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