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FMP 7 Gy KPR Zmic CR O5 e 8 FWRG 4 Onn 3 Vws VPyb J8 H DZ

This document provides definitions for key terms used in the Vermont Agency of Human Services' Health Care Administrative Rules. Some key terms defined include: - Adverse benefit determination - Agency - Beneficiary - Centers for Medicare and Medicaid Services (CMS) - Code of Federal Regulations (CFR) - Day - Department of Vermont Health Access (DVHA) - Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) - Global Commitment to Health Waiver - Health Care Administrative Rules (HCAR) - Human Services Board - Medicare - Network - Plain Language The document defines these administrative and healthcare-related terms to clarify their
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© © All Rights Reserved
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0% found this document useful (0 votes)
58 views47 pages

FMP 7 Gy KPR Zmic CR O5 e 8 FWRG 4 Onn 3 Vws VPyb J8 H DZ

This document provides definitions for key terms used in the Vermont Agency of Human Services' Health Care Administrative Rules. Some key terms defined include: - Adverse benefit determination - Agency - Beneficiary - Centers for Medicare and Medicaid Services (CMS) - Code of Federal Regulations (CFR) - Day - Department of Vermont Health Access (DVHA) - Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) - Global Commitment to Health Waiver - Health Care Administrative Rules (HCAR) - Human Services Board - Medicare - Network - Plain Language The document defines these administrative and healthcare-related terms to clarify their
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 47

LECTURENOTEON

PUBLI
CHEALTHCAREMANAGEMENT 1
(HCM 203)

BY

AKOROS.
A
M.
SC,
MSOW(
Nig)

1
CHAPTERONE

1.0HEALTHCAREADMI NI STRATI VERULESDEFI NI TIONS


Fort hepur posesoft heseHeal thCar eAdmi nist
r ati
v eRul es, theterm:
“Adv er
sebenef itdet erminat i
on”meansanyoft hef ollowi ng
(1)Deni alorli
mi tedaut hor i
zat i
onofar equest edser vice,includingdet erminati
onsbasedonthe
typeorl evelofser vice,requi rement sofmedi cal necessi ty,appr opri
ateness,setti
ng,
or
effecti
venessofacov eredser vi
ce,
(2)Reduct ion,suspensi on, ort erminat i
onofapr ev i
ousl yaut hori
zedser vice,
(3)Deni al
,inwhol eori npar t,ofpay mentf oraser vice,
(4)Failuretopr ovideser vicesi nat imel ymanner ,asdef i
nedbyt heAgencyofHumanSer vi
ces,
(5)Failuretoactwi thintimef ramesr egar dingst andar dr esol uti
onofgr ievancesandappeal
s,
(6)Deni alofabenef ici
ary'sr equestt oobt ainser vi
cesout sidethenet wor k,
(7)Deni alofabenef ici
ary’sr equestt odi sput eaf i
nanci al l
iabili
ty,i
ncl
udi ngcostshari
ng,
copay ment s,premi ums, deduct i
bles, coinsur ance, andot herbenef ici
aryl i
abi
li
ti
es.

“Agency ”meanst heVer montAgencyofHumanSer vicesoranyofi tsdepar t


ment s,off
ices, or
divisions.
“Benef iciar y ”meansanyi ndi vi
dual eligi
bletohav ebenef i
tspai dtohi m orher ,oronhi sorher
behal f, underVer montMedi cai d.
“Cent er sf orMedi car eandMedi caidSer v
ices”or“ CMS”meanaf ederal agencywi t
hintheU. S.
Depar tmentofHeal thandHumanSer vi
ces.Pr ogr amsadmi nist
eredbyCMSi ncludeMedi care,
Medi cai d, theChi l
dr en’ sHeal thI nsur ancePr ogram ( CHI P) ,andt hef eder alHeal thInsurance
Mar ket place.
“CodeofFeder alRegul ati
ons”or“ CFR”meant hecodi ficat ionofr ulespubl ishedi nt heFeder al
Regi st erbyt hedepar tment sandagenci esoft heFeder al Gov er
nment .
“Day ”meanscal endardayunl essot herwisespeci fi
ed.
“DVHA”meanst heDepar tmentofVer montHeal thAccess.
“Ear l
yandPer i
odi c, Scr eening, Diagnost i
c,andTr eatment ”or“ EPSDT”meant hei temsand
serv i
cesdef inedi n1905( r)oft heSoci alSecur i
tyActwhi chi ncludescr eeni ng, vi
sionser v i
ces,
dent al ser v ices, hear ingser vices, andsuchot hernecessar yheal thcar e, di
agnost i
cser vices,
treatment , andot hermeasur esdescr ibedinsect ion1905( a)t ocor r
ectoramel ioratedef ects
andphy sical andment alil
lnessesandcondi t
ionsdi scov er edbyt hescr eeni ngser v i
ces,whet her
ornotsuchser vi
cesar ecov eredundert heSt atePl an.
“GlobalCommi tmentt oHeal thWai ver”meansaMedi cai dDemonst rat i
onWai veraut hor i
zedby
Sect ion 1115 oft he Soci alSecur ityAct ,whi ch pr ov idesVer montMedi caid wi t
hf eder all
y
appr ov edwai versofspeci fi
cr equi rement soft heSoci alSecur i
tyActt hatwoul dot herwiseappl y
toVer montMedi cai d.Thesewai verspr ov i
deVer montwi thexpendi tur eandpol icyaut horityt o
AgencyofHumanSer vices.
expandMedi cai del i
gi bili
tyandt opayf orprogramsandser v i
cest hatpr omot et heobj ect i
vesof
theMedi cai dpr ogr am out sideoft heMedi caidSt atePl an.
“Heal thCar eAdmi nist rati
veRul es”or“ HCAR”meant hecol lect
ionofr egulationsadopt edbyt he
AgencyofHumanSer vicest hatgov er ntheadmi nistrationofVer montMedi caid,including
gener al pr ov isi
ons, eli
gi bil
it
y ,benef i
tdel i
very,cov eredser vices,reimbur sement ,speci al
ized
serv i
ces, benef i
ciaryr ight s,andpr oviderresponsi bili
ties.

2
“HumanSer v icesBoar d”meanst hei ndependentpar tofAHSt hatser vesast heext ernal
appeal sent i
tyf orcompl iancewi th42CFR§431, Subpar tE, and3VSA§3090.
“Medi care”meanst heheal thinsur ancepr ogram f ort heagedanddi sabledunderTi tl
eXVI IIof
theSoci al Secur it
yAct .
“Net work”meanst hepr ov i
der swhoar eenr ol
ledi nVer montMedi cai dandwhopr ov i
deser vices
tobenef iciaries.
“PlainLanguage”meansl anguaget hatt hei nt
endedaudi ence, includingi ndiv
idualswi thlimited
Engl i
shpr oficiency ,canr eadi l
yunder st andandusebecauset hatl anguagei sconci se, well
organized, andf oll
owsbestpr acticesofpl ainlanguagewr i
tingfort hataudi ence.
“Prov i
der ”meansanyi ndividual orent i
tywhohasent eredi nt oanagr eementwi ththeAgencyof
HumanSer v
icesoranyofi tsdepar tment s,offi
ces, ordi visi
ons, topr ovideser vicescov eredby
VermontMedi cai d.
“Prov i
derManual s”meanspol icyandpr ocedur edocument sout l
iningt hepoliciesandpr act i
ces
formedi cal pr ov idersenr olledwi thVer montMedi cai d.Manual sar emadepubl i
callyav ai
lablef or
medi calcov er ageandmedi cal programsadmi ni steredbyt heAgency .
“Ser vi
ceAut hor izat i
onRequest ”meansar equestf ort hepr ov i
sionofaser vi
ce, i
ncludingpr i
or
author i
zat i
onandconcur rentr eview, thatr equir esaut hor izationpur suantt o42CFR§438. 210.
“Ser vi
ces”meansabenef it(1)cov eredundert heGl obal Commi tmentt oHeal thWai ver,(2)
i
ncl udedi ntheSt ateMedi cai dPlan, (3)aut hori
zedbyst ater uleorot herlaw, (4)requiredby
federal l
aw, or( 5)ident if
iedi nt heI ntergov ernment alAgr eementbet weenDVHAandAHSf ort he
admi nistrati
onandoper ationoft heGl obal Commi tmentt oHeal thWai ver.
“StateFai rHear i
ng”meansanappeal toAHSf orahear i
ngbef oret heHumanSer vi
cesBoar d.
“StatePl an”meanst heagr eementbet weenVer montandt heCent ersf orMedi careand
Medi caidSer vicesappr ov edunderTi tleXI Xoft heSoci alSecur i
tyActdescr i
binghowVer mont
admi nistersit sMedi caidpr ogram.
“Ver montMedi cai d”meanst hemedi calassi st ancepr ov i
dedundert heSt at ePlanappr ov ed
underTi tle XI X oft he Soci alSecur it
yAct ,and t he t erms and condi ti
ons oft he Gl obal
Commi tmentt oHeal thWai ver,asappr ovedbyCMS.

3
CHAPTERTWO
2.
0THEHOSPI
TALASANENTERPRI
SE:MANAGEMENTSTRATEGI
ES

Introduction
Heal thsect orrest r
ucturi
ngf ir
sti nt
roducedi ntheNor th(Dekker1987)i snow adv ocatedby
maj orinternati
onalor ganizati
ons( WorldBank1993)asawayt oaddr essthechronicproblems
affectingdev el
opi ngcount ri
es’healt
hsy stems.Oneoft hebasi ctenetsofthesereformsi st hat
thei nt
roduct i
onofmar ketprincipl
esintheheal t
hsectorwi l
li
ncreaseef f
ici
ency.
Organi zati
onssuchashospi tals,i
ncludi
ngpubl i
clyownedones,shoul dber unasenterprisesi n
ordert omaxi mi zetheiroutputandv alueformoney .Impli
citinthisasserti
onistheconv entional
argumentt hatpubl icmanagementi sinherent
lyandet ernal
lydiffer
entf r
om priv
ateent erprise
management ,thelatterbeingintri
nsi
callypronetoinduci
ngef fi
ciency.

Whyshoul dahospi talbeanent erpri


se?
The i dea ofan ent erpr i
se conj ures up a f r
ee- mar ketscenar io wher e buy ers and sel lers,
unr estrained by st ate cont r
ol,ar e atl ibertyt o make choi ces i n a compet i
ti
ve busi ness
env ir
onment .Beinganent erpriset husmeansusi ngmet hodst y
picaloft hepr ivatesect or.
Possi bleexampl esoft hesear et opmanagementaccount abili
ty;thepr e-emi nencegi vent o
cli
ent s’expect ati
onsanddesi res;emphasi son‘ balanci ngt hebooks’ ;andsy st emat i
cuseof
i
ncent i
v esanddi sincent i
vest or egulatebehav iourr at hert hanhav i
ngasepar atebodyexer cising
discret i
onar ycont rol.
Compet it
ionbecomest her uleoft hegame:anumberofsel lerscompet etosat isfyaconsumer .
Ifther ei sonl yoneconsumer ,heorshewi llhav ewhateconomi stscall‘monopsoni stic’power ,
theanal ogyf orconsumer sofmonopol isti
cpowerbypr ovider s.
Hence t he ‘purchaser –prov i
derspl i
t’
,whi ch separ ates t he pur chaser( i.e.di stri
ctheal t
h
aut horiti
esandot hernon- gov ernmentagenci es)f rom heal t
hcar epr oviders( i.
e.sel f-
gover ning
hospi talsandot heraut onomouspubl i
candpr ivatei nst i
tutions, suchas
communi t
yheal tht rusts).A mar keti st huscr eat edwhi chcanbemor eorl essr egul ated
(‘
managed’ )i nor dert opr ev entmar ketf ail
ures.A managedmar keti ntheheal t
hsect ori s
supposedl yboundt opr omot ecompet itionamongpr ov i
der sandt hussuppl y-sideef fici
ency .The
separ ation ofpol i
cymaki ng and execut ivef unct i
ons and t he introduction ofcont ract ual
relati
onshi psbet ween pur chaser sand pr ovider si sal so bel i
ev ed toi ncreaset ranspar ency ,
quant ityandqual ityofser vicesbydecent r
al i
zingmanagementandbymaki ngexpl i
citt he
obligat i
onsofeachsi de( Broomber g1994) .Mostr efor mst endt omai ntain
theexi st i
ngsi tuationofpubl i
cmonopsonyt oov ercomeequi typr oblemsofmar ket-determi ned
resour ceal l
ocati
on.

HowDoHospi t
alsWorkAsEnt erpri
ses?
Autonomousorsel f-
gover
ningst at
us( orindependenthospi
talboards,IHB)ist heprinci
pal
mechanism wherebyt
hisspl
itofresponsibi
l
ityi
stobeachieved.Buthowar etheseautonomous
hospit
alent
erpri
sessupposedt owor k?I
nt heUnitedKi
ngdom,amongt hefuncti
onsdelegat
ed
4
toNat ionalHeal thSer v i
ce( NHS)Tr usts( thenamegi vent osel f
-gov erni
nguni ts,including
hospitalsandcommuni tyheal thser vices)ar et hef ollowing:pr ov i
dingser vicesei therunder
managementbudget swi ththei rowndi stri
ctsorundercont ract swi thot herdi strict
s; negoti
ating
thepr i
ceofser v i
ces;gener atingi ncome;aqui ring,owni nganddi sposi ngofasset s;borrowi ng,
subjectt oanannualf inanci all imit;r etai
ningoper at i
ngsur plusesandbui ldingupr eserv es;
setti
ngt heirownmanagementst ructureswi thoutcont r
olf rom t hedi str
ictorgov ernment ;
empl oyingwhat ever ,orhowev ermany ,staf ft heyconsi dernecessar y;deter miningpayand
conditi
onsofser v
icesf orst affandconduct ingt heirowni ndust rial rel
at i
ons.
Ther ational ei sthatt hesel f-
gov erninghospi talwi llear ni tsr ev enuepr i
ncipal l
yfrom ser vices
rendered,i .e.f r
om cont ractswi thheal thaut hor i
ti
est opr ov idet heirr esident swi thspecified
servi
cest oagi venl evel andqual it
y.Ot hercont r
act sandr evenuemay
come f rom heal t
h car e pr ov iders wi t
ht heirown budget s( e.g.‘ budget -
holder’gener al
practit
ioner si nt heUni tedKi ngdom) ,pr i
vatepat ient sort heiri nsur ancecompani es,pr i
vate
hospitalsandempl oyer singener alandot hersel f-gov erninghospi tals.
Awayt oi ntr oducei nter nalmar ketmechani smsi nur banar easofAf ricawoul dbe,f orinstance,
totransf err esourcespr esent l
yal l
ocat edt oci tyhospi talst our banheal thcent res.Theseheal t
h
centrescoul dthenactasf und- holder s,buy ingei therr efer ralorcl inicalsuper vi
sor yservices
from hospi tals.Cont r
act ual arrangement smaybeoft hr eeki nds: Bl ock
Contract s,i.
e.anannual feepai di ninst alment sbyt hepur chasi ngagency ,inreturnf oraccesst o
adef i
nedr angeandl ev elofser vices; CostandVol ume
Contract s,i.
e.hospi talsr eceiveaf i
xedsum f orabasel inel ev elofact ivity,definedi ntermsofa
givennumberoft reat ment sorcases; CostperCase
Contract s,i.
e.eachcasei spai df oroni tsown.

HowDoSel f-Gov erni ngHospi tal


sPer formI nACompet it
iveEnv ironment ?
Themai npr obl em ofhospi tal sact ingasent er pri
sesi stwof ol d.Ont heonehand,becauseof
theircompl exi t
yas‘ or ganizedanar chies’ ,i
ti sof tenpr oblemat ict odef ineandmeasur eei t
her
thequant it
yort hequal ityoft heirout putand, consequent ly,
toagr eeonhow t hei ref fi
ciencyi st obeassessed.Ont heot herhand,i tisdi ffi
cul ttor egard
hospi tal
sas‘ pr ofi
t-maxi mizingf ir
ms’ ,aspr of itisnotnecessar ilythemosti mpor tantgoal( as
mayev en bet hecase i n‘ for-prof it
’i nstit
ut ions).Hospi tals’r esponsest o changest ot he
economi cenv ir
onmentandt odi fferentmar keti ncent i
vesar equi teunpr edictable.
Ther ati
onal ebehi nd‘ hospital sasent er pri
ses’i stousescar cer esour cesmor eef ficient l
y.In
gener al,theter m ef ficiencyr el at
est ohowwel linputsareusedt opr oduceout puts.Int heheal th
sectorwemustaddr esst wodi f f
er entki ndsofef fi
ciency ,techni calandal l
ocat ive.Techni cal
effi
ciencymeansr eachi ngtheobj ect i
v eatt hemi nimum cost .Conv ersel y,al
locat i
veef f
iciency
i
mpl iest hatav ail
abl er esourcesar eusedi nawayl eadingt ot hehi ghestbenef i
tt osoci ety,at
ti
mesev enconf li
ctingwi t
hpr ev i
ousl ysetobj ect iv
es.Itisnotuncommon, f
orexampl e,thatwhat
i
sgoodf orthepat ientmaynotbedesi rableforsoci etyasawhol e.
All
ocat i
veef fici
encyi st husaboutwhatt ochooseasanobj ect i
v e,wher east echni calef f
iciency
dealswi thhow t oachi evei t( Shi ell1991) .Theef fici
encyobt ainedt hroughaheal thsect or
mar keti sof tenmer elyconf inedt oi tst echnicalaspect .Mor eov er,thecompet i
ti
vemechani sm
thatkeeps cost s down may wel lj eopar dize heal th car e qual i
ty and ev entuallyi t
s own
effectiveness.Theopposi tecanal sooccur ,namel y,thatt het hrustofcompet iti
onwi l
lf orce
provider stoconcent rat eon‘ cosmet ic’qual ityl eadingt ohi ghercost s( t
houghnotnecessar il
y
mor eef fectivecar e) .Theunj ust i
fieduseofgl amor ousandext remel yexpensi vet echnol ogywi th
5
nosi gnifi
cantmar gi nalbenef i
tisacaseinpoint.
Asf oral l
ocativeef ficiency,howcoul dmar ketforcesint heheal t
hsect orimpr ovethesituation?
I
ti sconcei v
abl et hatheal thcar eprovi
dersandmanager s(includingthepubl i
cones)maywant
to pur sueobj ectiv esi nconsistentwiththeNat ionalHeal th Plan orev en with government
objectives.Theymayseekt omaxi mizegr owth,est abli
shorconsol i
datepol it
icalall
iances,
obtainf avours,orbei nterestedinanyofanumberofot herf actor
swhi charepar toft heir
personalut i
li
tyf unct i
on.Thei rimmediateconcernmi ghtwel lbej ustthetechnicaleffi
ciencyof
theirownor gani zat ions,theirunitsofproduct i
onasgaugedi nt ermsoff inancial(
pr ocess)
i
ndi cators.
Outcomei ndicator s, i
npar t
icularthei
mpactont heheal t
hoft hepopulation,aretypical
l
yofl itt
le
i
nter esttomanager s.

TheExper ienceSoFar
The exper i
ence t hati sbui lding up i nternat ionallyshoul d gui de usi n oursear ch fornew
managementst rategies.Lar ger efer ralandt eachi nghospi t
al si ndev elopingcount ri
eswer e
giveni ndependentst atusmai nlyt oenabl emi nistriesofheal t
ht ocapspendi ngont er
ti
ar ycar e
and shi f
tr esour ces t owar d pr i
mar ycar e.Manager s,wor king wi t
hinaf ixed budget ,wer e
expect edt o ensur ev aluef ormoney .A l essexpl icitobj ect i
v et o‘ free’t hesecumber some
i
nst it
ut ionswasnodoubtt odi stancet hemi nistryf rom amaj orsour ceofpr oblems.Anecdot al
evidencespeaksf oragener alr eluct anceofmi nistr i
est ogi venewl yindependenthospi talst he
necessar yaut hor i
ty( e.g.st af frecr uitmentanddi smi ssal ,dr ugsandsuppl i
espr ocur ement ).
Hospi talmanager shav enor eal incent i
v et ocont aincost sori ncr easeef fi
ciency .
TheBoar ds,est ablished t oi mpr ov emanagement ,of ten makemanagementmor edi ffi
cult
becauseofconf l
ictingi nterests, professi onaldomi nat i
onandcont rast ingl oy alti
es.Ingener al,
to
myknowl edge,t her ei sl i
tt
leev idencet o suggestt hatsel f-gov erning hospi tal
shav ebeen
effect ivei ncut t
ingt hef undsspentont ertiarycar e.Mul agoHospi t al
,t henat ionalr eferral
i
nst it
ut ioni nKampal a,af t
er7y ear sf rom t hef i
rstini tiati
v et obecomeaut onomous, isstillatan
earlyst ageoft hepr ocess.Sof arMul agohasbeengr ant edonl yfinanci alindependencet hough
i
thasmanagedt oat tractmor ef undsf rom t hegov ernmentt hani nt heol dt i
mesofmanager ial
cent ralization,whi chcl ear l
ydef eat st hegov er nment ’
sobj ect ivet or edistributer esour cest o
pri
mar ycar e.Exper iencewi t hcompet itionandi t
sef fect sonhospi talef fi
ciencyi snomor e
encour agi ng.I nt heor y,theadv ant agesofcompet itionar eeasyt odemonst rate,butcondi ti
ons
forawor kabl e,letal oneper fect,mar ketr arel yhol di npr act i
ce.Ashasbeensai dwi thregar dto
theUni t
edKi ngdom,heal thsect orr ef or msr epr esentanat temptt oi ntroducecompet i
ti
oni na
non- compet itiv
esi tuation.Thi sf acti sev en mor eappar enti n dev elopi ng count ri
eswher e
consumer sdonothav eadequat ei nf ormat i
ononser vices,andwher eexcesscapaci t
yf or
cli
nicalser v i
ces—anessent ialpr erequi sit
ef oraf unct ioni ng mar ket—exi stsonl yi ndensel y
popul at edar eas.Ot herpr oblemswhi char eal soappar enti nr ichercount ri
esar emanager s’ need
ofessent iali nformat i
ont oai mf orr eal isti
cpr icingpol iciesaswel lasseeki ngt hebestbuyi n
termsofqual i
tyofcar eandpr i
ce.Sophi st i
cat edmanagementi nfor mat ioni saf undament al
requi rementwhi chmakesi mpl ement ingr efor msi nmostdev elopi ngcount r
iesmer ewi shful
thi
nki ng.Onecommonr ati
onal ef orf r eeinghospi t alsf rom gov ernmentbur eaucraciesi st he
supposedcompar at i
veef fi
ciencyofNGOsagai nstgov er nmenti nst i
tut i
ons.TheWor ldBank,
SIDA,t he Eur opean Uni on i n Uganda and ot hers pr ov ide f unds t o be channel ed t hr ough
gov ernmentagenci esf orusebyNGOs,ar guingt hatt her ei sacasef orst r
engt heningt he

