Compiled Research Articals

University of Central Punjab
Research Articles

A COMPARITIVE STUDY OF HUMAN RESOURCE PRACTICES IN
PUBLIC AND PRIVATE SECTOR HOSPITALS

UNIVERSTY OF CENTRAL PUNJAB

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Faculty of Management Studies
University of Central Punjab Lahore, Pakistan
Spring 2009
SUPERVISOR:________________
Comparative study of Human Resource practices in Public and Private Hospitals

ARTICLE:

Modern Hospital

Management: Human

Resource Management in
Hospitals
By: S.F. Chandra Shekhar
11/2/2009

Modern Hospital Management
Article: Human Resource Management in Hospitals
[Pg: 119/392] S.F. Chandra Sekhar
Introduction
T he simple and familiar word ‘hospital’ represents much, but is not always understood in its entirety and
complexity. A hospital cares for patients of all ages and backgrounds, some appreciative and some
disgruntled, some happy and some sad. It houses cooks and doctors, cleaners and nurses, technicians and
therapists, ambulance drivers and administrators of different kinds, plumber sand clerks, all interacting with
each other. It experiences love and hate, hope and despair, sympathy and indifference. It is a place which never
closes complex equipment, has a wide variety of supplies, imposes policies and rules, has budget sand debts,
experiments and learns, and plans for the future (William 1990).The central theme conspicuous in a hospital is
that it gives prominence to the people who deliver services to the wider constituents of a hospital. A human
asset, in modern times, is considered to be a treasure rather than a mere resource in progressive business
organizations. This is because it is the people who shape the destiny of the business, rather than the structures,
systems and processes effectively formulated in the organizations. Many a time, managers comment, ‘I wish I
had a highly competent, motivated and committed staff working for me’, while setting aside the structures and
processes of their organizations. Hospitals are becoming large and complex, with the increase in modern health
facilities, increased health awareness among people, and the advent of new technologies in medicine.
Government intervention in recognizing the hospital as an industry, and regulating their purpose and
performance, has also increased in India. There have been many success stories documented in the
management literature about companies whose human resources have turned them around from failure. In
contrast, there are also stories of some companies that are extinct because of poor human resource
management (HRM) practices. Thus, it is evident that effectiveness of a hospital is, to a large extent, dependent
on the quality of services delivered, and the work effort expended by its employees. Therefore, HRM function is
critically important and cardinal for the efficient and effective operation of a hospital as an organization. Due to
this fact, the recurring changes taking place in the health care industry, which affects health services, have also
influenced the HRM function considerably. As aptly pointed out by Armstrong (1987), the fundamental belief
underpinning HRM is that sustainable competitive advantage is achieved through people. They should therefore,
be regarded not as variable costs, but as valued assets in which to invest, thus adding to their inherent value.
This chapter has five objectives. First, it presents the evolution of hospital HRM in India. Second, the objectives
of HRM systems in the hospitals are explained. Third, the distinction between personnel management and HRM,
and its objectives in hospitals are dealt with. Fourth, it enlists and elaborates each of the sub‐functions of HRM
vis‐à‐vis general management functions. Figure 5.1presents the framework for such a relationship. The last
objective, in brief, suggests show to put HRM into practice, followed by the future of HRM in hospitals in the
new millennium.

Evolution of Hospital HRM in India
HR function is in existence in some form or the other in Indian organizations in general, and in hospitals
specifically. This is because organizations exist for people. They are made of people and by the people. Their
effectiveness depends on the behaviour and performance of the people constituting them. However, organized
HR functions can be traced to the concept of concern for the welfare of employees that started in the 1920s.
Today, the status of personnel management function in hospitals is not much different from what it has been
during the last twenty years, not only in terms of its role and execution, but also, and more importantly, in terms
of the approach and philosophy towards human resources. Neither has the evolution of the function been
smooth, nor has any significant progress been made lately. The evolution of HR function in India is presented in
Table 5.1 to show its logical development.
Objectives of HRM System in Hospitals
The broad objective of HRM is to contribute towards realization of the hospital’s goals. The specific objectives
are to:
 Achieve and maintain good human relations within the hospital.
 Enable each employee to make his/her maximum personal contribution to the effective working of the
hospital.
 Ensure respect and the well‐being of the individual employee.
 Ensure the maximum development of the individual, and to help him/her contribute his/her best to the
hospital
 Ensure the satisfaction of the various needs of individuals in order to obtain their maximum contribution
to achieve the hospital’s goals.
Personnel Management versus HRM
Conceptual differences between personnel management and human resource management have run into
controversies and contradictions. Such differences should be perceived as a matter of emphasis and approach,
rather than of substance. The numbers of established differences are more in number than the similarities that
exist between them. However, all such dissimilarities, to a large extent, are related to philosophical tenets. Table
5.2 presents such differences in philosophy.
Personal Management Human Resources Management
Employee commitment, involvement, identification
Employee alienation ignored
and loyalty encouraged
Fear psychosis created Trust and confidence promoted
Policing poor performers, absentees, late comers, etc Supportive to employees
Understanding, providing autonomy and
Confrontation practiced
empowerment
Collaboration and counseling arranged for
Power concentrated
responsibility shared
Problems of individuals solved Problems of group solved
Inequality in accepting ideas Equality of ideas
Anonymity of person Recognition of person
Knowledge conservation the main motive Knowledge dissemination the main motive
Distancing from management Proximity with management
Managing people Managing performance and process
Unions resented Unions involved in HRD programs

Today, the emphasis of HRM is on commitment rather than compliance, which was emphasized by the
personnel function during the past several years. Despite such philosophical differences, the functions remain
the same. But, it is noteworthy to mention that a manager with the personnel management philosophy tends to
be more traditional in his approach towards employees. Whereas, the approach may be more humane if the
manager embraces the human resource management philosophy. Thus, in this chapter, the terms ‘personnel’
and ‘HRM’ are not treated separately while discussing their operative functions in management.
The operative functions of HRM are presented in the following sections. Under each of the operative functions,
the tasks, assignments and responsibilities of the HR functionary are listed out and discussed in brief.
Modern H
Hospital M
Managem
ment
uman Resourrce Managem
Article: Hu ment in Hosp
pitals
[Pg: 11
19/392] S.F. Chandra Sekhar

The general managemeent function ns of planning, organizzing, directin ng and conntrolling are the ubiquiitous
functions that are carrieed out by all the clinical and manageerial function naries in the hospital; wh hereas operaative
functions arre function‐sspecific (seee Figure 5.1)). Planning involves seleecting missio
ons and objectives, and d the
necessary co ourse of action to accom mplish them; it requires decision‐maaking that is, choosing future coursees of
action from among alteernatives. Orrganizing is a a function thhat involves establishingg an intentio
onal and speecific
structure off roles for peeople in orgaanizations. D Directing peo ople is influeencing them so that they will contribute
effectively to
t organizattion and gro oup goals. It
I has to do o predominaantly with tthe interperrsonal aspecct of
managing.
Figure 5.1Geeneral Management vs. H
HRM Functio
ons
Controlling iis identifyingg, measuringg and correctting the indivvidual and o
organizationaal performan
nce against ggoals
and plans, shhowing where deviationss from stand dards exist, and helping to correct theem.

Procurement of Human Resources
Procurement is the planning; organizing, directing and controlling of activities that are related to the acquisition
and deployment of human resources. The activities of the HR functionary under the procurement sub‐system
are: first, job analysis, which includes, designing job descriptions, making job specifications and making personal
specifications. Second, he/she will perform activities related to human resource planning for estimating the right
number and best combination of people needed to start the functioning of the hospital. Last, on the basis of the
human resource plan, he/she has to formulate a recruitment program, followed by selection and induction
programs.
JOB ANALYSIS
Job analysis is the primary function in HRM. It is the prerequisite for all processes leading to recruitment,
selection, performance appraisal, training and development of staff. It is defined as the scientific process of
generating job description, job specification and person specification.
Job Description
Job description is the organized and factual statement of duties and responsibilities of a specific job in the
hospital. It should indicate what is to be done, how it is done, and why is it done. It sets out the purpose, scope,
duties and responsibilities of a job. In specific, it contains:
 The job title  Prospects
 The environment  Standards
 Objectives  Employment conditions
 The training required  Responsibilities

 Tasks

Job Specification
Job specification is a statement of the minimum acceptable human qualities required to perform the job
effectively. It is a statement of skills, knowledge and attitudes, that are needed to perform the job.
Person Specification
Person specification is the interpretation of job specification in terms of the kind of person needed to perform
the job effectively. This includes characteristics of the person, such as his/her physical qualities, skill
attainments, formal education and intelligence, special aptitude, interests, disposition and essential or desirable

qualities. These three elements put together are called a job analysis. There are four methods of collecting data
for doing a job analysis:
1. Direct observation
2. Interviews
3. Diaries
4. Questionnaires
Since managing a hospital involves employing a diverse workforce, in broad terms, the staff can be classified into
the following types:
 Midwifery  Medical
 Ambulance  Ancillary

 Technical  Allied professionals (medical)
 Operations or works  Administrative
 Scientific  Nursing
 Others  Maintenance
Invariably, for all of them, a job analysis needs to be done.

Human Resource Planning in Hospitals
MANPOWER ESTIMATION
Human resource planning is a process of generating a plan, showing the demand for staff over a period of time,
based on assumptions about productivity and costs associated with the employee. The supply of the resources
available within the hospital, and the shortfall, that may have to be supplemented from outside, are also
estimated. Estimates regarding demand for and for the supply of human resources are always generated in
relation to the job analysis.
Human resource planning is a continuous activity in an organization because people come and go. Further, as
and when recruitment and selection take place, such planning helps the HR manager. It is the process of
forecasting, developing and controlling the resource level by which a hospital is assured that it has the right
number and kind of people at various activity nodes, doing the work when needed, and for which they are
competent and suitable in economic terms. Thus, it consists of projecting future manpower requirements and
developing manpower plans for the implementation of the projections. It helps in procuring personnel with the
necessary skills, knowledge and attitudes. If the hospital has a corporate plan, this exercise will form a part of it.
An estimate of the future requirements of manpower in a hospital, department‐wise, by specialization, by grade,
etc., is made by applying many simple and complex statistical models. Some statistical methods, such as
correlation and regression analysis, or stochastic models can also be used for in estimating the demand.
Operations research is yet another quantitative approach that can be used to estimate the demand for doctors,
nurses and other staff in the outpatient and in‐patient sections of the hospital. However, the following are some
of the easy and ready methods that help managers to update their HR plans.


Health Statistics of Employees (past illness, disabilities, present health condition etc.)—compiled according to
department, location, occupation, grade, sex, age, etc. A five‐year manpower plan for a hospital is illustrated in
Table 5.3.
Stock is the current number of staff employed. Intake is the predicted demand for the number of staff. Losses
are historical turnover rates, that is, the number of personnel leaving, as a percentage of the existing staff.
Balance is from stock, adding the recruits, and subtracting the number of personnel leaving. Requirements are
calculated by examining workload predictions, service changes and possible future expansion of services.
Additional need is the difference between the ‘balance’, which is likely to be the stock available, and that which
is predicted as really required. Interestingly, in the domain of HR planning, there is often a conflict that arises
from two constituents of the hospital management function—the HR‐related estimates of hospital planning, and
the estimates generated by HRM function. More often than not, planning estimates for the hospital are
accepted as rule of thumb. As such, HR planning is not paid much attention to in hospitals. Taylor, the father of
the scientific school of management thought, suggests that there is a need for replacing the rule of thumb with
scientific rationality. Therefore, there is a need for a close relationship between these two entities, for the
effective and efficient utilization of human resources in hospitals.
RECRUITMENT
Recruitment is undertaken as an activity to fill vacancies from external or internal sources to comply with the
human resource plan. It is the process of identifying the number and quality of people required for the hospital,
identifying the sources of availability—internal or external to the hospital—preparing a press announcement
containing the job description, job specification, person specification, a brief note on career prospects, and the
history, mission/vision, image and future plans of the hospital, inviting applications, short listing the applicants
on the basis of the conditions specified and intimating prospective candidates for selection tests. In summary,
recruitment is a process of attracting a large pool of applicants for a small number of jobs, thus creating an
opportunity to pick the best from the lot.


