Improving Hospital Performance
Improving Hospital Performance
Improving Hospital Performance
Mukesh Chawla
Research Associate
Data for Decision Making Project
Department of Population and International Health
Harvard School of Public Health
Ramesh Govindaraj
Research Associate
Data for Decision Making Project
Department of Population and International Health
Harvard School of Public Health
August 1996
Data for Decision Making Project i
Table of Contents
Acknowledgements ............................................................................................. 1
1. Introduction .................................................................................................. 2
6. Design ........................................................................................................ 22
Nature and Extent of Autonomy .................................................................... 23
Relationship of Hospital Autonomy and Health Sector Reforms ...................... 25
Organizational Models .................................................................................. 26
Models of Autonomy .................................................................................... 28
Internal Organization .................................................................................... 29
Performance Evaluation System .................................................................... 30
Consensus-Building and Goal Attainment ...................................................... 32
End-of-Section Checklist ............................................................................... 33
References ....................................................................................................... 45
Data for Decision Making Project 1
Acknowledgements
This study was supported by the United States Agency for International
Development (USAID) Washington through the AFR/SD/Health and Human
Resources for Africa (HHRAA) Project, under the Health Care Financing and
Private Sector Development portfolio, whose senior technical advisor is
Abraham Bekele.
Hope Sukin and Abraham Bekele of the HHRAA project at the Africa Bureau
reviewed and gave technical input to the report.
2 Implementation Guidelines
1. Introduction
The findings of the five country studies point to the need of improved
conceptual and implementation protocols for decision makers in developing
countries wishing to consider autonomy as an option for bringing about
improvements in hospital performance. These implementation guidelines are
a step in that direction.
Data for Decision Making Project 5
Figure 1.1
Hospital Autonomy: Implementation Guidelines
IDENTIFICATION OF HOSPITALS
DECISION MAKING
PROCESS
DESIGN
KEY INTERVENTIONS
It is also useful to understand what the guidelines are not. The guidelines are
not a book about management principles. There is no attempt here to apply
theories of organization and management behavior to public hospitals. We
understand that the hospital is a very complex and dynamic organization,
producing a wide variety of goods and services, and in such situations
managers increasingly need to have a more sophisticated understanding of
the organization. These guidelines do not attempt to contribute to this need.
This is not a management text, but a guide to help planners and managers
improve their performance through a better understanding of the broad scope
of issues related to hospital autonomy.
Figure 1.2
Hospital Autonomy: Implementation Guidelines
Identification of Hospitals
IDENTIFICATION OF HOSPITALS
DECISION MAKING
PROCESS
DESIGN
KEY INTERVENTIONS
3. Identification of Hospitals
Step 7: Revise, if necessary, the priorities in the list of hospitals targeted for
reform.
The information required for steps 1 and 2 should be available from the
government in the ministry of health, finance and planning. The preliminary
listing according to step 3 can be performed according to any known or used
procedure, since in any case this will be revised and updated later on.
Prioritizing is recommended since the government reforms are more likely to
succeed if they are concentrated rather than if they are dispersed. Steps 6
and 7 need special attention, and we discuss them in more detail below.
Performance Evaluation
The first step in assessing the performance of the hospital is to describe the
scope and nature of hospital services, such as present inpatient services
(medicine, surgery, pediatrics, maternity, etc.) outpatient services, casualty,
and specific clinics. It is also useful to understand (a) the role and place of
the hospital in the referral system; (b) the rules and procedures that the
hospitals follow for admission of patients to the hospital as private patient,
government paid patient, and government nonpaying patient; and (c) the
number of beds allocated to private patients, government paid patients, and
government nonpaying patients.
Hospital performance can be evaluated in terms of efficiency, quality of care,
accountability, equity and resource mobilization. We discuss these in detail in
Methodological Guidelines (Chawla et al, 1996), and briefly refer to the
concepts here.
Efficiency
The main plank against which performance of the hospital is ultimately assessed
is its capacity to deliver high quality clinical care at least cost. Some measure of
Data for Decision Making Project 9
Table 1
Health Domain What role, if any, does the hospital play in setting goals for the health sector?