6
capaci tyofsuchagenci est o actasmor eef fectivepur chaser sandpr ov ider s.St udieson
nongov er nmenthospi talsfrom di f f
erentcount riescomet oconf li
ct ingconcl usi ons.Whi leGi lson
(1987)r epor tsmor ewast ef uldr ugsuppl ysy stemsi ngov ernmenthospi t
al st hani nmi ssi on
hospi talsi nSwazi land,Mat thiasandGr een( 1994)f oundnoconcl usiveev idencef orgr eat er
NGO ef f
ici encyi nZi mbabwe.I nherext ensi ver esear chonhospi talsi ndev elopi ngcount ries,
Mills( 1990)acknowl edgest hel ackofdat at osubst ant i
at et hecl aimt hattheuni t
cost sf orcompar ablef acil
itiesar ehi gherorl oweri nNGOorgov ernmentf aci l
iti
es.I ngener al
,
compet i
tionbet weenpubl icandpr ivatepr ovider si sr ar eandwheni tisencour aged,publ ic
sect oragenci esmaybeatadi sadv ant agebecauseoft hei rl imi tedcont r olov ert heuseof
resour ces( e.g.st aff) .Anexampl eoft henewr efor mistwi ndi nUganda( Stefani ni1995)i st he
activepr omot ion,wi thint hef ramewor kofamul ti
-mi ll
ionpr ojectwi thal oanf r
om t heWor ld
Bank,ofcont ract ualr elati
onshi psbet weent hepubl icsect or( MOH) ,gr aduallyr emov edf rom i ts
roleasamaj orheal thcar epr ov ider ,andt hepr ivat esect or( bot hf or -profi
tandNGOs) .Hospi tals,
heal thcent res,managementandsuper v i
si onf unctionsaswel lassuppor tser v i
cesar enow
encour agedt obecont ractedoutt opr ivat ei nst i
tut i
onsi nasear chf ormor ecost -
ef fect i
veway s
toobt ai nopt i
mal valuef ormoney .Ser vicessuchasst affmeal sorst eam housesar eal readyr un
bypr i
vat econt ractor si nsomebi ggerhospi tal
s.Buti ti sof tendi fficulttoquant i
fyt heext entt o
whi chcompet iti
v et ender ingr esul tsi ngr eat eref fi
ciency ,andf orsomeser vicest her ei sl i
ttle
capaci tyi nt hepr ivatesect or.
Asr egar dscl inicalser vi
ces,t heabsenceofr ealcompet ition,par ti
cularl
yout sideKampal a,
thedear t
hofi nfor mat i
onneededt omoni torcont ractper for mance,andt heshor t
ageof( non-
project )f inancet of oott hebi ll
scastser iousdoubt sov ert hev iabi l
ityofsuchschemesona
l
arge scal e.Pr ice r educt ion,an expect ed benef itofcompet ition,i s of ten of fsetby t he
occur rence of‘ non- pr i
ce compet i
tion’when heal th car e pr ov ider s engage i n‘ f
acel ifting’
exer ci
sesanddupl icat i
onofser v ices.Thi shappensbet weent hemushr oomi ngpr ivat ehospi tals
i
nKampal a, leadingt ohi ghercost sandpr ices.Theper formanceofahospi t
al /enter pr i
secanbe
consi der ednotonl yatt hei nst itutionall ev el,i
.e.asapr oduct i
v euni t,butal soatt hesy st ems
l
ev el,i.e.i nt ermsofhow wel lthel ocalheal thsy stem per f
or msaf teri t
shospi talsar egr ant ed
self-gov erni ngst atus. Theexper iencei nEur opeandt heUni t
edSt atesi sclear:pr ov ider sexer cise
unduepr ef er encei nt het ypesofpat ient sadmi ttedt okeepcost sdown,whi chmayobv i
ousl y
affectov er allaccesst oheal thcar e.Theper v erse‘ qual itycompet it
ion’ref erredt oabov ei s
anot herexampl eofpossi blesy stemi cef fectsofcompet itionbet weenhospi tals.Ev eni ft he
actualqual i
tyofheal thcar edoesi mpr ov e,l i
ttleconsi der ationi sof tengi vent oi nef f
icienci es
resul t
ingf rom t hedupl icati
onorunder -useofcapaci tyorf ail
ur et oexpl oiteconomyofscal e.

ManagementSt rategi es
Whatdoest hef utur ehold?Heal thsect orreformsar eresul
ti
nginaf undament alenvi
ronment al
changewhi chchal lengeshospi talmanagement .Itisunli
ke(andinmyopi nionundesirabl
e)that
a genuine,f ul
lyf ledged heal th sectormar ket,wher eself
-governing hospital
scompet ef or
surviv
al,willeverdev el
opi nmostAf ri
cancount r
ies.Thisisbecausemostoft hecondit
ions
requir
edt ofulfi
ltheef fi
ciencyclaim oft hesereformsdonotoccur .Asecondr easonisthatthe
costoft heser eformswoul dbepr ohibiti
veinspi t
eofsomedonor s’eager nesstopusht hem
through.Butal i
mi tedi ntroductionofpar ti
cularelementsoft heser ef
ormsi sconceivable,
perhapsev endesi r able.Thisappl iestot hespl i
tbet weenpurchasingandpr ovidi
ngfuncti
ons,
qualit
ycont rolandt heemphasi sonpat ientchoice.Contracti
ngwi l
lnodoubtr equir
esome

7
degr eeofmanager ialdecent rali
zat i
on,andagener all ackofmanager ialexper t
isei sboundt o
count er actt hist endency .Compet iti
onwi llprobabl yoccuratt hemar gin, foraddi tional resour ces,
wi t
hdonor sact ingasi nst i
tutionalpur chaser s.Anexampl e( ar
guabl ynotf oremul ation)ofhow
donor sdocompet ei st hemar ketf orwor kshopat tender sorf i
eldal lowancesf orsel ect ed
progr ammeact ivities.Whati sneededi sanev aluationoft hefai r
lywi despr eadexper iencei n
dev elopi ngcount ri
es,aswel lasawat chf uley eont heemer gingev idencef r om dev eloped
count ries( Robinson&LeGr and1994) .
Hospi tal sandpol icy -
maker smustbeawar enotonl yofpr esentdanger sbutal sooft hef uture
threat swhi cht hesedev elopment smaybr ingabout .Hospi talmanager sandheal thwor ker sar e
expect ed t or espond t o di f
ferentst imul iand i ncent ives,and t heirbehav i
ouri s notf ully
predi ct able.Tr ansf er ri
ngpubl i
ccompl ai nt sf rom gov er nmentt oaut onomoushospi tals,shi fting
cost s ( i
.e. bounci ng expensi ve pat ient s bet ween pr ovider s), ‘ backdoor ’ pl anni ng
(euphemi sticallycal ledmar ketmanagement )andcoor dinatedpur chasi ngonanar eabasi s,ar e
probl emst hatmanyheal thcar e mar ket sal r
eadyhav et odealwi th( Pat on1995) .Hospi talsar e
anexpensi vewayt odel ivermedi calcar e.Nev ertheless,t hespeci alser vicest heypr ovidear e
cheapert opr ov idet heret hanathome.
Basi cal ly,ef fi
cientuseofhospi talsmeansdeal i
ngwi tht her ightpat i
ent s( thosewhocannotbe
treatedel sewher e)att her ightt ime( whenhospi t
alt reat mentcanst illbeef f
ect i
v e).‘Car eby
subst i
tut ion’ ,dev elopmentofpr ot ocol sf orcer t
aincat egor iesofpat ient s( diagnosi sgr oups) ,day -
carecent res, suppl ement ar yhomecar e( e.g.mat ernit
y -homes)andaspeci al ef f
or ttor ati
onal ize
referral sy stemsar esomeoft hei nnov ationst omakehospi talsmor er esponsi vet ot heneedsof
thepopul at i
onswhi l
ecut ti
ngcost s( Maar seetal .1990) .Low- costal ternat i
v est ohospi talsar e
essent ialt omakehospi talsef ficient .Bypr ov i
dingat echni calf ocalpoi ntf ort hedel iv eryof
speci al ized, r
efer red
care,hospi talscanact uallymagni fyt heef f ecti
venessofl owerl ev el,non- hospi talcar e( Van
Lerber ghe&Laf ort1990) .
Theabsenceofhospi tali ntegrat i
oni nt hel ocalorr egi onalheal thsy stem whi chf ullhospi tal
autonomymayent ailisboundt ohav eanegat ivei mpactont her efer ralpat tern.Funct ional
coor di nat ioni snecessar yf orar ef erralpol i
cywhi chemphasi zest heuseofl ower -l
ev elf acili
ties
to pr ov i
decar e.Ev aluat i
onofhospi talsshoul dt henf ocusont hesy st em l ev el.Thel ocal
prov isionofser vicesshoul dbepl annedandcoor dinat edatt heDi st ri
ctHeal t
hSy stem ( DHS)
l
ev el.Ther el
at i
v eper formanceofhospi tal sdependsont heext entt owhi cht heyr espondt o
prioritiessetbyt hel ocalDi stri
ctHeal thAut hor it
ies( DHA) .Whathast obeseeni showf art he
i
ncent iv esgener at edbysel f-gover ningst atuswi l
lconst raint heabi lityt oDHAst opr ov i
dewhat
theyr egar dasa
desi rabl er angeofser vi
cesl ocall
y .

Conclusi
on
The assumption thatpubl i
c managementi si ntri
nsical
ly di
fferentf rom pr
ivat
e ent er
pri
se
managementi scommonl yusedtost udypubli
csect orfail
uresandt osuggestsolut
ionsof t
en
focusedonthesuccessoft hepr
ivat
esect or
.Butt hereisenoughev i
dencet osupportthev i
ew
thatpri
vatesectormanagementandt heso-call
edf reemar ketent erpri
sesarebynomeans
exemptfrom t
hef orcescommonlycitedtoexplai
nmanager ialf
ailureinthepubl
icsector.Ski
ll
ed
and mot i
vat
ed manager s ofpubl i
c agencies can i ndeed be ef fect
ivein bri
nging about
perfor
mancei mprov ement,asthepr acti
cesthatbr ingsuccessar egener al
l
ysi mil
ar,ifnot

8
i
dent i
cal,to successf ulpr actice inpr iv
ate busi ness ( Kor ten 1984) .Publ ic hospitals made
autonomousandsel f-
gov er ningt opl ayanact i
vepar ti nthenewenv ironmentcr eatedbyheal th
sect orreformsshoul dnotbeensnar edbyar i
gidlyi deologi cal‘my stiqueofmar kets’(Bennet
1991) .Inv i
ewoft hedi stinct i
vef eatur esoft hepubl icsect or( thatis,thepol it
icalnat ureofi ts
policy-making,itsgoalofequi t
yandt henat ureofpol it
icalaccount abi l
it
y)r ef
ormer sshoul dbe
verycar ef
ulwhent ransfer ri
ngmanagementst ructuresandpr ocessesf rom thepr ivatetot he
publ i
csect ors(Collnsetal
i .1994) .
Akeypl ayerinthisnewscenar i
owi ll bethehospi t
al manager : goodmanager sact i
velytunet hei r
organi zati
onst ot heext ernalenv ironmentandt hinki nt ermsofsy stems.Goodmanager s
consi derthel ong-term consequencesofdeci sionsandst rategies,andempat hizewi thmany
dif
fer entkindsofpeopl eandconst ituencies.Trainingsuchmanager sposesagr eatchal l
enge,
particularl
yasl it
tleofwhati scr it
icalt odev elopingheal thsy stemsi st aughti nconv enti
onal
managementcour ses.AsKor t
en( 1984)put si t:‘Wear epr epar ingt hemanager soft omor row
witht het oolsofy esterday ’.Tocount eractthei ncreasi ngpr essuresoft hepr evail
i
ngmar ket
orthodoxy ,theconceptofef fi
ciencymustnow becompl ement edwi t
ht heconceptofsoci al
uti
lity:Doest hehospi talser veausef ulsocialfunct ionr elativet oitscost ?Manager swhoar e
l
itt
le mor et han account ant s willhav eal imited r olei n managi ng hospi t
al sint hi
s new
env i
ronment .

9
CHAPTERTHREE

3.
0THEHEALTHCAREPOLI
CYANDREGULATI
ONS

The pur pose ofheal t


hcar e policy and pr ocedures ist o provide standardizat
ion in dai ly
operationalact i
vit
ies.Thr oughourmanyy earswor ki
ngwi thpol i
ciesandpr oceduresi thas
becomecl eart oust hatt heyar eessent i
ali nprovi
ding cl
arit
ywhendeal i
ngwi thissuesand
acti
v i
ti
est hatar ecriti
caltoheal t
handsaf et y,l
egalli
abil
iti
esandr egulatoryrequir
ement s. 
The
i
mpor t
anceofheal thcarepol icyandpr ocedur escannotbedi sputedbutt hewayt heyar e
managedbestwi l
lv aryfrom oneor ganizat iontoanot her.Ast heimpor tanceofpol iciesand
procedur esmanual smaynotbeasappar entasi tshouldbe, wethoughti twouldber esour ceful
toshar eourknowl edgeont hemat t
er.Toourend,wet r
yt odeveloppower fulsolut
ions,t ohelp
managepol iciesandot herdocument si nor dertoimpr ovet heproductivi
tyandef fi
ciencyofa
healthcaref acil
i
ty,aswel las,ensur ei ti snotbr eachinganyr egul
ati
ons.Wi t
ht hatsai d,we
real
izet hatwemaynotbeev er yorganization’scupoft eaandt hatanot hervendormayof fera
bettermat ch.

Poli
cyinhealt
hcareisvit
all
yimportantasitset
sagener alpl
anofact i
onusedt ogui dedesired
outcomesandi saf undamentalguidel
inetohelpmakedeci si
ons.Thepur poseofheal thcare
poli
cy and procedures i
st o communi cateto employees the desir
ed out comes oft he
organi
zati
on.They help employees underst
and thei
rr ol
es and responsibi
li
ties wit
hint he
organi
zati
on.I
nt hehealt
hcareenvi
ronmentspecif
ical
ly
,poli
cyshouldsetthef oundationforthe
deli
ver
yofsafeandcostef f
ecti
vequalit
ycare.

Withtheconti
nuedincr
easei
nnewr egul
ati
onsandr equi
rements,suchast heAff
ordabl
eCare
Act,HIPAA,andMeaningf
ulUse,t
heburdenofsett
ingpol i
ciesandeffect
ivel
ycommunicat
ing
thesetotheemploy
eeshasbecomeburdensome.

NewLawsAndRegul
ati
ons

Foreverynewlaworr egul
ation,neworupdated,poli
ciesmustbecreatedandbedissemi nat
ed
tostaff
.Thereareregular
lychangingprovi
sionswi t
hintheAffor
dableCareAct,otherfederal
heal
thcarerequi
rements,statelawsandr egulat
ions,CMSCondi ti
onsofPar t
ici
pation,Joint
10
Commi ssi
onStandar ds,andotheraccredit
ati
onrequirements.Thismakesi tdif
fi
culttoensure
thatproperpoli
cesar enotonlycreated,butareeffi
cient
lycommuni catedtotheempl oyees.As
such,t hel
egacypolicymanagementsy st
emsf ormai nt
aini
ngpol i
cesar enolongerviabl
eand
canpl acetheorganizationatr
isk.Iti
sdi f
fi
cul
tjustkeepingupwi thev erynewlaworr egulati
on
update,aswellas,ensur i
ngpoli
ciesandpr ocedur
esar eeffect
ivelyrolledouttoempl oyeesis
alsojustascompl i
cat ed.

Withtherapidpaceofnewandupdat edlawsandregul
ati
onst hatprov
idersmustaddress,t
he
task of ensur
ing that
 pol
ici
es and pr
ocedur
es are up-t
o-date,avail
able,and eff
ecti
vel
y
communi cat
edthroughouttheor
gani
zati
oncanbeverydif
fi
cult.Thi
siswher emorestat
eofthe
artpol
icymanagementsof t
warecanassi
st.

Ut
il
izi
ngTechnol
ogyAndEducat
ion

Thebestheal t
hcar
eorganizat
ionsmustusebot ht echnol
ogyandeducat iont omanaget hei
r
heal
thcarepol i
ci
esandprocedur es.Technologysolut
ionsbecomecr i
ti
calenabler
st ostr
eamli
ne
thi
spr ocess.Itcanhelpi npr ovidi
ngacont rol
ledframewor kforupdating,authori
zi
ng,and
communi catingtotheor
ganization,aswel las,ensurethatolderpol
ici
esar eproperl
yarchi
ved
andnotdi sseminat
edinafashiont hatcanimpactpat i
entcare.

The r
apid pace i
n which regul
ati
ons change r
equi
res automat
ed pol
i
cy appr
ovaland
di
sseminat
ionaswel
lasacknowledgmentofemploy
eeaccess.

AtPolicyMedi
calwehaveworkedwi t
hanumberofl argehealthcar
epr oviderswhor el
yheavi
ly
onusingaweb- basedpoli
cymanagementsy st
em f orpolici
esandpr ocedures.Throughour
resear
chwehav efoundthi
sisanexcellentmethodt or eachstaffnotonl ylocal
lybutalsoto
thosethatmaybelocat
edoffsi
te.Thi
sispart
icular
lytrueforthosethatoper at
einmor eremote
andisolat
edregi
ons.

Poli
cymanagementsyst
emst hatall
owf orst
reamlinedupdati
ngandnoti
fi
cati
ontool
stomake
staf
fawareofthechangesarecr i
ti
cal.Iti
sal soimport
anttoall
ow easyaccesstovi
ew t
he
document
sandcommuni cat
et hechangesthroughoutanorgani
zat
ion.

TheBestSof
twar
e ForHeal
thcar
ePol
icyAndPr
ocedur
es

Thebestpol icymanagementsof t
war esol uti
onswi l
lensuret hatempl oyeescaneasi l
yaccess
thati nfor
mat i
on and can communi catet o manager s and st akeholder
st he changes in
regulati
onst hataf f
ectthosepol i
cies.Additional
l
y ,soundpolicymanagementsy st
emscanhel p
ensur e an organizati
on’s poli
cyand pr ocedurei nformat
ion is updat ed and accurate.This
providesmor eeffecti
vemeansf orregulatoryandaccr edi
ti
ngor ganizat
ionstov al
idat
et hatyou
areoper at
ingi nast ateofcontinuedr eadinessforasur veyoraudi t.Nothav i
ngsoundsy st
ems
i
npl acecanr esulti
naddi t
ionalon-sit
ev i
sitsbyt hesebodiesput ti
ngt heorganizati
onatr i
skfor
i
ncreaseddef ici
enciesandpenal t
ies.

Poli
cyinthehealt
hcareenvir
onmentsetst
hef oundat
ionforprovi
dingthebestlevelofcar
e.In
today’
senvironment,inordertoreal
i
zeopt i
malef f
ici
enci
es,healthcar
eor gani
zati
onsmust
combine sound organi
zat
ionalpr
ocesses wit
h complimentarytechnologyto achiev
et hei
r
11
desi
redout
comes.

AtPol icyMedical,wear ef i
rm adv ocatesofbei ngont rackwi t
hr ulesandr egulationswheni t
comest opol i
ciesandpr ocedures.Ther efore,west r
ivetodev elopsol uti
onst hathelpdoj ust
thatandkeept heheal thcar efacili
ti
esont rack.Ifyouwoul dl i
ket of i
ndoutmor eaboutour
healthcarepolicymanagementsol uti
on, Poli
cyManager ,
pleasegeti ntoucht ofi
ndoutmor e.We
woul dhappyt ochatt hroughhow pol icymanagementsof twarecanhel pbr i
ngor dertoy our
policyand pr ocedur es.I tmaybe t hatoursof t
warei s exactlyt he kind ofsol ut
ion your
organizati
onneeds, oritmaybet hatanot hervendorhasabet t
eroffering.Regardless,wewoul d
bemor et hanhappyt opoi ntyoui nt her i
ghtdi r
ecti
on;pleasedonothesi tat
et ocont actus.
Alternati
vely,ify ou wantt o seeoursof t
ware,PolicyManager ,in action,pleaser equesta
free demonst r
ation.

3.
1QUANTI
TATI
VEMETHODSI
NHEALTHCAREMANAGEMENT

I
ntr
oduct
ionToQuant
it
ati
veDeci
sion-
Maki
ngMet
hodsI
nHeal
thCar
eManagement

Int oday'shi ghlycompl i


cat ed,technologi
cal,andcompet iti
v eheal t
hcar earena,thepubl ic'
s
outcryisf oradmi ni
str
at ors,phy si
cians,andot herheal t
hcar epr ofessional
st opr ovi
dehi gh
qualit
ycar eatal owercost .Heal t
hcar emanager smustt her ef
or efindway st ogetexcel l
ent
resultsfrom mor el i
mitedr esources.Thegoaloft hi
sbooki stoi ntr
oduceaspi ri
ngheal t
hcar e
manager stooper at i
onsr esearchmodel st
hatallowdeci si
onmaker stosor toutcompl exissues
andt omaket hebestpossi bleuseofav ail
ableresources.Suchmodel sareused, f
orexampl e, t
o
forecastpat i
entdemand,and t o guide capi
talacqui si
tion and capaci tydecisi
ons,f acil
it
y
planning,per sonneland pat i
entschedul ing,supply chai n,and qual i
ty control
.They use
mat hemat icaland st atisti
calt echniques:mul ti
vari
atest atist
icalanal ysis,decisi
on analysis,
l
inearpr ogrammi ng,pr ojectev aluationandr eview technique( PERT) ,queuinganal ysi
s,and
simulation, t
onameaf ew.

Thisbookpr esent
sal ltheset echni
quesf rom theperspecti
veofheal thcar eorganizations'
del
iveryofcar e,r
atherthantheirtradi
tionalmanufactur
ingappli
cat i
ons.Thi schaptercov ersa
bri
efhi st
or i
calbackground and t he devel
opmentofdeci sion techniquesand expl ainst he
i
mpor tanceofheal thcar emanager susingtheset echni
ques.Fi nall
y,t hescope,distincti
ve
character
isti
csandcur r
enttrendsofheal thser
vicesareemphasized.Af terreadi
ngthischapt er,
youshoul dhav eafai
runderstandingofhowi mpor t
antquanti
tat
ivet echniquesarefordecisions
aboutdeliveri
nghealt
hcar eofhighqual i
ty.