SELECTION
As recruitment attracts a large number of applicants, the process of selection issued for choosing a few for
further consideration on the basis of predetermined criteria—it is the matching of the specified job
requirements with the candidate’s achievements, the principle of best fit. By and large, selection of candidates is
done with the basic assumption that people are different, and job‐related skills and abilities can be measured.
Thus, some of the tests that can be utilized for the selection of the candidates are:
 Achievement tests
 Personality tests
 Aptitude tests
 Interview
 Interest tests
 IQ and EIQ tests
Of late, intelligence tests are being questioned for their inability to predict accurately and comprehensively job
performance. They have been questioned for their poor reliability in assessing real work performance. Often,
these tests predicted performance only to the extent of 20 per cent. The rest of the 80 percent of work
performance is predicted by what is called the emotional intelligence quotient (EIQ). Thus, these days, EIQ is
being given importance. Since the rest of the 80 per cent of job behavior is dependent on the emotional IQ of
the candidates, there is a need for a deeper understanding of its utility, and its right application during selection.
HR functionaries need to pay scrupulous attention to this aspect. Therefore, hospitals need to be careful in
administering selection tests to the candidates.
Emotional intelligence quotient is characterized by an individual’s self‐awareness, mood management, self‐
motivation, and impulse control and people skills. It is strongly suggested that EIQ is far better than mere IQ
tests, because it is the EIQ test that separates the stars from the average performers (Goleman 1996).Service
orientation is yet another personality attribute that is imperative on the part of hospital employees. Service
orientation requires a helpful, thoughtful, considerate, cooperative and kind‐hearted disposition, which is an
important attitude needed in all kinds of jobs that involve dealing with people and patients in a hospital. As
such, as part of personality assessment, the selection program should also include scope for assessing the
service orientation of the employees. A scale to measure service orientation of hospital employees was
developed and tested over 19 jobs in a large corporate hospital (Chandra Sekhar, 1998). The scale was tested
and found highly reliable. A brief description of this instrument, for illustration, is given as follows:
Each item of the instrument is measured applying Likert’s (1932) 5‐point response pattern; where
‘strongly agree’ is given the score of 5, ‘agree’ is given the score of4, ‘neutral’ is given the score of 3,
‘disagree’ is given the score of 2, and ‘strongly disagree’ is given the score of 1. Illustrative sample items
of the Service Orientation Scale are given below:

o I willingly assist other hospital personnel
o I communicate clearly and courteously with others
o I always notice when people are upset
o I never resent it when I do not get my way
o The service I perform is completely done by me
o I can tell the impact of my job on the service
o I have got a chance to serve the patients here
o I feel I am rendering meaningful service to the patients
o A lot of patients are benefited by my service
o This job gives me an opportunity to fulfill my desire to serve and work
The interview is yet another popularly‐used selection instrument. There are five types of interviews.
They are:
1. Preliminary interview
2. Stress interview
3. Depth interview
4. Patterned interview
5. Panel interview
It is expected that this instrument is able to obtain reasonably accurate information from the incumbents.
However, a plethora of research work revealed that interviews are notorious for their poor reliability in
obtaining accurate and complete information from the candidates. The reasons are varied, but predominantly it
has been found that the element of subjectivity can never be entirely precluded. Despite its failure, it is still in
vogue in every sector of business. However, it can be made reliable and effective by taking care of the following
aspects:
 An interview should be based on a checklist of what to look for in a candidate. Such a checklist is
based on job analysis
 A specific set of guidelines for the interview should be prepared before the event
 Interviewers need an orientation on how to evaluate the interviewees’ performance objectively
 There should be consistency in questioning to put the candidate at ease
 The interview setting should be disturbance‐free, and the interview should be conducted in a
relaxed physical setting


INDUCTION OR SOCIALISATION
This is a formal program, designed and partly carried out to introduce new employees to the organization, in all
its social and work aspects. It is a systematic, planned introduction to the company. It is also a scientific
approach to help solve the problems of the new worker, and his/her integration into the organization of the
hospital. The purpose of this program is:
 To build the confidence of the new employee in the hospital
 To promote a feeling of belonging and loyalty, and adjusting to the new circumstances
 To give information about essentials such as working conditions and terms of employment
In this program, the employer gives the first impression to the incumbent about the uniqueness of his
organization (hospital). A representative of the HRM department, or the head of the department, with the
coordination from the HRM department, will carry out the induction program. The topics to be covered in the
induction program are about the hospital and its services. They are:
 The geographical location of the hospital
 The structural and functional aspects of the hospital
 Terms and conditions of employment
 Standing orders and various provisions
 HR policy
 The department and its employees
It is important for the concerned HR functionary to carry out the follow‐up of the induction program. This is
done by creating informal contacts between the HR functionary and the head of the department periodically, to
provide first‐hand information about the performance and personality of the incumbent. Brief monthly reports
till the end of the probation period will support decision‐making later, counseling the employee in a friendly and
impartial manner, incase he/she is not shaping up well, will correct the employee’s behavior and attitude.
PLACEMENT
This is the last in the series of activities to ensure that the selection of the right man for the right job, as a
principle, is followed through. The new incumbents need to be put through an intensive training program in
various departments before the ultimate decision is taken about which job they are suitable for. This helps in
proper placement. Many organizations which have a high turnover in the initial months of employment do not
get the right people for the right job.
In brief, the tasks of a HR functionary include:
 Reviewing vacancies
 Writing job advertisements

 Calling candidates for interviews
 Making and obtaining acceptance of offers
 Sending for references and arranging medical screening
 Informing unsuccessful candidates
 Contract preparation, signing, etc
 Induction and placement program
Development of Human Resources
Development is the planning, organizing, directing and controlling of a program that has a wide range of
activities relating to Human Resource Development (HRD) in terms of enabling employees to acquire
competencies needed for future job requirements.
Human resource development is a continuous process to ensure the development of employee competencies,
dynamism, motivation and effectiveness, in a systematic and planned manner (Rao 1990). It deals with bringing
about improvements in physical capacities, relationships, attitudes, values, knowledge and skills of the
employee, required for achieving the purposes of the hospital(organization) (Balaji 1998). If employees are
effective, their contribution to the hospital will be effective, consequently the hospital will also be effective in
accomplishing its goals. Human resource development in a hospital is achieved through three sub‐functions,
which should be well‐planned and organized in their execution. They are:
 Training
 Performance and potential appraisal
 Career development
TRAINING
The aim of any training program is to provide instruction and experience to new employees to help them reach
the required level of performance in their jobs quickly and economically. For the existing staff, training will help
develop capabilities to improve their performance in their present jobs, to learn new technologies or procedures
and to prepare them to take on increased and higher responsibilities in the future.
Training is formal and informal instruction designed to ensure and improve the individual’s performance at
work. It helps the individual achieve the stipulated or expected performance standards. Training needs may be
derived from appraisal reports, dedicated surveys, human resource plans and corporate strategy; or assessed for
the new entrants to the posts in question. Why is training needed? An employee’s value is measured not only in
terms of the cost of employing them, but in terms of the investment made in their training, development and
on‐the‐job learning. Post‐experience training in the hospital should focus on the improvement of the quality of

services, and use of better or new technologies. There is enough evidence to show that employees who were
trained on a regular basis are the ones who provide a higher quality of services to the patients.
In a hospital, there is a need for the continuous training of the staff in the areas of patient care services. How are
the needs identified? The training needs are assessed through task analysis and performance analysis, which can
be conducted through surveys, or from information furnished by the heads of department. There are two ways
of conducting a training programme—through an established HRD department, or through external trainers
coordinated by the HR department. These days hospitals have recognized the need for training and re‐training
their staff in order to develop a competitive edge over others.
PERFORMANCE APPRAISAL
Performance appraisal is a formal technique for assessing individuals, to advise them about their progress,
improve their performance, judge their merit and identify any personal difficulties. It is considered a powerful
tool to control the performance and productivity of human resources. Used effectively, it has tremendous
strategic potential for governing employee behavior, and can be used for selection, training, career planning and
reward systems in the hospital. It provides data about past, present and expected performance of hospital
employees, which is helpful in taking decisions about several constituent functions of HRM. Unlike traditional
appraisal systems, which were in the nature of checks, modern systems are geared to help the employee build
his/her potential for future performance. Of the several methods of performance assessment, three are relevant
for hospitals. They are:
 Management by Objectives (MBO)
A method by which every employee sets his/her own objectives in consultation with his/her superior, and
accounts for success or failure in accomplishing these objectives in the stipulated period of time
 Behaviorally Anchored Rating System (BARS)
A system by which good and bad behavior can be described and measured against a scale of
performance levels.
 360° Feedback
A procedure by which all concerned superiors, subordinates, and colleagues of the employee give their
ratings of his/her performance for a period of time. This system should be carefully designed and
executed, with the objective of enabling employees to identify their strengths and weaknesses, rather
than making use of them as a basis for reward. If the latter takes place instead of the former, then
employees tend to resent it and develop a kind of aversion to it, which consequently will affect their
performance adversely. What is needed is a development‐oriented performance appraisal rather than a
strictly reward‐oriented appraisal.

CAREER DEVELOPMENT
A career is a sequence of positions occupied by a person during the course of his/her professional life. It is
affected by the changes in values, attitudes and motivation that occurs as a person grows older. Career planning
is important because the consequences of career success or failure are linked closely with the individual’s
concept of self, identity and satisfaction with career and life. It is common knowledge that the career planning of
employees has a direct bearing on the productivity and quality of their lives. As such, hospitals should be
sensitive to the need of career management. In Japan, employees make a lifetime career commitment to an
organization, because of its well‐planned career path for its employees. Though the same may not be possible in
Indian organizations, yet a consistent career can be arranged for the employees because the hospital invests
large amounts of money in its employees, right from their joining the hospital to their leaving it. It is unwise to
let people leave with all the skills, knowledge and expertise that have been imparted to them.
Designing a complete HRD system rather than initiating it on a piece meal basis can benefit the hospital in a big
way. First, a HRD climate assessment should be conducted to know if the hospital is prepared to have HRD
programas. Next is the creation of an HRD function or department in the hospital, and, as a consequence,
employing a professional who will design all the HRD processes. All this requires systematic planning, controlling
and development of HRM functions.
Some aspects that an HR manager should take into consideration before initiating HRD programas in the
hospital are given below:
 Conduct an HRD climate survey to assess whether a ‘developing climate’ exists in the hospital
 Generate a report based on the survey, abstracts of which can be submitted to the top, middle and
lower levels of management
 Assess the top management’s belief in and support to HRD
 Develop the OCTAPAC culture (openness, confrontation for cause, trust, authenticity, proactive,
autonomy and collaboration)
 Design HRD mechanisms
 Implement HRD mechanisms such as training, career development, performance appraisal etc.,
simultaneously
Compensation of Human Resources
Compensation is the process of planning, organizing, directing and controlling the wages and salaries related to
the pay policies and programe of the hospital. In many cases, it is also called wage and salary administration.
The determinants of wages and salaries in the hospital are:


1. The financial position and corporate philosophy of the hospital
2. Statutory regulations pertaining to wages and salaries
3. .Job evaluation
4. Cost of living index
5. Benchmarking
Statutory regulations, such as the Payment of Wages Act, Minimum Wages Act, Equal Remuneration Act, and

Payment of Bonus Act are all applicable to hospitals also. Thus, the provisions under these laws have to be
observed while developing wages and salaries policy. Job evaluation is a method of estimating the relative worth
of a job compared to other jobs in the hospital, so that all occupational titles can be graded, and the relative
worth of each job can be expressed in monetary terms. Though such a procedure seems scientific, it is
cumbersome. Virtually no organization practices this method of determining wages and salaries. The consumer
price index or cost of living index has to be taken into account before finalizing the general wage and salary
levels in the organization. Last, yet another practice are to conduct benchmarking—a wage survey with the
objective of knowing the wages/salaries and benefits offered in similar hospitals. HR consultants often conduct
such surveys, since it is a confidential area of HR function, which no HR functionary would like to share with their
counterparts. But it is worthwhile to employ consultants to know the details about pay‐related issues in similar
organizations. This will also help in revising or reformulating the corporate pay policy. Many organizations are
now adopting a kind of corporate policy regarding pay.
1. They lead the market in salaries
2. They pay on par with other similar organizations
3. They pay less, but give more fringe benefits
Incentives are another type of compensation and reward. They are an additional financial motivation. They are
planned to improve the efficiency and productivity of the processes in the organization, and they are the
cheapest, easiest, quickest and surest means of increasing productivity. But they suffer from their design
considerations in many organizations, and particularly in hospitals, where jobs are not done individually. Group‐
linked incentives can be worked. Non‐wage incentives are more value‐driven in motivating employees than
wage incentives. They can be planned for.
Integration of Human Resources
Integration is the process of planning, organizing, directing and controlling the broad range of relationships in a
hospital, in order to ensure a proper interface between individuals and the organization.
Most hospitals have mission statements. A mission statement defines the purpose and aim of a hospital and
gives it a clear focus (Rigby 1998) in society. It has been seen that even the best mission statements are of no
use if they are not followed through and made a part of the company culture. Thus, it is the responsibility of the

HR manager to see that employees use the mission statement to work towards combined goals. This is possible
only when the needs of the employees are linked with the needs of the organization. Some of the activities that
need to be performed to ensure that greater integration takes place are:
 Building morale and motivation
 Managing change program
 Managing good industrial relations
BUILDING MORALE AND MOTIVATION
Morale or esprit de corps is the extent to which an employee’s needs are satisfied and the extent to which the
individual perceives that satisfaction as stemming from his total job situation. Morale involves interactions
among group members, and is akin to the common concept of team spirit. It is often stated that when an
employee has few frustrations, he/she seems to possess a high morale, and that when he has relatively
numerous frustrations, or intense ones, he/she appears to have a low morale. Research evidence shows that
morale affects productivity and job satisfaction in organizations. In hospitals, the effect is often of a serious
nature. The factors and situations which affect employee morale in the hospital are:
 Frustrations resulting from lack of recognition
 Frustrations caused by the belief that promotions and pay hikes are unfair
 Frustrations caused by jealousies between departments and between persons
 Frustrations from fear of being inefficient
 Practice of blaming rather than praising
Some of the severe outcomes of a low morale in hospitals are:
 Absenteeism and tardiness
 Employee unrest
 Disciplinary problems
 Poor commitment
 Fatigue and monotony
 Turnover
 Grievances
In order to improve morale in a hospital, the human relations approach, with its emphasis on employee
participation, effective communication, promoting teamwork and ensuring fairness in all aspects of work, should
be practiced. More appealing are attempts like paying a bonus to everyone, and encouraging employee
investments in the company’s shares and so on.

