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The era of managed care has forced an unprecedented restructuring of the health care environment. As hospitals downsize in response, materiel managers should consider adopting strategies that may help ensure their survival, including innovative approaches to supply management and the development of individual responses that will best position them to succeed in this new reality.
Columbia/HCA Healthcare Corp.'s long-awaited restructuring plan is leaving Wall Street unsatisfied and raising questions about what will happen to one-third of the nation's largest for-profit hospital chain. Under the plan, Columbia will be carved into five groups, with the company keeping its choicest hospitals. Three groups with a total of 108 facilities--which haven't performed as well overall--will be spun off.
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Summing up across the three phases of this case, the pattern of evolution was (1) emergence of a market orientation by hospitals as the industry moved away from regulation; (2) steady expansion of what the hospitals considered to be their business, to include nonacute hospital and medical services as well as insurance, with vertical integration and concentric diversification serving as the vehicles for accomplishing this expansion; (3) remarkable change with respect to who was competing with whom, stemming from restructuring of hospital relationships away from open competition among many toward domination by a few; (4) a shift in the market from one of consumer choices among physicians and hospitals toward one of competitive choice among health plans; and (5) the emergence of negotiated pricing within the context of the new oligopoly, stemming from the heightened and organized power of corporate purchasers. Finally, we return to a concept presented in the introduction to this case: strategic alignment. The case has described the substantial realignment of our study hospitals to their new and changing environment. And it has highlighted their managers' use of boundary scanning, competitor analysis, and strategy to achieve this realignment. James Thompson's word for this process is "co-alignment," referring to "the most critical managerial function, and the skill closest to creativity." This case has illustrated this management skill, defined as "the discernment of hitherto unnoticed relationships in the complex environment, calculating their cause-effect relationships, and translating them into appropriate programs of action". This is both a summary of the performances of our case study managers and a powerful prescription for those who might face similar circumstances and challenges.
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BACKGROUND: We investigated whether a recently restructured pediatric intensive care unit (PICU) had a decrease in the cost of patient care over the years. METHODS: We retrospectively studied 89 previously healthy patients admitted to the PICU of a community-based, university-affiliated teaching hospital over a 4-year period (1991 to 1994) for treatment of lower airway disease. Data collected were patient age, severity of illness, length of stay in both PICU and hospital, prorated hospital bill, year of admission, and patient-specific PICU-originated costs (POC). RESULTS: There was a decrease of POC over the 4-year period, though two factors were associated with a cost increase in this group of patients: an increase in the severity of illness and intubation. The decrease over the years remained present even when excluding intubated patients and adjusting for severity of illness. A decline of 58% below the initial cost for diagnostic tests was the most prominent of all the individual areas studied. Decreases in POC correlated with decreases in the prorated hospital bill. CONCLUSIONS: The costs of management for these previously healthy patients treated for lower airway disease decreased over the study period. We speculate that the time related decrease in costs is a reflection of the learning curve of the pediatric critical care team. The decrease in POC did not shift costs to other areas of the hospital.
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With the advent of managed care and the restructuring of hospitals, health care is in a state of transition. In the past, healthcare executives seemed to believe that they were isolated from the changes that were occurring in corporate America. However, the need for change in both organizational culture and performance is here. To successfully navigate the "permanent white water" of health care change, examples from business are needed. These examples include work redesign, restructuring, and behavior modification to promote the changes needed for health care to move forward.
OBJECTIVES: This article reviews health system reform in Canada and discusses how hospitals are restructuring staffing patterns and redesigning work in response to increasing budgetary constraints. METHODS: Two models for work redesign at the patient unit level are contrasted, one employing a mix of registered nurses and registered practical nurses and one using registered nurses and assistive personnel. Principles and rationale for work redesign are discussed. RESULTS: Both models for patient care redesign reduce registered nurse positions and both appear to yield some cost savings. These models for patient care redesign are controversial among providers, and there is no consensus as to which model is preferable. No research has been undertaken to determine whether staffing changes and work redesign result in adverse patient outcomes. CONCLUSIONS: Regionalization of hospitals is reducing inpatient capacity in Canada, although the pace of regionalization varies in the different provinces. Hospital re-engineering is designed to reduce expenditures by reducing the cost of staffing. Research is needed to evaluate the results of re-engineering on patient outcomes and their relationship to registered nurse staff reductions.
In summary, it is important to define the "right" set of performance indicators to monitor the success of your Patient Focused restructuring program. Keep these indicators to the vital few--those reflecting the hospital's quality, service, environment and economic performance--rather than falling into the potential trap of the trivial many. Be sure to define many of these indicators in the customers' terms, not necessarily your own. Your Patient Focused program will mature across four primary eras--The Vision, The Plan, The Reality and The Journey. Several important aspects of your performance indicators must evolve along with it if they are to facilitate rather than hinder progress. This should happen naturally. However, it is always wise to keep an eye on these evolutions to ensure they aren't stifled by traditional paradigms, lingering biases and lack of attention. Defining and evolving the "right" performance indicators for your Patient Focused Care program will not only provide valid measures of success, but actually contribute to greater success as well!
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As scientific advances in biochemistry shaped the health-care system since World War II, the projected advances in molecular biology will drive the system of the future. With each scientific advancement or new technology there will continue to be the need for efficient organizations to provide acute care to the patients who will benefit most. Despite numerous projections about the viability of the acute care hospital as we know it and vigorous redirection of services to the patient at home in ambulatory settings or in their community, it is crucial for nurses to take a leadership role in developing long-term approaches to patient care delivery systems for the acute care hospital of the future.
Dramatic changes in hospitals' operating environments are leading to major restructuring of hospital organizations. Hospital mergers and acquisitions are increasing each year, and conversions by hospitals to different forms of ownership also are continuing apace. Such changes require policymakers and regulators to develop and implement policies to ensure that consumers' interests are protected. An important consideration in this process is the impact on the price of hospital care following such transactions. This paper reviews empirical evidence that mergers that reduce competition will lead to price increases at both merging hospitals and their competitors, regardless of ownership status. We show that nonprofit and government hospitals have steadily become more willing to raise prices to exploit market power and discuss the implications for antitrust regulators and agencies that must approve nonprofit conversions.
Academic health centers (AHCs) have been under siege for the past few years, with decreased federal and state funding for educational and research programs and increasing competition in the health care marketplace. In addition, many AHCs are burdened with the bureaucratic red tape of large educational institutions, which makes agility in responding to a demanding health care market difficult. The authors describe the response to these threats by Oregon Health Sciences University (OHSU), an approach that has been different from those of most similar institutions. OHSU chose to change its structure from being part of the state system of higher education to being an independent public corporation. The authors outline the political process of building widespread support for the legislation passed in 1995, the key features of the restructuring, the challenges faced before and after the transition to a public corporation, and lessons learned in this metamorphosis to a new form.
The authors describe the process undertaken by the Department of Medicine at the Mayo Clinic in Rochester, Minnesota to improve inpatient care. The department systematically analyzed its inpatient practice and developed a set of hypotheses that challenged whether new inpatient models with greater physician commitment could improve the quality of care; patient, resident, and staff satisfaction; and financial performance. The new practice model they developed, which includes using more physicians whose time is dedicated to the hospital practice, has led to a more focused hospital experience for learners and has implications for all academic medical centers involved with primary care, subspecialty care, and hospital consultative services.
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