| There are many types of hospitals but the most | | | | to raise capital to finance hyper-sophisticated |
| well known are the Public Hospitals. What sets | | | | marketing. Public policy must be written to |
| them apart is that they provide services to the | | | | support "safety net" institutions. They must be |
| indigent (people without means) and to | | | | allowed to organize their own MCOs (Managed |
| minorities.Historically, public hospitals started as | | | | Care Organizations of patients), to insure patients |
| correction and welfare centres. They were | | | | and to market their services directly to groups of |
| poorhouses run by the church and attached to | | | | potential consumers. This way they will save the |
| medical schools. A full cycle ensued: communities | | | | 20% commission that they are paying HMOs |
| established their own hospitals which were later | | | | currently. If they become more efficient and |
| taken over by regional authorities and | | | | reduce utilization, they will absorb the full benefits, |
| governments - only to be returned to the | | | | instead of ceding them to contracting groups of |
| management of communities nowadays. Between | | | | patients and insurance companies or even to the |
| 1978 and 1995 a 25% decline ensued in the | | | | government's medical insurance plans. The |
| number of public hospitals and those remaining | | | | hospitals will thus be able to construct their own |
| were transformed to small, rural facilities.In the | | | | networks of suppliers and share their risks with |
| USA, less than one third of the hospitals are in | | | | their physicians or with the insurance companies |
| cities and only 15% had more than 200 beds. The | | | | as best suits their objectives.An example: a Public |
| 100 largest hospitals averaged 581 beds.A debate | | | | Hospital with its own healthcare plan is likely to |
| rages in the West: should healthcare be | | | | make use of all its specialists and facilities, increase |
| completely privatized - or should a segment of it | | | | capacity utilization and profits - whereas today |
| be left in public hands?Public hospitals are in dire | | | | only its primary care, less lucrative, services are |
| financial straits. 65% of the patients do not pay | | | | used by independent HMOs.The government can |
| for medical services received by them. The public | | | | limit the total number of healthcare plans available, |
| hospitals have a legal obligation to treat all. Some | | | | so that the one propagated by the public hospital |
| patients are insured by national medical insurance | | | | will stand out and not be swamped by hundreds |
| plans (such as Medicare/Medicaid in the USA, NHS | | | | of other plans. Such a public hospital plan could |
| in Britain). Others are insured by community | | | | also be declared the "healthcare plan of default" - |
| plans.The other problem is that this kind of | | | | anyone who has not selected a plan will be |
| patients consumes less or non profitable services. | | | | automatically referred to and included in the public |
| The service mix is flawed: trauma care, drugs, | | | | hospital plan.Not every hospital can start an HMO |
| HIV and obstetrics treatments are prevalent - | | | | plan. Only the big ones can support the necessary |
| long, patently loss making services.The more | | | | insurance payments, the reserve requirements |
| lucrative ones are tackled by private healthcare | | | | and the marketing and administrative costs. The |
| providers: hi tech and specialized services (cardiac | | | | paradox is that big public hospitals are already |
| surgery, diagnostic imagery).Public hospitals are | | | | committed to HMOs, insurers, other patient |
| forced to provide "culturally competent care": | | | | groups, or government-sponsored MCOs. These |
| social services, child welfare. These are money | | | | resist the inclusion of hospitals which own |
| losing operations from which private facilities can | | | | competing healthcare plans - in their networks. |
| abstain. Based on research, we can safely say | | | | This is natural: a hospital with a plan - is a direct |
| that private, for profit hospitals, discriminate | | | | competitor of a private provider of healthcare |
| against publicly insured patients. They prefer | | | | management and insurance. Another obstacle is |
| young, growing, families and healthier patients. The | | | | that governments are very reluctant to |
| latter gravitate out of the public system, leaving it | | | | encourage the public sector on account of the |
| to become an enclave of poor, chronically sick | | | | private one. This is definitely out of fashion |
| patients.This, in turn, makes it difficult for the | | | | nowadays.So, an alternative strategy looks more |
| public system to attract human and financial | | | | viable:Public hospitals can act as direct contracting |
| resources. It is becoming more and more | | | | networks. They can team up, pool their |
| destitute.Poor people are poor voters and they | | | | resources, exercise political lobbying, relegate |
| make for very little political power.Public hospitals | | | | administrative and audit functions (data processing, |
| operate in an hostile environment: budget | | | | claim processing, payment system, accounting, |