There are many theories for work motivation. What motivates employees has‐been a question asked over the
years. And today, we are back to the crux of the issue of motivation. It is, ‘work itself is the greatest motivation’.
Some believe that hospital staffs are either motivated or they are not, and that appealing to an employee’s need
for material gain will not make any difference to their inherent motivation level. The result of monetary
inducement is mechanical behaviour, designed to get the reward. In hospitals, it is thought that the staffs are
motivated to deliver services and care at the level they have been trained to provide it. As Handy (1994) puts it,
‘the wealth creation of a business is as worth doing and as valuable as the health creation of a hospital’. This is
very much different from the common view which emphasizes that an employee’s performance will improve if a
monetary reward lies at the end of the work undertaken, and, if individual employees know they will gain cash
or other tangible benefits, they will work harder.
Contrary to this belief, the theory propounded by Hackman and Oldham (1976) claims that if all the core
dimensions exist in the jobs carried out by people, they are well‐motivated to perform. The core dimensions of a
job are:
 Skill variety
 Autonomy
 Task identity
 Feedback
 Task significance

1. Skill variety is the degree to which the job requires a variety of different activities, so the worker can use
a number of different skills and talents.
2. Task identity is the degree to which the job requires completion of a meaningful whole and identifiable
piece of work.
3. Task significance is the degree to which the job has substantial impact on the lives or work of other
people in the organization.
4. Autonomy is the degree to which the job provides substantial freedom, independence and discretion to
the individual, in scheduling the work, and in determining the procedures to be used in carrying it out.
Last,
5. Feedback is the degree to which carrying out the work activities required by the job results in the
individual obtaining direct and clear information about the effectiveness of his other performance.
It is understood that if the first three dimensions exist in a job, participating employees feel that their job is
meaningful, important, valuable and worthwhile. Autonomy gives them a feeling of personal responsibility for
the results, and if the job provides feedback, employees know how effectively they are performing, and this
leads to learning. In order to measure this level of motivation, Hackman and Oldham (1976) have suggested the
scale, Motivating Potential Score (MPS), for a job. The formula to compute MPS is

1/3(Task Variety + Task Identity + Task Significance) + (Autonomy) + (Feedback).
With the help of MPS, every individual employee’s motivation level can be periodically assessed, and decisions
to improve his/her work can be taken. This way, all jobs in the hospital can be made powerful in their
motivational potential. A scale to measure the MPS of hospital employees has been developed and used in a
corporate hospital by Chandra Sekhar and Ramesh (1998). Nearly 19 corporate hospital jobs have been
diagnosed with the help of this scale.
MANAGING CHANGE PROGRAMMES
Change in the social and economic environment is an inevitable phenomenon. Forces of change that are
external to the organization necessitate adjustment in the internal structure and process of the hospital. Some
of the sources of major change affecting hospital management are:
 Innovations in medical technology, leading to new services and methods of delivery of services
 Greater competition, especially as a result of lower tariffs
 Changes in government regulations and taxation
 New tools of management, such as computers
 Changes in the employee’s, background, training and occupation of those already employed
Employees look upon change with suspicion and generally resist them. Such resistance could be due to the
following reasons:
 The pressure to maintain equilibrium in their work lives
 Habits are not easily changed
 Selective perception and retention
 Feeling of insecurity about their job, status, position, etc
 Attitudes do not change easily
Therefore, one of the most difficult tasks of an HR functionary is to make employees responsive to change.
These days, organizations are resorting to planned organisational development (OD) programe to achieve this.
OD is a long‐term, systematic and comprehensive change program involving all levels in the organization. This is
carried out by an external change agent, an OD consultant, and an internal change agent—the HR manager.
Together they coordinate and initiate the change programe in the organization.
MANAGEMENT OF INDUSTRIAL RELATIONS
Industrial relations in a hospital are bifurcated into individual relations and collective relations. With regard to
individual relations, the hospital HR manager deals with some significant issues, such as grievance procedures,
disciplinary procedures, counseling, and so on.

Grievance is the dissatisfaction or discomfort an employee feels regarding his/her job, or conditions of work in
the hospital. A grievance procedure is a mechanism by which a hospital ensures that an employee’s grievances
are redressed as expeditiously as possible, to the satisfaction of the employee. It is a kind of assurance to the
employee that there is a mechanism available to him/her, which will consider his grievance in a dispassionate
manner. In some organizations, this procedure facilitates multiple levels of re‐dressal. That is, in case the
employees not satisfied with the decision taken by his supervisor, he/she can go to the next higher level in the
hierarchy.
Discipline is orderliness obedience and conforming to the rules, regulations and procedures of the organization.
Employees are expected to adhere to established norms and regulations, thereby creating a state of order in the
company. This is also one of the principles of management stated by Henry Fayol (1987). Indiscipline refers to
the absence of discipline or nonconformity to rules, regulations and procedures. A hospital cannot afford it,
because it affects the morale, involvement and motivation of other employees, often leading to chaos,
confusion, reduced organizational efficiency, strikes, go‐slows, absenteeism, loss of production, and, hence, loss
of profit and wages. Some forms of indiscipline are:
 Inconsistent discharge of duties
 Immoral acts
 Acts that trigger disloyalty
 Insulting and insubordinate behavior that affects relationships
 Abusive acts
 Habitual negligence in discharging duties
 Indecent behavior with the patients
In order to ensure discipline in a hospital, there is the need for a code of discipline, and a disciplinary procedure
that can handle indiscipline or misconduct cases. This should be reinforced with the hot stove rule. It is a sound
disciplinary system, having the following characteristics:
 Advance warning is given
 Immediate action is taken
 There is consistency
 It is impersonal
Like a hot stove that burns anything touching it, in the same manner, penalty for the violation of rules should be
immediate and automatic for everyone.
As part of collective relations, a major task of the manager is to work with trade unions, followed by
participating in collective bargaining. Trade union movements are also increasingly growing in hospitals these
days. A trade union is a collective of wage earners, for the purpose of improving conditions of employment.
More often than not, the HR manager resents the word, union. But he should take time to find answers to

questions, such as, ‘Why did it happen?’ ‘How did it happen?’ The simple answer is, people join unions because
managers are notable to protect the employees’ rights and privileges. Unions assure them of getting these
rights. Hence they join them. The existence of unions may create the following problems in hospitals:
 Inter‐union rivalry
 Vested interests
 Productivity decline
 Services coming to a standstill
 Poor image
One way of preventing the formation of unions is through extensive HRD programmes and good HR policies. In
case unions are already there, HRD programmes should be gradually introduced in order to win the confidence
of the employees. But it should be handled carefully, because employees in unionised organisations suspect
motives in management decisions and initiatives.
Collective bargaining is another challenge that has to be faced by HR managers in unionized hospitals. Collective
bargaining is a procedure by which the terms and conditions of employment of workers are regulated by
agreements between the bargaining agents—union representatives and management representatives.
Prerequisites for successful bargaining are:
 Preparation by managers and union members
 A realistic charter of demands
 Mutual trust
 Both parties’ willingness to arrive at agreements
Management in India still does not realize a trade union’s position. Understanding them is very important and
involving them in the strategic management will benefit the organization in the long run.
Participation takes place when management and employees are jointly involved in taking decisions regarding
matters of mutual interest, where the objective is to arrive at solutions that will benefit all concerned. At the job
level, encouraging participative management is the task of the HR functionary. Groups such as the works
committee, the joint management council, and the quality circle and project teams may be called on an ad hoc
basis, to consider a particular situation. Successful organizations are characterized by a higher degree of
employee participation and involvement.

Maintenance of Human Resource
Maintenance is the process of planning, organizing, directing and controlling health, safety and welfare
programe that contain a wide range of activities related to the sustenance of the human resources in the
hospital. It is a recognized fact that the health, safety and welfare functions within the organization have been
the ‘Cinderella’ of HRM, despite the enormous human and economic benefits that can flow from a well‐
conceived and properly implemented health and safety policy within the company (McKenna and Beech1997).
There have been counter arguments about why an organization should take care of the health, safety and
welfare needs of its employees. These services are provided by the hospital to ensure acceptable standards of
performance, and so that the hospital can prevent personal difficulties from inhibiting performance. Therefore,
welfare of the individual should be taken into account.
FACTORIES ACT, 1948
The Factories Act 1948 by the Government of India makes it obligatory for the employer to observe the
provisions contained in the Act. Some of the main provisions are regarding health, safety, welfare and working
conditions. However, this Act is not applicable to a hospital, since a hospital is not a factory as per the definition.
Hence, only the first three are relevant for a hospital. It becomes amoral obligation, in the absence of a legal
requirement, of the employer to provide the following facilities to the hospital employees.
Health
Health provisions have to be arranged by the management, to ensure that they have healthy employees working
for them. Healthy employees make a healthy organisation. Most of these health programe are concerned with
the identification and control of occupational health hazards arising from toxic substances such as radiation,
noise, infection, fatigue and the work stress imposed on the employees. Good housekeeping, periodic medical
examinations, regular environmental checks, vaccinations, training and so on, will prevent the deterioration of
the health of the employees. Hospitals need to have a separate health program for their employees, since
employee health should be part of their regular activity.
Safety
Safety is the prevention of accidents, by identifying actual or potential causes. The process of identifying them is
mainly by conducting inspections, checks and investigations. Most accidents are related to the system of work,
and some of them are also related to personal factors, which in many cases arise from the system of work. In
hospitals, there are several places where accidents can occur. They can occur in the case of electrical or
electronic equipment, which may give violent electric shocks. They can also occur in diagnostics, where
inexperience or carelessness could result in an accident. Some of the hospital staff in clinical departments may

get HIV infection while handling patients without taking proper precautions—using gloves, handling infected
syringes or other equipment. Poor housekeeping—congestion, blocked gangways or exits, inadequate disposal
arrangements for swabs or other waste and infected materials, lack of storage facilities, unclean working
conditions, assaults on staff members by outsiders and fire can cause accidents. Almost all of these can be
prevented if a carefully worked out safety policy is adopted. In many instances, an activity in a hospital can
cause health and safety problems. Sometimes they may be inseparable. A faulty handling in diagnostics could
cause an infection, which is not only an accident, but also a health problem. Hence, there may be a need for a
combined health and safety policy.
Welfare
Welfare is the total well‐being of the employee. It is improving the morale and commitment of the employees.
Some of the welfare measures that can be provided are transport facilities, housing, co‐operatives, and canteen
facilities, education for the employees’ children and other benefits or facilities where the families of the
employees also avail of benefits such as paid holidays, and so on. In this case, families influence the employee’s
decision to stay or leave the organization in the long run.
Separation of Human Resources
Separation is the process of planning, organizing, directing and controlling the activities that deal with the
physical separation of human resources, as and when required, or provided by the separation policy in the
hospital. Organisations have to pay attention to this particular function, because there is a general feeling that
there is not much benefit derived from executing this function in elaborate form. However, a planned
separation program can be useful for hospitals.
In these days of fierce competition, hospitals have to ensure that they have the right number and right quality of
employees. A single extra employee could result in additional cost. Further, as the saying goes, ‘an idle brain is
the devil’s workshop’, and a single employee with no work could cost the hospital a great deal in terms of
discipline and unionism. Reducing the number of employees who are not needed in a systematic manner, and
also reducing employee costs without tears is a perplexing problem. Many a time, there are cases pending in
labour courts, causing additional cost to the hospital. A separation programme will also help hospitals downsize
when they realize that the hospital is overstaffed. Thus, it is necessary to have a well‐planned separation
program. Hospitals can also learn from their mistakes and from those who are leaving about what made them
get jobs elsewhere. The activities that are included in the separation programme are listed below.


1. Exit interviews should be conducted for all staff members who are leaving. They should be asked frankly
to give their impression about the hospital in general, about their job activities while working there, its
HRM operations, and suggestions for improvement
2. Voluntary retirement schemes should be formulated, which are economical for the hospital in the long
run, and should be implemented when necessary
3. In anticipation of a probable turnover reformulation, further plans regarding manpower should be
formulated
Human Resource Information System
(HRIS)
HRIS, earlier called personnel information system (PIS), uses computer hardware, software and database.
Information pertaining to all human resources is incorporated into the computer system, as far as possible in
numerical form. These numbers can then be manipulated by the HRIS to provide the type of information needed
for planning and controlling, decision‐making, or preparing reports about all operational functions of HRM.
Computer systems have simplified the task of analyzing vast amounts of HR data. It is an invaluable tool for
HRM, with the capability of preparing the payroll process, to the retention and retrieval of records..
HOSPITAL HRIS
A hospital HRIS should consist of the following modules:
 Personal profile—name, age, sex, domicile, marital status and address of employees
 Career profile—performance appraisal, job title changes, salary changes, promotions, transfers and
career paths designed for employees
 Skill profile—education, training, license, degrees, skills, hobbies and interests
 Benefits profile—insurance coverage, provident fund or pension, holidays, leave, bonus, etc.
HRIS will help the hospital know the core competencies of its human resources—managerial, supervisory,
clinical and operative competencies. Such reports will enable the hospital to make the right decisions in the
event of a probable merger and acquisition on a future date.

