How Management Science Rescues Healthcare

Author: Stanisław Pisarski, President of the Board, Corporate Strategy Adviser, Factor Consulting

To regain social trust and rebuild the health service, the medical community must boldly open up to professional managers and give up the current oligarchic management style.

After almost a year of struggling with the pandemic, the doctors who are devoutly fighting on the front lines are well aware that they cannot cope on their own and that they need professional, managerial support. As the results show so far, their colleagues who hold managerial positions in hospitals, public administration, and industry organizations are not able to provide them with such support. For years, we have been witnessing the shifting of responsibility for healthcare onto the government, regardless of their political affiliation, while protecting their privileges.

You don't measure, you don't manage

Management has more to do with medicine than it is commonly believed. They are both highly specialized branches of science combining knowledge and practice, and both seek to heal the patient - a person or an organization. Both rely on scientifically verified solutions, and they recommend therapies based on the symptoms and their interpretation. Finally, the selection and modification of therapies are based on objective data.

No wonder that the doctor requires the patient to repeat the same test to decide on the further therapeutic procedure, depending on the test results. All the more surprising is the enormous discrepancy between medical practice and management practice in our hospitals. On the one hand, we demand accessible and precise diagnostics, and on the other hand, we tolerate the lack of useful managerial information, making do with data that is long overdue and unhelpful. We blame an insufficient amount of information on the lack of appropriate systems, time, capabilities, and finally, on the inability to measure something due to the "complex nature of the object". In short, it cannot be done. Perhaps such an attitude results from the conviction that without additional financial resources, nothing can be done. Why measure something that can't be changed anyway? Well, this is wrong thinking.

A better-managed hospital offers better treatment

The consulting company, McKinsey together with the London School of Economics, Harvard Business School, and Stanford University, have analyzed 1,200 hospitals, mainly from the USA and Europe. The conclusions of this analysis clearly show that better managed hospitals have better treatment results. But that’s not all. Management excellence is not linked to public health expenditure, nor market and regulatory conditions, nor even to national culture.

For example, an analysis of hospitals in the US and the UK suggests that a 1-point improvement on the management excellence scale results in a 6-7% increase on the scale of clinical outcomes (e.g. 6-7% lower 30-day mortality related to myocardial infarction).

Treatment that is both efficacious and cost-effective is possible, as the experience of the University of Wisconsin Hospital and Clinics further shows. Reorganization of the hospital's activities around the so-called service lines allowed this institution to neutralize the impact of declining revenues from reimbursement of services provided, and also resulted in improvement of financial indicators and - importantly - improved effectiveness of patient treatment.

The service line is a concept that is being implemented by many hospitals in the United States as well as in the United Kingdom as part of the public healthcare system. It can be organized around a comprehensive treatment pathway for a given group of diseases (e.g. cancer), around a specific population (e.g. women), or a specific medical procedure (e.g. kidney transplant). Identification of service lines is a strategic decision based on the hard epidemic, operational, and therapeutic data. It allows for the rationalization of investments, coordination within the healthcare institutions and system, as well as the identification and elimination of waste. Each service line encompasses a comprehensive therapeutic process focused on a clearly defined outcome for the patient. All tasks and resources are coordinated to achieve this outcome.

Management is a remedy for underfunding

Even underfunded hospitals hold available reserves that can be released by making bold and informed decisions, based on objective data. Many examples show that hospitals can offer high-quality medical services and even further improve their quality, despite the lack of additional funding.

Non-commercial health service systems from the USA, such as Allina Health (11 hospitals, 42 outpatient facilities, 1677 beds), Indiana University Health (19 hospitals, 3326 beds), or Trinity Health (49 hospitals, 432 outpatient facilities, 32 social care facilities in 10 states) are just some examples of how good management based on objective data can lead to better clinical outcomes and cost savings.

Each of these institutions has to face the increasing costs of medical services and at the same time the growing pressure from insurers to reduce the costs of reimbursement of treatment. Increasingly, insurers also require guaranteeing a certain level of therapeutic effectiveness. These institutions and similar ones look for solutions within the framework of coordinated healthcare, often defined in terms of service lines. This requires high management competencies and a well-designed system of monitoring the effects - financial, operational, and therapeutic.

Management does not try to replace medicine in the pursuit of improving healthcare but creates the conditions for the actual implementation of medicine based on evidence and value. Patients and payers in Poland and around the world require healthcare organizations to decisively align their activities to offer comprehensive patient health management, instead of providing medical services in an uncoordinated manner. The therapeutic outcome is still the leading indicator, but the measured costs associated with it (time, organizational, technical, financial) are variables that are subject to improvement and optimization.

Dual management by managers and clinicians

In these hospitals and healthcare institutions, where management plays an important role, a matrix (dual) management of the process of providing health services is used, starting at the level of specific service lines. The separation of operational and therapeutic accountability allows for a precise assignment of responsibilities and a clear definition of the scope of decision-making autonomy. This leads to making decisions where the problem arises, and the feeling of being in control of the situation is highly motivating for the teams involved.

Management experience in each of the industries shows that the lack of appropriate management information, lack of coordination, and precisely assigned scopes of accountability for the overall activity lead to ineffectiveness and, as a result, to a catastrophe. The healthcare industry is no exception. Management can play a very positive role in improving healthcare, as exemplified by the medical organizations mentioned above. We cannot expect doctors to improve the situation in our hospitals. There are too few of them and they are too overworked. Besides, they don’t have appropriate managerial competencies, the acquisition of which requires many years of work and specialist training. The solution is dual management, i.e. close cooperation between managers and clinicians. Necessarily based on current and relevant empirical data.

The crisis has highlighted weaknesses

The SARS-CoV-2 pandemic highlighted the actual state of management in the public health service organizations in Poland. The most striking example of a management crisis is the inability to collect and report information related to the situation in hospitals on an ongoing basis, necessary to assess the situation and effectively coordinate activities throughout the healthcare system. And although in the Polish healthcare system, not only hospitals have a problem with collecting and reporting managerial information, shortcomings in this area particularly undermine social trust in the health service. It also dramatically limits the central government's ability to coordinate the fight against the pandemic and protect the health and lives of Polish patients.

Photo: https://pl.freepik.com/photos/medyczny