| reductions, the rapid proliferation of competing | | | | legal services) to a common centre. This will |
| healthcare alternatives with a much better image | | | | eliminate the need for middlemen like the HMOs. |
| and the fashion of privatization (even of safety | | | | These joint networks will be able to negotiate |
| net institutions).Public hospitals are heavily | | | | contracts with other contractors: physicians, |
| dependent on state funding. Governments foot | | | | pharmacies, specialized laboratories and so on. This |
| the bulk of the healthcare bill. Public and private | | | | will assist the public hospitals to preserve a loyal |
| healthcare providers pursue this money. In the | | | | and stable (low churning) patient base.Finally, public |
| USA, potential consumers organized themselves in | | | | hospitals are large employers with political muscle. |
| Healthcare Maintenance Organizations (HMOs). The | | | | All they lack is the will to exercise it. They should |
| HMO negotiates with providers (=hospitals, clinics, | | | | do it to force governments to adopt some |
| pharmacies) to obtain volume discounts and the | | | | unpopular decisions: offer incentives to HMOs |
| best rates through negotiations. Public hospitals - | | | | which will refer patients to public hospitals, require |
| underfunded as they are - are not in the position | | | | HMOs to use all the range of services (both |
| to offer them what they want. So, they lose | | | | primary and speciality), compensate public |
| patients to private hospitals.But public hospitals are | | | | hospitals directly for nonpaying patients.But the |
| also to blame for their situation.They have not | | | | public hospitals must begin to behave as public |
| implemented standards of accountability. They | | | | entities: they must open their decision making |
| make no routine statistical measurements of their | | | | processes and make them community-oriented. |
| effectiveness and productivity: wait times, financial | | | | They must shift from relying on contractual |
| reporting and the extent of network | | | | language to relying on administrative law |
| development. As even governments are | | | | (regulations) - except when it comes to |
| transformed from "dumb providers" to "smart | | | | employment. In a nutshell: they should be business |
| purchasers", public hospitals must reconfigure, | | | | oriented, on the one hand - and publicly |
| change ownership (privatize, lease their facilities | | | | accountable on the other.There is the little matter |
| long term), or perish. Currently, these institutions | | | | of Public Relations and advocacy. Public Hospitals |
| are (often unjustly) charged with faulty financial | | | | have a terrible image and they are doing very |
| management (the fees charged for their services | | | | little to change it. They do not even collaborate |
| are unrealistically low), substandard, inefficient | | | | with researchers trying to establish a factual |
| care, heavy labour unionization, bloated | | | | fundament concerning "safety net medical and |
| bureaucracy and no incentives to improve | | | | social care". In a world where images count more |
| performance and productivity. No wonder there is | | | | than realities this may well be the public hospitals |
| talk about abolishing the "brick and mortar" | | | | biggest mistake.Eight Ways to Improve the |
| infrastructure (=closing the public hospitals) and | | | | Operation of Public HospitalsA public hospital can |
| replacing it with a virtual one (=geographically | | | | lease physical space or temporal slots, or |
| portable medical insurance).To be sure, there are | | | | computer equipment or any other equipment |
| counterarguments:The private sector is unwilling | | | | which suffers capacity underutilisation - to their |
| and unable to absorb the load of patients of the | | | | physicians for private practice.The lessee |
| public sector. It is not legally obligated to do so | | | | physicians will undertake to pay the hospital - |
| and the marketing arms of the various HMOs are | | | | either in the form of fixed fees or in the form of |
| interested mainly in the healthiest patients.These | | | | participation in the income (franchise |
| discriminatory practices wreaked havoc and chaos | | | | arrangements).They will also commit themselves |
| (not to mention corruption and irregularities) on | | | | to provide community-oriented, non profit |
| the communities that phased out the public | | | | services in return for the right to use what is, |
| hospitals - and phased in the private ones.True | | | | essentially, community property.Another method |
| enough, governments perform poorly as cost | | | | of using the excess capacity is to sell it, rent it, or |
| conscious purchasers of medical services. It is also | | | | lease it to entrepreneurs who are not members |
| true that they lack the resources to reach a | | | | of the hospital staff. There are many such |
| substantial segment of the uninsured (through | | | | possibilities: small laboratories, speciality medical |
| subsidized expansions of insurance | | | | services, primary care and specialist practitioners. |
| plans).40,000,000 people in the USA have no | | | | All these would love to use the superior |
| medical insurance - and a million more are added | | | | infrastructure of the hospital. The right to use this |