Putting HRM into Practice
The most important task of the HR manager is implementing the HRM function. Many managerial initiatives fail
sooner than they have been commissioned. Some organizations have a negative attitude towards HR function,
as a consequence of faulty implementation. Therefore, the modus operandi for implementing HRM is as follows:
 Elicit top management’s ideas about the importance of HRM, and their full commitment
 Formulate a comprehensive HR policy for the hospital. This will include issues such as
o emphasis on strategy
o concern for cultural change
o concern for empowerment
o the importance of resourcing
o stress put on performance
o focus on quality and customer care
 Establish an HRM department and allocate a budget for its operations
 Develop and execute sub‐systems of HRM, as explained above
 Periodically monitor the effective execution of all sub‐systems, in order to avoid errors or deviations. If
needed, correct them and continue their implementation
 Generate reports periodically about the effectiveness of each sub‐system for designing a strategic HRM
for future consideration.

The Future of HR Function in Hospitals
Modern organizations are moving from a monolithic, vertical, homogeneous and slow‐paced scenario to
divergent, horizontal, centralized, heterogeneous, flat, network‐based and fast‐paced organizations. Hospitals
also have to be alert and responsive to changing times and demands. They should be multifunctional,
multidisciplinary, multispectral, develop the skills of a think‐tank, rapidly disperse new knowledge, new
capabilities and acquire a reservoir of knowledge about people.
Therefore the challenges that will be faced by hospital HR managers, to understand and solve the problems of
the future will be related to:
 The increasing size of the workforce
 The changing psychosocial system
 Satisfying the higher level needs of the employee
 Creating an equitable social system
 Absorbing new medical and technological advances and ideas
 Taking advantage of the computer‐aided information system
 Adjusting to the changes in the legal environment of hospitals
 The management of human relations
 The emerging concept of the knowledge worker
 Developing a highly committed workforce
They should also examine and improve their ability to learn. Today, people do not want to be ‘used’ by the
organization as a ‘victim’ or ‘pawn’. They want to have a sense of ownership over the resources they use, to feel
that the tasks they perform have a significant impact on others in the organization, and that they are
meaningful. They expect to be empowered to take decisions on their own, and desire an atmosphere favorable
for learning and personal development.
As mentioned earlier, future hospitals need to have a well‐designed and operational HRIS to keep track of the
changing status of their human resources. HRIS will play a revolutionary developmental role in the managerial
decision‐making process. It will have an increasing impact at the coordinating and strategic levels of hospitals.
Thus, an earnest endeavor should be made to redesign and restructure the HRM system, in order to enable
hospitals to have the best employees working for them.
Employees working for them. At this juncture, it would be worthwhile to recollect the contributions of corporate
culture analysts, Pascale and Athos (1981), and Peters and Waterman(1982). They have analyzed a number of
attributes of successful organisations which have influenced the thinking about HRM, regarding the need for
commitment and a strong culture. Pascale and Athos emphasized the importance of ‘super‐ordinate goals’, the

significant meaning of the guiding concepts or values by means of which an organization influences its members.
Peters and Waterman suggested that excellent organizations are characterized by the following attributes:
 Productivity through people—the belief that the basis for productivity and quality is the workforce.
Therefore, encouraging commitment and getting everyone in the organization involved, is important
 Hands‐on and value‐driven—the people who run the organization get close to those who work for them
and ensure that the organization’s values are understood and acted on. This is very important in the
context of a hospital
 Visionary leadership—the value‐shaping leader is concerned with ‘soaring lofty visions that will
generate excitement and enthusiasm. Clarifying the value system and breathing life into it are the
greatest contribution a leader can make’. Thus, excellent organizations are characterized by visionary
leadership.
Conclusion
In conclusion, management of human resources in a hospital is a very challenging job, because of the dynamic
nature of the human element. Since human resources decide the destiny of hospitals, there is a need for a
properly organized HRM department. The HR functionary is a dynamic, formally qualified professional, who
understands the needs of personnel in the hospital, and plans the entire HR strategy, which includes procuring,
developing, compensating, integrating, maintaining and separating human resources in the hospital. These days,
emphasis is laid on a transformation from a personnel philosophy to a human resources philosophy, also called
‘from control perspective to commitment perspective’. This kind of transformation is needed in existing
hospitals in order to gear this resource for the efficient and effective functioning of hospitals.

References
Armstrong, M. 1987. Human Resource Management: Strategy and Action. London: Kogan Page. Balaji, C. 1998.
‘Editorial’, HRD Newsletter, 14:1.
Chandra Sekhar, S.F. 1998. Service Orientation and Continuance in Work: A Study of Corporate Hospital
Employees, Term paper, Apollo Institute of Hospital Administration, Hyderabad.
Chandra Sekhar, S.F. and M. Rarnesh. 1998. Job Characteristics Survey at a Private Hospital, Working Paper,
Apollo Institute of Hospital Administration, Hyderabad.
Fayol, H. 1987. General and Industrial Management: Henri Fayol’s Classic revised by Irwin Gray .Belmont, CA:
David S. Lake Publishers.
Goleman, D. 1996. ‘What’s Your Emotional IQ?’ Reader’s Digest, February: 33–37.
Hackman, J.R. and R.G. Oldham. 1976. ‘Motivation Through the Design of Work: Test of a Theory’, Organizational
Behavior and Human Performance, 16: 250–79.
Handy, C. 1994. The Empty Raincoat: Making Sense of the Future. London: Hutchinson.
McKenna, E. and N. Beech. 1997. The Essence of Human Resource Management, New Delhi: Prentice‐Hall of
India.
Likert, Rensis. 1932. ‘A Technique for the Measurement of Attitudes’, Archives of Psychology, 140:1–55.
Nanus, Burt. 1992. Visionary Leadership: San Francisco, CA: Jossey‐Bass.
Pascale, R.T. and A.G. Athos. 1981. The Art of Japanese Management: New York: Simon &Schuster.
Peters, T. and R. Waterman. 1982. In Search of Excellence: New York: Harper & Row.
Rao, T.V. 1990. The HRD Missionary: New Delhi: Oxford & IBH.
Rigby, R. 1998. ‘Mission Statements’, Management Today: March: 56–58.
William, J.A. 1990. Hospital Management in Tropics and Subtropics. London: Macmillan.

ARTICLE:
Hospital Management

Dr. Mehboob Ali Khan
Quality Specialist
Puget
Sound Business Journal (Seattle)
11/2/2009

Hospital Management
History and Introduction to Hospital:
The word "hospital" comes from the Latin "hospes" which refers to either a visitor or the host who
receives the visitor. From "hospes" came the Latin "hospitalia", an apartment for strangers or
guests, and the Medieval Latin "hospitale" and the Old French "hospital." It crossed the Channel in
the 14th century and in England began a shift in the 15th century to mean a home for the elderly or
infirm or a home for the down-and-out. i
Hospital is an institution or the organization for the treatment, care, and cures of the sick and
wounded, for the study of disease, and for the training of physicians (teaching hospitals), nurses,
and allied health care personnel. ii
What is the importance of Hospital Management?
The answer to this question is simply that supervisors and managers of hospitals must not only
have vocational, technical knowledge about hospitals and treatment, but also should have
Prepared by: Mahboob ali khan (M.sc,M.H.M) quality specialist PSBJH 1

knowledge about contemporary management and its functions and principles. The work module of
any job is based on two pillars, namely technical work and management work.
What to be managed in Hospital?
Like other organizations and institution hospitals or any healthcare facility passes through the
following stages or in other words they need the management of below sections for the smooth
running of their organizations, but the hospitals are very complex in its nature.
• Operations (actions)
• Finance (money and resources),
• Personnel(human relations)
• Information(needed information for wise decisions)
• Time (your own and that of others)
According to the Project Definition: “A project is a sequence, set or series of unique, complex and
connected activities, having one goal or purpose to be completed with time frame, allocated budget
and according to its specification, now we can say the leading, controlling, organizing and planning
of all these activities is called project management. Now we can say it easily, that a hospital or any
healthcare facility is a project in its nature, therefore; applying the rule of project management will
be no far away from it.
Each of these five elements mentioned, must be managed by any person, who has its own set of
principles and guidelines to follow. For instance, when it comes to managing people, the teachings
of Industrial Psychology become pertinent. For operations, the teachings of Operations
Management as a subject become important. So, in analyzing these five elements, it also becomes
evident that the teachings of Financial Management, Information Management and Time
Management, are also important for the other three elements. In a nutshell, for a hospital manager
it is compulsory to have the sound knowledge of Operations Management, Financial Management,
Information Management, Human Resources Management, Time Management and
Communication.
For the lower level jobs at hospitals and healthcare facilities, the principles of Supervision can
become a starting point for teaching or studying the principles of management. A person in one of
the lowest level jobs found at employers must also plan, organize and control work, even if it is
just to clean an office or do some washing in one of the departments of the hospital.
Top Management members of the hospitals such as Chief Executive Officer, Financial Manager
etc, must be able to plan, organize, control and lead the wards and departments with a focus on
understanding and influencing the environment, setting the strategy and gaining commitment,
planning, implementing and monitoring strategies and evaluating and improving performance. The
Top Management must therefore have high capabilities with regard to human relations inwards and
outwards, strategic planning, team building, leadership, and negotiation and performance
management.
Prepared by: Dr. Mahboob ali khan(M.sc,M.H.M) quality specialist PSBJH 2
Middle Management members must be able to plan, organize, control and lead departments and
sections with a focus on assistance upwards for application of scientific methods and assistance
downwards for application of scientific methods. They must have the same capabilities as Senior
Managers as well as Supervisory Managers and also be good at interviewing techniques, goal
achievement, conflict handling tactics and project management.
Supervisory Management members must also be able to plan, organize, control and lead sections,
units and individuals with a focus on operations, finance, people, information and time.
Lack of Management skills in employer or employees at every hierarchy level of the hospital or
healthcare facility can be detrimental. Lack of Management skills can lead to poor performance,
lack of improvement, low profit, decisions making, disheartening of employees, lower
productivity, and jeopardize your organization.
Therefore; it is obligatory that hospital managers should have the updated and cotemporary
knowledge of Management. In below sections, you will read more about hospital management, that
how to manage hospitals or any healthcare facility in order to achieve the intended objectives to
meet the organizational goals.
Concept of Productivity in the context of hospital:
As we are discussing regarding the concept of Productivity in the context of a hospital, so we

must know that every organization whether it is Profitable or non profitable, governmental or
non governmental needs and uses different resources, which is classified in many groups:
• Manpower/Labour/Task Force
• Material/ Raw Material
• Money/Cash/Budget
• Machinery/Equipment
The effective and appropriate usage and utilization of the above mentioned factors or resources
shows and determines the organization’s effectiveness. For example if it is a profitable
organization, its benefits and advantages are increased, while in case of other organizations, its
costs are reduced and diminished, therefore the reliance on private sectors and donors or
government grants and aids or itself the fee for its services are diminished. iii
The effective and valuable usage/utilization/consumption of the resources or assets is important

and significant for every organization or association, whether it is public or private. Hospitals
are not including in the row of except ness, they should be included. Actually, Health care
organizations or hospitals need to give more and more concentration and attentiveness to good
and better management and execution because of the shortage of resources. Usually the health
related organizations are short of resources, bearing in mind the demands for services placed on
them.
Prepared by: Mahboob ali khan(M.sc,M.H.M) quality specialist PSBJH 3

It is useful at this phase to comprise how management and productivity concepts as well as
techniques are related to the health field. There is mistaken idea that modern management and
productivity concepts and techniques are concerns to profit- making institutions and
manufacturing organizations only.
Productivity or Output, in simplest terms, is the relationship or bond between the resources used
and results produced. In shorter terms the productivity is the ratio or difference between Input and
output.
E.g. Input + Output=Productivity.
The effective usage of inputs will ultimately increase or affect the output or productivity. So it
means that we must give more concentration for the effective usage of inputs or resources, we must
allocate all our resources in a better way in order to achieve our goals and objectives.
So for the improvement and enhancement of the productivity it is so important to have qualified
and well trained and skilled staff, by this way they utilize and use the resources and raw material in
a good manner. This is the responsibility of the organization to conduct seminars, workshops and
trainings for their employees.
Equipment:
As it is obvious and more apparent that most hospital or health facilities have expensive equipment
remains out of the order or inventory list because of the insufficiency of the engineering
department, improper maintenance, defective service contracts and so on.
The expensive and costly equipment is under utilized because often the users do no have a clear
understanding of the capital cost of the equipment or machinery and the bond between these costs,
capacity utilization and a fee charged from the patients. It is important to improve and enhance the
quality of medical services without incensement in fees and other charges. And it is also possible to
increase the quality of services without increasing the fee by improving the utilization and usage of
the existing equipments and machinery.
Thus the engineering department of the hospital or health facility is the most and critical
department, because they are mostly involved in the maintenance and repairing the equipments and
machinery, as it is usual in my hospital there is no proper system of the maintenance. A planned
and scheduled maintenance can reduce the chance of breakdown and damage in of machinery and
deterioration in normal routine hospital activities. All the staff of the hospital must be understand
about the usage and operation of electrical/mechanical appliances and equipments. By this way we
can prevent the breakdown the equipment.
The most critical point is that, which the engineering department needs to keep a stock and storage
of day to day requirements.
Prepared by: Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 4

Personnel Matters:
Almost all the staff who is working in the engineering department they are not satisfied from their
works due to their small salaries, wage of disparities and lack of opportunities for development and
so on.
It is a clear fact that the engineering department is so neglected, so they hospital management
should in take all these concerns regarding the engineering department, their problems should be
solved in a better way for the betterment of hospital services.
Space:
Space is also playing a dominant role in the productivity of hospitals, as we have seen some of the
hospital have so small space while other has a plenty of space. examples of the poor use of space,
and defective layouts of equipment causing unnecessary movements of personnel and hospital
staff, patients and materials.
For the better planning of hospitals we need a coordinated thinking of medical specialists,
engineers and architects specializing in the hospital field.
Funds:
In most hospitals and health facilities the financial and costing system are usually weak. The
particular income or surpluses and the expenses of various departments are not separately analyzed
nor the different costs fixed. As a result the related medical and other staff has no idea and concept
of the financial management and its implications of the resources at their disposal, or the
relationship between costs and the fees for various resources. It is obvious that financial
management becomes very critical to the productivity of hospitals.
Public hospitals in general need a financial advisor who can advise the management on its
spending policies; this will help cost reduction which is so vital. Many of the health related
institutions suffer from the unfavorable and unpleasant ratio of administrative and actual health
care expenditure.
Material:
It is clear fact that the good material management can be use to diminish operating costs for the
time it is somehow been neglected in hospitals and other facilities, so it is most important to take in
consideration the vitality of the material management in order to achieve the goals and objectives
of the hospital. As it is indicated in previous surveys that 40 to 50 percent of the annual budget of
the hospital are spending on material used.
5
Prepared by: Mahboob ali khan(M.sc,M.H.M) quality specialist PSBJH
Hospitals must adapt the ways and methods to streamline and make more efficient their
procurement, consumption and utilization control, inventory and records control, storage and
dissemination and service organization.
The following factors have a big role in the effectiveness of materials.
• The items which are needed urgently should be provided.