What role, if any, does the hospital play in setting goals for itself?
What is the nature of formal/informal interaction between the hospital and government?
Hospital Domain
Strategic Management Has the hospital defined and described its mission and objectives?
What steps, if any, has the hospital taken towards strategic planning and preparing for
implementation?
Financial Management What are the different sources of revenue for the hospital?
What is the extent of contribution made by the ministry of health and other Government
agencies?
Is the budget broken down into recurrent and capital expenditure components?
Human Resources Who has the responsibility and authority for making personnel decisions such as
Management recruitment, dismissal, etc.?
What is the process of determining the salary structure? Is it the same as state
employees?
Who purchases these drugs? Is it the government or the hospital? If it is the hospital, are
drugs obtained from central stores or from the market?
Quality of Care
Changes in quality of health care can be evaluated in terms of the effects of an
intervention on structure, process, and outcome (Donabedian, 1980). These
can be judged along six different dimensions: effectiveness, acceptability,
efficiency, access, equity, and relevance (Maxwell (1984, 1992). This three-by-
Data for Decision Making Project 11
six classification gives eighteen “cells”, or cross-dimensions, and each cell gives
information on two dimensions: where (structure, process, outcome) and what
indicator of quality (effectiveness, acceptability, efficiency, access, equity,
relevance). Quality of care may be assessed by judging each cell against an
established or tested norm, and progress can be assessed by comparing the
cells over time.
Table 2
Quality of Care
Outcomes
Patient recovery, follow up for treatment, and impact on health status for
different groups of people are some of the outcome issues that are important
for assessing quality. Effectiveness in outcomes can be evaluated by looking
at indicators of patient recovery and survival, or alternatively at mortality
rates in the hospital. Patient acceptability can be assessed by using
indicators of follow up visits for improvement. Cost and case-mix
comparisons over time may give some idea of changes in efficiency. Equity
and access may be assessed by looking at the hospital use across income
groups, gender, age, race, and diseases and conditions treated in hospitals.
Equity
Following Wagstaff and Doorslaer (1993) equity can be defined in terms of
finance and delivery of health care. Equity in the finance of health care refers
to the requirement that “persons or families of unequal ability to pay make
appropriately dissimilar payments” for health care (vertical equity), and the
requirement that “persons or families with the same ability to pay make the
same contribution” (horizontal equity). Equity in the delivery of health care
refers to the requirement that “persons in unequal need be treated in an
appropriately dissimilar way” (vertical equity), and the requirement that
“persons in equal need be treated equally” (horizontal equity). (All quotes
are taken from Wagstaff and Doorslaer, 1993).
Accountability
Accountability was of little concern when hospitals were symbolic of
humanitarian efforts for community welfare. Today, however, with hospitals
using an increasing proportion of scarce resources and not using it so
efficiently and effectively, as Schulz and Johnson, 1990, note, there are
many questions of quality and effectiveness. Accountability, rather than
control is increasingly becoming the important issue, with hospitals being
accountable to consumers, individual patients, government and others who
provide funds, regulatory agencies, and own employees. Accountability is an
important factor in the successful use of public resources for the
improvement of community health. According to Bowen (1973), a good system
of accountability would have a clear purpose of goals and objectives, with an
ordering of priorities; allocation of resources toward maximum return in relation
to goals and objectives; evaluation of actual results; and reporting on evaluation
to all concerned.
Data for Decision Making Project 13
End-of-Section Checklist
Check that the following information is collected by the end of this section:
Figure 1.3
Hospital Autonomy: Implementation Guidelines
Decision Making
IDENTIFICATION OF HOSPITALS
DECISION MAKING
PROCESS
DESIGN
KEY INTERVENTIONS
4. Decision Making
• Privatization
Data for Decision Making Project 15
efficiency. Various reasons have been cited for these gains: the incentive
structures and other reforms that usually accompany autonomy; the
assumption of greater responsibility by autonomous hospitals; the greater
freedom of autonomous hospitals to choose their optimal production
function, the types and levels of inputs, throughputs, and outputs, and
the overall strategic direction and development agenda.