| annually. But, there is no data to support the | | | | infrastructure can be given in the form of a |
| contention that public hospitals provide inferior | | | | concession, a franchise, a rental arrangement, or |
| care at a higher cost - and, indisputably, they | | | | any other arm's length mode of collaboration. |
| possess unique experience in caring for low | | | | Professionals are likely to jump on the bandwagon |
| income populations (both medically and socially).So, | | | | when they realize that the hospital provides them |
| in the absence of facts, the arguments really boil | | | | with a "captive market" of patient. This is very |
| down to philosophy. Is healthcare a fundamental | | | | much like the relationship between an "anchor" in a |
| human right - or is it a commodity to be | | | | shopping mall and the small retail shops |
| subjected to the invisible hand of the | | | | surrounding it. The small shops benefit from the |
| marketplace? Should prices serve as the | | | | business diverted in their direction from the big |
| mechanism of optimal allocation of healthcare | | | | "anchor" outlets.The next logical step would be to |
| resources - or are there other, less quantifiable, | | | | sell products and services to the community on a |
| parameters to consider?Whatever the | | | | commercial, competitive basis. The hospital does |
| philosophical predilection, a reform is a must. It | | | | not have to limit itself to the sale of medical |
| should include the following elements:Public hospitals | | | | goods and services. It can also sell medical legal |
| should be governed by healthcare management | | | | services, use its print shop to offer print jobs, |
| experts who will emphasize clinical and fiscal | | | | organize its social services as a profit centre and |
| considerations over political ones. This should be | | | | sell them to the community or to individuals, offer |
| coupled with the vesting of authority with | | | | medical consultancy on a fee per service basis, |
| hospitals, taking it back from local government. | | | | even sell food from the hospital kitchen through a |
| Hospitals could be organized as (public benefit) | | | | catering service or data to researchers from its |
| corporations with enhanced autonomy to avoid | | | | archives. A natural extension of this approach |
| today's debilitating dual effects: politics and | | | | would be "internal privatization".A hospital is a |
| bureaucracy. They could organize themselves as | | | | collection of small (to medium) size businesses |
| Not for Profit Organizations with independent, self | | | | operating under one organizational roof. Laundry, |
| perpetuating boards of directors.But all this can | | | | cleaning, kitchen, the provision of television sets |
| come about only with increased public | | | | and telephones to patients, a business centre for |
| accountability and with clear measuring, using clear | | | | the hospitalized businessmen - these are all profit |
| quantitative criteria, of the use of funds dedicated | | | | or loss generating centres.Internal privatization |
| to the public missions of public hospitals. Hospitals | | | | entails the transformation of the hospital into a |
| could start by revamping their compensation | | | | holding company. This holding company will own |
| structures to increase both pay and financial | | | | and operate a host of corporations. Each |
| incentives to the staff.Current one-fits-all | | | | corporation will constitute a separate contractor |
| compensation systems deter talented people. Pay | | | | which will provide the hospital with a service or a |
| must be linked to objectively measured criteria. | | | | product. Thus, all laundry will be done by a |
| The Hospital's top management should receive a | | | | corporation which will charge the hospital for its |
| bonus when the hospital is accredited by the | | | | services. The same will go for the kitchen, the |
| state, when wait times are improved, when | | | | printshop, the legal services and so on. These |
| disrollment rates go down and when more | | | | corporations will employ the former staff of the |
| services are provided.To implement this (mainly | | | | hospital. This way, the knowledge and experience |
| mental) revolution, the management of public | | | | accumulated within the hospital will not be lost. |
| hospitals should be trained to use rigorous financial | | | | The corporations owned by the former |
| controls, to improve customer service, to | | | | employees will have a "right of first refusal" in the |
| re-engineer processes and to negotiate | | | | first five years following the transformation. The |
| agreements and commercial transactions.The | | | | employee-owned corporations will be allowed to |
| staff must be employed through written | | | | match the best offers in yearly tenders that the |
| employment contracts with clear severance | | | | hospital will conduct for the services that they are |
| provisions that will allow the management to take | | | | offering.These corporations will also be allowed to |
| commercial risks.Clear goals must be defined and | | | | offer their services to other clients. Thus, they will |
| met. Public hospitals must improve continuity of | | | | reduce their dependence on one employer, the |
| care, expand primary care capacity, reduce | | | | hospital. They will become truly entrepreneurial |