• Use the money in such a way that the cost of storage is reduced to a minimum.
• Handle the items and equipments with the least loss in storage and management.
In order to achieve the above mentioned objectives when need to have a good and stabilized
policy decisions. However we have to put the short term polices for the time being to run our
work.
Personnel:
As it is a clear fact and I mean it is obvious to all of us that hospital totally and almost always
on human resources/Man Power, the numbers of human resources usually higher than in other
organizations. So in a result the quality of the services in hospital totally depends on the quality
of their human resources and man power. So for that the management is very crucial in this
stage.
Actually the staff or personnel productivity (output) is quite low in many hospitals. It is a big
problem that the staff is not assigning in a specific hours of work but not with whole hearted
commitment. So they show insufficient commitment to their tasks, to the care for the patients,
and towards creativity in finding solutions to institutional problems.
Regarding the capacity building and training of the staff and personnel hospitals infrequently
sponsor staff and personnel to external training program. But in large hospitals the training can
take place in house with the help of professionals organizations, so these trainings should be
conducted periodically so that the employees and staff make aware from the new changes in
technology and techniques. It is so vital for the hospitals to train their staff qualitatively and
quantitatively. The trainings by upgradation of staff and personnel skills can help in the
improvement of staff productivity.
Pathology Services:
In general the pathology services are the cornerstone of the

medical field and it is playing a great role in diagnosis of
different pathologies and diseases. Pathological laboratories
have a crucial role in the diagnosis and detection and
eventually in treatment of the patients. The course of
treatment and the cost of the medicine is quietly related to the
Prepared by: Dr Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 6

out come of the pathological tests, so the management and maintenance of this department has a
great importance.
Some Key Issues to be addressed:
1- Load of work:
The load of work increased on pathological laboratories is increased every patient should go
prior to his treatment to medical or pathological laboratories, so by this the laboratories are
overloaded, this overload is more in those laboratories who are attached to the hospital or in
hospital territory, and in contrast there is less load on those laboratories which are outside the
hospital or private laboratories. The hospitals and laboratories which are located in surrounding
area can enter into common understanding. Routinely the hospitals are collecting the samples
from the patient and after the examination they are giving reports to the patients back. So in this
way the load will be decrease on the laboratories and hospitals.
2-Trained/Skilled Staff:
Hospitals need trained and skilled technologists and staff, as it is obvious that many hospitals
have no professional technologists because they are not paid satisfactory. The professional
technologists have their own private laboratories in the city and they can earn more than
monthly salary of the hospitals, so if the hospitals are welling to attract and absorb the
professionals in hospital so they must pay for them a good wage salary and other bonuses.
These medical technicians who are working in the hospitals must be trained and they need these
trainings, these training programs must be undertaken by different medical association
3- Waste Control:
The wastage management is the crucial step in the hospitals, and it is so important that the
staff should be aware of the cost of wastages.
4 –Optimum Utilization:
Many of the hospitals have small number of technician and these technicians are busy in other
clerical works so this is the big problem in the hospitals. Those laboratories have many
problems which is facing the above said problem. The laboratories which is owned by the
pathologists the so these pathologists are also busy with its administrative responsibilities. So it
is important for the hospitals to train extra staff for the administrative and clerical works in
order to improve the quality of the work in laboratories.

In another hand the computerization of record and documents can reduce the paperwork load on
the staff, the other benefit of the computerization and compilation of the data and information is
to facilitate subsequent and ultimate analysis and tracking of the information.
5- Maximum utilization of Lab Service
Some of the steps for the development of the laboratory services are as follows.
• Making links with small hospitals and nursing.

• It is impossible for the patient to wait for long hours to get the result of their lab exam. They
have to go to the laboratories at specific time. It is also possible that technician go to the
home of the patients and to collect the sample from the patients and after the lab exam the
result should be given back to the patient, so by this way the patients can charged for the
services. Many of the patients are willing to pay for their lab exams.
• Relations with general practitioners who can collect the sample from the patient and then
these samples are checked in the laboratory after examining it is given back to the patient.
• It is good to have a 24 hours service instead of having fixed time collection of sample,
because in 24 hours service program take and give the results and reports quickly, so in this
way their will be no delay in treatment of the patient.
• It is also possible that laboratories can give the results of the laboratory tests via phone to
the medical or pathology specialist in the urgent cases, so in this there will be also no delay
in the treatment of the patient.
Radiology Services:
As it is obvious to all of us by moving this world forward and advanced in technology and
physics so the radiology also moved with this advancement and the advancement of the
radiological services also need more capital or financial investment. The cost of operation is
also increasing with the consumption of inputs such as x-ray films, chemicals which is used for
the washing and cleaning of films. But the radiology department center is the big department in
the hospital for that the cost or the expenses of this department is high from the other
departments, on the other hand its profit is also high in contrast to other departments. So it is
most important to keep this department managed and well equipped because the surplus or the
profit which are coming from this department should be spent on the less income department by
this way we can run the hospital daily expenses.
Key Managerial points:
1- Equipment Breakdown:
The breakdown and even the collapse of the equipments and other instruments are common in
all hospitals, so the collapse pave the way for the idling of instruments, so in the result the test

are not doing properly and the income will also decreased and hence at the end the results of the
patients test is also delayed.
The majority of the machinery and the instruments which are so important they are mainly
imported from the other countries, so in case of the breakdown and failure the spare parts of
these equipments is not easily found in the market, so we have make the maintenance program
for these equipments.
2- Location/Place:
In many hospitals the radiology departments are situated in a very important place
because the patients can not move with films in the front of the departments and wards. So for
that the radiology departments are located from the beginning in a very strategic place.
3- Storage/warehouse.
As usually the x-ray films are stored in racks with separators according to case or patients
numbers. The appropriate storage of the x-rays paves the way for recovery. In many hospitals
and health facilities the storage system is not appropriate and also unnecessary storing take
place. The records which are older than 3 or 4 months should be distracted.
4-Lack of Skilled Technicians:
There is lack of professional technicians, so it is crucial that the technicians must be trained,
some of the technicians have got on the job training. In many hospital they have few programs
for training, so they are limited to main areas, so it so important to expand the training
programs.
5- Allocation of work:
In many hospitals it is a big problem that the trained staff is engaged in extra-curricular works
like some clerical works such washing films and preparing reports and making registration, so it
is the misusage of the skill and it is so harmful for the organization.
Computerization: it is so important in many ways, and it think in this era it is so important and
crucial, it has many profits such as:
a. The data will be regularly and easily checked and retrieved and cross match of
information is so easy.
b. Control of inventory and even the asset management will go so swift and easily.
6- Wastage:

In many hospitals there is no proper mechanism for the waste management, all the expensive
should be used in a proper manner and we must not loose it because it will eat the profit which is
made by the hospital. So the staff will must be trained on waste management. By this way we can
control the flow of the wastage.
Management of Blood Banks:
Blood is the part of life that is given to those who need it by those who have the resource to satisfy
the need. Emergencies occur every minute. For each patient requiring blood, it is an emergency and
the patients could have set back if blood is not available. And also the surgeries need blood, and
also the blood is also required in blood disease, such as leukemia’s, thalassemia, and a blood
cancer.
The main tasks of blood banks are as follows:-
o Collection of Blood
o Testing of the blood.
o Storage of Blood.
o Supply of Blood to the hospitals and other health facilities.
How we can collect a Blood:-
1- Voluntary/intentional donors: - This kind of blood collection is done by

the voluntary organization, they are establishing blood camps in different
organization and institutions and they persuade the people to donate with
the poor and venerable patient and save their life.
2- Professional Donors: they are the private blood banks, even they collect
the blood voluntarily or they buy the blood and then they sale the blood.
Some Critical issues in blood banks:
o Insufficient provision of Blood: The blood bank is facing many problems, one of the
most important one is the lack of donor and volunteers, so this deficit is due to some
misconceptions and lack of education among the local people, to educate the people
and to wash the brain of the people so the public information campaign is so vital
because the media is the blood of the war, the volunteers and especially the youth
should encourage to donate blood.
As it is obvious that the volunteer organization can play a big role in the collection of blood,
through blood donation camps in different places, they are supplying the blood just for a little
payment because they are just cutting their test expenses. If the blood is broken in to small
components so we can protect this blood from wastage by this way. One thing which is worth-
mentioning here is that the blood wastage is increasing by giving blood to children.
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o Blood Testing: - Among the blood banks some of them are just working to recover
their cost but some of them are subsided. With the emerge of AIDS these laboratory
costs are increased because the costs are increasing by this Test.
It is so important for the blood banks to test the blood so carefully, because it is the matter of life
and death to the recipient of blood e.g. jaundice typhoid, malaria and even the AIDS. It is not bad
for the patient to pay more for a good quality of blood, because it is secure from different
infectious diseases.
o Staffing and workload:-
When there is the collection time for blood so there is overcrowding of the staff is exist, when this
process end up so the overcrowding is became decrease. The blood banks which are attached to the
hospitals they are usually using the trained staff of other hospitals, when the load is less so they are
going back to their own duties.
Internal blood banks v.s external blood banks:
The advantage of the external blood banks are:-
- No capital investment
- No staffing and management problems.
The Disadvantage:
- Blood is not quickly available when it is needed.

- Patients can replace the blood immediately when he want.
In-house blood banks depend on:-
- Having financial resources.

- Location of hospitals near to private blood banks.
- Basic equipments for example laboratory.
Health Management Information System (HMIS)
The healthcare industry is continuously evolving and becoming more technologically advanced.
The need for information managers in this field is escalating rapidly. The major provides a solid
foundation of knowledge about management in the healthcare industry and, specifically, the
management of information systems within the healthcare field. Emphasis is on managing and
advancing the application of information technology and systems to improve the effectiveness of
healthcare delivery in a variety of settings. This major meets the industry’s desire for
professionally educated individuals in the converging healthcare fields of people and information

management. Graduates with a degree in Healthcare Information Systems Management will be
able to:
o Analyze the informatics processes as it relates to the healthcare enterprise

o Integrate information management processes with clinical processes to provide
effective healthcare delivery
o Develop a plan to integrate the convergence of various healthcare information
technologies into a healthcare organization.
o Identify the implications of federal regulations on healthcare IT
o Compare and contrast the various process improvement strategies that can be used
in a healthcare IT environment
o Analyze the relationship between the management of IT and the management of
people within a healthcare organization
The reliable Management information system is the key to any organization for its better
performance, prompt availability of the information can help the management in order perform the
work with full accuracy and quality. Computers can help in this regard to improve the management
information system.
Advantages of Computers:-
o It provides less staff to operate and manage.

o Decrease the paper work and enhance the accuracy.
o It is easy to track, compile and get back the entered information.
o It can store large of data and information.
o It can provide only one click type of ease.
Possibility of computer usage in hospitals:-
Prior to introduce the computers to the hospital the possibility study should be done to find out
the:-
o Requirement for computerization.

o Requirement of software and hardware and costs.
o Degree of computerization compulsory.
It is so necessary that prior to introduce the computer to the hospitals, we must do and perform the
feasibility study and survey with the help of ICT Manager or Officer.
The Profit/Advantage of Computerization:
o The investment is easily can be phased.

o There is chance for staff to be trained on the usage of computer, so in future
there will be no difficulty with computers.
o The fear for using new technology will be overcome by this method.
In hospital the incorporated network is not present to be used by staff, but have their Personal
computers which can not do the same work which is done through integrated network system.
Some of the Problems in Computerization:-
The below are the problems which is facing during computerization.
o The staff may fright from economizing due to computerization.