2/ This terminology is commonly used in the relevant literature on public economics. Our use of these terms is
inspired by Ramamurti (1991).
18 Implementation Guidelines
End-of-Section Checklist
By the end of this section it is expected that you would have taken a
decision on the future of the hospital. If the decision is to make marginal
reforms in the existing administrative and control structure, then the rest of
the guidelines offer only academic reading. If, however, the decision in
principle is to give the hospital more autonomy, the remaining sections on
design, process and key interventions are useful.
√ Final list of target hospitals, prioritized according to some well defined
criteria.
√ Preliminary decision regarding autonomy taken.
Data for Decision Making Project 19
Figure 1.4
Hospital Autonomy: Implementation Guidelines
Process
IDENTIFICATION OF HOSPITALS
DECISION MAKING
PROCESS
DESIGN
KEY INTERVENTIONS
5. The Process
Once the decision to give autonomy to a hospital or a group is taken, the next
step is to create enabling conditions to facilitate implementation. It is important
to recognize that a large number of people and organizations, within the
government, the hospital, members of the public, press, etc. would have the
potential to affect the decision making process, and ignoring their contribution
could well defeat the whole process even before it starts. Within the government
there are the issues of decision-making regarding the type and extent of
autonomy; an assessment of the likely impact of autonomy on government’s
finances, administration and people; political issues such as support and
opposition from different groups; legal issues such as those concerning the
existing laws of the land and the need for change; and personnel-specific issues
that concern government employees in the hospitals.
Within the hospital there are employees’ concerns regarding their future
employment conditions; changing relations between groups of employees,
particularly between medical staff and managerial personnel; union and
collective bargaining issues; scope and nature of the hospital’s services and
expansions; and every mission and goal of the hospital under autonomous
management.
20 Implementation Guidelines
Similarly, within the general public and the press there are concerns regarding:
the role the autonomous hospital will play in meeting community needs and
requirements; changes in resource mobilization strategies that may come about
with autonomy; and the accountability of an autonomous organization to the
community.
Reich (1994) provides a “six-step procedure for describing the issues, key
players, resources, and networks involved in a specific health policy
decision”.
• The first step considers and describes the expected effect of the
health policy along the dimensions of identity, size, timing, and
intensity of the effects.
• The sixth and final step analyzes the strategies for influencing the
decision.
End-of-Section Checklist
The process of implementing decisions regarding autonomy thus involve:
Figure 1.5
Hospital Autonomy: Implementation Guidelines
Design
IDENTIFICATION OF HOSPITALS
DECISION MAKING
PROCESS
DESIGN
KEY INTERVENTIONS
6. Design
Step 4: Decide whether any changes are required in the internal organization of
the hospital.
Table 3 presents our conceptual model in the form of a 6X3 matrix, with the
extent of autonomy and the policy/management functions representing the
two axes of the matrix. Autonomy is conceptualized as a continuum from a
situation where all decisions are made by the owner (public or private), to
one where the system of decision-making and policy formulation is highly
decentralized. We differentiate between decision-making at the macro level, i.e.,
in the national health domain; and the decision-making occurring within the
domain of hospitals. In this continuum, we define 3 stages (1-3) for each of the
policy and management functions.
24 Implementation Guidelines
Table 3
a b c
A. Health Domain
Overall Health All decision making Decision making jointly by owner and hospital
Goals entirely by owner management
B. Hospital Domain
Health domain refers to decisions that are made at the level of the government
or at the government-hospital interface, over which hospitals, typically, have
only limited control. Hospital domain,
domain in contrast, refers to those activities
undertaken within the hospital, over which the hospital management usually
exercises much greater control.
The two health domain functions are: formulating overall (national or state)
health goals (e.g., deciding on national health targets, health programs,
allocation of health resources, etc.), and setting hospital-specific goals (e.g.
deciding on hospital roles and functions, reporting requirements, evaluation
criteria, etc.).