| lengths of stay (=increase turnaround) and meet | | | | entities, competing for profits in a market |
| budgetary constraints imposed both by the state | | | | environment.A part of the re-engineering process |
| and by patient groups or their insurance | | | | is to determine which of the functions that the |
| companies.All this cannot be achieved without the | | | | hospital fulfils are "core functions", indispensable |
| full collaboration of the physicians employed by | | | | functions without which the hospital will cease to |
| the hospitals. Hospitals in the USA form business | | | | exist or will change its identity to such an extent |
| joint ventures with their own physicians (PHO - | | | | that it will no longer will be recognizable as a |
| Physicians Hospital Organizations). They benefit | | | | hospital. All other, "noncore", functions should be |
| together from the implementation of reforms and | | | | tendered out (a concept called "outsourcing"). |
| by the increase of productivity. It is estimated | | | | They should be awarded in a tender to the most |
| that productivity today is 40% less in the public | | | | competitive bidders, regardless of their identity |
| sector than in the private one. This is a dubious | | | | and previous allegiance. The hospital is likely to |
| estimate: the patient populations are different | | | | benefit from the transfer of functions, in which it |
| (sicker people in the public sector). But even if the | | | | has no relative competitive advantage, to |
| figure is incorrect - the essence is: public hospitals | | | | outsiders whose expertise these functions are. |
| are less efficient.They are less efficient because | | | | This is somewhat akin to international (free) |
| of archaic scheduling of patient-doctor | | | | trade, where each nation optimizes its resources |
| appointments, laboratory tests and surgeries, | | | | and passes the (beneficial) results of this |
| because of obsolete or non-existent information | | | | optimization process to its trading partners.To |
| systems, because of long turnaround times and | | | | control this kind of transformation, medical |
| because of redundant lab tests and medical | | | | information management systems need to be |
| procedures. The support - which exists in private | | | | introduced. Many are available and they improve |
| hospitals - from other (clinical and nonclinical) | | | | both the quality and the quantity of data available |
| personnel is absent because of impossibly | | | | to the management of the hospital and, as a |
| complex labour rules and job descriptions imposed | | | | result, the decision making process. This will make |
| by the unions. Most of the doctors have split | | | | it easier for the management to pinpoint which |
| loyalties between the medical schools in which | | | | areas require doing what. For instance: the |
| they teach and the various hospital affiliates. They | | | | management of the hospital will be able to |
| would tend to neglect the voluntary affiliates and | | | | determine what kind of incentives should be |
| contribute more to the prestigious ones. Public | | | | provided to which members of the staff, where |
| hospitals would, therefore, be well advised to hire | | | | could costs be cut and where and how could |
| new staff, not from medical schools, share risks | | | | productivity be improved.Finally, a novel concept is |
| with its physicians through joint ventures, sign | | | | emerging. Universities and hospitals are two |
| contracts with pay based on productivity and put | | | | important repositories of human knowledge and |
| physicians in the governing boards. In general, the | | | | experience. Virtually every hospital somehow |
| hospitals must shrink and re-engineer the | | | | collaborates with an academic institution, or with a |
| workforce. About half the budget is normally | | | | medical school.There is symbiosis between hospital |
| spent on labour costs in private hospitals - and | | | | and medical and social researchers.Hospitals should |
| more than 70% in public ones. It is no good to | | | | actively encourage this. It improves their image, it |
| reduce the workforce through natural attrition, | | | | contributes to their ability to provide quality |
| mass layoffs, or severance incentives. These are | | | | services. But should not do it for free. They |
| "blind", nondiscriminating measures which affect | | | | should be contractual partners to the commercial |
| the quality of the care provided by the hospital. | | | | exploitation of the results of research conducted |
| When compounded by work rules, seniority | | | | within their premises or with their co-operation. |
| systems, job title structures and skewed | | | | There is a vast field for pharmaceutical, medical, |
| grievance procedures - the situation can get | | | | genetic and bioengineering research - and a lot of |
| completely out of hand.The government must | | | | opportunities to make money for the benefit of |
| contribute its part. Public hospitals cannot comply | | | | the entire community. By not getting commercially |
| or compete with the demands of national, publicly | | | | involved - hospitals give up money which really is |
| traded HMOs with political clout and the capacity | | | | not theirs to give up. |