o Fear about new technology.
o Finance (Salary, profit, benefits and hazards).
Some Recommendations to overcome these problems:-
o Phasing.
It will not just diminish the strain on the finance department, but it will help the staff to use the new
technology and new computerized system. It is recommended that a single and small department
should be computerized first, because it easy to measure the benefits or achievement of the
computerization.
o Training.
Whenever the office is going to be equipped by new technology, so it necessary that the relevant
staff should be trained, because the staff are not familiar with the new technology , so it is the
responsibility of the information and technology department to undertake the training on
computerization. ICT should compare the advantage and disadvantage of the new technology and
should compare the old manual and monolog system with the new digitalized and computerized
system.
o Finance.
Computerization is so important for the finance department, because the finance department is
always engaged with sorting, analyzing and compiling the expenses and budget issues, so it is
always recommended by the information and technology consultant the finance department should
also be computerized.
At the end we can say the in this world of transition and competition, only those organizations are
stay alive who have the capacity of changing and adapting quickly and abruptly. Computerization
facilitates more quick works and tasks, there is no department in the hospital which doesn’t need
computerization, and every department needs to be computerized.
Financial Management of a Hospital:-

The financial management is so compulsory for the hospital and healthcare organization; because
the hospitals are growing day by day and they are becoming capital intensive which requires a lot
of investments by mean of equipment Purchasement and operating expenses.
The hospital and other health facilities which are privately running or it is government based they
need a tight and well managed financial department, financial Management is also one of the most
important branch of the hospital as other branches like operation, administration, logistic and so on.
We have many hospital in our society which are running and financed by Government, some are
running by voluntary organizations and some are running and financed by influential and charitable
members, so all of these need a financial management section, because if there will be no financial
management so how we can analyze our revenues.
Steps in Financial Management:
Some of the best techniques in Financing
Budgeting:-
The process of translating planning and programming decisions into specific projected financial
plans for relatively short periods of time. Budgets are short-range segments of action programs
adopted that set out planned accomplishments and estimate the resources to be applied for the
budget periods in order to attain those accomplishments
Budgeting is the back bone of the financial management, actually the budget is the financial
forecast for the upcoming year, and it can be made quarterly or on monthly bases.
In general it estimates the income and expenditure and also the in –flow and out-flow of funds, so
every department should have there own report on their activities and also the expenditure and
should report to finance section.
Cost accounting and Cost Control:
Cost accounting is actually the process of tracking, recording and analyzing costs associated with
the products or activities of an organization, where cost is defined as 'required time or resources'.
Costs are measured in units of currency by convention. Cost accounting could also be defined as a
kind of management accounting that translates the Supply Chain (the physical movement of
products) into financial value to support decision making to improve costs and cash flows.
While Cost analysis (also called economic evaluation, cost allocation, efficiency assessment,
cost-benefit analysis, or cost-effectiveness analysis by different authors) is currently a somewhat
controversial set of methods in program evaluation. One reason for the controversy is that these
terms cover a wide range of methods, but are often used interchangeably.

In general cost control has to be exercised if it is possible, while in some cases the income is
enhanced by charging clients (Patients) more, it is the ethical obligation of the hospital to exercise
cost control, so the patient does not have to charge or pay than standard values. It is essential that
control must be exercised at all level and departments of the hospital.
Prices/Fees/Charges
It is important that an appropriate amount of fee for various services be charged. Actually the
charges influence the number of patients receiving services and the income of the hospital or other
health facilities.
The fees should be based on:-
- Cost and Competitors fees.
Funds:-
1- Sources of Funds
o Public or Governmental hospitals are financed by government fund and grants, which is
financed by income tax and custom duties.
o Trust or charity hospitals or health facilities depends on the benevolent and charitable
people of the society or community, they mainly deliver free of charge services.
o Privately owned hospitals or health facilities are proprietary in nature or partnership types
which are mostly managed by medical professionals.
o Corporate hospitals and health facilities invite the civil people to invest and share.
Whether it Private, corporate, or governmental hospitals or health facilities they are facing the
same problem of limited/restricted financial resources.
2- Fund Raising.
a- Fees Charged:-It is necessary that independence should be given to the governmental hospitals
or health facilities and they should be confident to enhance the financial resources, it is not fair that
all services should be rendered free. Special Allowance/Concession should be given to some of the
departments, to whom the patients are more going, specially those patients who can not support the
fee or charges.
b- Institutional Contracts: - One of the good ways for the enhancement of income is to contract
with other organizations for providing medical services to their employees or staff. It is necessary
for the hospital to have a special budget for their employees, so the employees can get benefits
from this budget in order to take free and subsided treatment.

c- Donations/Contributions: - The type of donation to the charitable hospitals is to make
concession in taxation with donors. Fund raising through charity is a special occasion or case.
How to Launch a Fund raising Campaign, to do this we have different techniques and methods:-
o Face to face Solicitation: - It means that we have conduct face to face meeting with
prospective or tentative donor or philanthropic personalities of the community.
o Direct Mail: - Describing and briefing the subject through leaflets, broacher and pamphlets
by mail.
o Legacies and Bequests: - Encouraging donor or stakeholders to run off legacies.
o Special Events/ Procedures: - Organizing special meetings, events to invite the donors and
philanthropic people of the community to donate and by this way to raise the fund.
o Pay-roll deductions: - It is a kind of in-house fund raising method, in this method some
amount of money is deducting directly from the salaries of the middle and upper rank
officers.
Therefore; the above mentioned methods are the good way to raise the fund, so we have to adopt
and choose one of them for our health organization to raise our fund in order to render good quality
of medical services. And by this way we can offer good services to the needy patients who can’t
afford high medical charges, and eventually we will have a healthy community.
Investing funds:-
The funds which is not been utilized yet should be invested and the interest earned should be
utilized or used for hospital operation, so in this way we will move swiftly to render good medical
services.
Loans:-
This is also a good method for fund raising, to take some amount of loan from bank in order to run
the daily operation of the hospital or nursing home, but the hospital should return the interest and
benefits to the bank on time. So by this way we can render a good quality of medical services.
Computerization:-
Computerization of the financial record is very crucial because we can sort, track and compile all
the financial matter in a due time with more feasibility and easy way. And this is easy way of
financial reporting. The computer software is available in the market, we can buy this software
with ease, so we have use computer in the hospital to track and compile the financial records,
calculation of balance sheets and budget.
Finance Personnel.

Large hospital must have a finance manager to control and audit all the financial issues, and it will
help the hospital in financial management.
While in Small hospital the Administrator can run the finance section also or they must be trained
in finance. Generally the hospital must have a chartered professional accountant. So by this way all
the financial issue will run smoothly.
Human Resource Management system in hospitals:-
Definition of Human Resource Management:-
HRM is the business of people and also HRM refers to activities by which an organization recruits,
selects, trains, develops, motivates, evaluates, compensates, and rewards people fairly
The Human Resources Management (HRM) function includes a variety of activities, and key
among them is deciding what staffing needs you have and whether to use independent contractors
or hire employees to fill these needs, recruiting and training the best employees, ensuring they are
high performers, dealing with performance issues, and ensuring your personnel and management
practices conform to various regulations. Activities also include managing your approach to
employee benefits and compensation, employee records and personnel policies. Usually small
businesses (for-profit or nonprofit) have to carry out these activities themselves because they can't
yet afford part- or full-time help. However, they should always ensure that employees have -- and
are aware of -- personnel policies which conform to current regulations. These policies are often in
the form of employee manuals, which all employees have.
The goal of the management of human resources function is to identify and provide the right
number of competent staff to meet the needs of patients served by the hospital
A Growing Profession:-
As it is obvious to us that the current century as an era of development and knowledge, the
knowledge is expanding through the world by the emerging of new decade, new technologies and
new inventions and new observations and even new experiments keep emerging, at the meantime
many new proficient fields and specialization have also emerged.
As compare to social sciences the rapid growth is more in physical such as medical sciences is
increased, because the financial and technological resources are more assigned in this field.
Labour Management/Unionization:-
Labour Management is one of the most important and even a crucial part of Personnel
Management. Since the emergence of unionization the management has faced with many
challenges and obstacles. Some times these unions are creating many problems and headache in the
hospitals, and we hope that they have contribute in a positive side such as trade unions and so far.
The constructive and destructive role of unions depends on some factors, such as past management
practices and leadership style, many union are emerging like a virulent and infectious disease who
are not following the healthy personnel policies.
External political and trade unions giving birth to such disruptive and virulent unions, which can
only infect the people in the external environment, in addition they can help their members in the
workplace, most unions and central Labour bodies are also active in their communities, helping to
make conditions better for working people and their families, both union and non-union. Unions
individually and collectively pressure the government on issues that impact working people such as
minimum wage, hours of work, health and safety regulations and other employment standards.
Unions have been at the forefront of struggles to preserve and protect health care, education and
other important public services. Unions fight budget cuts and laws that help big business while
eroding the quality of life in our communities. Unions support people in need by lobbying
government on Employment Insurance, public pension plans, and welfare to ensure that all people
have a safety net underneath them. Unions have been a key player in educating the public about the
negative impacts of globalization.
On the other side union members enjoy better wages, better benefits and increased job security. But
the biggest benefit is the strength that comes from solidarity. Unlike non-union workers, unionized
workers are not alone when they have grievances.
Functions of Human Resource Management:-
Human resource planning

Training and Development
Employee Communication
Staffing (recruitment and selection)
Compensation and benefits
Job design and Organization design
Employee/Labour industrial relations.
Performance Appraisal
Employees training and development:-
Training and Development provides employees with background information about an employer. It
can also teach you a new skill and can provide you with overall knowledge that can help you better
perform your job.
There are many different kinds of training. You can start by handing out a packet of information
that people can use as a handbook about the organization. If you are trying to teach a skill, a video
or some type of visual aid can be very beneficial. Seminars comprise another form of training.
These can be used to teach any size group and are very helpful in providing a vast amount of
18
information in a short period of time. Other types of training can involve on-the-job observation in
which you watch what others are doing and learn while they work.
With all these different types of training, people can choose the best training for their organization.
Since it is important to provide clear, accurate and up to date training, it is also important to
revamp your training styles every couple of years. This will make it so your employees enjoy the
training they are going through and that they are learning information that will be beneficial not
only to themselves but also to the employer.
Benefits of Training and development:-
1. Increased job satisfaction and morale among employees
2. Increased employee motivation
3. Increased efficiencies in processes, resulting in financial gain
4. Increased capacity to adopt new technologies and methods
5. Increased innovation in strategies and products
Updating Medical Knowledge:-
It is so necessary to keep the medical staff updated and trained in order to fit them for the
emergence of new technology in the medical field, Participation in medical seminars, workshops,
and joining medical communities and reading the medical books, journals and literature is essential
but it is not enough. There is also advance in training technology such as the software and
hardwares (videos, projectors, and other instruments).
Hospitals and other health facilities require professional and expert training manager and
instructors on their staff, and it is so hard that these organizations have trained and skilled
expertise.
Manpower Palnning:-
Personnel management is productive exploitation of manpower resources. This is also termed as

‘Manpower Management’. Manpower Management is choosing the proper type of people as and
when required. It also takes into account the upgrading in existing people. Manpower Management
starts with manpower planning. Every manager in an organization is a personnel man, dealing with
people
Advantages of manpower planning:

Manpower planning ensures optimum use of available human resources.
1. It is useful both for medical organization and for others.
2. It generates facilities to educate people in the organization.
3. It brings about fast economic developments.
4. It boosts the geographical mobility of labor.
5. It provides smooth working even after expansion of the organization.
6. It opens possibility for workers for future promotions, thus providing incentive.
7. It creates healthy atmosphere of encouragement and motivation in the
organization.
8. Training becomes effective.
9. It provides help for career development of the employees
Recruitment and selection:-
Recruitment and selection is the important stage in HRM, actually the selection processes, if use it
inappropriately, may have the potential to discriminate against certain groups. Equally subjective
judgments based on stereotypes, appearance, can disadvantage the applicant.
The entire selection process must therefore be based on criteria related to the requirements of the
job, the necessary competencies to perform the job and the potential for development such as
intelligence, qualification, aptitude. The panel therefore needs to be clear on the necessary
competencies for the job and how to identify them.
Interviewers need training, because every administrator or a medical doctor can not be a good
interviewer. As we know in many private institutions the recruitment is done by referral basis,
while in governmental institutions the routine advertisements of the posts, screening of documents,
and then interviewing. So these all need an overhaul, and to introduce scientific methods for the
selection and recruitment in order to avoid nepotism and referral system.
Job and Organization design:-
As it is clear from the definition of Job design, that job design is the specification of the contents,
method and relationships of the jobs to satisfy technological and organizational requirements as
well as the personal needs of the job holder.
So the evidence that we have from social sciences and behavioral sciences such as sociology,
psychology, they have been incorporated and applied in the management of organizations, so these
all have a focus on the analysis of the jobs, roles and regulations, design and development of the
organizations.
Like other organizations and institutions, hospital and health facilities also have the same structure
and roles; sometimes they are not able to achieve their targeted goals and objectives.
So hospitals need clear job description and image, proper declaration of personnel policies and
procedures, organizational charts and so on as much the other organizations have.
Employee Communication:-
Effective communication have much more effect on the human and organizational health, because
if we have a proper channel and code of communication, so it is not easy that we have face any
problems, the problems and obstacle is preventing by the virtue of effective communication,
effective communication is the blood of any organization.
When there is a strike or the spread of infectious disease so in that time the effective
communication can play a significant role to control all the matters. So newsletters, pamphlets,
leaflets, slide presentations, and cassettes are so essential for employee communication.
Cut Practice in medical field, so how it can be discouraged and curtailed:

As it is obvious to every doctor that, all doctors qualified to practice modern medicine take the
classical Hippocratic Oath before beginning their professional career, The idealistic values learned
during the period of training get shaken up when the doctor steps out from a world of ‘practice of
medicine’ to one of ‘medical practice’. Here he sees ‘practical’ adjustments that he is required to
make in his clinical and therapeutic decisions and encounters open offers of referral of patients for
a predetermined and regularized practice of fee- sharing (‘cut practice’) Which is unethical
practice.
Cut practice (Malpractice) occurs in many forms:
• Giving a share of fees to the referring doctor.