Hi
stor
icalBackgr
oundandt
heDev
elopmentofDeci
sionTechni
ques

Beginni
nginthe1880s, t
hescienti
fi
cmanagementerabroughtaboutwidespr
eadchangesi nthe
managementoft hefactor
iesthathadbeencreatedatanexpl osi
verateduri
ngtheIndustrial
Revolut
ion.Themov ementwasspear headedbyanef f
ici
encyengineerandinvent
or,Freder
ick
Winslow Taylor,who i sregarded as t
he f
atherofmoder n scient
if
ic management.Taylor
proposed a "science ofmanagement "based on observat
ion,measurement,analysi
s,and

12
i
mpr ov ementofwor k met hods,al ong wi th economi ci ncent ives.He al so bel i
eved t hat
management '
stasksar et opl an, caref ull
yselectandt rainwor kers, fi
ndt hebestwayt oper form
eachj ob,achi evecooper ationbet weenmanagementandwor kers,andsepar at emanagement
activitiesf rom wor kact ivit
ies.Tay lor'swor kwasbasedonhi sideat hatconf li
ct sbet weenl abor
andmanagementoccurbecausemanagementhasnoi deahow l ongj obsact uallytake.He
theref or efocusedont i
mest udi est hatev aluat edwor kmet hodsi ngr eatdet ailt oidentifyt he
bestwayt odoeachj ob.Tay lor'scl assi c1911book,ThePr inciplesofSci entifi
cManagement ,
explai nedt hesegui dingpr inci ples:1)dev elopmentofsci encef oreachel ementofwor k;2)
scient ific selecti
on and t raini ng ofwor ker s;3)cooper ation bet ween managementand
empl oy ees;and4)r esponsi bilityshar edequal lybet weenwor ker sandmanagement( Tay lor,
1911) .Ot herear lycont ri
butor st osci enti
ficmet hodsofmanagementwer eFr ankandGi l
lian
Gilbret h,whowor kedonst andar di zation,andHenr yGant t,whoemphasi zedt hepsy chological
effect st hatwor kcondi ti
onshav eonempl oy ees- hedev elopedat i
me- baseddi splaychar tt o
schedul ewor k.Quant it
ati
vei nv ent orymanagementwasdev elopedbyF.W.Har ri
si n1915.I n
the1930s,W.Shewhar tandassoci atesdev elopedst atisticalsampl ingt echni quesf orqual it
y
contr ol( Stev enson,2002;p.23) .Wor ldWarI Ipr ompt edt hegr owt hofoper ationsr esear ch
met hods, anddev elopmentofpr oj ectmanagementt echniques; linearpr ogr ammi ngandqueui ng
met hodsf oll
owedi nt he1950s.Af tert he1970s,t hedev el opmentandwi deruseofcomput ers
and managementi nformat ion sy stems ( MI S)r eshaped al lt hese t echni ques,si nce lar ge
amount sofdat acoul dbeanal yzedf ordeci sionmaki ngi nor gani zations.Sucht oolsf orqual it
y
i
mpr ov ementast otalqual itymanagement( TQM)andcont i
nuousqual ityimpr ov ement( CQI )
becamev erypopul ari nt he1980sand 1990s;t hen camesuppl ychai n managementand
product ivi
tyimpr ov ementt echni ques, inpar t
icul arreengineer ing.

TheHeal
thCar
eManagerandDeci
sionMaki
ng

Aheal thcar emanagercanbeachi efexecut iveof f


icer(CEO)orchi efoperatingof f
icer( COO) , or
ami ddl e-l
evel managertowhom t hedut i
esar edel egated.Att het opmanagementl evel,aheal th
caremanager 'sresponsibil
iti
esi ncludepl anni ngf orcapaci ty
,l ocation,servicest obeof fer ed,
and f acilit
yl ayout;those r esponsi bi
li
ti
es ar e st rat
egic.The heal th care manageral so i s
ult
imat elyr esponsibleforov erseeingser vicepr oduct i
ont hr
oughsuppl ychai nmanagement ,
quali
tymoni t
or i
ngandi mpr ov ement ,andor gani zingheal thser vi
cest obeei therpr oducedor
outsour ced.Fi nal
ly,
theheal thcar emanageri sr esponsi bl
ef orpat i
entandper sonnel schedul i
ng,
andf oropt imal l
ystaff
ingthef acili
tyanddi rect i
ngj obassi gnment sandwor korder s.Regar dless
ofwhet hertheheal thcaremanageri sdirectl
yi nv olvedordel egat estheser esponsi biliti
es,hisor
herul ti
mat er esponsibil
i
tyr emai ns.Gener ally,oper ati
onaldeci sionsar edelegat edt omi d-and
l
ower -leveldeci si
onmaker s,whi lest r
ategicdeci sionsar eev aluatedatt heor gani zation'
st op
l
evels.Wi t
ht hei nt
egrateddel i
verysy stems( IDS)mov ement ,heal thcar eor ganizationsar e
becomi nglargerandmor ecompl ex,soheal thcar emanager sar ei ndireneedoft hemostr ecent ,
rel
iablei nformat i
onderivedf r
om quant i
tati
v edat aanal ysisinor dert omakei nfor meddeci sions.
Inf
ormat iontechnology(IT)hasbecomei ntegral tomanagementdeci sionprocesses.

I
nfor
mat
ionTechnol
ogy(
IT)andHeal
thCar
eManagement

13
Iftheyar eto analyze t heircurrentsi t
uati
onsand make appr opr i
ate changest oi mprove
eff
ici
encyaswel last hequal it
yofcar e,healt
hcar emanager sneedappr opriat
edat a.Thedat a,
fr
om v ari
oussources,ar ecol l
ectedbyi nf
ormationt echnologyembeddedi nsy stemsei t
her
i
nternalorext
ernaltot heheal t
hcar eor gani
zati
on.Forexampl e,decisi
onsaboutt hel ocati
onof
anewheal thfaci
li
tywi llrequir
eanal y
sisofdat aont hecommuni tiesunderconsi derat ion(such
ascensus,epidemiol
ogi caldata,andsoon) .Decisionsaboutnur sest aff
ingwi l
lrequi reinternal
dataonpat i
entadmi ssi onsandacui t
yt hatarecol l
ectedr outi
nelybyt hehospi tal.Thi sbook
i
dentif
iesthesourcesoft hedataforv ari
ousdecision-makingt ool
sandemphasi zest heuseof
ITforinf
ormeddecisionmaki ngbyheal thcaremanager s.

TheScopeofHeal
thCar
eSer
vices,
andRecentTr
ends

Accor dingt otheOr ganizationforEconomicCooper at


ionandDev elopment( OECD)count ri
es,i
ts
member s'totalexpendituresonheal thservi
cesconst i
tutedfrom 5. 7to14. 6percentofgr oss
domest i
cpr oduct( GDP)i n2002,maki ngt hatav erysignif
icantsect orfr
om apubl i
cpol i
cy
per spective.Mor eov er
,thest ati
sti
csinTabl e1.1show ani ncreasingtrendinheal t
hcar e
expendi tures.Thecount r
iest hatspentabout3.4percentofthei rbudget sonhealthcar einthe
mi d-1990sar enowspendi ngal mosttwicethat.TheUni t
edSt atesi sthecountryspendi ngthe
highestper centageofGDPonheal t
hcare.Itspercentageshar eofGDPwasst abil
izedf r
om
1995t o2000, buthasbeeni ncr
easingagai
ndur i
ngthelastfewy ear s.

Healthcare,especial
l
yintheUnitedSt ates,isal abor-
int
ensiveindustr
ywi thmorethant wel
ve
mill
ionjobs,consti
tut
ing9.
5percentoft hewor kforcein2002.Asshowni nTable1.2,thehealth
carewor kforceisexpect
edtoreachcl oset osixteenmi l
li
onint enyears.Thatconsti
tut
esov er
28per centgrowthandi sthef
ast estjobgr owthar ea,withnineoutoft wentyoccupationsin
healthcare(U.S.Depart
mentofLabor ,2004) .Theagi ngpopulation-
aswel lastheproli
ferati
on
ofmedi calt
echnologyandnewtreatment s-cont
ributestothisgrowth.

Theheal thcar eindustryseekst omat chv aryi


ngmedi calneedsint hepopulat
ion.It
s518, 000
establ
ishment sv ar
yi nsize,compl exi
ty ,andorgani zati
onalstr
ucture,r
angingfrom smal l
-t
own,
pri
vatepr acti
cephy sici
answithonemedi calassistanttourbanhospital
sthatemployt housands
ofdiverseheal thcar eprofessionals.About2per centoftheheal thcar
eest abl
ishment sare
hospit
als, buttheyempl oyover40per centofallheal thcareworkers.Whil
e59per centofhealth
careest abli
shment sar ephy si
cians'anddent ists'offi
ces,thoseempl oy21.4per centoft he
healt
hcar ewor kforce.

Advancesinmedi caltechnol
ogies,new proceduresandmet hodsofdi agnosi sandt r
eatment
,
l
essi nvasi
vesurgicaltechni
ques,genet herapy-
allt
hesei ncr easelongev i
tyandi mprovethe
qual
ityofl i
fe.Si
mi l
arl
y,advancesi ninformati
ont echnologycani mpr ovepat i
entcare.For
example,handheldorderentrysy st
ems( suchasper sonaldi git
alassistant
s( PDAs)andbar
codescannersatbedsidemakeheal thworkersmor eeffi
cient
, butalsomi nimizeer
rorsandthus
i
mpr ovethequali
tyofcare.

Theseadvancesusual
lyaddtocost s,socostcontainmentisamaj orgoalinthehealt
hcare
i
ndustr
y.Toaccompli
shit
,thehealt
hcar eindustr
yhasshi
ftedthecar
eofpatient
sf r
om hospi
tal
car
et o out
pati
entandambul at
orycar e.Att hesamet ime,managedcar epr ogramshave
14
stressed prev
enti
vecaretoreducetheev ent
ualcostsofundiagnosed,untreat
ed medi cal
conditi
ons.Enr ol
l
menthasgrowninpr epai
d managed carepr
ograms:heal t
hmai ntenance
organizat
ions (HMOs)
,pref
err
ed pr
oviderorgani
zat
ions (
PPOs)
,and poi nt
-of-
servi
ce (POS)
programs.

Thehealthcareindust
ryhasturnedtorestr
ucturi
ngtoimprovefinancialandcostper f
ormance.
Restr
ucturi
ngisaccomplishedbyachievi
ngani ntegr
ateddel
i
v er
ysy stem (IDS).AnIDSmer ges
thesegment sofhealt
hcar edeli
very
,bothverti
call
yandhorizontal
ly,toincreaseeffi
ciencyby
str
eamli
ningf i
nanci
al,
managerial,
anddeli
veryfuncti
ons.Morethan50per centofthehospital
s
expectt
obepar tofIDSin2005( U.
S.Depart
mentofLabor ,
2004).

I
tisfai
rtoconcl
udethatthechangesi
ntheheal
thcareindust
rywil
lconti
nueandwi l
laf
fectt
he
del
iv
eryofheal
thser
vicesint
ermsofcostandef
fi
ciencyaswellasthequali
tyofcar
e.

Heal
thCar
eSer
vicesManagement

Givensuchcompl exi
tyinboththenatureandt heenvi
ronmentofhealt
hcar e,managersofsuch
establi
shmentsfacechallengi
ngday -
to-daydecisionsaswellaslong-t
erm andst r
ategi
cones.
Theirdisci
pli
ne,t
hemanagementandi mpr ovementofthesyst
emsandpr ocessesthatprovi
de
healt
hcar e,mustrel
yondeci siontools-namely,t
hespecif
icmet hodsthatcanhelpmanager s
analyze,desi
gn,andimpl ementorganizationalchangestoachieveeffi
ciencyaswel lashigh
quali
tyofcare(ef
fect
iveness)forpati
ents.

Clearly
,then,managementofheal th care establi
shment srequir
es reasoned inqui
ry and
j
udgment .Theref
ore,healt
hcar emanagersmustusepr ovenscienti
ficmethodsdr awnf r
om
suchdi sci
pli
nesasi ndust
rialengi
neer
ing,stati
stics,operat
ionsresearch,andmanagement
science.However
,itmustber ememberedt hatsuchquant i
tati
vetoolsdonot,alone,shapethe
fi
naldecisi
on,whi
chmayhav etoincl
udeother,qualit
ati
vefactor
stoar r
iveattheri
ghtcourseof
action.

Ani ncreaseint henumberofmanagerposi ti


onsinheal t
hcar eisexpecteddur i
ngt henext
decade.Accor di
ngt otheU.S.Depart
mentofLaborst at
isti
csshowninTabl e1.3,thegrowt hin
healthcaremanagementposi t
ionsisproject
edt obeslightl
yhighert
hant hatinallhealt
hcar e
occupat i
ons.In2002,ther
ewer e598,
000manager semployedinthehealthcareindustr
y,al evel
expectedt oincr
easeby31. 2percentwithintenyears.Mor especi
fi
call
y,inthetopandmi ddle
managementl evels,t
hethreesubsecti
onsshowni nTabl e1.3,approxi
mat el
y284,000heal t
h
caremanager sar eemployed,
consti
tut
ingappr oxi
mately2percentofthehealthcareworkf orce.

Futurehealt
hcar emanagers,whetherintopadmi nistrat
ionori nadmi nist
rat
iveorclini
cal
operati
ons,wi
llbemakinginf
ormeddecisi
onsusingstate-of-
the-artdeci
sion-maki
ngtechni
ques
andt helat
estinfor
mationfr
om managementi nfor
mat i
onsy stems.Touset hosetechni
ques
successful
l
y,however,t
heymustalsounderst
andt hedi sti
nctiv
echar act
eristi
csofhealt
hcar e
servi
ces.

Di
sti
nct
iveChar
act
eri
sti
csofHeal
thCar
eSer
vices

Heal
thcar
eoper
ati
onshav
efi
vemaj
ordi
sti
nct
ivechar
act
eri
sti
cs:1)pat
ientpar
ti
cipat
ioni
nthe
15
servi
ce pr ocess;2) si
mult
aneity;3) perishabi
li
ty;4) i
ntangi
bil
i
ty;and 5) heter
ogeneit
y
(Fi
tzsi
mmonsandFi t
zsi
mmons, 2004;pp.21-25)
.Letusexamineeachofthesechar
acter
ist
ics,
tobetterunderstandt
hedeci
sionplatf
ormsinhealthcar
e.

Pat
ientPar
ti
cipat
ion

I
nheal thcare,asinanyser vi
cei
ndustry,t
oev al
uat
eper f
ormance( eff
ici
encyandef fect
iveness)
adi st
incti
onmustbemadebet weeni nputsandoutputs.Patient
s( ortheirheal
thcondi tions)
whor ecei
vecar ear eamongt heinputsi nt
ot heservi
cepr ocess.Ont heotherhand,af ter
diagnosisandt r
eatment ,
thepat
ient
'sconditi
onconsti
tutestheeffect
ivenessofthehealthcar e
organizati
on-t
hati s,output
.Hence,t he healt
h care organi
zati
on and t he pat
ientint eract
throughoutt he deli
very ofcare-a prof
ound dist
incti
on ofheal th care as compar ed t o
manuf actur
ingindustr
ies.

Si
mul
taneousPr
oduct
ionandConsumpt
ion

Asaser vicei ndustr


y,heal thcar eispr oducedand" consumed"si multaneousl y
.Thi spoi nt
refl
ectsthef actthatheal thisnotapr oduct ,tobecr eated,stor
ed,andsol dlat er(wil
lscience
achievethatv i
agenet herapy ?).Oneoft hedr awbacksoft hatsimult
aneityof" producti
on"and
"consumption"i sthechallengei tpresentsf orqualit
ycont rol
-t
hatis,ensuringt heef fecti
veness
oft heservice.Inmanuf acturing,apr oductcanbei nspectedand,i ffounddef ecti
ve,notbe
offeredf
orsal e;meanwhi l
et hepr ocesst hati sproducingbadout putsiscor rected.Howev er,in
healthcare,duet osimul taneity,ani nstanceofpoorqual i
tycarecannotbe" recall
ed,
"ev en
thoughthepr ocessresultingi npoorcar ecanbecor r
ectedf orfut
urepatients.

Per
ishabl
eCapaci
ty

Heal thcareor ganizati


onsdesignt hei
rservicestoser v
ewi t
hcer t
aincapacit
yoveragi vent ime.
Ifthedesi gnedcapaci tyisnotuseddur i
ngt hatperi
od, t
heopportunit
ytogeneraterevenuef rom
thatcapaci tyisl ost.Forexampl e,considerahospi t
alwithfift
eenoperatingroomst hatar e
staffedandopenf ortwelvehours.Ifthesur geri
esar enotscheduledappr opr
iat
elytof illthe
opensl ot
s,ori falargeamountoft imeiswast edbyt heturnoverofthecases,apor t
ionoft he
availablecapaci ty
,andt husofpot ent
ialrevenuesfort hatdayper i
shes.Simil
arl
y,consi dera
phy sici
an'sofficewi thanav ail
ableten-hourschedulef orpati
entv i
sit
s.Iftheoffi
cedoesnot
receiv eappointment st ofil
lal
lthoset imebl ocks,thepracti
ce'scapacit
yf ort
hatdaywi l
lbe
reduced, aswi l
l t
her evenues.

TheI
ntangi
bleNat
ureofHeal
thCar
eOut
put
s

Theout putinheal t
hcar edoesnotcompr i
seat angibleproductonhandl ikefoodboughtf rom
yourfav or
it
ef ast-
foodr estaurant
,wherey oucanj udget hequali
tyoft hefoodasmuchast he
prompt nessoft heservice.Inhealthcare,i
tisnotsoobv i
ouswhatt hepat i
enthaspaidfor .For
onething,sinceaheal ingpr ocesstakestime,theopi ni
onsofpat i
entsaboutt heserv
icequal it
y
oftheircarearef ormedov ert i
me.Mor eover,
healthcar eisnotsomethingt hatcanbetestedor
handledbef oredecidingoni t
.Althoughhealthcaremoni tor
inggroups,aswel lashealthcar e
faci
li
ti
esi nt heirmarket i
ng,maypr ovideinformati
onaboutt hequal it
yofanor gani
zation's

16
ser
vices,
onepatient
'
sexperi
encemaynever
thel
essnotequalthatofanotherr
ecei
vi
ngt
hesame
ser
vicebecausepati
ent
s'condi
ti
onsandper
cept
ionsareneverident
ical
.

TheHi
ghLev
elsofJudgmentCal
ledupon,
andt
heHet
erogeneousNat
ureofHeal
thCar
e

Althoughsomer outinehealthcar etaskscanbeaut omated( r


ecor di
ngpat i
enthistor
yv i
aIT),
thereremai nawi der angeoft asksthatrequir
eahi ghl ev
elofj udgment,personalint
eracti
on,
andi ndi
v idualadaptat i
ons,eveni nagi venservi
cecat egory.Forexampl e,asur geonandan
anesthetistmustmakespeci f
icdecisionsbefor
eoper at
ing,toplant hesur
geryfortheparti
cular
conditi
onofpat i
ent .Thehet erogeneityofpati
ents'condit
ions,alreadynoted,oft
enmandat es
considerablespeci al
izati
oninthedeliveryofcar
e.

Even giv
en these disti
ncti
ve char
act
eri
sti
cs ofhealth care,managers worktogetherwi t
h
cl
inici
anstostandardizehealt
horgani
zati
ons'oper
ati
onsf orbotheff
ici
encyandeffect
iveness.
Examplesofsuchst andardi
zati
onarethediagnost
icandtreatmentprot
ocol
sdevelopedf ort
he
careofvari
ousdiseases.

CHAPTERFOUR
17
4.
0STRATEGI
ESNEGOTI
ATI
ONANDCONFLI
CTMANAGAMENT

Whereverther
ear
epeople,therealwayswi l
lbeconf
li
ct.I
t’
’sasimplefactofli
fe.Opini
onsvary
,
and miscommunicat
ion and mi sunder
standi
ngs occur.People have di
ff
ering val
ues and
pri
ori
ti
es,andmostofusresistchange.Al
loftheset
hingscreat
econfli
cti
nourlifeandwork.

Theprobl
em i
snotconf l
ictit
sel
f,butrat
herhow wedealwithit.Thegoodnewsi sef
fecti
ve
conf
li
ctmanagementstrategi
escanbel ear
nedandmast er
ed.Whi l
etherearemanydi
ffer
ent
ty
pesofconf
li
ct,
let
sdiscusssomest r
ategi
esformanagi
nginter
personalconf
li
ct.

Dealwi
thi
t

Mostpeopleprefertoavoidconfl
ict
.I’
vehear dfrom manynurseswhoact ual
l
yhav equi
tthei
r
j
obsrathert
hanat t
empttoresolv
eani nter
personalconf
li
ctatwork.Thisal
mostneveri
sagood
sol
uti
on,anditusuall
yleadstofeeli
ngsofr egretandguil
t.Besi
des,ifyouqui
teveryti
mey ou
hav
eaconf l
ictonthejob,y
ou’l
lbequitt
ingeveryjobyoueverhaveinashortper
iodofti
me.

Ifyouignoreoravoi
dit,i
tcanleadt oi
ncr
easedstr
essandunr esol
vedf eel
i
ngsofanger ,hosti
l
ity
andr esent
ment .Whenyoulearnt omanageconfli
cteffect
ively,y
ou’l
lbehappi erandhealthi
er,
physical
lyandemot i
onall
y.You’l
lhavebetterr
elati
onships.You’llbeabet t
erl eader
,abet ter
team memberandabet terperson.You’
llgai
nr espect,i
mpr ovey ourself
-esteem andbui ld
courage.You’
llgetmoreofwhaty ouwant.

Thi
nki
tthr
ough

Beforeaddressi
ngt hepersonwi t
hwhom y ouhav eaconflict,considerdi scussi
ngthesituat
ion
withanobj ecti
vef r
iendorf amil
ymember .Thiscanhel pt ocl ari
fyissuesandneeds.Seek
feedbackandadv i
cei ndeali
ngwi t
hthesituation.Butbecar efulnottor elyont heopini
onofan
i
nv olv
edthi
rdpar t
ywhomayhav ehisorherownagenda.Pl any ourst r
ategy ,i
ncludi
ngwhaty ou
wantt osay,andthenwr it
eitdownandr ehear seit
.Createanot ecard,i fnecessary
,withyour
mai ntal
ki
ngpoints.Thiswil
lhelpyoutofeel mor ei
ncontrol andst ayont arget.

Tal
kitout
,facet
oface

Meeti
ng in person can be inti
midati
ng,buti tis of
ten t
he bestwayt o go.Face-t
o-f
ace
communicationismor eeffect
ivethanotherfor
msbecausei tal
lowsforanacti
veexchangeof
i
nfor
mation.Itgivesyout heoppor t
uni
tytomakeuseoft hehandshake,asmile,ey
econtact,
handgesturesandot herimportantbodylanguage.Ital
soal l
owsyout oobserveimportant
nonv
erbalcuesf r
om theotherparty.

Setasi
detimet omeetwit
hthepersonface-
to-
faceatamutual
lyconv
eni
entt
imeandplace.
Whenpossibl
e,meeton“neut
ralt
urf
”rat
herthanoneofyourof
fi
cessonoonehasthe“
home
cour
t”adv
antage.

E-mailandlett
erwri
ti
ngshoul
dbeav oi
ded,i
fpossi
ble,t
oresol
veconfl
ictort
odi scusssensit
ive
topi
cs,problemsorhurtfeel
i
ngs.Itistooimpersonalandindi
rectandincreasesther i
skof
miscommuni cati
onandmisunder
standi
ng.Aphonecal li
sthenextbestthingwheni n-per
son
18
meet
ingsar
en’

tpossi
ble.