Table 4
B. Hospital Domain
Organizational Models
The public hospital system can be reorganized to grant varying levels of
independence to various sub-units. This reorganization could, for instance,
entail the transfer of authority for planning, management, resource
mobilization, and resource allocation from the central government and its
agencies to:
• field units of central government ministries or agencies;
Data for Decision Making Project 27
Table 5
Autonomy as a Component of Health Reform
Delegation,
Delegation or the reorganization of authority specific to functions, involves
the transfer of decision making and management authority for particular
functions to organizations which are not directly controlled by the central
government ministries. Functions may be delegated from the central
government to organizations such as public corporations and regional
planning and development authorities, and other parastatal organizations
which are not officially within the government structure.
The nature and extent of autonomy would depend on the degree to which
the government continues to retain control over the various functions of the
hospital, particularly important functions such as (a) health policy
formulation and the establishing of national priorities; (b) the allocation of
certain resources, in particular capital funds; (c) control over quality and
licensing; (d) regulation of health personnel, including selection and
recruitment, training, salaries and wages, discipline and discharge, etc.; and
(e) regulation of user-fees, allocation of surplus, and financial accounts and
bookkeeping.
Models of Autonomy
There are two popular models of autonomy that countries in our study
favored:
• Making individual hospitals autonomous and transferring decision
making to independent boards.
• Setting up an organization of hospitals as a quasi-governmental
organization and making this body autonomous.
Internal Organization
The internal organization of a hospital may not need to undergo any change after
autonomy, though if a change in the control environment is required for any
other reason, this may well be the appropriate time for a reorganization. A
reorganization with a change in policies, personnel and responsibilities might
bring about new approaches to problem-solving and new attention to chronic
problems. At the same time, the reorganization may be simply necessary to
communicate the message that something is being done, which by itself may
trigger favorable responses. Moreover, organization design is largely an
executive function, and the introduction of a new board and new executive
leadership may also necessitate appropriate changes in the organization.
Figure 2
D iv isional Organization
Governing Board
CEO
Subspeciality
3/ This section draws heavily from Jones (1991) and Shirley (1991).
Data for Decision Making Project 31
Figure 3
Functional Organization
Governing Board
CEO
M edical M edical
Administration
Staff Director
M edical Records
Accounts Plant
Pharmacy
Purchasing Equipment
Food Services
M aintenance
House Keeping
& Laundry
noncommercial objectives and enter them explicitly into the enterprise accounts.
Thus costs are measured rather than benefits. While this is not the best
solution, costs are usually easier to quantify and value.
Within any government or hospital, there are several distinct power centers -
each of whom is likely to play a role in the evolution of hospital autonomy,
and the impact of this autonomy on efficiency, equity, revenue mobilization,
public accountability, and patient satisfaction. At the same time, there are
many potential points of conflict between the government and the hospital,
e.g., in defining the relationship between physicians and the autonomous
management, between the various departments of the autonomous hospital
and the various arms of government, etc.
Data for Decision Making Project 33
End-of-Section Checklist
√ Final list of target hospitals, prioritized according to some well defined
criteria.
Figure 1.6
Hospital Autonomy: Implementation Guidelines
Key Interventions
IDENTIFICATION OF HOSPITALS
DECISION MAKING
PROCESS
DESIGN
KEY INTERVENTIONS
7. Key Areas
• Finance
• Human Resources
• Procurement
Mission
The mission of the hospital, like that of any organization, should identify and
describe the purpose of the hospital and the relationship of the hospital to
the society that it seeks to serve. The mission should be shaped by the
hospital's capabilities, future potential, its role assigned by the government
or by itself, and the demands and requirements of the community. Schulz
and Johnson (1990) suggest that a sound formulation of the mission should
be based on considerations of:
• what services is the hospital providing?
• what is the main purpose and objective for the hospital to be in this
activity?
• what tasks must be carried out to meet community needs?
A mission statement of a public hospital would typically include:
carries out the mission of the government. The main functions of the board
are:
• Approve the annual budget, and ensure strict control over income and
expenses.
Boards organized along divisional lines are suitable for large multi-institutional
systems, where each component within the system is a distinct entity by itself.
A typical example is a structure like that of a holding company, where a large
number of hospitals are placed under one parastatal organization. The
divisional model applies to such cases, where the holding company has a board
and each of the constituent hospitals has its own board.
There is no obvious rule regarding the optimal size of the board. A very small
board (2-3 members) has the benefit of coming to quick decisions, but it lacks
the knowledge and expertise of a diverse group of individuals. On the other
hand, a very large board (20 and more) can become cumbersome and difficult to
manage. A 7-15 member team appears to be a good representation of the
community without overburdening members. A 9 or 15 member board has the
added advantage in that it provides for one third of its members to retire each
year, thus ensuring that at any given point in time there are some old members
providing continuity and some new members adding a fresh perspective to
decision-making. In any case, there is a distinct advantage in having an odd
number of members in the group to facilitate voting and avoiding stalemates.
There are no hard and fast rules regarding membership criteria, though it is
generally agreed that the members of the Board
• should represent diverse interests and professional background
• have sufficient time for attending board meetings
• have sufficient time to sit on committees
• clear priorities
Finance
Another area where autonomy is likely to bring about significant changes is
the financial management of the hospital. Autonomy is likely to lead to a
change in government financial allocations from line budgetary allocations to
block grants. In addition, there may be increasing opportunities for the
hospital to raise their own resources, through user charges, institutional
finance, donations, etc. At the same time, changes in the procurement and
personnel processes may put additional demands on the financial managers
Data for Decision Making Project 39
in the hospital. And finally, reporting and auditing requirements may also be
challenging tasks in an autonomous hospital. Thus, changes in financial
management may become necessary because of:
Procurement
Another activity that may be transferred to the hospital is procurement of
medical and nonmedical supplies, including drugs. Non-autonomous public
hospitals seldom purchase their own requirements of consumables, and thus
usually do not have separate procurement departments or procedures. An
autonomous hospital may thus be required to create a new procurement
department, whose primary objectives would be to purchase or otherwise
acquire equipment and materials of quantity and quality consistent with
departmental requirements and good patient care. Centralized purchasing
within the hospital has the advantages of bulk quantity purchasing,
standardization of items, controlled accounting procedures, controlled
inventory management procedures, controlled accounting and audit
procedures, and strong supervision. Decentralized purchasing within the
departments in the hospital has the advantage that specialized departments
can procure supplies in accordance to their specialized needs.
Figure 4
Hospital Information System
Cost For:
Patient Diagnosis •Procedure
Financial
& Treatment •Patient Days
Data •Outpatients
System
Strategic
Planning
Patient Record
System
Standard
Product Finance Utilization
Profiles Analysis By:
Patient Boards •Department
Scheduling & •Physician,
Order System etc.
Control
Standard
Service Service
Patient Profiles
Accounting Concurrent
System Technology Patient
Service
Personnel Review
Expenditure &
Patient
General
Data Internal
Accounting
Control
System
Department
Personnel Service &
System Clinical Statistics
Data
Support Services
System
Planning Performance
Data Reporting
Management
Control System
• Patient scheduling and order system, which includes patient care and
support services, such as food, housekeeping, etc.
End-of-Section Checklist
√ Final list of target hospitals, prioritized according some well defined
criteria.
8. End Note
References
Mills, Anne, J. Patrick Vaughan and Duane Smith and Iraj Tabibzadeh (1990):
“Health System Decentralization”, World Health Organization, Geneva.
Needleman, J. and M. Chawla (1996): “Hospital Autonomy in Zimbabwe”,
Data for Decision Making Project, Harvard University, Boston, MA.
Newbrander, W., H. Barnum, and J. Kutzin (1992): “Hospital Economics and
Financing in Developing Countries”, World Health Organization, Geneva.
Ramamurti, Ravi (1991): “Controlling State Owned Enterprises” in Ramamurti
and Vernon (ed): “Privatization and Control of State Owned Enterprises”, EDI
Development Studies, The World Bank, 1991.