• Referring patients for unnecessary consultations or tests to ensure a kickback from the
consultant or laboratory.
• Giving expensive gifts periodically to the referring doctor.
• Appointing junior specialists to a super specialty hospital so that procedural work is always
referred by them to you.
• Unnecessary admissions in nursing homes/hospitals.
• Sponsoring of a conference or payment of travel expenses by a company in return for the
use of its equipment or prescription of its drugs.
The basic problem is that, that the patients are neither aware of their rights in getting neither
information nor do they take any action against the doctors if they know that the doctors are mal
practicing.
Basis for charging fees:-
Every doctor determines his/her professional fees on the basis of experience, wisdom and self-
perception of the level of skills required for a particular treatment. Fees thus vary widely from
doctor to doctor. Hence a particular amount cannot be termed ‘unreasonable’ as long as the patient
is aware of the sum to be paid before the service is rendered. What the treating doctor does with the
fee after it is received by him is entirely and solely his concern and the patient or any other person
has no say in it. Hence if a doctor decides to give a portion of his fees to another person (medical or
non-medical) it is entirely legal and ethical to do so provide this is done openly and after obtaining
a receipt.
Various specialized procedures - such as endoscopy, angiography, angioplasty - form lucrative

sources of income and are therefore frequently advised even when the stated indications are not
scientifically valid. (At times it is difficult for a doctor to say that the procedure advised by another
was not required because on most such issues, opinions published in the medical literature support
Prepared by: Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH

21
both points of view. There is truly no substitute for one’s own competence and conscience acting
as an internal judge and counsel.)
How we can control this mal-practice or cut practice:-
- Public Education or awareness on such mal-practices is the first step of controlling.

- In the absence of a clear, logical, bold and community oriented health care policy on
the part of the government and a lobby of strong, honest, clear thinkers representing
the medical profession in the corridors of power, the present situation is unlikely to
change in the near future.
- To avoid this mal-practice we have to have strong local or national medical
association or federations, with the strong code of ethics.
- Themselves medical doctors should talk and conduct meetings to prohibit and
condemn the mal-practice.
- Consumer protection act needs to be implemented in order to stop this cut or mal-
practice.
- The monthly salary and other benefits of full time doctors especially in teaching
hospitals should be such that they are able to maintain a decent standard of living
commensurate with their position and seniority. There will then be no need or
incentive for unethical ways of earning extra income
- Each general practitioner must charge a publicly stated fee from the patient for the
act of medical examination, making a diagnosis and recommending appropriate
treatment or referral to an appropriate consultant or hospital
- A body of experts in each hospital or nursing home should monitor the performance
of various procedures to ensure that they are based on scientifically valid indications
School Health Services:-
School Health Services fosters the growth, development and educational achievement, students by
promoting their health and well being. It monitors health status and identifies and addresses the
unmet needs of students, families and school personnel. It builds public and private partnerships to
ensure quality services that are effective, culturally appropriate, and responsive to the diverse,
changing needs of students and their communities, and most of all school health services have a
major role to play in preventive health. Health education is important for the school children for the
better and bright future of the nation.
It is known to all, that once child learn something in early childhood from his parents/family or
teachers so he/she repeating that thing throughout his/her life. The school health education not
merely ensures a healthy generation, but also promotes preventive health care awareness among the
society.
Most of the school have the facility of health services for their students, and they have dental/skin
checkups, it the school doctor find some problem, so they prescribe some medicine for the
students, but they are not following the case with the parents of the child.

School Health Services should cover the following steps:-
- Regular checkups of the students.
- Education of the children in preventive health and care.
- Encouragement of the children to know about the symptoms and signs of the local
disease in order to alert to early symptoms of health problems.
- And the most important, the doctor should follow-up the disease of the children with
their parents.
Causes of Overcrowding in Hospitals and its Management:-
What are the primary causes of hospital overcrowding?
The primary cause is a mismatch between the supply of beds, poor flow of patients through beds,
and demand. As demand increases and the bed supply shrinks, flow through hospitals becomes
impaired.
The most important driver has been the increasing age of patients coming into hospitals. As
patients get older, they tend to consume more resources for the same kind of medical conditions.
For example, if someone comes in to have their knee replaced at 50 years old, and he is otherwise
well, he'll have a short, uneventful medical stay. At 75, with chronic obstructive pulmonary
disease, length of stay is likely to be longer and there's more risk of complications. In the past 20
years, expectations have changed. We tend to be more invasive in our approach to older patients.
And that typically drives up costs.
We can shortly discuss the main causes of overcrowding, and basically it is divided in to
parts.
IPD/Ward:-
o The admission of those patients who needs its treatment in OPD.

o Some of the patients escaping from work, so they are insisting on unnecessary admission.
o Delay in the treatment of the patient due to insufficient resources of the hospitals.
o Delay in discharging of patients.
o Unnecessary or unscheduled absence of doctors or other medical services.
OPD (Out-Patient Department):-

o Hospital Management should always be in strives to facilitate the patients in putting proper
direction signs in corridors or lawns.
o Irregularities in the attendance of doctors/nurses and other medical staff.
o Absence and poor functioning of inquiry services.
o Rhythmic visiting of patients, who have already been visited by the same ward doctors.
Suggestion for overcoming the overcrowding problem:-
What should be done?
There are two broad strategies for managing access block resulting from hospital
overcrowding — reducing hospital demand and optimizing hospital bed capacity.
1-Reduce hospital demand
o Diversion/substitution: The major focus of this strategy has been to divert patients to
community services and provide more services in the community that traditionally occur in
hospital (e.g. hospital outreach programs, hospital in the home, and improved after-hours
general practice services).
o Reducing expectations: Reducing community expectations of what a public hospital system

can provide. Access block cannot be controlled without some limits being placed on the
provision of services. Demand for health care is elastic and potentially unlimited, especially
in an essentially free health care system. There must be public debate about what is essential
versus what is desirable, and how much the community is willing to pay.
o Prevention: There is potential to reduce demand by disease prevention strategies, and

improved management of patients with chronic ill health.
2-Optimize hospital bed capacity

o Balancing elective and emergency workload: Contrary to popular opinion, the emergency
workload is highly predictable across metropolitan areas. Elective treatment must be tailored
to match the capacity allowed by predicted emergency work.
o Better discharge: Moving patients quickly from acute hospitals to more appropriate
facilities increases hospital bed availability. Access to rehabilitation, residential aged care
and community outreach programs is an essential component of an efficient and well
managed health system. Addressing physical, social and psychological issues through care
coordination in the emergency department and after hospital discharge can also help reduce
hospital length of stay and readmission.
o Increased bed numbers: It is important to note that access block does not correlate well
with the absolute number of hospital beds. Increasing the number of hospital beds
temporarily alleviates access block, but does not solve the problem — the beds quickly fill
and the problem recurs. Nevertheless, governments must fund an adequate number of beds
to provide the health care that the community demands.
Doctor Patient Contact:-
The contact or relationship between the doctor and patient should so transparent, and this
relationship and contact is so important in order to satisfy the patient. And he will satisfy from the
relation and behave of the doctors because the patients are waiting for hours, and even the patients
are waiting for doctors appointments for weeks, and when they visit the doctor, so the doctor just
see them for a minute, so this will disappoint the patient, so in this case the doctor has no fault
because he is overcrowded by patients and he has no enough time to give to all patient.
Points for the satisfaction of patient
o Enough time should be given to the patient to define his illness and doctor should take the
full history from the patient.
o The doctor should give full information regarding the patient’s illness or disease.
o The patient is willing to know about his/her problem so the doctor should strive to give
necessary information regarding his illness.
o The doctor should give general information in a text form in a local language, so the patient
can get more information about his disease.
References:
i http://www.medterms.com/script/main/art.asp?articlekey=8390
ii en.wikipedia.org/wiki/ Hospital
iii www.ias.ac.in/currsci/nov102008/1118.pdf
Books:
Health Management Information Systems by Jack Smith
Essentials of Health Care Finance by William O. Cleverley
Understanding Health Policy by Thomas S. Bodenheimer and Kevin Grumbach
Hospital and Health Care Administration: Appraisal and Referral Treatise. by Gupta
Hospital Administration: Francis Cm, Mario C De Souza

ARTICLE:

Improving Hospital

Performance through

policies to Increase Hospital
Autonomy: Implementation
guidelines
By: Mukesh Chawla, Ramesh Govindraj
11/2/2009

Improving Hospital Performance through
Policies to Increase Hospital Autonomy:
Implementation Guidelines
Mukesh Chawla
Research Associate
Data for Decision Making Project
Department of Population and International Health
Harvard School of Public Health
Ramesh Govindaraj
Research Associate
Data for Decision Making Project
Department of Population and International Health
Harvard School of Public Health
August 1996
Data for Decision Making Project i
Table of Contents
Acknowledgements ............................................................................................. 1
1. Introduction .................................................................................................. 2
2. How Use the Guidelines .................................................................................. 5
3. Identification of Hospitals ................................................................................ 7

The Present Structure of Decision Making ....................................................... 8
Performance Evaluation .................................................................................. 8
End-of-Section Checklist ............................................................................... 13
4. Decision Making .......................................................................................... 14

5. The Process ................................................................................................ 19

6. Design ........................................................................................................ 22
Nature and Extent of Autonomy .................................................................... 23
Relationship of Hospital Autonomy and Health Sector Reforms ...................... 25
Organizational Models .................................................................................. 26
Models of Autonomy .................................................................................... 28
Internal Organization .................................................................................... 29
Performance Evaluation System .................................................................... 30
Consensus-Building and Goal Attainment ...................................................... 32
7. Key Areas ................................................................................................... 34

Governance and Administration .................................................................... 35
Finance ........................................................................................................ 38
Human Resources Management .................................................................... 39
Procurement ................................................................................................. 40
Hospital Information Systems ....................................................................... 40
8. End Note .................................................................................................... 44
References ....................................................................................................... 45
Data for Decision Making Project 1
Acknowledgements
This study was supported by the United States Agency for International
Development (USAID) Washington through the AFR/SD/Health and Human
Resources for Africa (HHRAA) Project, under the Health Care Financing and
Private Sector Development portfolio, whose senior technical advisor is
Abraham Bekele.
Hope Sukin and Abraham Bekele of the HHRAA project at the Africa Bureau
reviewed and gave technical input to the report.
2 Implementation Guidelines
1. Introduction
Public hospitals are a significant component of health systems in many

developing countries. Generally responsible for 50 to 80 percent of recurrent
government health sector expenditure (Barnum and Kutzin, 1993), public
hospitals utilize nearly half of the total national health expenditure (Mills,
1990). In many African countries the bulk of hospital spending is tied up in
one or two major urban hospital facilities. These hospitals consume a large
amount of scarce resources, and many tend to have low occupancy rates.
Governments therefore face the task not only of finding new resources to
fund the high cost activities of the hospitals, but also of utilizing existing
resources more efficiently. Faced with diminishing resources and escalating
costs, the need to use public resources more cost-effectively has never been
greater.
Some governments have recently taken the decision to grant greater

autonomy to hospital operations in the expectation that it may offer a means
to both reducing the financial burden of hospitals on governments and
strengthening the efficiency and effectiveness of public hospitals. However,
relatively little research has been directed towards evaluating the experiences
of these hospitals, and assessing the overall merits and limitations of hospital
autonomy as public policy. As part of the overall strategy of US Agency for
International Development (USAID) to conduct research into matters of
critical importance to policy makers in developing countries, the Data for
Decision Making (DDM) project at Harvard University was commissioned by
the Health and Human Resources Analysis for Africa (HHRAA) project of the
Africa Bureau to conduct five case-studies on hospital autonomy. These
studies were conducted in Ghana, Kenya and Zimbabwe within sub-Saharan
Africa, and in India and Indonesia outside Africa.
The objectives of this research were (a) to describe different approaches
which have been taken in different parts of the world to improve
performance of public hospitals through increased autonomy, and to improve
allocative efficiency of government health spending by shifting public funds
away from public hospitals; (b) to analyze factors which contribute to
successful implementation of a strategy to increase hospital autonomy; and
(c) to formulate a set of guidelines to support the design of policies to
improve hospital performance through greater autonomy.
At the onset of the project, a provisional conceptual framework was

proposed by the principal investigators at Harvard University. This framework
was intended to guide the assessment of the autonomy effort in each
participating country, and assist in organizing the presentation of the data
and results (see Chawla and Berman, 1995). The evaluation framework
suggested a combination of qualitative and quantitative analyses of the
experience of the study hospitals with autonomy. The four evaluative criteria
used in assessing hospital autonomy in each country, based on the project
guidelines, were efficiency, equity, public accountability, and quality of care.
The research methodology employed in undertaking the studies included
secondary data collection and analysis, direct observation by the study
teams, interviews, and field surveys.
This general framework was subsequently modified by the project teams in

course of their enquiry, and based on the experiences of the research teams,
the general framework of 1995 was revised in a later edition (Chawla et al,
1996). Known as Methodological Guidelines for Evaluating Autonomy, the
framework suggests that the important issues in evaluating hospital
autonomy can be addressed in the form of the following questions:
• Description of the nature and extent of its autonomy.