Useamedi
atori
fnecessar
y

Ifasit
uationispar
ticul
arl
yv olat
il
eortr
oublesomeandot hereff
ort
shavenotwor ked,youmight
i
nvit
eaneut r
althi
rdparty,suchasasuper vi
sor,toactasamedi atori
fthi
si sagreeabl
etoall
concerned.Amedi atorcanr emainobjecti
ve,l
istentobothsides,andfaci
l
itateresol
uti
onand
compromi se.Bef i
rm ony ourobject
ives;you’’
retheret oresol
veaconf li
ct,notdefeatan
opponent.

Apol
ogi
zewhenappr
opr
iat
e

Be aware ofy ourown partin creat


ing the confl
ict
.Ifyou’’
ve done somethi
ng wrong or
i
nappropr
iate,bewil
li
ngtoacknowledgeitandsayy ou’’
resor
ry,
eveniftheconf
li
cti
snotenti
rely
aresul
tofy ouract
ions.Someti
mesy ouhav etomeetpeopl ehalf
wayt ogettowhereyouwant
togo.

Therealway swillbedi
ff
eri
ngopini
onsandway sofdoingt hings.Decidewhichissuesyoucan
l
ivewithandwhi chneedaddressi
ng.Ify oubri
nguponl yt hemosti mportantissues,y
ouwil
l
devel
opcr edibi
li
ty.Ont
heotherhand,ifyoumakeani ssueaboutev er
ythi
ng,you’’
l
lbelabel
eda
complainer.Then,whenyouhaveal egi
ti
mat ebeef
,youlikel
ywi llbeignor
edlikethefabl
edboy
whocriedwol f.

Take steps t
o mi ni
mize confl
i
ctatwor k befor
ei thappens.Wor k atdev el
oping good
rel
ati
onshipswit
hcowor kersandcoll
eagues.Gett oknow people.Bef r
iendl
yandsoci abl
e.
Every
onehasdi ff
erentneedsandpr i
ori
ti
esandcomesf rom dif
ferentcult
uralbackgrounds.
Contrar
ytowhatyou’vehear
d,famil
i
ari
tybreedsrespect
.

Wor
kony
ourcommuni
cat
ionski
ll
s

Theabil
i
tytoexpr
essyour
selfclear
lywil
lall
owy outosaywhat’
sony ourmi
nd,askf
orwhaty
ou
wantandneedandgetyourpointacross.Ther
ei sanexpr
essi
onthataprobl
em wel
l-
stat
edi
sa
probl
em hal
f-
sol
ved.

Avoidtroubl
emakersasmuchaspossi bl
e; 
theywil
lsucky oui nanddr agyoudown.Don’ t
engageingossiporbackstabbi
ng.Getthef
actsbefor
ejumpingt oconcl
usi
onsaboutsomet hi
ng
you’
re heardt hr
ough the grapevi
ne.Know when i t
’s appr
opriat
et o walk away fr
om a
confr
ontati
on,andal
way sconsidert
hesour
cei nt
hefaceofcrit
ici
sm orhur
tful
comment s.

Confl
i
ctcan’
tbeav oided,butitcanbemini
mizedandresol
ved.Al
thoughavoidancesometi
mes
seemsli
ketheeasywayout ,faci
ngconf
li
cthead-
oninanappropr
iateandprofessi
onalmanner
wil
ll
eadtobett
errelati
onships,amorepr
oducti
veworkenvi
ronmentandempower ment.

CHAPTERFI
VE

5.
0 PREVENTI
ON AND MANAGEMENT OF I
NFECTI
ON I
N HEALTHCARE SETTI
NGS./
MANAGEMENTANDDISEASESCONTROL
19
Thepracti
cesthatf
ormt hebasi
cmeasur
estopreventtr
ansmissi
onofinf
ecti
ousdi seases
wit
hinheal
thcar
eenvi
ronment
saredi
vi
dedi
ntost
andardandtr
ansmissi
on-
basedprecautions.

When a disease agentis unknown,a sympt


om-based approach willr
educe the risk of
tr
ansmissi
ontot hehealt
hcareworkerandtoot
herpati
ent
s.Forexampl e,i
fapatientpresents
wit
hv omiti
ngordi ar
rhoeaorrespir
ator
ysympt
oms( coughing,sneezi
ngandf ever)thent he
appropr
iat
eprecauti
onsshouldbeimplement
edimmediat
ely,
r at
herthanwait
ingforadef i
nit
ive
di
agnosis.

St
andar
dpr
ecaut
ions

Theuseofst andardprecaut
ionsforallpatient
si sthepr i
marystrat
egyf ormini
misingt he
transmi ssi
onofi nfect
ionsinhealt
hcareset t
ings.
Itisessenti
althatst
andardprecaut
ionsar e
appl i
edatal ltimeswhencar ingforanypatientregardlessofthei
rinf
ecti
ousdiseasestatus.
Thisi sbecomi ng morei mport
antast hepr eval
enceofuni denti
fi
ed car
riageofmul ti
drug-
resistantorganism (MRO)incommunitysett
ingsincreases.

Thepr
act
icest
hatf
orm par
tofst
andar
dpr
ecaut
ionsi
ncl
ude:

 handhygieneaccor dingt othe"5moment s"forhandhygiene


 appropr
iate use ofper sonalpr otecti
ve equipmentaccor di
ng t
or isk ofbodyf
lui
d
exposure
 useofaseptict echniquewher erequired
 appropr
iatereprocessi ngofre-useableinst
rument sandequi pment
 safehandli
nganddi sposalofshar psandpot enti
all
yinf
ectiousmateri
al
 safehandli
ngofwast eandl i
nen
 envir
onmental controlsincl
udingcleaningandspi l
lsmanagement .

Tr
ansmi
ssi
on-
basedpr
ecaut
ions

Transmission-basedpr ecauti
onsareappli
edinadditi
ontostandar
dpr ecaut
ionsforpat
ients
suspectedorconf i
rmedt obei nf
ectedwithspeci
fi
corganismsofconcer n.Theadditi
onal
precauti
onsr equiredtomanaget heseinf
ecti
onsvar
iesaccor
dingtotherouteoftr
ansmission
(ai
rborne,dropletorcontact)
.

Thespeci
fi
caddi
ti
onal
precaut
ionsmayi
nvol
vet
heuseof
:

 i
solati
onfaci
li
ti
es(si
ngleroom)
 addit
ional
respi
rat
oryprot
ecti
on,
suchast
heuseofhighf
il
tr
ati
onr
espi
rat
orymasks
 di
sposablegowns,glov
esandeyeprot
ect
iononent
rytot
heroom.

Detai
lsoft
heser equi
rement sar
ef oundi
nlocalfaci
l
ityprocedur
emanual
s,stat
eguidel
inesf
or
managementofmul t
i-
resi
stantorgani
smsandt heAustrali
anguidel
i
nesf
ortheprevent
ionand
contr
olofi
nfect
ioninhealthcar
e(opensinanewwi ndow).

Resour
ces

20
A usef
ulsummaryofi nf
ecti
ousdi
seasesandt hei
rmodesoft ransmi
ssi
onandt hespecifi
c
pr
ecauti
onsrequi
redcanbefoundi
nthedocumentInfect
ionCont
rolManagementofI
nfect
ious
Di
seases(PDF467KB)(opensi
nanewwi ndow)
.

SAHeal
thhasdev
elopedspeci
fi
cadv
iceon:

 i
nfecti
onpr ev
entionandcont r
olofcy
sti
cfi
brosi
s(PDF312KB)(
opensi
nanewwindow)
 ma nagementofgast roenteri
ti
soutbr
eaks(
PDF272KB)(opensi
nanewwindow)
 
 i
nfl
uenzaf orhealthcareprofessi
onal
s
 f
lu/gastr
o poster
sandr esources

SAHealt hhasalsodev el
opedat r
aini
ngtoolfortheAustr
ali
anGover
nmentt
itl
ed"Thesaf euse
ofpersonalprotect
iveequipment( opensinanew wi ndow)"pr
imar
il
yforuseinapandemi c
si
tuat
ion,buttheprinci
plesandinformati
oncontainedintheDVDisappl
i
cabl
et oallsi
tuati
ons
wheretransmissi
on-basedprecaut
ionsarerequi
red.

TheAustral
i
anCommi ssi
onf orSafetyandQualit
yinHealthCarealsohasanumberofgener
ic
resour
cesavail
abl
efrom theirwebsite,suchasasetofst andar
disedsi
gnage(
opensinanew
window)onstandar
dandt ransmission-basedpr
ecaut
ions.

SA Health'
sInfecti
onContr
olServi
cealsoprovi
deseducationaloppor
tuni
ti
esf
orst
affwi
th
responsi
bil
i
tyforinf
ect
ionpr
event
ionandcont
rol
inthei
rfaci
l
ity.

5.
1GUI
DELI
NESFORDI
SEASECONTROL

Thedev el
opmentoft echni
calguidel
i
nesisbasedonconsultati
onswithMember soft heWHO
ExpertAdvisor
yPanelonTrachomaandPr event
ionofBli
ndness,andwithanetworkof20WHO
Coll
aborat
ing Centr
es around the wor
ld.When av ai
l
able,specif
ic exper
ience acqui
red i
n
countri
esistakeni
ntoaccount.

TheWHOt echni
calguideli
nesfocusonpubli
cheal t
hpr obl
ems,inter
msofbl i
ndi
ngdiseases
global
l
y ,andwher ethereispot ent
ialf
ori
nterv
ention,eit
herforprev
enti
onofdiseaseorits
complicati
ons,orforrestor
ingsi
ght.Manyofthetechnicalgui
del
inesarepubl
i
shedinthenon-
seri
alWHOpubl i
cati
ons,whichcanbeobtai
nedthroughtheonli
nebookshop.

 St
rat
egi
esf
ort
hepr
event
ionofbl
i
ndnessi
nnat
ional
progr
ammes

Trachomai saninf
ecti
ouseyedi
seasethatcausesbl
i
ndness;i
tispr
evalenti
nmanypoorrural
communi t
ies.TheWorldHeal
thOrgani
zati
onhassettheyear2020asthetargetf
orgl
obal
el
iminat
ionoft r
achomaasapubli
chealthprobl
em.

Toreachthistarget,
theSAFEst r
ategy(
Surger
yfortr
ichiasi
s,Ant
ibi
oti
cstot
reatChlamydia
tr
achomatisinfecti
on,andFacial
cleanl
i
nessandEnvironmentali
mprovementtoreduce
tr
ansmissi
onofC.t r
achomatisfr
om onepersontoanother)i
srecommendedfordistr
ict
sand
communi t
ieswi t
hendemi cdi
sease.
21
Thisgui
dehasbeenwr i
tt
enformanager
sofnationalanddist
rictt
rachomacont rol
pr ogr
ammes.
I
tsetsout,step-
by-
step,whati
sneededtoassessthemagni t
udeandext entofthetrachoma
probl
em intheareaandhowt opl
an,i
mplement,monitorandev al
uateaprogrammet ocont
rol
,
andulti
matelyel
iminat
e,tr
achoma.

Templ at
esforanumberoffor
msr ecommendedf oruseinaprogrammecanbef oundi
nt he
annex.Toallowadapt
ati
onoftheformsforuseinaspecifi
cprogramme,
electr
onicver
sionsare
avail
ableontheCD-ROM t
hataccompaniesthi
sguide.TheCD-ROM al
socontai
nsanant i
biot
ic
requi
rementesti
mator,
atemplatebudgetandagenericeval
uati
onmanual
.

Twov er
sionsoft
hisgui
dear
eavai
l
able:
Thetr
ainersversi
oni
ncl
udesthegui
de,
wit
hasetof30
sl
idesandtheCD-ROM.Thel
ear
ner'
sversi
oncontai
nsthegui
dewit
htheCD-ROM.

WHOConsul
ati
ononPubl
icHeal
thManagementofchr
oni
cey
eDi
seases

TheAct ionPl anfort hePr eventionofAv oidableBlindnessandVi sualI mpai rment2009- 2013,
Obj ecti
ve2,Task59r equirestheWHOSecr etari
attor evi
ewt heevidencer elevantt othepubl i
c
heal t
hst rat
egi esf
orthemanagementoft hemaj orchronicey ediseases.Inor dertoachi evet hi
s
task,ameet ingofexper tswascal l
edi nWHO onSept ember19t h,2011t or evi
ew t hewor k
alreadydonei nworkshops,meet ingsandt hematicpaper sont hei ndividualdi seases.The
meet i
ngr eviewedt heexi sti
nggui delinesanddi scussedt hebestappr oachf ortheef f
ect iv
e
managementofchr onicey ediseasesi napubl ichealthf ramewor kfordi fferentdev elopment
settings.Themeet i
ngwast het echnicalpr eamblet ot hedev el
opmentofaWHO Techni cal
Repor tSer i
esi nwhicht hedi f
ferentopt i
onsf ormanagi ngt hemai nchr onicey ediseaseswi llbe
present ed fort heuseofdeci sionmaker s,NGO manager s,healthcar epr ovi
ders,pat ients
associ ati
ons.I nanti
cipati
onoft hecompl et
eddocument , wear epostingont hispaget henot es
from themeet i
ng,t
hemai naddr essesoft heexper t
sandoft heWHO.

Di
abet
es

Diabeti
cr et
inopat
hyisundoubtedlyanimpor
tantandgrowi
ngcauseofblindnessworl
dwide;
therearenoaccur at
eepidemiologi
caldat
aavail
abl
easy et
,butiti
sli
kel
yt hatdi
abet
eswi t
h
reti
nopathyisthemostcommoncauseofsev erevi
suall
ossintheworki
ng-agepopul
ati
onof
developedcountri
es.

 Pr
event
ionofdi
abet
esmel
l
itus

Gl
aucoma

Gl
aucomai srecognizedtobeamaj orcauseofbl i
ndnessgl oball
y,pr
obabl yaff
ecti
ngmor ethan
5mi l
li
onpeople,whichcorrespondsto13. 5%ofwor ldblindness.Wher east hecongeni
talform
ofglaucomai sar areconditi
on,theangl e-
closur
eandopenangl e("si
mpl e"
)glaucomasar e
i
ncreasi
nglycommoni nrel
ationtoagingofpopul at
ions,butwi t
hdi f
ferentgeographi
cal/r
acial
di
stri
buti
ons.Theimpor t
anceofsecondar yglaucomai sof t
enr el
atedtot heunderl
yingdisease,
22
andt
her
efor
edi
ff
icul
ttoassessi
nter
msofv
isual
loss.

 Thegl
obal
impactofgl
aucoma

Onchocer
ciasi
s

Onchocerci
asi
sor" r
iverblindness"isapar ti
cularcauseofblindnessinsome27count r
ies
acrosstheAfri
cancont i
nent,andi naf ew Lati
nAmer icancountri
es.Thediseasehasbeen
successf
ull
ycontr
oll
edori sintheprocessofbeingso,in11WestAf ri
cancountr
iest
hroughthe
Onchocerci
asi
sControlProgramme( OCP) .

 Onchocer
ciasi
sandi
tscont
rol

Vi
tami
nAdef
ici
ency/
xer
opht
hal
mia

Bli
nding malnut
ri
ti
on (xer
ophthal
mia/ ker
atomal
acia)isthe l
eadi
ng cause ofchi
ldhood
bl
indnessintheworld.I
tisest
imatedthateachyearappr
oxi
matel
y500000chil
drengoblind,
and70%oft hoseduetovit
aminAdefici
ency.

CHAPTERSI
X

6.
0BASI
CECONOMI
CS

Basi
cEconomi
csi
saci
ti
zen'
sgui
det
oeconomi
cs-
fort
hosewhowantt
ounder
standhow t
he
economyworksbuthavenointerestinjargonorequat
ions.Sowellr
evealsthegeneralpri
ncipl
es
behi
ndanykindofeconomy -
capital
ist
,sociali
st,f
eudal,andsoon.I nr eadablelanguage,he
showshowtocr i
ti
queeconomi cpolici
esi nter
msoft heincenti
vestheycreate,r
atherthanthe
goalst
heypr
oclai
m.Withclearexplanationsoftheent
irefi
eld,
from r
entcontrolandtheriseand

23
f
allofbusi
nessestothei
nter
nati
onalbal
anceofpayment
s,t
hisi
sthef
ir
stbookf
orany
onewho
wi
shest ounder
standhowtheeconomyfuncti
ons.

Economi cs isaf ield ofst udy t hathas become i ncreasinglyrelev


anti n ourgl obali
zed,
fi
nanciali
zedsociety .Theeconomyi spartofourcol l
ect i
veconsci ousandabuzzwor dthatlinks
personalfinancestobi gbusinessandi nternati
onaltradedeal s.Economi csdeal swithi
ndividual
choice,butal sowithmoneyandbor rowing,productionandconsumpt ion,t r
adeandmar ket s,
empl oymentandoccupat i
ons, assetpr i
cing,taxesandmuchmor e.Whatt heni sthedefi
niti
onof
economi cs?Onewayt othinkofi ti sthest udyofwhatconst it
utesrati
onalhumanbehav i
ori n
theendeav ortofulfil
lneedsandwant sgivenawor ldwi thscar ceresour ces.Inotherwor ds,
economi cst r
iest
oexpl ainhowandwhywegett hestuffwewantorneedt oliv
e.Howmuchofi t
doweget ?Whoget stohav emor e?Whomakesal lthisst uf
f?Howi sitmade?Thesear et he
quest i
onsanddeci sionsthateconomi csconcer nsit
selfwi th.

Asani ndividual,forexampl e,y ouconstantl


yfacet hepr oblem ofhav i
ngl i
mitedr esourceswi th
whicht of ulf
il
ly ourwant sandneeds.Asar esult
,y oumustmakecer t
ainchoi ceswi thy our
money–whatt ospendi ton,whatnott ospendi ton,andhowmucht osav eforthef uture.You'll
probablyspendpar tofy ourpay checkonr el
at i
venecessi ti
essuchasr ent,electri
city
,clothing
andf ood.Theny oumi ghtuset heresttogot ot hemov ies,dineoutorbuyasmar tphone.
Economi stsarei nterestedint hechoi cesyoumake, andi nvestigat
ewhy , f
orinstance, youmi ght
chooset ospendy ourmoneyonanewXboxi nsteadofr eplacingyourol dpairofshoes.They
wouldwantt oknowwhet hery ouwoul dsti
llbuyacar tonofci garett
esifpr i
cesi ncreasedby$2
perpack.The under ly
ing essence ofeconomi cs i
st ryi
ng t o understand how i ndividuals,
compani es,andnat i
onsasawhol ebehaveinresponset ocer t
ainmat eri
alconst r
aints.

Adam Smith(1723-1790) ,i
softenconsideredthe"fat
herofmoder neconomi cs."Hisbook" An
I
nquir
yintotheNat ureandCausesoft heWeal thofNations"
 (
1776)wast hefi
rstf ul
lyelabor
ated
at
temptto understandwhysomenat ionspr osperedwhileot
herssuffer
edwi despr eadpoverty
.
Hefamouslyarguedt hatindiv
idual
swor kingforthei
rownself-
int
erestcoul
dnonet helesscr
eate
astabl
eandwel l-provi
sionedsociet
yt hroughamechani sm hecalled t
heinvisiblehand ofthe
market
.(Seealso:'
 Adam Smi t
hand'TheWeal t
hOfNat i
ons.'
)

Smith,however,wasnott hefi
rsttowr i
teoneconomi cmat t
ers.Ot herscholarsofwhatwast hen
knownaspol iti
caleconomy  
wrotepriorto"TheWeal thofNations,"butAdam Smi thwasoneof
thefi
rsttoi
dent i
fytheuni queeconomi cchangest hataccompani edt hebi r
thofi
ndust ri
ali
zati
on
andcapital
istproduction.Smi t
h’swor kwasf ollowedbyDav i
dRi car do’s"Pri
nci
plesofPol it
ical
EconomyandTaxat ion"(1817)andl aterbyKar lMar xin"Capit
al"( 1867).Eachoft heseauthors
soughttoexpl ai
nhow capi t
ali
sm wor kedandwhati tmeantf orpr oducersandwor kersinthe
capi
tali
stsystem.(Seeal so:Whatist hedif
ferencebet weenCommuni sm andSoci
al i
sm?)

I
nt hel e19thcent
at ury,t
hediscipl
ineofeconomi csbecamei tsowndi sti
nctf i
eldofstudy .Alfr
ed
Mar shall
,authorof"ThePr i
nci
plesOfEconomi cs"(1890)definedeconomi csasasoci alscience
thatexami nespeople'sbehavioraccordingtot hei
rindi
vidualsel
f-
interests.Hewr ote,"Thusi ti
s
ononesi det hestudyofweal t
h;andont heother,andmor eimportantside, apartofthest udyof
t
h
man. "Intheear l
y20 cent ury,howev er,t
herewasapusht owardl egit
imi zi
ngeconomi csasa
ri
gor ousscienceal ongsidethephy sicalsciencesl i
kechemi stryand phy si
cs.Asa r esul
t,
24
mat hemat icalmodelsandst ati
sti
cal methodswer ebr oughtt otheforefrontal
ongwi thanumber
ofst r ongassumpt ionst hatareneededt omaket hosemodel swor k.Forexampl e,moder n
mai nst ream economi csmakestheassumpt i
ont hathumanbei ngswillalwaysaimt oful
fil
lthei
r
i
ndiv idualsel f-
int
erest s.I
talsoassumest hatindiv
idualsar er ati
onalact or
sint hei
reffort
st o
fulf
illt heirunlimi
tedwant sandneeds.I talsomakest hecl ai
mst hatf ir
msexi sttomaxi mize
profitandt hatmarket sareeffi
cient.Thisschoolofeconomi cs,whichhascomet odomi nate
botht heacademi cfieldofeconomi csaswel lasthepr acticalappli
cationofeconomi ctheoryin
poli
cyandbusi ness,i sknownasneocl assi
caleconomi cs.(Seeal so:TheDi
  f
ferenceBetween
FinanceAndEconomi cs.)

Thebulkoft hist ut
orialwillconcer
ni t
selfwit
hthisl
ineofneoclassi
caleconomi ctheor y
.Other
str
andsofso- called“heterodox”economi cshavespr
ungupt ochall
enget hemainstream model,
andothersocialsci encessuchaspsy chologyandsociol
ogyhav eaddedv al
uabl
einsi ghttothe
mechanicalmodel sofpur eeconomi cs.Sometimesreject
edasf ri
ngeel ements,mai nstr
eam
economicsi st odayi ncreasingl
ytolerantofsomet heseideasandev engosof arast ryto
i
ncorporatealternati
vet heoryintoi
tsown.Someoft hesewillbeexaminedbrief
lyatt heendof
thi
stutori
al.

6.
1HEALTHCAREECONOMI
CS

Economi cs, 
particularl
yheal thcareeconomics,i smor er elevantnow t hanev er,al
thought he
fi
eld’
sent husiastsmayappeart obef ewandf arbetween.  Thewor d“economi cs”hasi t
sorigi
ns
i
nt heanci entGr eekwor dsf or“house”and“cust om orlaw. ”Roughlytransl
ated,itmeans“ rul
es
ofthehouse. ”Pai ntingint hebr oadestofst
rokes, economicsi sconcernedwi ththeallocat
ionof
resourcesamongact ors.Mi croeconomicsandmacr oeconomi csar ethediscipl
ine’
st womai n
sub-fi
elds.Mi croeconomi csf ocusesont hebehav iorofindiv i
dual
sandf i
rmswi t
hinmar kets.
Macr oeconomi cs, ont heot herhand, i
sconcernedwi t
hlarge-scaleissuesrelatedtomar ketsas
awhol e.Thesei ncludenat i
onal economicplanningandmonet arypoli
cy,amongot hers.

Economi
csandHeal
thcar
e

Howdoesanyoft hi
sr el
atet ohealt
hcare?Wel l
,healthcareisnotfree.Farf r
om it,
asamat t
erof
fact
.Accor di
ngt oJohnsHopki ns,healthcarehasbecomeoneoft helargestindustri
esinthe
world,andl i
feexpectanciesi neverycor nerofthegl obecont inuet osky r
ocket.Addi ngmore
yearstoeachi ndivi
dual’
slifeti
memeanst hat
,onthewhol e,peoplewillhavemor ey earsduri
ng
which to becomei l
l.Thismeansmor ehospi t
alst aysand mor epr escript
ion drugsbeing
consumed.I talsoli
kelymeansmor ebr i
ck-and-mortarhealthcarefacil
it
ieswillbebuilt,
meaning
aboonf ortheengineer i
ng,archi
tectur
al,andconstructionindustri
es.

Decisi
onsabouthow t oallocatedoct
or s’andnurses’labor
,whethertobui l
danew hospi tal
,
whethert
opassanewl aw,howmuchr esearchtoputi nt
oanewdr ug( and,oncether esear
ch
hasbeencompl eted,deci
sionsabouthowt opri
cethedr ug)ar
emadeal mostsolelybasedon
questi
onsrel
atedt oeconomi cpri
nci
ples.Wherewi l
llaborbemostv al
uable?Howcanwef i
nd
themostcost-eff
ectiv
emat er
ial
sforthehospital
?How muchdi ditcosttodev el
opt hisdrug,

25
andwhatki ndofl ong-
termreturnscanweexpectf r
om it?Peopleaskingthese,andot her
heal
thcar
e-r
elatedquesti
ons,wil
lturntothosewithknowledgeofeconomi csfortheanswer s.
Withexponentialgrowt
hexpectedi ntheglobalheal
thcareindustr
y,bei
ngconv ersanti
nt he
i
ssuesfaci
ngt heindust
ryandfamili
arwit
htheplay
ersinvol
vedwi l
lprov
einval
uable.

Concl
usi
on

Regardl
essofwhet heryouagreet
hatiti
st hemostdi
smaloft hesciences,establ
ishi
ngatleast
apassingfamili
ari
tywi t
htheconceptofhealt
hcareeconomi cswillprovidey ouwiththetools
necessar
yt o understand manyoft he chal
l
enges poli
ti
cians and busi nesspeopl
ef ace in
mappingglobalpol
icy.

CHAPTERSEVEN

7.
0STRATEGI
CMANAGEMENTOFHEALTHCAREORGANI
ZATI
ONS.

St
rat
egi
cManagementofHeal
thCar
eOr
gani
zat
ionspr
ovi
desessent
ialgui
dancef
orl
eadi
ng
healt
hcar eor ganizationst hroughst r
ategicmanagement .Thi sst r
ucturedappr oacht ostrat
egic
management exami nes t he processes of st r
ategic t hinking,consensus bui l
ding and
document ationoft hatt hinkingintoast rategicpl an,andcr eati
ngandmai ntai
ningst r
ategic
moment um –al lessent i
alf orcopingwi tht her api
dlyev olvingheal t
hcar ei ndustry.Strat
egic
ManagementofHeal thCar eOr ganizati
onsf ull
yexpl ainshowst rategicmanager smustbecome
strat
egict hinkers wi t
ht he abil
it
yt o evaluate a changi ng i ndust ry,anal
y ze dat a,question
assumptions,anddev elopnew i deas.Thebookgui desreader sthrought hest r
ategicplanning
processdemonst r
atinghowt oincorporatest rategict hi
nkingandcr eateanddocumentacl ear
andcoher entpl anofact ion.Inaddi ti
on,theal l
-impor tantprocessesofcr eat
ingandmai ntai
ning
thestrat
egi cmoment um oft heorganizati
onar ef ul
lydescr ibed.Fi nall
y,thet extdemonst r
ates

26
howst r
ategi
cmanager
sincar
ryi
ngoutt
hest
rat
egi
cpl
an,mustev
aluateit
ssuccess,
lear
nmor e
aboutwhatworks,andincor
porat
enew st
rat
egi
cthi
nki
nginto operat
ionsandsubsequent
pl
anning. 

This strategic managementappr oach has become t he de f acto standar


df orhealth care
managementasl eadershipandst r
at egicmanagementar emor ecrit
icalthaneverincopingwith
anindust ryi nflux.Thisbookpr ovi
desheat hcaremanagementst udentsaswel lashealthcare
administrator swi thfoundat i
onalgui danceonst rat
egicmanagementconcept sandpr acti
ces,
tai
l
oredt ot heuni queneedsoft heheal thcareindustr
y.I
ncl udedar eacl eardi
scussionofhealth
servi
ces ext ernalanalysis,or ganizationalinternalanalysis,the dev elopmentofdi recti
onal
str
ategies,st rategy alternati
vei dent ifi
cat
ion and ev aluation,and t he dev el
opment and
managementofi mpl ement at
ionstr ategiesprovi
dingani nformat iveandi nsi
ghtfulr
esourcefor
anyonei nt hef i
eld.

Thisnew eighthediti
onhasbeenf ull
yupdatedtor ef
lectnew insightsintost
rat
egicthinki
ng,
newmet hodstoconceptual
izeanddocumentcr i
ti
calenvir
onment alissues,pr
act
icalst
epsf or
carr
yingouteachoft hestr
ategi
cmanagementpr ocesses,i
ndustryandmanagementessent i
als
forstrat
egicthi
nkers,andnewcasest udi
esforapplyi
ngthestrategicmanagementpr ocesses.
Morespeci f
ical
l
y,reader
softhisedi
ti
onwillbeabl
eto:

 Createapr ocessf ordev elopi ngastrat egi


cplanf oraheal thcar eorganizat
ion.
 Mapandanal yzeext ernali ssues,t rends,andev entsint hegener alenv i
ronment
,the
healthcaresy stem, andt heser vicear ea.
 Conductacompr ehensi veser vi
cear eacompet i
toranalysis.
 Perform ani nternalanal y sisanddet erminethecompet it
iveadv antagesandcompet i
ti
ve
di
sadv antages.
 Developdi r
ectional st r
ategi es.
 I
dent i
fyst r
ategical ternativesandmaker at
ionalst r
ategicdeci si
onsf orahealthcare
organizati
on.
 Developacompr ehensi vest r
ategyforaheal t
hcar eorganization.
 Createeffectivev alue-addi ngser vi
cedel iv
eryandsuppor tstr
at egies.
 Translateservicedel i
veryandsuppor tplansintospecificactionpl ans.

Theheal thcar ei ndustry’srevolut


ionarychangeremainsongoi ngandor ganizat
ionalsuccess
dependsonl eader ship.Strat
egicmanagementhasbecomet hesingl
eclearestmani f
estat
ionof
effecti
vel eadershipofheal t
hcar eor gani
zat
ionsandt hest rat
egicmanagementf r
amewor k’
s
strengths are needed now mor et han ever.The Strategic ManagementofHeal th Care
Organizationspr ovidescompr ehensi
veguidanceandup- to-datepract
icestohel pleaderskeep
theirorganizat
ionsont rack.

7.
1OPERATI
ONMANAGEMENTI
NHEALTHCARE

Oper
ati
onsmanagementref
erstoaf ocusonthepr
acti
cesdesi
gnedtomonit
orandmanageal l
oft
heprocesseswi
thi
ntheproduct
ionandthedi
str
ibut
ionofpr
oduct
sandservi
ces.Thel
argest

27
activi
ties t hat operati
ons management focuses on ar e product cr
eation and servi
ce
dev el
opment ,and t he ef
fi
ciency wi
th which bot
h ar e dist
ri
buted.Managing purchases,
moni toringi nventor
yandpr eserv
ingqual
it
yar ethepr i
mar ygoals.Operati
onsmanagement
often i ncludes analyzi
ng a company'sinter
nalpr ocesses.Ultimat
ely
,t he way thatan
organizat i
oncar r
iesoutoperati
onsmanagementdependsupont henat ur
eofpr oductsor
serv i
cest hatitoffer
s.

Healt
hcar ei sanext r
emelydiver
sei ndustry.I
tprimar i
lyincl
udesinstit
utionsandpr act i
tioners
thatofferservi
cesf orthediagnosis,treat
mentandpr eventi
onofi nj
ury,ill
ness,disease,and
otherphysicalandment alimpairments.Ther eareawi dev ari
etyofspeci al
tiesthatf ocuson
specifi
ctreatments.Healt
hcar er efer
st opr i
mary ,secondaryandt ert
iarycar e,aswel last o
publi
cheal t
h.Socialandeconomi ccondi t
ionslargelyaffectaccesst ohealthcar e,asdot he
poli
ciesandmanagementofser vices.Foraheal t
hcar esystem tofuncti
onef fi
cientl
y,necessar y
aspectsincludegenerousfi
nancing, awell-
trai
nedandwel l-
pai
dwor kforce,credibl
einformat ion
onwhi chpol i
ci
escanbest ruct
ured,andheal thfacili
ti
est hatarewel l
-maintainedandr eli
ably
managed.

Operati
onsmanagementi sessentialfortheeff
icientf unct
ional
it
yand provi
sion ofheal
th
servi
ces.Becauset hehealt
hcar esectoriscurr
ent l
yunder goingaconsider
ableamountof
ref
orm, t
hejobsofthosewhomanageheal t
hcareoper at
ionsarechangingaswell
.Someoft he
mostpr ominentexamplesofoperationsmanagementi nheal t
hcareincl
udecont r
oll
i
ngcosts
andimpr ov
ingthequali
tyofser
viceprovi
dedtopat
ients.

Cont
rol
li
ngCost
s

Oneoft hefirstareasoff ocusforoperati


onsmanager siscostcont r
ol.Thecurrenthealt
hcar e
system ov erusesexpensi ve,technol
ogicalandemer gency-
basedt reatment.Highcost sfrom
careoftenr emai nsuncompensat edduet opatientsbeinguninsured.Aprev al
enceofservi
cesi n
expensiv eset t
ingscr eat
esabur denont axpay er
s,healthinsurancehol dersandhealthcar e
i
nstitut
ionst hemsel ves.Thegoalf oroperat
ionsmanager sistohel pstri
keabal ancebetween
necessar yhigh-techtreat
mentandcommuni tycentersthatofferpreventati
veservi
ces.Pri
mar y
careinstit
utionsar ealsoapartofkeepingpatientsfrom needingexpensiveemer gencyserv
ices.

Costcont r
olal so af
fect
sthe l
evel
s and quali
tyofser vices t
hatare provi
ded t
o cl
i
ents.
Inef
fi
cient
lymanagedcost scutdownonbudget s,l
imiti
ngt hetechnol
ogyandequipmentthat
canbepur chasedandusedtoprovi
denecessaryserv
ices.Foroperati
onsmanagers,t
hegoalis
tostreaml
inecost sandtocr
eatenecessar
yfundingtomai ntai
nadequatelevel
sandqual
it
yof
servi
cesoffered.

TheBot
tom Li
ne

Operati
onsmanagementpl aysav i
talrol
eintheheal
thcar
eindustry.I
tisresponsi
blef
orthe
over
sightofhealt
hcarefacil
i
tyoperati
ons,howeff
ici
ent
lyt
heyfuncti
on,andhowcapablethey
ar
eofpr ovi
dingadequat
eandr el
i
abletr
eatmentt
othecommunit
yt heyserv
e.

28
7.
2HEALTHCAREMANAGEMENT

Healthcar
emanagementi sagr owing i
ndustr
yi ntheUnit
ed Stat
es.TheBur eau ofLabor
Stati
sti
csstatesthatjobsinhealt
hcaremanagementar eanti
cipat
edt oseeagr owt hof22
percentinthedecadebet ween2010and2020.I tmakessenset hattheneedf orheal thcare
provi
dersandf aci
li
ti
esisgrowi
ng,asthepopulati
onagesandli
feexpectancyincreasesduet o
medicaladvances.Theneedf orprof
essi
onalstomanagehealthcarefaci
li
tieswillal
sogr ow.
Herear esomet hi
ngstoknowabouthealt
hcaremanagementifyouareconsideri
ngent er
ingt he
fi
eld.

AboutHeal
thcar
eManagement

Healt
hcaremanagement ,alsor ef er
redtoasheal t
hcar eadmi nistrati
on,istheadmi ni
str
ation,
managementorov er
sightofheal thcare sy stems,publ i
c heal t
h sy st
ems,hospi tals,entir
e
hospi
talnetworksorothermedi calfacil
it
ies.Dut iesoft hesepr ofessional
sincludeensur i
ngthat
i
ndivi
dualdepartmentsrunsmoot hly,
quali
fiedempl oyeesar ehi r
ed,informati
oni sdisseminated
eff
ici
entl
yt hr
oughouttheor gani zati
on,speci f
icout comesar er eachedandr esourcesar eused
eff
ici
entl
y,amongmanyot herr esponsibil
iti
es.Ther earegener alheal t
hcaremanager sandt hose
whoar econsideredspecial
ists.Gener ali
stsov erseeent i
ref acil
it
ies,whilespecial
istsfocuson
theadministr
ati
onofspecifi
cdepar t
mentsl ikemar keting,fi
ance, policyanal
ysisoraccount i
ng.

Requi
redEducat
ion

Therearev ari
ousdegr eesthatcanl eadt oapr of
essionalposi t
ionasaheal thcaremanager .
Student
susual l
ypur sueapr ogram inheal t
hcar emanagementt hr
oughabusi nessschoolor
schoolofpubl i
cheal th.Therear ebachel or’
sl evelprogramsbei ng of
fered int hef i
eld of
healt
hcareadmi ni
st r
ation;however,mostpeopl ei nthepr ofessiondohol damast er
’sdegree,
which tends to be t he expectati
on ofhi ri
ng per sonnelf orsuch posi t
ions.Heal thcare
managementpr ofessionalscanal soadv ancet hei
reducat i
ont opursueadoct oraldegreei n
healt
hadmi nist
rationinor dertomov eintoteachingposi ti
onsatt hecollegel evel,becomea
publi
cpolicyanaly
storl eadl
argerorgani
zationsatmor ecompl exlevel
s.

The ov erar
chi
ng accrediti
ng body t hat oversees educati
onal programs of heal thcar
e
administ
rati
onintheUni tedSt atesisTheCommi ssi
onont heAccreditati
onofHeal thcar
e
ManagementEducat i
on.Degr eepr ogr
amst hatf al
lunderitsauspicesincludet heMasterof
Heal
th Ser vi
ces Administr
ation,Mast er of Hospi t
al Admi ni
str
ati
on,Mast er of Healt
h
Administr
ati
on,MasterofBusi nessAdmi ni
str
ationinHospi t
alManagementandMast erof
Publ
icHeal t
h,amongot hermor egenerali
zedprogramst hatcanl eadtocar eer
si nheal
thcar
e
over
sight.

Cer
ti
fi
cat
ion,
Licensur
eandAssoci
ati
ons

Whil
er equi
rements are di
ff
erentf r
om statet o state,mosthealthcar
e admini
str
ati
ons
prof
essi
onal
sdonotr equi
real i
cense.Anexcepti
ontot hisrul
emaybef orthosewhowishto
openthei
rownf acil
i
ty,asmostst atesdor equi
real icenseforoper
ati
onssuchasnur si
ng
homes,pri
vatehospi
tal
sandl ong-t
erm car
ef aci
li
ti
es.Fort hosewhodonotneedal i
cense,

29
certi
ficati
onorot hercredential
smaypr ovi
deapr ofessionaladvantage.Cr edential
i
ngboar ds
offercerti
ficati
onbasedonacombi nat
ionofeducation,experi
enceandknowl edgeexams.The
Amer ican Col l
ege ofHeal thcare Execut
ives off
erst wo wel l
-respected tit
les toi ndust
ry
professionals.Thesear etheFel l
owofAmer icanCollegeofHeal t
hcareExecut ives(FACHE)and
Certif
iedHeal thcareExecutive(CHE) .TheNat i
onalAssociati
onf orHealthcareQual i
tyandt he
Amer icanCol l
egeofMedi calPracti
ceExecut i
vesaretwoot heraccredit
ingor ganizat
ionsinthe
healthcareadmi nistr
ati
onf i
eld.

7.
3INFORMATI
ONMANAGEMENTI
NHEALTHCARE

Healthinf ormationmanagement( HIM)i sinfor


mat i
onmanagementappl i
edtoheal thandhealth
care.Itist hepr act
iceofacqui ri
ng,analy zi
ngandpr otecti
ngdi gi
talandt raditi
onalmedical
i
nf or
mat i
onv i
taltoprov i
dingqualitypati
entcare.Wi t
hthewi despreadcomput erizati
onofhealth
records,t radi
ti
onal( paper -
based)r ecordsar ebeingr eplacedwi thelectr
onicheal threcords
(EHRs) .Thet oolsofheal thinformat i
csand heal thinformation technol
ogyar econtinuall
y
i
mpr ov i
ngt obri
nggr eatereffi
ciencytoinformationmanagementi ntheheal t
hcar esector.Both
hospitalinformat i
onsy stemsandHumanResour ceforHeal t
hInformationSystem ( HRHIS)are
commoni mplement ati
onsofHI M.

Healthinf ormationmanagementpr ofessionalspl aninformat i


onsystems,dev elophealt
hpol icy
,
andi dentifycurrentandf utureinformat i
onneeds.I naddi tion,t
heymayappl ythesci enceof
i
nformat icst othecol lect
ion,storage,anal y
sis,use,andt ransmissionofi nformati
ont omeet
l
egal ,prof essi
onal,ethicaland admi ni
strati
ver ecor ds-keeping requi
rement sofheal th care
deli
very.Theywor kwithcl i
nical
,epi demiological,demogr aphic,f
inancial
,reference,andcoded
healthcaredat a.Healthinformationadmi nistr
atorshav ebeendescr i
bedto" pl
ayacr it
icalrolein
thedel i
veryofheal thcareintheUni tedSt atesthrought heirfocusont hecoll
ect i
on,maintenance
anduseofqual itydatat osuppor tt heinformat i
on-intensi v
eandi nf
ormation-reli
anthealthcare
system" .

TheWorl
dHeal thOrganizati
on(WHO)st at
edt hatthepropercol
l
ecti
on,
managementanduseof
i
nfor
mati
onwi thinhealthcar
esy stems"wil
ldet ermi
net hesyst
em'seff
ect
ivenessi
ndetect
ing
heal
thpr
oblems,def i
ningprior
it
ies,i
denti
fyi
ngi nnovat
ivesol
uti
onsandall
ocati
ngresour
cesto
i
mprovehealt
hout comes"

Whi l
et heimageofadoct ororasur geonmi ghtbethef
ir
stthingthatcomest omi ndwheny ou
thinkaboutt heheal
thcareindustr
y,asur pri
singamountofwor kisal sogoingonbehi ndt he
scenes.I nt he21stcentury,healt
hi nf
ormat i
onanddat aisasser t
ingi t
selfast heequal l
y
i
mpor tantcounter
parttothemor ephy si
calaspectsofmedici
ne.It'
sstilladevel
opingf i
eld,but
peoplei nt
erest
edinhealthandwel lnessshouldbeawareoft hefactthatithasal readyhada
signi
ficantimpacton t he healt
hcarei ndustr
yand is onlygaini
ng moment um as i tsf ul
l
usefulnessbecomesclear.

Whati
sTr
acked,
andWhy
?

30
Thei deaofcol lecti
ngheal t
hinformati
oni snotnew,buti tischangi
ngi nt hefaceofnew
technology
.Int heday sbeforecomput ersbecamepr ev
alent,paperdocument swereusedf or
recordkeeping;ininsti
tut
ionsthathavey ett
ofull
yconverttothedigi
talmodel,thi
si ssti
llhow
i
t'sdone.New di gitalr
ecordsareeasiert oaddtoandt akeupnophy sicalspace,though,so
doctorsarebecomi ngablet oaddmoreandmor ecri
ti
calpiecesofinf
ormationtoeachpat ient
's
record.Curr
ently,manyaspect sofphysicalandmentalhealthcanbepar tofaper son'shealth
record,i
ncl
uding:

 Hist
oryofsigni
ficantvir
alandbact eri
ali
ll
nesses
 Vacci
nationinf
ormat i
on
 Di
agnosedal l
ergiesandot hercondit
ions
 Curr
entandpastmedi cati
onandt reatmenthist
ory
 Si
gnifi
cantimprov ementsorsetbacksdur i
ngacurrenthospi
tal
stay

Alloft hesepiecesofi nformati


onar ecri
ti
caltotheday -
to-daycareoft hemi l
l
ionsofpatient
s
servedbyt heheal thcaresy st
em.Storingalloft
hisknowl edgeasdigit
aldatamakesi teasyto
organizeandaccess,andt husmor eusefultohealthcar
epr of
essi
onalsser v
ingmanypat ient
s
simultaneously.Italsoal l
owspatientstoexperienceacont i
nui
tyofcar ebet weenthemany
professional
swor ki
ngont hei
rcase,reducesther i
skofhand- of
ferrors,andpr ovi
desamor e
robustpat i
entprofil
efordiagnost
icpurposes.

CHAPTEREI
GHT

8.
0 MANAGEMENT ACCOUNTING AND EFFI
CIENCY I
N HEALTH SERVI
CES: THE
FOUNDATI
ONALROLEOFCOSTANALYSI
S

I
ntr
oduct
ion

Efficiencymeasur ementisconcernedwi thmeasur i


ngandanal ysinginput sinrelat
iontoout puts
orv icev er
sa.Managementaccount i
ngof fer sabroadsetoftool sandt echni quesformeasur ing
andmanagi ngmanyaspectsoft hi
schal lenge.Risi
ngheal t
hcar ecost s,dr i
venbypopul ation
growt h,demographicshif
tsandadv ancesi nmedi calt
echnology ,putthef ocusoncostanal ysis
andmanagementbecausecosti nformationunder pi
nsdeci sionsonr esourceallocati
onand
effect ivenessatsy st
em and or ganizat
ionall ev
elsforpr oviders,pur chaser sand regulators
gl
obal ly.Inthi
schapter,wefocusoncost ingbecausecosti nformationf eedsint
omanyot her
commonmanagementaccount i
ngpr act
ices,suchast ari
ffset ti
ng,target edcosti mprovement
pl
ans, benchmarki
ng,budget
ing,serviceredesignandperformancemanagement .

The peculi
ari
ti
es oft he nat
ure ofhealt
h care as an area ofact
ivi
tyhavev eryspecif
ic
i
mplicat
ionsforthescopeandnatureofcostaccounti
ng.Fi
rst,
healt
hcareinmostcountr
iesi
sa
heav
ilyregul
atedsector,
andthisr
egulat
ionhasadi r
ectimpactondefi
nit
ionsofcost
ing,
thati
s,
31
howcostingiscarri
edout,i
ncl
udi
ngthecal
culat
ioni tsel
f,butalsoli
nkedconcept ssuchasthe
kindofcostobjectt
hatbecomesafocusforanalysis.Forexampl e,r
egulat
ionsonpay mentof
hospi
tal
sont hebasisofDRGshasmadet heDRGt hemaj orcostobj ecti
ntheacut esect
or,i
n
turnhavi
ng ani mpactont hecost
ingcalcul
ati
onandmedi calpracti
ce( Chapman,Kern&
Lagueci
r,2014)
.

Asecondi mpactoft henat ureofheal thcar eoncost i


ngpr acti
ceder ivesf rom t hef actt hat
treat mentmustof t
en beadj usted foreach pat i
ent;therefore,patient-l
evelcost ing shoul d
accountf ordifferencesbet weenpat ients.Howev er
,theshar eoft ot
alcostt hatcanbedi rectl
y
attribut edt opat i
entsisr elativelysmal l
.St udiessuggestt hatthedirectv ar
iablecost st hatcan
bedi rectlyinfl
uencedbyphy siciansarear ound42%( Taheri,Butz&Gr eenfiel
d, 2000)wi t
h58%of
1
fi
xedandi ndi
rectcost s bei ngoutofr eachofphy si
cians’responsibili
ty.Simi lar
ly,studieson
hospi t alcostst ruct
urehav eemphasi zedt hehi ghpr oporti
onoff i
xedcost si nt hisset ti
ng,
reachi ng65%,t husmaki ngi tdiffi
cultf orf r
ont-
li
nest afftoact ual
lymanagecost s( ormor e
preci sel y
, shor
t-runcashf l
ows)atpat ientl evel(
Robertsetal .
,1999).Av olume- basedal location
ofi ndi rectcost sisnotappr opr i
ateforsuppor ti
ngcostmanagementatt hepat ient-
level,whi ch
i
nst eadr equir
esanact ivi
ty-basedappr oach.Anact ivit
y-basedappr oachal soal lowsl inking
cost swi thhealthout comesi nameani ngf ulway(Kaplan&Por ter
,2011) .

Athirdi mpactarisesfrom thefactthatthereishighpr essuretoimprov etheeff


ici
encyofhealth
careser viceswhi l
ekeepingqual i
tyatt hesamel evel,theaim beingt hegenerati
onofmor e
benefit
sf rom thecur r
entlevel
sofspendi ng.Asar esult
,thenumberofuser sforcosti
ngdat a
hasi ncreased,now r angi
ngf r
om gov ernmentandr egulator
satnat i
onalorregionall
evel,to
healt
hcar eprofessions,i
nsurers,healt
hcar epr oviders,pati
entsandt hegeneralpubl
ic.This
unusual l
ywi der angeofuser smakesi tdiff
icul
tt oadj ustthenat ur
eofcal culat
ionstot he
potentiall
ydiff
erentpurposesandi nter
estsoft heseuser s(Smithetal.,
2008).

Perhapst hisdi versit


yhel pst oex plai
nwhy ,despi t
eagr owt hinther eachandcompl exityof
costi
ng i nr ecenty ears,pr ogress has been hamper ed bya t endencyt owar ds a l ack of
conceptualcl ari
tyov ert hecost ingmet hodol ogiesappropri
atetopar t
icularkindsofpur poses
anddeci sion- maki ngobj ectiv
es( Chapman,Ker n&Lagueci r
,2014).Recentdev elopment shav e
shownf argr eat
erat t
entiont ot hedetail
edt askofcost ing.Cost
inghasbeenr ecognizedby
poli
cymaker sast hekeyf orimpr ovi
ngthequal i
tyofevaluati
onofheal t
hcar eser vices.Theki nd
ofcostingi nplacedoesnotonl ydi r
ectl
yinfl
uencet heaccuracyofthetariff,
butal sohowheal th
carecanbemanaged( Moni t
or,2014a).Ther apiddevel
opmentofpat i
ent-l
eveli nformationand
costi
ngsy stemsal soshowst her ecognit
iont hatcostdat amustsi talongsideot herpat i
ent
i
nformat ion( i
ncl
udi ngcomor biditi
esandout comes) .Makingthi
slinkhel psr ai
set hestakesof
analysi
st oi ncludeef fectivenessbey ondefficiency(Kapl
an&Por ter,2011).

Howev er,beforecost i
ngcanl i
veupt osuchexpect at
ions,wemustf ir
staddr essthewi dely
notedconcer nov erthevariabi
li
tyandquali
tyofexi sti
ngcosti nformation(Busse,Schr ey ögg&
Smith,2008; Busseetal.,2011;Chapmanetal.,2013;Moni t
or,2006, 2013;Northcott&Ll ewel l
yn
2004).Inf act,manycount ri
esf i
nditdiff
iculttopr oducehi gh-quali
tycostingdat a( Busse,
Schreyögg&Smi th,2008;Busseetal.
,2011).Analysisofhealthcarecost sacrosscount rieshas
rev
ealedt hatthecoststructurebehi
ndacertainprocedur eortreatmentv ar
iessignif
icantlyf r
om
onecount rytoanotherandbet weenprovi
derswi t
hincount r
ies.
32
Cost
sindi
ff
erentcostcat
egor
iesf
orAMI
.

Poor-qualitycostdata–whet heri nt ermsofunexpl ainedsour cesofv arianceori nappropri


ate
disguisingofv ari
ancethroughexcessi verel
ianceonav er
ages–ar eat hreatt othedeliveryof
effi
cientandef fecti
vehealthcar e.Poor -qual
itydat awillnotbeusedi ndeci sion-
making( orwil
l
notbeef fect
iveifused)whi l
er esour ceswi l
lbeconsumedi npr oducingit.Towar dstheendof
thechapt erweof f
eradet ai
leddi scussi onoft hekindsofef f
iciencydeci sionst hathi
gh-quali
ty
costdat ami ghtinf
orm.Howev er,givent hecent r
alit
yofcostsy stem designt otheproductionof
datat hatcanbeusedi ndeci si
on- maki ng,wewi lladdressthiscr ucial
issuef irst.

8.
1ANALYSI
NGTHECHALLENGEOFCOSTSYSTEM DESI
GN

Inthi
nki
ngaboutthefundament
alst
epsr
equi
redinatt
achi
ngtheelement
sofor gani
zati
onal
costtoaparti
cul
arcostobj
ect(
suchasapat
ient
),t
her
earethreebasi
canal
yti
calstepsthat
mustbetaken:

1.Thecostingsy stem needstoidentif


yandgr oupt ogethert hecostsoft hevarioust y
pesof
resour
cest hattheorganizati
onhas( forexample, cli
nicalstaff,
drugs,premises) .
2.Resourcecost sneedt obegr oupedi nt
ocostpool s(basedar ounddepar t
ment sorother
managerialcostcent r
es,oractiv
iti
es)forwhichchoi cesar emadeast ot hecostdr i
verfor
thecostpool.
3.Costshav etobel i
nked( showingmor eorlessv ariabi
lit
ydependi ngont hechoi cesmade)
tothechosencostobj ect(f
orexampl e,t
hepatient, t
heser viceli
ne,andsoon) .

Choicesmustbemadeast ot hel evelofgr anul


arityineachoft heset hreestepsandt hereisno
si
ngleuni v er
sallybestappr oacht omaki ngt hesechoi ces.Par t
lythisi sar esul
toft hemany
di
fferentpur posest owar dswhi chcostdat ami ghtbeput( f
orexampl e,pricesetting,cost
management ,r esourceal l
ocat i
on) .Part
lyt hisi
sar esultoft hetr
ade- offtobest r
uckbet ween
ri
sing cost s as gr anul
ar i
tyincr eases setagai nstt he possibil
i
tyofbet t
erdecisions such
granularit
ymayormaynotof fer.Inconsider i
ngt his,itisv it
altounder standthatgranulari
tyis
notsimpl yaf unctionofthegr anul ari
tyoft hecostobj ect(step3),butal soofgranul
arit
ychoi ces
madei nt hef i
rstt wost eps.Al so,whi l
ewehav esepar atedthesest epsf orthepur posesof
concept ualcl ari
ty,i n practice many of t hese deci si ons arei nterdependentand t aken
si
mul taneously .

St
ep1:det
ermi
ningt
hegr
anul
ari
tyofcost
satr
esour
cel
evel

Basedont hechartofaccount s(thati s,alisti


ngoftheaccountsf oundinthegeneralledgerof
anor gani
zation),
cost sar
emostt ypicallygroupedaccordingt
ot hekindofcoststheyrepresent,
such assal ar
iesormat er
ial
s.Thewayt hechar tofaccount sisconstruct
ed signifi
cantl
y
i
nfluencest hedetailthatisavailablef orcosting.Forexample,insteadofsimplydealingwi t
h
salari
esasanov erar
chingcategor y,
ther ecanbeadet ai
l
edbreakdownoft hesalari
esofnur ses,
cl
inici
ans,technici
ans,admi ni
strativ
est aff
,andsoon.I naddit
ion,thechartofaccount smay
al
lowf orthesepar at
ionofsalar
iesf orcer t
aingr adel
evel
s.

33
Thest r
uct
ureoft hechar tofaccountsandi t
sdet ai
lsthereforegreatl
yinfl
uencet hedet ai
land
nat
ureofcost sthatarer eadi
lyavai
labl
eforthecostingcal cul
ati
onunder t
akeni nsteps2and3.
Fur
therdetailcanal way sbeaddedt othatmadeav ailablethroughthechar tofaccount sif
det
ailedadhocanal ysi
si sundert
aken,butthi
siscost l
ytopr oduceandmai ntainaccur ately
,and
socostsystem designrel i
esheavil
yonthestruct
ureoft hechar tofaccounts.Thisisnotal ways
toi
tsbenefitgiv
ent hatof t
enthechartofaccountsisstructuredwithexter
nalfinancialreporti
ng
i
nmi nd(Johnson&Kapl an,1987)
.

Withthisconcer ninmi nd,itisquitecommonf orthechar tofaccount stointroducerelevant


noti
onsofcostbehav i
ourint ermsofdi ffer
ent i
ati
ngbet weenf ixed( coststhatdonotchange
wit
ht helevelofoutput)andv ari
able(coststhatchangewi t
ht helevel ofoutput
)cost si
nrelat i
on
tospecifi
cr esourcesbeingmapped.Thi ski ndofdi sti
ncti
oncanf eedi ntoadhocanal ysi sof
marginalcostchangesi nr el
at i
ontoser vi
cer edesigndeci sionsandt heappli
cationofasetof
basic managementaccount ing techniques compr i
sing cost–v olume–pr ofi
tanal ysi
s.The
str
engthoft hisf r
amingofcostbehav iourist hatitqui ckl
yandeasi l
yal l
owst hemodel l
ingof
short
-runcashf lows,somet hingthatisbot himpor tantandi nt
uiti
velyappeal i
ngasamat t erof
concerntoawi der angeofstakeholders.

Thel i
mitat
ionsofaf i
xedandv ar
iabl
ef r
amingofcostbehav iourareparti
cular
lypressingin
areassuchasheal thcarewher ealargeproport
ionofcostisf i
xed.Suchaf ramingcanhel p
bri
ngaboutar elat
iveinat
tent
iontof i
xedcosts,evencreati
ngasenset hatsuchcost sare
i
nev i
tabl
e.Howev er
,evenwhenat t
enti
onisdirect
edtowardsf i
xedcosts,undersuchaf raming
theapproachoffersli
tt
lesupportf
orcapacit
yplanni
ngandmanagement .Bothofthesef act
ors
caneasil
yleadtoal ackofcontr
oloffi
xedcostsandinef
fi
cientuseofthem.

Managementaccount ingoffer
st hedisti
ncti
onbetweendi r
ect( coststhatcanbel ogical
l
yli
nked
toacostobj ect
)andi ndi
rect(coststhatcannot)coststoaddr esst heseli
mitat
ions.Inrel
ati
on
tofixedandv ar
iabl
ecosts,av ari
ablecostisinpri
ncipl
edirect.Af i
xedcostmayormaynotbe.
Thef i
xedcashflowcostofacl ini
cian’
ssalarycansti
llbedirectinrelati
ontothetimespentwith
dif
ferentpat
ient
s, f
orexample.Howev er,t
hefixedcashflowcostofpr emisesisi
ndirect.

DRGt ar i
ffstructuresareoftenbasedont heful
l costofspecif
ictr
eatment s.Ful
lcostismadeup
oft hedi rectcost soft het r
eatmentandanappr opri
ateshareofi ndirectcosts,suchthat
ul
timat el
yi fallreport
edt r
eat mentcost
sar eaddedup,t hetotali
st hetotalcostoftheprov
ider
organization.Thecent ralchoicetobemadei showt odeterminewhatanappr opri
ateshar
eof
i
ndirectcost si s.Therearet womai nal
ternat
ivesher e:v
olume-basedallocati
onandanact i
vit
y-
basedappr oach.

Tradi
tionalvolume-basedabsorpti
oncost i
ngassumest hati ndi
rectcostsarefixedandcanbe
al
locatedidentical
l
yt oeachservicedeli
vered.Howev er,sinceani ndi
rectcostcannotlogi
call
y
bel i
nked to acostobj ect,volume-based all
ocati
oni si nherentl
yar bi
trar
yand i npri
ncipl
e
i
ncorrect.I
nt ermsofmoni t
ori
ngshort-r
uncashf lows,thisisnotsodamagi ngbecauset
hef i
xed
cashflowsar eassumedt obelargel
yunaffectedbydifferentoutputchoices.

Theprobl
em withvol
ume-r
elat
edallocat
ion(
whichanacti
vi
ty-
basedappr
oachisdesi
gnedto
remedy)i
sthatwhi
l
etheindi
rectcostsar
enotrel
atedt
ovol
ume, t
heyar
erelat osomet
edt hing.
34
Ift
hecost i
ngsy stem doesnotreflecttheseact ualrel
ati
onshi ps,t
heni nthemedium termt here
i
sar iskofpromot i
ngbehav i
oursthatwi l
linadv er
tentl
yincreaseov erheadsandshor t-
runf i
xed
cashf l
ows.Thecent r
alargumentofact ivi
ty-
basedcost ingi st hattradi
ti
onalvolume- based
all
ocati
ons sy stemat i
cal
ly overval
ue hi gh-volume si mple pr ocesses and sy stemat i
call
y
underval
uelow- volumecompl exones.Asar esult,suchsy stemsencour agemor elow- vol
ume
complexact i
vi
tiest hatinturnrequiregreaterov erheadinv estmentst ohandlethei ncreased
complexit
y.Thus, theri
skwi t
hvolume- r
elatedsy stemsisthati ndi
rectcostswil
lri
sef asterthan
thevolumeofser vices(Kapl
an&Cooper ,1998).

Whil
et hechoi
cebetweenvolume-basedandact i
vi
ty-basedanalysi
sismostcommonl ythought
ofinrelat
iontothenextst
ep(step2) ,i
tisimportanttobearinmi ndthattherel
ati
veeaseof
anal
ysingacti
vi
tycost
sdependsont hestruct
ureandgr anul
ari
tyofthechar
tofaccounts.

St
ep2:det
ermi
ningt
hegr
anul
ari
tyofcostpool
sandcostdr
iver
s

Thisstepinvol
vestworelat
edchoices.Thefir
stchoicei
nvol
vestheaggr
egati
onofresour
ces
i
dentif
iedinthechartofaccountsi
ntocostpoolsthatfor
mt hebasi
cstr
uctur
eofanalysi
sin
costsystems.Thesecondchoiceinvolv
estheselect
ionofacostdri
verfort
heresul
ti
ngcost
poolsthatal
l
owscost st
obel i
nkedtothechosencostobj
ect(
step3)
.

Theconcept ualchal
lengeint ermsofdi rectcostsisnotgr eat,al
thoughcapt ur i
ngt henecessary
datacanbemor ediff
icul
t.Thedi ff
icult
iesarisewhendeal i
ngwi thindirectcost s.Inthehealth
caresector,adisti
ncti
onisof tenmadebet weenindirectcostsli
nkedt omedi calprocesses(for
example,manageroft heoper ati
ngt heatre)andov erheadcost sli
nkedt othei ndirectcost
sof
theadministrat
ion(forexampl e,chiefexecut i
veof f
iceroft hehospitalorcent raldepartments
suchasaccount i
ng,legaldepar t
ment ,andsoon) .Whenweuset hewor di ndirectcostinthis
chapter
,wer efertoallnon-dir
ectcost sbecauset hechoicesf ort
heirtreatmentar econceptual
ly
thesamei ntermsoft hevisibil
i
tyofcostbehav i
our.

Take, f
orexampl e, afigur
ef ortheov erallcostoft hefinancedepartment.Thi
sisanindirectcost
i
nt hesenset hati ti sacostwhosebehav iourwedonoteasi lyunderst
andatthepat i
entl ev el
andsowear echal lengedwheni tcomest ochoosi nganappr opri
atecostdri
ver.Thisdiff
icul ty
ari
sesbecauset hecost soft hef i
nancedepar t
mentar eanaggr egati
onofmanydi ff
er ent
resourcecost s(forexampl e,pay r
ollcost sofaccount i
ngst aff
,offi
cecostst ohouset hem,
uti
li
tiessuchasel ectri
cit
y,butalsoconsumabl essuchaspaperandcomput ers)
,whichr i
seand
fall
inrelati
ontomanydi f
ferentfactors.Suchdepar tment-basedaggregati
onsareoftenamat ter
ofpr acti
calconv enience.Asadepar tment ,t herewillli
kelybeanannualbudgett hatgr oups
togetheralloftheser esourcecost s.Int ermsofaut horizi
ngspending,thi
sisuseful;howev er,
thi
saggr egati
oni snothel pfulf
orunder standingcostbehav iour.

Byvir
tueofaggregatingsomanydi ff
erentkindsofcost sintoasi nglefi
gure,thereisnosingle
costdri
verthatof
fersacl earr ef
lecti
onofwhataccount sf orcost sinthefinancedepartment.
Thevolumeofservicesof f
ersani ntui
ti
vebutnoi sybasisforanaly si
s.Atanaggr egatelev
el,i
tis
pl
ausibl
ethatmorepat i
entswi l
l t
osomeext entl
eadtomor ef i
nancedepar t
mentcost s.Assoon
asweconsi deri
ndivi
dualpatients,howev er,i
tseemsl ikel
yt hatindivi
dualpatientconsumpti
on
offi
nancedepartmentr esourcesmi ghtv ar
yconsiderablydependi ngonmanydi f
fer
entfact
ors,
35
someofwhi
chwi
l
lhav
enot
hingt
odowi
thpat
ientbehav
iour
.

Theal ter
nati
vet oav olume-r
elatedallocationisanact i
v i
ty-
basedcost ingappr oach.Thi
swoul d
reanalysedepartment alcosts,breakingt hem downi ntocostpool sr eflect
ingspecifi
cactivi
ties
(forexample,runningt hepayroll
,creditcont r
ol)
.Onceanal ysedintermsofact i
v i
ti
es,i
tbecomes
possibletounder standwhatdr i
vescost s.Forexampl e,payrollcostslikelydependmor eont he
numberofcl i
nicalst affthanthenumberofpat i
ents( becausest aff/
pat i
entratiosmightv ary
considerabl
yacr ossspeci al
it
ies)suggest i
ngt heneedf orat wo-stageappr oachattr
ibuting
pay r
ollcostst ocl i
niciansfir
standt hent opatients.Creditcont r
olcost smayal sodi splay
signif
icantdi
fferencesbet weenspeci alit
iesdependingonpar ti
cularfinancingar r
angementst hat
mayagai nhavev eryli
ttlet
odowi t
hpat ientnumber s.

Credi
tcontr
olisanotherhigh-
levelacti
vi
ty.Dependingonthenatur
eofdeci sionstobet aken,i
t
mightbeappropr
iat
et obreakitdowni ntosubactiv
iti
esandtomapresourcesy eti
nmor edet ai
l.
Wheni tcomestothenat ureofthecostdr i
ver,againchoi
cesmustbemadeaboutgr anulari
ty.
Forexample,wemustdeci dewhet heriti
ssuf fi
cientt
oassumet hatcr
edi tcontr
olcost sare
dri
venbypati
entnumber sinparti
cularspeci
ali
ties,orwhet
heramoregranularanalysi
sofhour s
spentonpart
icul
arpati
entcasesi sappropri
ateasacostdr i
ver
.

Asal way s,thesedeci sionsar eat r


ade-offbet weent hecostofcol lectingandanal ysi
ngmor e
granulardat aov erthepossi bili
ti
esf ormaki ngbet terdecisionsinl i
ghtofi t.Thedi stinct
ion
betweendi r
ectandi ndirectcost sisnotpur elylinkedt othenatureofcost s,butalsodependson
thistr
ade- offbetweent hecostofunder standi ngi ndirectcostbehav i
our ssucht hattheymaybe
consider eddirectcost sandt hebenef itofhav ingsuchdi r
ectcostsinfor m decision-making.For
exampl e,drugsar einpr i
ncipl
eadi rectcost ,i
nt hatspeci ficpati
entsconsumet hem.Howev er,
dependi ngont hecostofadr ug,thecostsy stem mayt r
eatitasadi r
ectori ndirectcost.Ifthe
costofadr ugi sr el
ativelyhigh( forexampl e, ahigh- costcancertreatment ),i
tmaybebenef i
cial
toattri
but ethiscostdi rectlytot hepar t
icul arpat ient.Howev er,i
fadr ugi slessexpensi v e(f
or
exampl e,ast andar dcancert reatment )
,itscostmaybet r
eatedeffecti
v elyasani ndi
rectcosti f
thecostofanal y
sisout wei ghst hepossi bi
litiesofmaki ngbetterdecisionsont hebasisofmor e
refi
nedi nformat ion.Thesamechoi cemustbemadef orstaffcost s( thatis,shouldt heybe
treat
edasdi rectoref fectivel
yi ndir
ectcost s)andatwhatl evelofgranular i
ty.

Insummar y,acti
vit
y-basedcost ingi sanappr oacht oat tr
ibuter esourcecosts( st
ep1)t ocost
obj ect
s(step3),wher ecar ef
ulchoi cesar emadet ol i
nkindirectcostst othespeci f
icactivit
ies
thatdr i
vethem.Act i
v i
ty-
basedcost ingi sanal ternativetov olume-rel
atedallocati
onofi ndirect
cost stocostobj ects( forexampl e,di vi
dingcost sacr osspat i
entnumber s) .Volume-related
allocati
onsacrif
icespr ecisi
onf orthesakeofsi mplicit
yandr educedcostofmeasur ement .In
deci di
nghowbestt oaccountf orindi rectcosts,itisimportantt oalway sconsiderthecost sand
benef i
tsassociated wi t
hcol l
ect i
ng suchdat a.Thequest i
ont o askis:Doest heef fortt o
transform aparti
cularbl ockofov er headsi nt
odi r
ectcost st hroughananal ysisofact i
vitypay
backwi thregardtothedeci si
on-maki ngbenef i
tsobt ainedfrom suchef fort
s?

St
ep3:det
ermi
ningt
hegr
anul
ari
tyoft
hechosencostobj
ect

Acost
ingsy
stem canal
way
spr
oduceanest
imat
eoft
hecostofapar
ti
cul
arcostobj
ect(
for
36
example,pat i
entepisode,pati
ent ,
serviceline,
trust)
.Howev er,
dependingont heapproacht aken
i
nt hepreviousst eps,thi
sestimat emaymor eorl essr ef
lectreal
ity
.Assuch,t hi
sf inalstepis
potenti
all
yt heleastinformativ
ei ntermsofgi vingausef ulindi
cati
onoft hegr anular
ityofa
costi
ngsy stem,whi chinpracticeder i
v esmuchmor ef rom choicesmadei nt heprecedingt wo
steps.Akeymat terinter
msofgr anulari
tyatthislevelari
sesmor efrom t
hedegr eet owhi cha
parti
cul
arcostr epresentsanav erageacr ossapar ti
cularlevelofcostobject,orshowsr eliabl
e
vari
abil
it
ybet weencost satthatlev el
.

Thisi ssuei sof tendi scussedwithr egardtot op-


downandbot tom-upcost i
ng.Di v
idingt otal
oper ati
ngt heat recost sbyt henumberofpat i
entstoident
if
yacostat tr
ibutabletoani ndividual
pati
enti sat op-downappr oach.Aggregatingtheper-t
heatr
emi nutecost
st oarriveatat otalper-
pati
entcosti sabot t
om- upapproacht hatall
owsv i
sibi
li
tyofcostvari
ati
onbet weenpat ients.To
rephr asethisdi stincti
on,wi t
hwordst hatmakei tmor eobvi
oushowandwhyt hesedistincti
ons
mat ter:atop- downappr oachi sacheapwayt oproduceaveragecosts.Abot t
om- upfi
gur ehelps
tor ef l
ectv ariabili
tyofr esourceconsumpt i
onacr ossparti
cularcostobjects,buti ti smor e
2
expensi vetopr oduce.

Thedev el
opmentoft ime-dri
venact i
vi
ty-
basedcost i
ng( TDABC)( Kaplan& Ander son,2004)
representsadev el
opmentt hatcanreducethecostsofmor ef l
exi
bleandgranularanalysi
susi ng
abot tom-up,activi
ty-
basedappr oach.Thefirststepi stowor koutt hetotalcostofr elevant
resourcesr equi
red bya costobj ectand determi ne t
he levelofpr act
icalcapacityoft he
resourcestopr ovideservi
ces.Timei nTDABCr eflectstheobser v
ati
ont hatforasur pri
singly
wider angeofr esources,t
hisisanappr opri
ateunitofcapaci ty.Thesecondst epi stochar ge
costobjectswiththeirconsumptionofcapacit
yatt heper-unitcostofcapacit
ywor kedoutint he
fi
rststep.

Anadv ant ageofTDABCi sthati tsimpl ifi


esstep2asunder t
akeni near li
eract ivi
ty-
basedcosting
systems.So, f
orexampl e,anear lyact i
vit
y-basedcost i
ngsy stem mi ghthav eaggr egat
edcl i
nical
staffcost sasar esource( step1) .Thi swoul dt henbespl itacr ossi npat ientandout pati
ent
acti
v i
ti
esbasedonconsul tantj obpl ans( step2).Thesecost swoul dt henbedr iv
ent opati
entsin
theinpatientandout pati
entar eas( step3) .ATDABCappr oachav oidst heneedt omakeapr iori
assumpt ions aboutt he spliti n st ep 2.When deal i
ng wi tht he act ivityofpeopl e,thi
si s
parti
cularlyusefulsincetheirspl itacr ossmanyact ivi
ti
escansi gnificantlyandf r
equentl
yv ary.
TDABCi nsteadwor ksoutaper -minut ecostofcl i
ni calstafftimeandt henbui l
dscost supf r
om
theassignmentoft hatcostt omi nutesspentwi thi npatientsandout patients.Granulari
tyatstep
3cant henbeeasi lyadjustedbydoi ngt hi
susingest imates,orst andar dmi nuteratesperactivit
y,
ordirectmeasur ementdependi ngont hei mportanceoft hei nformat ioni nt ermsofi t
scapaci ty
toinform usefuldecisi
ons.

Demonst
rat
ingcostsy
stem desi
gnchoi
ceswi
tht
wodet
ail
edexampl
es

Toplacet hevari
ouschoi
cesanddi
sti
nctionsdiscussedintheprevioussecti
onwi t
hinamor e
concret
econt ext
,nextweanaly
sehow thesechoi cesplayoutusi ngtwodet ailedexamples
chosenfortheiri
mpacti
nter
msofcli
nicalandfi
nanciali
mportance.Fir
st,wediscusshowt hese
costsystem desi
gnchoi
cesi
mpactontheanalysisofcostsi
nt heoperati
ngtheatre,andsecond
how theyhav eani mpactontheanalysisofpr opert
ycosts.Theexampl esar ebasedon
37
observat
ionsofcost
ingpr
act
icesandnat
ionalcost
inggui
del
i
nesGer
manyandt
heUni
ted
Kingdom.

Tr
aci
ngoper
ati
ngt
heat
recost
stopat
ient
s

Theoper at
ingtheat reinanacutecarehospi talr
epresent
sahi ghl
ysigni
ficantresourceand
l
ocationofcl i
nicalact i
vi
ty.Assuch,thewayi nwhi chcostist racedtopat ient
sr eceiving
tr
eatmenti noper ati
ngt heat
resi
samat terofconsi der
ableimpor t
ance.Asdocument edi n
Chapman&Ker n( 2010)andbasedonr esearchintheUni t
edKi ngdom,thereisconsi derable
vari
abil
it
ytobef oundi ntermsofthesophist
icati
onofcostsy st
em designrelat
ingtoact i
vityin
operati
ngtheat
res.

Thel eastgr anularlevelofcostmodel l


i
ng obser ved consi sted ofa si
nglecostpoolt hat
assembl edallresourcesassignedt otheoperat
ingt heatr es(f orexampl
e,spacecosts,cli
nical
staffcosts,consumabl escosts,andsoon)wi t
hmi nutesi ntheat r
easacostdr i
verappli
edtoa
singlecostpool .Thishasbeenmappedouti nTabl e4. 2,whi chshowst hisver
ysimplecosting
approacht ooper at
ingtheat
reswi t
hresourcesont hehor izontalaxis(col
umns),act
ivi
ti
esont he
verti
calaxis(rows),andthechosencostdriveratthei nter
sect ion.

Av
erysi
mpl
ecost
ingappr
oachf
oroper
ati
ngt
heat
react
ivi
ty.

Thissy stem givesaper -


mi nutecostr atebasedont otalcostandt otalmi nutesacr ossal l
pati
ent sasappl i
edtothemi nut esofapar t
icularpatientont heoperatingtheatreregi
ster .The
costdr i
vermi nut
esseemsact ivi
ty-basedandt hecostobj ectisthepatient
,sot hi
smayl eadt o
thebeliefthatthi
sisapatient-l
ev el
, act
ivi
ty-
basedappr oacht ocost
ing.Howev er,theproblem i s
thatthechoi ceofcostpoolsi snotact i
vit
y-basedandt her ei
sami nimum possi blegranul ari
ty
withregar dt oacti
vi
tyandr esourceanal ysis( al
thought hecostdrivershowsatl eastmor e
granulari
tythansimplypat
ientnumber swoul dhavegi ven).Hencethiscostcalculati
oni scl oser
toav olume-basedthenanact i
vi
ty -
basedappr oach.

Att he nextl ev
elofsophi sti
cation,we encount ered an i nter
medi atel evelofcostmodel
granulari
ty.Thi sar osewhenpr ov i
dershadmul ti
pleoper ati
ngt heatres,andwef oundt hat
i
ndividualt heatr
eswer eof t
enusedf orpar ti
cularcl i
nicalspeci al
it
ies.Thi sall
owedf orthe
constructi
onofi ndividualoperatingt heatr
ecostpool st hatcol l
ectedt hev ari
ouscostsoft he
proceduresunder takeni neachpar t
iculartheatre.Asar esult,thesy st em couldref l
ectthe
potential
l
yv er
ydifferentcostsf orstaff(forexampl e,becauseofv erydifferentstaf
fi
ngl evel
sfor
parti
cularkindsofpr ocedures)withindifferentspeciali
ti
esr esulti
ngindif ferentper
-minutecosts
forthedifferentoper ati
ngtheatres.

Anel
abor
ati
onoft
hev
erysi
mpl
ecost
ingappr
oachf
oroper
ati
ngt
heat
react
ivi
ty.

Asi nt
hesimpl emodel ,t
hecostobj ectisthepati
ent,andagainther
eislit
tlegranularityatt he
resour
celevelwher eallki
ndsofr esourcesaregroupedtogether
.Itismor egranulart hant hat
seeninthepr ev
iousmodel( Table4. 2)giventhatthereisacostcent re-basedgr oupi ngof
resour
cecost s.Thel ackofr esourcegr anul
ari
tymakesi tdiff
icul
ttodi f
f er
enti
atebet ween
resour
cesli
kecl i
nici
ant i
meandnur setime,however.Assuch,wheni tcomest odev elopinga

38
moregranul
arsetofcostpool stomapt heresourcesont
o,ther
eislit
tletogoon.Andsowe
fi
ndacostsy stem thatproducesthreeseparatecost-
per-mi
nut
er at
est hatcanbetr
acedto
pati
ent
sinthethreedif
fer
entspecial
it
ies.Over
allhowever
,thel
evelofgranul
ari
tyi
sst
il
lver
ylow.

Atthemostsophisti
catedlevelweencounter
edacostsy st
em thatdi
sti
ngui
shedresour
cesand
acti
vit
iesatafarmor egranularl
evel
.Suchanappr oachalsomi r
ror
sthedetai
lofthecosti
ng
approachtobefoundintheInEKKalkul
ati
onshandbuch(DKG,2007)usedinGermany.

Muchmor
egr
anul
arcost
ingofoper
ati
ngt
heat
react
ivi
ty.

Thisproperlyreflectsanactiv
ity-
basedapproachbecauseitshi ft
sf r
om tr
eat i
ngt heoperati
ng
theat
reasasi ngle,depart
ment al
-basedcostpoolt oonei nwhi cht heoper at
ingt heat
reis
understoodasal ocati
onwher emanydi ff
erent(andseparatel
ycost ed)activi
ti
est akeplace,
eachofwhi chdr awsonpar t
icularsubset
sofresources.AsdiscussedinSection4.2,oncethese
acti
vi
tiesareident i
fied,t
henextst epist
ounderstandwhatdr ivesthecostincurredincarryi
ng
them out.

Showshowf oreachact i
vit
yar elati
onshi pbet weent heact i
v i
tyandt heconsumedr esour cesi s
establ
ished,dependi ngont hepr acticali
ti
esofdat acol l
ect i
on.I nsomecases,t hisl eadst o
chargi
ngast andardr ate,forexampl e,forprepar i
ngt hetheat r
e.Inot hercases,theconsumed
resourcesarer el
atedtoanact ivi
tyont hebasisofacostdr iver,suchast i
me.Anaest heticdr ugs,
forexampl e,arechar gedont hebasi soft hel engthoft imet hepat ientisanaesthetized.The
datafort het i
mewhenanaest hetizedar eav ail
ableint hesy stem andcanber et
rievedeasi l
y.
Costsf ornursestakei ntoaccountt henumberofnur sespr esent,whichcanal sobecapt uredi n
thesyst em.Howev er,asi tistoocompl i
catedtoi ncl
udet heact ualstaffcostforeachpar t
icular
nurse,ast andardchar ger ateisappl iedforeachnur se.Forseni orcli
nici
ans,theact ualst aff
costisassignedt othesessi on,whi l
ef orjuniorsitisagainast andar dchargerate.

Inthi
slastmodel ,t
hecostobj ect
sar eagainpatients.Incontrastt othesimpleandi nt
ermedi ate
costi
ngmodel s,howev er,thi
sactivit
y-basedmodeli dentif
iest heact i
vit
iesint heoper ating
theatr
eand costdr i
v er
sf oreachact i
vit
ywi t
hconsi derablymor egranulari
ty.Therefore,it
producesmor eaccuratecoststhant hesimpleandi ntermediatemodel .Thisi simportant,for
example,whenset ti
ngt ari
ffsandrepresentsasi gni
ficantimpr ovementinaccur acywhenusi ng
actualpatientcoststodoDRG cost i
ng.Anotherequal l
y,ifnotmor e,i
mpor tantbenefitisi n
termsoft heenhancedoppor t
uni
ti
est hiskindofgr anularinformationoffer
sf ormanager swho
areconsideringt
heeff i
ciencyandeffecti
venessofcl i
nicalactiv
iti
es.

Tr
aci
ngest
atecost
sthr
ought
opat
ient
s

Inthepr ecedi
ngdi scussion,welargel
yf ocusedonar angeofr esourcesandact ivi
tiest
hatwere
rel
ativ
elyeasilyli
nkedt opatientacti
vi
ty.Asi gni
ficantport
ionofor ganizati
onalcostsismadeup
ofindirectcosts( overheads,support,infrastr
ucture)
,whi charemor ecompl icatedtol i
nkto
pati
ents.I nthissection,wepr esenttheaddi t
ionalchall
engesofdeal ingwitht hesekindsof
costsint ermsofgr anul
ar i
tyofcostsy stem desi gntaki
ngt heexampl eofest ateorproper
ty
costs.

39
Perhapsthesimpl
estwayt odealwi t
hest at
ecostswoul dbet oadoptami nimum gr anulari
ty,a
top-
down, v
olume-
basedappr oach.Suchanappr oachwoul ddivi
dethetotalestatecostsacross
thenumberofdepartments(servi
celines,poi
ntsofdeliver
y),
andt henfr
om t hereall
ocatecost s
ontopati
entswit
hineachofthoseser viceli
nes.Thisisnotli
kelytobepar t
icular
lyaccurate,but
thecostsofsuchanapproacht ocosti
ngar elow.Themostobv iouscostdri
v erhere,
andwhati s
mandatedinmanyj uri
sdi
cti
onsi ntheircostingguidance,i
st ouseaspacemeasur e,suchas
squaremetresofspaceoccupied,ast hebasistoattri
buteestatecost
stocostcent r
es/service
l
ines.

However,t
her
eisconsider
ablev ar
iabi
li
tyinthelevelofguidanceindi
ff
erentjur
isdi
cti
onswi t
h
r
egardtothel
evelofgr
anular
it
ywi thwhichthisbroadapproachistobeappli
ed.Asar esul
t,t
he
t
reat
mentofpropert
ycostsacrossorganizat
ionscanbeirr
egular.

Av
erysi
mpl
ecost
ingappr
oachf
orpr
oper
tyov
erheads.

Amor egranul
arapproachi
sshowninTabl
e4.
6;her
e,v
ari
ati
ont
hati
scostdr
ivenbydi
ff
erent
spaceusestar
tstobecomeappar
ent
.

Begi
nni
ngt
odi
sti
ngui
shcostbehav
iouri
nmor
edet
ail
.

Thequest i
onremai ns,howev er,ofhowt ol i
nkpropert
ycost stoact ualpati
ents.Ifestatecosts
atthecostcent r
eorser vi
celinelev el(f
orexampl e,i
nt heoperatingtheatre)aredividedbyt he
numberofoper ationsorpat ients,itwi l
lcorrespond to at op-down,v olume-based costi
ng
approach.Evenift hefi
rststepwasabot tom-up,acti
vi
ty-basedcost i
ngappr oach,throughthis
second step,thecal culati
on t ur
nsi nt
o at op-down,v olume-based calculat
ion.If,howev er
,
propert
ycostsar eat tr
ibutedt opat ientsbasedonmi nut esspenti ntheoper ati
ngt heatr
e,it
remainsabot t
om- up,activ
ity
-basedcost i
ng.

showst hebot tom-up,act i


vity
-basedappr oachusedt oaccountf orest atecostsint heGer man
cost i
ngst andards.Asaf i
rststep,est at
ecost sar eaccountedforonaspeci fiedindir
ectcost
centre( department )
.Then, thecost sforserv i
cesbetweencostcent resarecalculated.Proper t
y
cost sareat tr
ibutedt ocostcent r
esaccor dingt osquaremet r
esofusedsur face.Then,est ate
cost sareallocatedinal aststepf rom dir
ectcostcent r
est opati
ent sont hebasisofact i
vitycost
dri
ver s.Throught heseact ivi
tycostdr i
vers,aki ndofcause- and- eff
ectr el
ati
onshipbet ween
estatecost sandpat i
entisest abli
shed.Thel evelofgranular
it
yunder pi
nningthiscalcul
ation( for
exampl e,separ ati
ngcl i
nicalest at
ecost sfrom admi nist
rati
veest atecost sanddi saggregat ing
estatecost saccor di
ngt oeachcl i
nicalar
ea)af fect
stheabi l
i
tytoaccur atelyexplai
nv ari
ationsi n
patientcosts.

Li
stofcostdr
iver
st oli
nkest
atecost
swi
thpat
ient
sint
heGer
mancost
ingst
andar
dsf
or
pr
ovi
der
sinf
ormingthet
ari
ff
.

Hy
bri
dcostsy
stemsi
npr
act
ice

40
Givent hevarietyofcost i
ngmet hodsandt hewi der angeofpossi blelev elsofgr anularit
y
di
scussed,t hequest ionar i
sesast owhatbestpr acticeofcost ingi nheal t
hcar ei s.This
questioncanbeanswer edbyconsi deri
ngt heul t
imateobj ecti
veofcl i
nicalcost i
ngf r
om a
managementpoi ntofv iew:tomakecost st r
ansparent.Whi l
ei npri
nciplethisobj ectivecanbe
obtainedwit
hal lmethods,v ar
iat
ionsi npati
entcost saremor eeasil
yandaccur atelyidentifi
ed
using an activi
ty-
based cost i
ng appr oach.Fur t
her,act i
vi
ty-based,pat i
ent-leveli nformat i
on
al
lowsf ormor eappr opriat
el i
nksbet weencostandheal t
hout comes,whi char eessent i
alfor
evaluati
ngser vi
cesinheal thcare( Kapl
an&Wi tkowski,2014) .Howev er,thedi f
ficulti
es( and
costs)ofachievi
ngact iv
ity-
basedcost ingaregreaterthanforv ol
ume- basedallocation.

Inpractice,costi
ngappr oachesar edomi natedbyr egulatoryrequir
ement sforDRGsasabasi s
fort
ar i
ffsetti
ng;thi
sissubj ecttowi delyv ari
edsophisti
cat i
on,detailandconstancyofguidance
i
nternati
onal l
y.Howev er
, gi
vent het r
ade-of fbet
weent hecostofcostanal ysi
sandt hequali
tyof
costinformat i
on,itisnotsur pri
singthat ,inpracti
ce,cost i
ngst andardsandsy stemsusual l
y
consistofami xt
ureofdifferentmet hods( thati
s,acti
vit
y -andv ol
ume- based)
.

Basedonouranal ysis,wesuggestt hatratherthanl abelacost i


ngsy stem orst andardsasa
wholei nt ermsofbei ngactivi
ty-
basedorv olume-based,onecoul dcalculatetheper centageof
costst hatf oll
ow eachcost ingmet hods.Cost i
ngst andardsi nt heUnitedKi ngdom r ecogni
ze
thatdifferentcostingmet hodsexistwi thi
ncost i
ngsy stems; attheproviderlevel
, materi
ali
tyand
quali
tyscor es(MAQS)ar eusedt orat ethequal it
yofcosti nformati
onbasedont hechoiceof
costdr i
v ers.Thecl oserthecostcal culati
oni stoact ualresourceconsumpt i
on,t hehigherthe
score;thechoi ceofcostdr iverisrat
edasbr onze,sil
verorgol d.Thisenabl esproviderstobett
er
understandhowt heircosti
ngsy st
em f uncti
onsi namor eusef ulwayandt oevaluatethequalit
y
oftheircosti nfor
mat ion.

Thatsai d,cur r
ently
,MAQSpr i
mar il
yf ocusont henat ureoft hecostdr i
ver,devotingf arless
attent i
ont otheconst r
uctionofthecostpoolt owhi chthecostdr i
verisappli
ed.Asdi scussedi n
relationtopr opertycost s,ther
ear emanyi mportantchoicestobemadei nthisregard,andt hese
signi f
icantl
yaf fecttheabi l
ityofcost i
ngsy stemst oshowact ualcosts,r
egardlessofwhi chcost
driveri schosen.Gi vent hisfocusoncostdr i
vers,theMAQSscor ei scurrentl
ywel lplacedt o
i
ndi cat ethroughal owscor ethatt heremi ghtberoom fori mprovementinthequal it
yofcost ing
dat a.Athi gherscor es,howev er,theappr oachlosest heabili
tytodiscri
minatebet weencost ing
syst emst hathav egoodcostdr i
versandgoodcostpool s,andthosethathav egoodcostdr i
vers
butdef i
cienciesincostpool str
ucture.

Ther
oleofcostdat
aindel
iv
eri
ngef
fi
cientheal
thcar
e

Muchoft heemphasisinthischapt erhasbeenpl acedont hei mport


anceoft hetechnical
charact
eri
sti
csofcosti
ngsy stem design.Whendesigningacost i
ngsystem,itisi
mpor t
antto
maintai
nacl earunder
standingoft hedeci si
onsandobj ect
ivesthatthesystem i
st hereto
support
.Inthi
ssecti
on,werev i
ewinmor edetai
lthev
ar i
ousway si
nwhichcostdatacanactas
av i
tali
nputintoeff
ort
st omeasur eandmanageef fici
encyatbot hpr
ov i
derandhealthcare
syst
em level
s.
41
Ther
oleofcostdat
ainsy
stem-
wider
esour
ceal
locat
ionsy
stems

Atthehealthcaresystem l
evel,
costdatafeedint
omajorresourceall
ocationexercisesthr
ough
tar
if
fsystems,andal soasthebasisofnegot i
ati
onsar
oundbl ockcontractsandt hesetti
ngof
budgetl
ev el
sbetweenpr ovi
dersandpur chaser
s.However,tar
iffset
ti
ngwi thi
nDRGf i
nanci
ng
syst
ems i s of
ten t
he domi nat
ing pur
pose ofcosti
ng across countr
ies (Chapman,Ker n&
Lagueci
r,2014).

Count r
ieswi thDRG- basedfinancingsystemsusecost i
ngdataf r
om pr ovi
derstoinfor
mt arif
f
setti
ng,compar isonsacrosspr ov i
dersand effi
ciencyand performanceassessmentatt he
system l ev
el.I n contr
astto manyot herindustri
es,detail
ed productorser vi
cecost i
ng is
regulat
ed,col lectedbygov ernmentandsomet i
mespubl icl
yrepor t
ed.Thisr ai
sesquestions
aboutt hepr ocessofcol l
ecti
ngandusi ngsuchcost i
ngdat aatthesy stem l
evel
.Inparti
cular
,
therear eimpor tantquesti
onsr egardi
ngt hestewardshipresponsibi
li
ti
esofgov ernmentsand
regulat
orsint ermsoft hecosti
ngappr oach(Smithetal.
,2008).

