jobs will be left for humans?” in a May 17, 2017, Crain’s New York article increase feelings of vulnerability.

In addition, such headlines should increase feelings of ethical due diligence and responsibility among technology developers and those who purchase and deploy the technology—often financial leaders.

A June 2, 2017, article in TheWall Street Journal reported on Myomo, an up-and-coming medical robotics powerhouse, and how it used the Regulation A+ law that allows less stringent rules for companies trying to go public and finance their startup. This is important for financial leaders for two reasons:

  • There may be an uptick in medical robotics with an increased variety of ways for entrepreneurs to raise capital.
  • Financial leaders or investment committee board members may suggest that healthcare organizations invest in some early medical robotics startups.

It is important for healthcare finance leaders to understand Regulation A+; the risks and rewards of medical robots—not as financial investments but as deployed capital in healthcare organizations; the ethical risks and rewards of implementing medical robots at a faster pace in healthcare organizations; and the need for audits that determine whether healthcare organizations have the policies, processes, and structures to evaluate medical robots and other possible disruptive technologies such as artificial intelligence (AI).

Understanding Regulation A+

Regulation A + was one part of the JOBS Act, passed on April 5, 2012, under the Obama administration, which allowed all Americans, not just accredited investors, to invest in companies of all types. Entrepreneurs need access to capital and this legislation offers yet another mechanism for entrepreneurs to raise capital and another outlet for individual and institutional investors.

Deploying Robots in Healthcare: The Future is Here

Robots are already deployed in large healthcare organizations. For example, da Vinci robots are used to improve quality, enhance patient safety, and increase efficiency. All three of these benefits should improve the financial bottom line.

Outside of the surgical setting, robots such as the Nao humanoid robot are used to offer companionship to children who are undergoing bone marrow-transplants and are confined to isolation rooms to protect their immune system.

Beyond surgical and clinical settings, robots such as HelpMate and Atheon transport supplies and materials. Considering these robotic capabilities, will a robot, algorithm, or natural language processing be able to write this column in the future?

Making a Financial Case

As is true with any capital expenditure, ROI must be determined to demonstrate whether the overall benefits exceed the overall costs. Many of the financial models used to justify purchasing robots are based on cost savings. These cost savings are generated by gains in efficiency, completing work that was not done due to worker shortages, decreasing work hours, and substituting robots for labor.

Key stakeholders should be considered when deploying robotics. Those stakeholders include professionals who interact with robots, current employees whose hours may be reduced, and current employees who may find that their positions have been eliminated because robots are now doing those tasks. Other key stakeholders include potential future workers in jobs that have been taken over by robots and taxing authorities who now have less payroll tax money.

On the flip side, jobs are created to develop, manufacture, and repair robots in health care. Is there a net loss or net gain in jobs?The evidence to date is silent on this question. The reality for healthcare finance leaders is that regardless of the overall net loss or net gain, hospitals and health systems employ workers who do not work in the design, manufacturing, and repair of medical robots. The bottom line for healthcare finance leaders is whether there are net losses or net gains in jobs in their organizations.

Understanding the Bottom Line Vs. the Triple Bottom Line

Tensions between machines and workers date to the Luddites who fought against the steam powered mechanical looms in the factories in New England in the late 1800s. These factory workers feared steam engine technology would destroy their jobs. This technology did not destroy all jobs, but it did result in a decline in that type of factory. Some workers lost their jobs but then retrained to find suitable employment.

Will history repeat itself with robots gradually showing up to work their shift in healthcare organizations? There are two ways of viewing this question from a corporate social responsibility lens: the bottom-line approach and the triple-bottom-line approach.

The bottom-line approach, which is closely related to the famed Milton Friedman, The Father of the Chicago School of Economics, argues that the only goal of businesses is to generate profits. Yet, the board and senior leaders can choose to use profits in ways that make society better. In this case, if costs are generated from deploying robots and revenues are increased, then the organization can use excess profits to soften the blow for those workers who may have fewer hours or lose employment.

The other approach, the triple bottom line, argues that the focus of business is three-fold: profits, people, and the planet. This approach would argue that a balance must be achieved among these three areas and that the pursuit of profits is neither dominant or primary but balanced among all three.

Healthcare financial leaders should consider which of these two approaches resonates with them as financial leaders and which reflects the strategic and cultural intent of their organizations.Responses, in part, are dependent upon whether organizations are for-profit or not-for-profit. If it is the latter, there are fiduciary duties to make choices that benefit communities and take actions that are more closely related to the triple bottom line than the single bottom line.

Taking a Holistic View on Risk/Reward

Financial leaders’ analyses should primarily focus on the financial aspects but must also take into consideration the clinical, operational, IT, legal, environmental, and human resources aspects of decisions.

For example, the deployment of robots in assisting patients in hospitals and nursing homes raises the issue of moral agency. This question becomes increasingly pertinent as AI systems become more autonomous. Do robots have the capacity to reason morally and identify ethical dilemmas when interacting with patients?

Questions of this type are not the province of financial leaders but these questions are pertinent in decision making. The structure of that decision-making process should seek to determine the possible impacts, positive or negative, on different stakeholders ranging from individuals to communities.

Most Decisions Can Be Reversed

Many capital expenditures such as building hospitals or investing in electronic health records cannot be reversed because implementation costs are too high. This also holds true for some of the more costly robots, but not all.

The deployment of robots in healthcare is relatively new, and given this reality there are many uncertainties. If healthcare leaders make decisions to deploy robots and then discover that the intended and unintended costs pose ethical dilemmas that are problematic to their organizations, they can reverse the decisions. This does not mean that the initial decision was bad. It means that when making decisions in emerging areas, you may not get it right the first time or 100 percent of the time.


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