Every once in awhile I talk to someone about their business and I can't figure out their reasoning for doing the things they do. Then I think about it a bit and I realize that most bad decisions come because of worries about money in some fashion. Of course it doesn't help when bad consultants then come in and give bad advice, and because your issues are sufficient enough you grasp at every little thing they say without asking the proper questions.

Companies do this sort of thing all the time. How often do we hear of company layoffs where they're going to save a million dollars but the CEO is making $10 million? Does that seem fair or logical? I don't think so and any reasoning person would think the same thing. Is it fair? I'll leave that one up to you.

This isn't an article about health care, and yet since that's my background to a degree it's where I have to go for examples that I can talk specifically about. These are true stories; see if you agree with my statements that the acts were the result of bad reasoning.

When hospitals start deciding that it's time to lay off people, often they start with people who don't generate revenue. While on the surface that might sound like good reasoning, it's not.

Let's take the billing department as an example. As a matter of fact, I'll talk about my own experience some 15 years ago. The hospital needed to lay some people off because we were in a bad way overall. They wanted to take a look at my department first because we didn't generate revenue. Of course revenue is important to hospitals, and I personally feel that most hospitals need to first review their income via charge master and charge capture processes before even thinking about doing layoffs, but I digress.

They came to me and wanted me to layoff at least one person in my billing department; I only had 5 people. I told them their beliefs were flawed. Of course no one at the C-level ever wants to hear that but I knew my stuff and they knew I knew my stuff so they asked me why. I told them that we were a well oiled machine, and that each person in the billing department was responsible for $750,000 a month in cash. I then said that the average each person was making a year was less than $20,000 plus benefits, which weren't extremely high back then. I asked them if it was more important to the hospital to lose $750,000 a month in cash, which was needed to pay bills and employees, or reduce expenses by less than $30,000? I kept all my people.

The second one was at a hospital I consulted at, where the move had been made six months before I got there. This hospital had done a marvelous job with offices built in a building that was across the bridge from the hospital. They had decided at the time to move physical therapy into the office space, and paid for a massive design that was absolutely beautiful. They moved the department and started it up, and six months later decided it wasn't making enough money and that they would shut down the entire department and outsource the work if they needed it done in the hospital, and tell patients to select which outpatient physical therapy company in the area they wanted to go to.

When I got there I saw the charges in their charge master and didn't see any revenue. I asked about it and was told that they'd shut down the department and farmed out all the work because it wasn't making enough money, aka revenue. When I took a look at the revenue they had accrued in the six months they ran it at the new facility and in the previous year I saw that they had set their charges up incorrectly and weren't coming close to capturing all the revenue they should have been capturing, which translates into not getting paid for everything they did.

In physical therapy, an overwhelming number of charges are based on 15-minute increments, but if you don't know that then you only capture one unit instead of multiple units, since quite often treatments and processes go for up to an hour. In your own terms, imagine how you'd feel getting paid $10 an hour when you should be getting $40. The reasoning shouldn't have immediately been to kill a department that so much time had been put into; it should have been to take a serious look at it first, with "competent" people who understand charge capture, and then made a decision as to whether it's doing what it should be doing.

The third bad reasoning came during another period where a facility felt they needed to layoff a bunch of people. In this case what they decided to do was to layoff all LPNs and unit clerks on the inpatient units and have registered nurses handle everything. Their original reasoning seemed sound on the surface. Registered nurses could handle a lot more legally than LPNs can, and unit clerks were only seen as secretaries that didn't help produce revenue and, in their eyes, anyone could be a unit clerk so the nurses could do the work just fine.

What was the problem? Registered nurses suddenly had a massive workload because they had to keep up with the paperwork, which means all the medical charts, they had to deliver charts to doctors and medical records which meant they had to leave the floor, suddenly they had to do everything with every patient and thus they had more patients to take care of, and initially they also had to learn all the paperwork, which they didn't know how to do because upper management fired everyone on the same day without realizing that none of the registered nurses had done any of it before. Eventually they realized they'd made at least a partial mistake and rehired some of the unit clerks to help, but never rehired any of the LPNs; the hospital ended up being closed a couple years later anyway.

Bad reasoning happens when people don't know what they're doing, and when they feel their backs are against the wall. The examples I used are in health care, but I bet everyone reading this has experienced bad reasoning where they work, or have worked, as well. Don't ever let the person doing the bad reasoning be you, and if you're in any position of leadership never go along with what you know is bad reasoning "just because". You might either end up having to try to fix something or not have a job left because of it.

Or you might be one of these people: