The Sickly State of Public Hospitals

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

Ncsap

The Sickly State of Public Hospitals