Dev elopmentofacl earconceptualfr


amewor kandacl earvisionoft hepur poseoft hecosting
appr oachar eneeded.Par
tofsuchaf rameworkmustbet hel i
nkofcost ingwi t
hpract i
cesthat
arei nformed by costi
ng,such as DRG dev elopment,t ari
ff sett
ing,cost –effecti
veness
calculationsandli
nkswithfi
nancialaccounti
ngandI T.Thegui dancemustspeci fythedesi gnof
thecostsy st
ems,incl
udi
ng,forexample,thestr
uctureofcostpool sandt hecostdrivers.

Detailedgui dancet henal l


owst hest andardizati
onofcostdat aacr osspr ov i
ders,whichisa
maj orst ewardshipr esponsibil
it
y.Inf act,standardizat
ionisacondi ti
onf ort arif
fsetti
ngor
compar isonsacr osspr ovi
ders.Furt
her,t hequestionofwhi chbodyori nstituti
ondesignst he
guidanceandcol l
ectst hedat aneedst obeaddr essed,asdoest heor ganizationofthedat a
coll
ect i
onpr ocess.Int ermsofdat acol lect
ion,weneedt oconsiderwhet herdat aarecoll
ected
from allprovidersorwhet herasampl ingappr oachshouldbechosen.Thequest ionofcosts,but
alsooft her epresentativ
enessoft hecost i
ngdat a,playsar oleint hislaterconsiderati
on.
Anot hercrucialquest i
ont hatneedst obeanswer edi show tohandl einformat i
ongov ernance
(Smi thetal .
,2008).Cost i
ngdat aneedt obeaudi tedanddat aqual i
tyneedst obechecked.The
qualityoft heinformationpr oducedusi ngcost i
ngdat adependsont hequal i
tyoft heraw cost
data.Audi tsandqual it
ychecksar et
her eforeessentialt
oensurepubl ictr
usti ninformati
onand
toensur eawel l
-i
nformedpubl icdebate.

Cross-countryresearchsuggest sthatconsi derablev ariabili


tyremai ns(Chapmanet .al.
,2013) .A
growingnumberofcount riest hati nit
iall
yopt edf orav olume- basedallocati
onmodelf ort ariff
setti
ngarenowmov i
ngtowar dsact ivi
ty-basedcost ing.Forexampl e,bothIrel
andandt heUni ted
Kingdom ar ecur rent
lydev elopinganact ivit
y-basedappr oacht ocost ingatt heproviderl ev el
(Chapmanetal .,2013).Ther easoni st hatwhi lev olume- basedal l
ocati
onenabl estherel ati
vel y
quickcalculati
onofat ari
ff,thet ari
ffitselfandt heunder lyi
ngcost sarenotconsi deredr elevant
orr el
iabl
eenough( Moni tor
,2014b) .Theper ceivedi naccuracyofv olume-basedov erheads
all
ocationatcl i
nicalunitlevelscanev enl eadcl inicianst or ej
ectt hetari
ff.Ul
timately
,v olume-
basedcost i
ngi smostpr oblemat i
cbecausei tlimitst hepot ent i
alforcostdatat omeani ngf ully
i
nform cli
nicalandmanager i
al decision-maki ng.

42
Thesel imit
ati
onsbecomeappar entonceweshi ftourat tent
ionbey ondt het ari
f fratest o
examinet hedetai
loft hevariouscostel ementsmaki ngupt hetari
fffi
gures.Ifcal culat
ionof
thesecostel ementsi sbasedonav olume-basedal l
ocation,theresultist her epor t
ingof
averages,withnovariat
ionincost sacrosspat i
ents.Howev er,i
fthecalcul
ati
oni sbasedonan
acti
vit
y-basedapproach,costsacrosspat ient
swi l
lvary.Table4.8showst hedet ail
edcost sfor
theGermanDRGf ortherevi
sionorr epl
acementofhi pjoint
sasanexampl eoft helevel ofdetai
l.

Tar
if
fint
heGer
manDRGf
orr
evi
sionorr
epl
acementofhi
pjoi
nt.

Whatbecomesi mpor tantast heemphasi sshift


sf rom tari
ffsetti
ngtoi nfor
mi ngcl i
nicaland
manager i
aldecisi
on-maki ng,howev er,isthecost ingappr oachadopt edi narriv
ingatt hese
vari
ouscostel ement s.Int hecaseofv olume-basedal locat
ions,pati
entsar eat tri
but edan
averagecostforeachcostcat egory(forexampl e,physici
an,nurse,wardandov erheadcost s)
.
Thismeanst hatthereisv eryl
itt
levari
ationinreportedcost satthepati
entlevel.Thedi fference
i
nr eport
edpat i
entcost smaybeexpl ainedbyj ustacoupl eofkeydr i
vers,suchasv ariationin
l
engt hofstayorvari
ationi nti
mei ntheoper ati
ngtheat r
e,forexample,withmanyot hersour ces
ofvariat
ionofactualcostsl ef
tunknown.Thi sbecomespr obl
ematicwhenseeki ngt olinkcost s
withhealthoutcomesandusi ngcost st omakedeci si
onsonser vi
cer edesi
gn,asdi scussed
fur
theron.

Activi
ty-
basedcost i
ngofov erheadsenablesr eport
ingofcost satthepatientlev elthattakeinto
accountawi der angeofdi f
ferencesinresourceconsumpt ion( f
orexampl e,thespeci fi
csizeof
cl
inicalteamsf ordiff
erentprocedures,ratherthananav eragecostpermi nuteacr ossmany
procedures).Thispr ov
idesmor eusefuli
nformationf orcli
nicalandmanager i
aldeci si
on-making,
asv ari
ati
onsbet weenpat i
entscanbecapt uredint ermsoft hei
ractualresour ceconsumpt ion.
Ther esult
ingt ar
iffmayt henbeaf ai
rerbasisforresour ceallocati
on.Accurat edat aarecrucial
,
ast hesefundi ngmechani smsar eusedbyr egulat
or sandpur chaser
stoi ncent i
vizereformsi n
healthcarepr acti
ceanddel i
veryatbot hprovi
derandsy stem level
s.

Costdat
aandsuppor
tofl
ocal
cli
nical
andmanager
ial
deci
sion-
maki
ng

Theef f
ecti
venessofi ncentivest oenhancet heef fi
ciencyofheal t
hcar eservi
cesdependsont he
quali
tyoft hecostdat a.Thi s,int urn,isdependentonaconst ructiv
eengagementbet ween
costi
ngandcl inicians.Prov i
der swillnotmaket henecessar yinvestment stoobt ainqualit
ycost
dataifthedatadonotpl ayar oleincl i
nici
ans’day-to-daydecisi
on-maki ng.Furthermor e,qual
it
y
costinfor
mat i
oni nhealthcar ei sdiff
iculttoachievewi thoutacti
veengagementofcl inici
ansin
thedesignoft hecostsy stem, sincet heyaret heoneswi t
ht hegranularknowl edgeofact i
vi
ti
es
thatisrequir
edt opr oducer obustandr eli
ablecostdat ainthef i
rstplace.Thist henset supa
potenti
all
yv i
ciousorv i
rt
uousci rcl
e.Ift hi
ngsgobadl y,thenpoor -qual
itycostdat aar elargel
y
i
gnoredbycl inicianst otheext enttheycanmanaget odoso.I fthingsgowel l,howev er,t
hen
dataoncostv ariationscanbecomeani mportanttooltoidentif
yareasf orcli
nical i
mprov ements.

43
Importantly,theprocessofdev el
opi
ngt hequal it
yofcosti nformationcanpr omptcl i
nical
deli
berationsanddeci sionsov erwhatrepresentscost-
eff
ecti
vehealthcare.Thepointofcost
ing
i
snotsi mpl yt oref
lectwhati sgoingon;mor eambi ti
ously
,itcanplayar oleinthinki
ngabout
bett
erway stodot hingssot hatclini
cianscanpl ayanactiveroleingenerati
ngthemaxi mum
healt
hbenef i
tsfortheirpatientswithi
nt heresourcesavai
labl
et othem.Clini
ciansengagewi t
h
costi
ngi nformati
ont hroughar angeofcommonmanagementaccount ingpracti
ces.Wediscuss
themai nonesi nthef ol
lowingsect i
ons.

Tar
get
edcosti
mpr
ovementpl
ans

Costr educt iont argetsar eof teninit


iall
yf ormulatedatnat i
onalorpol i
ti
call evels.Theyt hen
cascadedownwar dst hroughpr ovider
swi t
ht heproductionoft argetedcosti mpr ov ementplans
derivedf orindi
v idualcl i
nicaluni t
sanddepar tments.Thecapabi l
it
iesofcl i
nicaluni t
st orespond
effect i
velyt osucht argetsdependcr uci al
lyont henat ureandqual it
yoft hecosti nformati
on
availabl e.Asdi scussedear li
er,vol
ume- basedal l
ocati
onst endt oleadt oaver agerepor tedcosts,
showi ngv ariat
iononl yinr el
ationtodr iver
ssuchasl engthofst ay.Basedont his,informati
on
canr elativ
elyeasi lybepr oducedt ohi ghli
ghtsomeoft hev ar
iancei nactualpat ientcost s,f
or
exampl e,showi ngav eragehi ghsandl ows.Thechal l
engei st hatwi thoutanact ivi
ty-
based
analy sisofcost ,suchv ariati
onact sasal argel
yhy potheti
calpr omiset hatov eral
lcost scanbe
reducedi fmor epat i
ent swer eascheapast hecheapest.Unf ort
unately,av olume- basedcost i
ng
system of fersl
ittleinsightorsuppor ti
nt ermsofhowt oef fecti
velyandsaf elyachi evethis.

Anact iv
ity
-basedapproacht ocosti
ngenabl escosti mprovementplansthattakei
ntoaccount
thei mpactofi ndir
ectcostsonact i
vi
ties.Certaintypesofov er
headsmaybemor eli
nkedwith
certainser vi
celinesthanwi thothers.Rathert hanadv isi
ngtocutcost sby10% acr ossall
acti
v i
ties,costmanagementcanbet terfocusont hespecifi
ccostsandt hespeci
fi
cact i
vi
ti
es
thatcauseexcessi vecosts.Anal
ysedatt hepatientlevel
,thi
sinf
ormati
oncanthenbecompar ed
witht hehealthoutcomesachievedtoinform analysi
sofbot heff
ici
encyandeff
ecti
veness.

Ani mportantcaveattotheongoingr elev


anceoftarget
edcostimprovementplansisthatinthe
faceofcont i
nuedgr owt
hi ndemandf orheal
thcareser
vices,i
tseemsli
kel
ythatmor eattenti
on
willneedt obegi ventogenerati
ngmor ehealthfr
om existi
ngspendi
ngratherthanhopi ngto
makesi gnifi
cantreduct
ionsincurrentspending.Thi
sagendasuggestsgreateratt
enti
ont othe
foll
owingmanagementaccount i
ngpr acti
ces.

Benchmar
king

Oncecostdat aareacti
vi
ty-
basedandl inkedtohealt
hout comes,benchmarki
ngi sapower f ul
waytoengagecl ini
ci
ansinexactlyt
heki ndofanal
ysisthatcostimprovementpl ansrequi
re.
Eff
ectivebenchmarki
ngbuil
dsf r
om discussionswit
hphy sici
ansaboutthereasonst hatcosts
arehigherorlowerthanthoseofot herpr ovi
der
s.Discussionsbetweencostingexpertsand
cl
ini
ciansarealsoessenti
altoensur
et hatcostdataappr opri
atel
yrefl
ectphysici
ans’pract
ice
andresourceconsumpti
ondecisi
ons.

Suchdiscussi
onsaimt
oexpl
ainthev
ari
ati
onincostbet
weencl
i
nici
ansandpat
ient
s.I
nsome
cases,highercost
sar
ejust
if
iedbypati
entsrequi
ri
ngmorecomplexcar
e.Inothercases,

44
diff
erencesincost sar
ecausedbydi ff
erencesinmedicalpracti
ce.Adi f
fer
encecouldbecaused,
forexampl e,bytheuseofdi f
fer
entdrugsorot herconsumables,butalsobydi f
fer
entsur gical
techniques.Suchdi ff
erences,oncev i
sibl
e,formt hebasi sofdi scussi
onsamongcl i
nicians
aimedatconf i
rmingashar edunderst
andingofwhenv ari
ati
onisappr opr
iat
e,andaligndiverse
cli
nicalpracti
cewher eevidenceshowsacl ini
call
ydeterminedbalanceofhealthoutcomesand
cost.

Discussionsar oundcompar isonsofcost sbet weent heser vi


celi
nesofdi ffer
enthospital
scan
alsorev ealdif
ferencesinresour ceconsumpt ionforindirectcost
s.Ifactivi
ty-
basedcostingi sin
place,decision-makerscant henspotmor eeasi lytheoriginofsuchdi ff
erencesandpot entiall
y
makeser vicesmor eef fi
cient.Whileacti
v i
ty-basedcost inghasbeenshownt or educeov eral
l
costs( see,forexampl e,Pizzini
,2006),i
tsmai nadvantagemayact uallyli
einusingt heexisting
resourcesmor eef fecti
vel
y .Thisispar t
icularlyimportantinacont extofcopi ngwi t
hr ising
demandwi t
houtincreasingtheav ai
labl
eresour ces.

Budget
ing

Buildingont heseki ndsofanal yses,activi


ty-
basedcost i
ngdat acangoont oinfor
m mor e
appr opri
atebudget ar
yprocessesaspar toftheongoingmanagementofpr ovi
ders.Whenthere
arenocost i
ngdat aatt hepat ientlevel,thedangeri sthatbudget saresetbasedonpast
arr
angement s,powerandi nterestsratherthancli
nicalneeds,practi
cesandoutcomes.Acti
vit
y-
basedcost satt hepat i
entlevelallowf ormor eaccurat
eest i
mat esofcostsattheservi
celi
ne-
l
evelbasedont henumberandt ypeofpat ient
sexpect ed.Thebudgetprocessbecomesmor e
object i
veandf air
-basedoncl ear l
yspeci fi
edmodel l
ingofr esourceconsumpti
onandl esson
powerandl ocal i
nterest
s.

Activi
ty-basedcost inghast womai nadv antageshere.Itenablest heconstructionoft hebudget
i
nabot tom- upway ,enabl i
ngt hebudgethol derandoper ati
onalstafftoparti
cipat eint hebudget
processwhi l
ehav ingabet t
erunder standingoft heimpactoft heirwor kprocessesont hecost s
entail
ed.Thi sissuppor tedbyt heuseofl anguaget hatdirect
lyspeakst ocl inicalact ivi
ti
esas
opposedt ot echni calaccount ingter minology.Staffcanunder standwhenconst ructi
ngt he
budgethow t hecost sofwor kpr ocesses,f orexampl e,arelinkedt ocertainov erheadcost s.
Further,itenablesabr eakdownoft her esponsibil
i
tyofbudgethol derstoactiv i
tylev els(thatis,
budgethol dersf ort hedi ff
erentactivi
tiescanbedef i
ned) .I
nadmi nist
rati
vear eas, thiscanal l
ow
amor eef fecti
vedef ini
tionofr esponsibil
iti
esandcostmanagement .

Ser
vicer
edesi
gn

Ashasbeendi scussed,acti
vi
t y
-basedcosti nf
ormationinfor
msav ar
iet
yofconversat
ionsthat
caninformrobustdecisi
onsr egardingthenat ureofhow healt
hcareservi
cesmightbemor e
eff
ecti
velyar
ranged.Ati t
sbl untest
,redesigncant aket hefor
m ofproduct/
ser
viceselect
ion
deci
sions,whereby procedures orcl i
nicalar eas mightbe dropped alt
oget
her,ormor e
opti
misti
cal
ly
,improvedon.

Thi
skindofdeci
sionhasbecomei mport
anti
nmanycount
ri
esattheheal
thcaresyst
em l
evel
al
so,wher
eprovi
dersfacearest
ruct
uri
ng,ast
her
ear
etoomanyprovi
dersperpat
ienti
ncer
tai
n

45
catchmentar eas,suchascent ralLondon.Providersarethenaskedt of ocusoncer tai
nservices
represent i
ngthei
rstr
engths, whi l
ecompet i
torsmayt akeov erthoseservicesthatar econsidered
aweakness.A commont oolr ecommendedbyMoni tori nt heUnitedKi ngdom,f ormaki ng
decisionsi nsuchcases,i sthepor t
foli
omat ri
x.Thepor tf
ol i
omat r
ixcal cul
atest hepr of
it
/loss
perser viceli
neandt herelati
v esizeoft heservi
cel i
nefort heprovi
der( Moni t
or,2006).Amor e
sophisticatedapproachov erandabov esuchser vi
ceselectiondecisions,howev er,i
st ouse
acti
v i
ty-
basedcosti nfor
mat iont oi nf
ormr edesignactivi
tiessot hatser v
icesbecomemor e
cli
nicall
yandeconomi cal
lybenef ici
al.

Per
for
mancemanagement

Apopul armet ri
cformeasur ingeffi
ciencyi st heav er
agel engthofst ayinhospital
.Thisof f
ersa
si
mpl ewayt oreducet hepot enti
all
yv astcompl exit
yofindividualpatientresourceconsumpt i
on
patternst oaneasilyobser veddr i
verofov erheadcost s.Howev er
,studieshav eshownt hatthe
l
engt hofahospi talstayhasl i
mit
edi nfluenceont hetotalcostsofapat i
entstay( Taher
i,Butz&
Greenf i
eld,2000).Taher i
,But z& Gr eenfiel
dshowedt hatreducingl engthofst ayby1day
decreasest otalcostsofcar ebyonl y3%.Theyconcl udedt hatstaf fshouldinsteadfocuson
processchangesandbet teruseofcapaci tywhenseeki ngt oimprov eeffici
ency.Thisrequir
es
delvingintothecompl exi
tiesofr esour ceconsumpt i
onandr esourcespendi ngt hatmeasures
suchasl engthofst aysimpl i
fyawayf rom.

Mor eadv ancedappr oachest o perf


ormancemanagementi ncludet heuseofcost i
ngdat a,
activit
ydataandcl inicaldataf r
om aserviceline, f
orexampl e,t
akingi nt
oaccountthenumberof
patientstreatedi naser vice,costsforcer tainDRGsi nt hatser vi
cel i
neandot herrelev
ant
i
ndicat or
s.Somepr ov i
dershav eint
roducedper formancei ndicatorsbasedont hebalanced
scor ecar
dsy st em (Kaplan&Nor t
on,1996) .Forexampl e,Moni t
orr ecommendst heuseofa
balancedscor ecar
datpr ov i
derandser vi
cel inel evel
sint heUni t
edKi ngdom.Thi ssyst
em is
designedt olinkstrategyandper f
ormancei ndicators,bychoosingt hoseperf
ormanceindicat
ors
thatar ei
nstrument alforachievingstr
ategicgoal s.

State-of-
the-ar
tper f
ormancemanagementsy stemsi nhealt
hcar egoast epfurther.Theyseek
tolinkbot heconomi candcl i
nicalperf
ormance( Kaplan& Por t
er,2011)
.Forexampl e,t
he
HealthcareCost ingforVal
ueInstit
uteintheUnit
edKingdom aimst oimprovethequal it
yofthe
costinginformationinheal
thcare,butal
sotofurt
herdevelopli
nksbetweencostsandout comes
tomeasur ev alues.Thisagai
ni sonl ymeaningfulatapat ient
-l
evelofdisaggr egati
on,and
requiresbothout comeandcostdat atodemonstrateval
ue(Kaplan&Wi t
kowski,2014) .

Concl
usi
ons

Inthischapt er,wehav ereviewedt het echni


calchar act
eri
sticst hatunderli
egood-qual
itycost
data,andsomeoft heway sinwhi chsuchdat acaninform effort
st omeasur eandenhancet he
eff
iciencyofheal thcareservices.Wehav ear guedthatthemai nquest i
onsforthedesignofa
costingsy stem rel
atet omat tersofgranularityateachoft het hreestepsi ncosti
ngsy st
em
design:granulari
tyoftheresour ces,
granulari
tyofcostpoolsandgr anulari
tyofcostobj
ects.I
tis
onlywhenr esourcesandcostpool saredef inedinasuf fi
cientlygr anul
arwayt hatanactiv
ity
-
based cost i
ng appr oach can be achi eved.Shi f
ti
ng awayf r
om v ol
ume-based methods is
46
essenti
ali
fcosti
nfor
mati
oni
stoaccur
atel
yref
lectr
esour
ceuseandpl
ayamor
edi
rectr
olei
n
healt
hcaremanagement
.

Activi
ty-basedcost i
ngenabl esthemanagementofi ndirectcost sbyv i
rtueofi t
sr eorganizati
on
ofcostpool sawayf r
om t r
adi ti
onal(oftenfinancialreporting-
driven)str
ucturestowar dsanal ysi
s
ofact iv
iti
eswi thdefi
nedcostdr ivers.Realizingthedeci sion-
maki ngbenef i
tsoft hesedat aalso
requiresthatcostpool sbemappedont oar easofdeci sion-makingr esponsibi
lit
y.Ingener al,
the
misalignmentofcostanal ysi sanddeci sion-makingst ructuresrisksinhibi
ti
ngef fortsatser vi
ce
redesigni nt hefir
stinstance.Suchmi sali
gnmentr unst her i
skt hatanysav i
ngsf rom ser vi
ce
redesignsar eunl i
kel
yt oultimat elytr
anslatei nt
ochangesi nresourcespendi ng.Whi leactivi
ty-
basedcost i
ngcannotdi rectlyinformr eductionsinov erallspending,part
icular
lyinaset t
ingwi t
h
ahi ghper centageoffixedcost s, i
tcancont r
ibut
et ogreat ereff
iciencybyindicati
ngwher eslack
existsandt herebycont r
ibutet oincreasesi noutputs.Thi sseemspar ti
cular
lypertinentinheal t
h
careset ti
ngswher etherei sl i
kel
yt obei ncreaseddemandf orser vi
cesandt husexpect ationsof
reducedspendi ngseem unr eali
stic.

Ouremphasi sinthi
schapt erar i
sesfrom oursenset hatcostinfor
mat i
onisfundament alt
oa
wide r ange of ef f
ici
ency -
ori
ented pr acti
ces. Past effort
s to clearl
y and consi st
ent ly
concept uali
zecosti
ngint heheal thcar esectorhavenotbeenst r
ongenought obr i
ngabout
widespreadpr oducti
onanduseofcost ingdatathatcansuppor tev i
dence-
baseddeci sion-
making.Wear guethatregulatorsshoul dplayanessent i
alroleinensuri
ngthatresourcesset
asidefort hedevel
opmentofcost i
ngsy stemsarenotspentr ei
nvent
ingthewheel.I
tisessent ial
thatcost inggui
dancebesuf f
ici
entl
ydet ai
l
edsot hatcost i
nginpr act
icecandeliveront he
promiset oenhancetheeffici
encyofheal thcareprovi
sion.

47

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