• Description of the process by which autonomy has been extended to
the hospital.
• Description of the structure of hospital management, organization,
internal systems and practices, and any changes that may have
occurred to reflect the level of autonomy the hospital has.
• Description and analysis of the impact of autonomy, in terms of the
effect of autonomy on efficiency, equity, quality of care, public
accountability, and resource mobilization.
• Identification and description of the major implementation issues in
the extension of autonomy to this hospital, and analysis of the main
lessons learned in the process.
The results, conclusions, and recommendations of each study were then
compiled in a synthesis document (Govindaraj and Chawla, 1996). The
synthesis paper presents the summary findings of the five studies and draws
on them to derive broader lessons on formulating and implementing hospital
autonomy in developing countries. One disconcerting conclusion of the five
case studies undertaken as part of this project is that autonomy in public
sector hospitals has not yielded many of the hoped-for benefits in terms of
efficiency, quality of care, and public accountability - although there have
been occasional and isolated successes. To some extent, this situation might
be explained by the relatively short duration of autonomy enjoyed by the

public sector hospitals, or the instability that often accompanies systemic
reform. However, the evidence from the case studies suggests that a flawed
conceptual basis for hospital autonomy in the public sector, as well as poor
implementation of the autonomy measures, is to be held responsible for the
limited success. Among other things, an inability to successfully transplant
private sector structures and incentives to the public sector hospitals,
institutional conflicts and inertia, limited decision-making and management
capacities, the absence of a comprehensive and sustainable financial plan,
and inadequate information systems have all contributed to the limited
success of the autonomous hospitals to achieve significant change either in
their functioning or performance.
The findings of the five country studies point to the need of improved
conceptual and implementation protocols for decision makers in developing
countries wishing to consider autonomy as an option for bringing about
improvements in hospital performance. These implementation guidelines are
a step in that direction.
Figure 1.1
Hospital Autonomy: Implementation Guidelines
IDENTIFICATION OF HOSPITALS
PRESENT STRUCTURE PERFORMANCE

OF DECISION MAKING EVALUATION
DECISION MAKING
PROCESS
DESIGN
NATURE & AUTONOMY & ORGANIZATIONAL MODELS OF INTERNAL PERFORMANCE CONSENSUS

EXTENT of THE HEALTH SECTOR MODELS AUTONOMY ORGANIZATION EVALUATION BUILDING
AUTONOMY CRITERIA
KEY INTERVENTIONS
GOVERNANCE & FINANCE HUMAN RESOURCE PROCUREMENT HOSPITAL

ADMINISTRATION MANAGEMENT INFORMATION
SYSTEM
2. How to Use the Guidelines
The guidelines are designed to be used by countries that are considering

ways of improving the functioning of public hospitals. The focus of the
guidelines is one particular approach for improving performance, i.e., giving
the hospitals greater autonomy. Though the guidelines are organized in a way
that reading and using it alone would be sufficient in most cases, interested
users are strongly encouraged to read and refer to the two companion
documents: Hospital Autonomy: Methodological Guidelines (Chawla,
Govindaraj, Needleman, and Berman, 1996) and Recent Experiences of
Hospital Autonomy: Lessons from Five Country Studies (Govindaraj and
Chawla, 1996).
These guidelines aim to lead government officials in the ministries of health

and finance and hospital directors through the process of evaluating the need
and feasibility of autonomy in the context of existing political, sociocultural,
and economic circumstances. The guidelines provide detailed planning advice
on issues of design, process and restructuring of key areas to reflect
autonomy. It also provides useful advice and insight into the process of
effecting change and highlights some of the common obstacles that come in
way of successful implementation of autonomy.
It is also useful to understand what the guidelines are not. The guidelines are
not a book about management principles. There is no attempt here to apply
theories of organization and management behavior to public hospitals. We
understand that the hospital is a very complex and dynamic organization,
producing a wide variety of goods and services, and in such situations
managers increasingly need to have a more sophisticated understanding of
the organization. These guidelines do not attempt to contribute to this need.
This is not a management text, but a guide to help planners and managers
improve their performance through a better understanding of the broad scope
of issues related to hospital autonomy.
The rest of the guidelines are organized according to figure 1. We

recommend starting with an evaluation of the structure and management of
the targeted hospital, and assessing the performance of the hospital.
Decision making is considered in the next section. If the decision is taken to
give greater autonomy to the public hospital, issues of design, process and
key interventions become relevant and important. These are discussed in the
next three sections.
A checklist is placed at the end of each section, indicating the kind of
information that ought to have been collected by the end of the section. The
checklist tends to be cumulative, so that a reader examining the list at the
end of the last section would get a good indication of what should have been
achieved by the end of the guidelines.
Figure 1.2
Identification of Hospitals

DECISION MAKING
PROCESS
DESIGN

AUTONOMY CRITERIA
KEY INTERVENTIONS

SYSTEM
3. Identification of Hospitals
The process of identification of target hospitals involves seven steps:

Step 1: Make a list of all public hospitals, and classify them according to the
level of services they provide, i.e., primary, secondary, and tertiary.
Step 2: Estimate the sum total of government resources each hospital
consumes, both in absolute numbers as well as a percentage of total
government expenditure in the health sector.
Step 3: Identify hospitals believed to be performing poorly, according to criteria
currently being used by the ministry of health or finance, general or medical
community.
Step 4: If there are many hospitals that are believed to be performing poorly,
rate the hospitals according to criteria such as consumption of government funds
so as to choose a manageable number of hospitals that can be targeted for
reform.
Step 5: Describe the present structure of decision making and administration in

this list of selected hospitals.
Step 6: Evaluate performance of the selected hospitals in accordance with how

they meet the criteria of efficiency, equity, accountability, quality of care, and
revenue mobilization.
Step 7: Revise, if necessary, the priorities in the list of hospitals targeted for
reform.
The information required for steps 1 and 2 should be available from the
government in the ministry of health, finance and planning. The preliminary
listing according to step 3 can be performed according to any known or used
procedure, since in any case this will be revised and updated later on.
Prioritizing is recommended since the government reforms are more likely to
succeed if they are concentrated rather than if they are dispersed. Steps 6
and 7 need special attention, and we discuss them in more detail below.
The Present Structure of Decision Making

The starting point of the evaluation is the determination of the present
process of hospital administration. Using the evaluation framework proposed
in Hospital Autonomy: Methodological Guidelines (Chawla et. al, 1996), the
present process of hospital administration can be described along the
functional dimensions of hospital management and hospital policy.
Performance Evaluation
The first step in assessing the performance of the hospital is to describe the
scope and nature of hospital services, such as present inpatient services
(medicine, surgery, pediatrics, maternity, etc.) outpatient services, casualty,
and specific clinics. It is also useful to understand (a) the role and place of
the hospital in the referral system; (b) the rules and procedures that the
hospitals follow for admission of patients to the hospital as private patient,
government paid patient, and government nonpaying patient; and (c) the
number of beds allocated to private patients, government paid patients, and
government nonpaying patients.
Hospital performance can be evaluated in terms of efficiency, quality of care,
accountability, equity and resource mobilization. We discuss these in detail in
Methodological Guidelines (Chawla et al, 1996), and briefly refer to the
concepts here.
Efficiency
The main plank against which performance of the hospital is ultimately assessed
is its capacity to deliver high quality clinical care at least cost. Some measure of
Table 1
Characteristics of the Present Process of Hospital Administration
Functions Current Status
Health Domain What role, if any, does the hospital play in setting goals for the health sector?
What role, if any, does the hospital play in setting goals for itself?
What is the nature of formal/informal interaction between the hospital and government?
Hospital Domain
Strategic Management Has the hospital defined and described its mission and objectives?
Has the hospital identified areas of interest and expansion?
Has the hospital identified target population needing attention?
What steps, if any, has the hospital taken towards strategic planning and preparing for
implementation?
Who takes these decisions of planning and implementation?
Administration Is the hospital managed by a governing board?
If so, how is the board appointed?
Who constitutes the board?
What is the scope and authority of the board?
How is the Chief Executive Officer appointed?
Who does the Chief Executive Officer report to?
What is the authority and responsibility of the CEO?
Financial Management What are the different sources of revenue for the hospital?
What is the extent of contribution made by the ministry of health and other Government
agencies?
What is the contribution of user fees, if any?
Who sets the fee?
Who controls and retains the fee?
Who bears the risk?
Is there a system for institutional budgeting?
Is the budget broken down into recurrent and capital expenditure components?
If so, what constitute the recurrent budget? the capital budget?
Is there any difference of government control and supervision in these items?
Human Resources Who has the responsibility and authority for making personnel decisions such as
Management recruitment, dismissal, etc.?
What are the different levels of positions within the hospital?
What is the process of determining the salary structure? Is it the same as state
employees?
Procurement Who prepares the list and quantity of drugs required?
Who purchases these drugs? Is it the government or the hospital? If it is the hospital, are
drugs obtained from central stores or from the market?
What is the process of purchase from the market?
Who is responsible for the purchase of medical supplies?
Who is responsible for the purchase of non-medical supplies?
Who is responsible for purchase and maintenance of equipment?
Who is responsible for the maintenance of buildings and premises?
Who is responsible for transportation?

efficiency can thus be obtained by measuring costs and examining the

relationship of costs to services provided.
Hospital costs include recurrent costs (such as maintenance, rent, utilities,

personnel, catering, laundry, linen, and costs of diagnostic, therapeutic, and
other treatment services provided to the patient) and capital costs (such as
land, buildings, plant and equipment).
Hospital services are traditionally measured by the number of outpatient

visits, and the number of inpatient admissions and discharges. Traditional
hospital service indicators are:
• The bed occupancy rate, which is a measure of the percentage of

total available beds which are engaged by patients during the year;
• The average length of stay, which is defined as the average number
of days a patient remains in the hospital between admission and
discharge; and
• The bed turnover rate, which refers to the average number of

inpatients per bed per year.
One approach to evaluating efficiency is to select performance indicators
such as cost per bed day, output of services, rate of return on capital, etc.
and then examine the performance of the hospital in relation to the indicator.
It is important to note, however, that the effectiveness of unit cost studies
can be seriously undermined by differences in the completeness of data
used, and variations in the health, institutional, and economic environment.
In order for a study comparing costs per unit of output to indicate which
hospital is most technically and economically efficient, the following criteria
must hold : (a) the case mix at each hospital must be the same or have been
accounted for; (b) the quality of service must be the same or adjusted; and
(c) the cost information must take into account the social opportunity costs
of resources used. In the absence of these conditions, efficiency
implications of unit cost measures are indeterminate or hard to interpret with
confidence. High unit costs may be a reflection of a number of things such
as high quality, poor efficiency, or the characteristics of patients. On the
other hand, low unit costs could be indicative of poor quality or high
efficiency.
Quality of Care
Changes in quality of health care can be evaluated in terms of the effects of an
intervention on structure, process, and outcome (Donabedian, 1980). These
can be judged along six different dimensions: effectiveness, acceptability,
efficiency, access, equity, and relevance (Maxwell (1984, 1992). This three-by-
six classification gives eighteen “cells”, or cross-dimensions, and each cell gives
information on two dimensions: where (structure, process, outcome) and what
indicator of quality (effectiveness, acceptability, efficiency, access, equity,
relevance). Quality of care may be assessed by judging each cell against an
established or tested norm, and progress can be assessed by comparing the
cells over time.
Structure and Process

Structural issues affecting the effectiveness of hospital services are: the physical
state of the facility and the equipment; the administrative process;
qualifications, experience and training of the medical and nonmedical staff; and
Table 2
Quality of Care
Structure Process Outcome
Effectiveness facilities, equipment, clinical history, physical patient recovery,

administrative processes, examination, diagnostic restoration of function,
qualifications of medical tests, technical survival, etc.
staff , etc. competence, preventive
management, continuity
of care, etc.
Acceptability physical comforts, explanation of treatment, follow up for

cleanliness, privacy, patient education, etc. improvement, meetings,
counselling, etc. etc.
Efficiency appropriate staffing and administration, comparison of costs for

equipment levels, etc. organization, staffing, similar cases across
operational different units and time
arrangements, etc. periods
Access location, etc. capacity, etc. treatment of wait-listed

patients, etc.
Equity bias in treatment, etc. bias in outcomes, etc.
Relevance usefulness of resources, impact on health status

need for specific for different groups of
services, etc. people, etc.
accreditation of the hospital Patient acceptability of hospital services is

affected by comfort, courtesy, privacy, counseling etc. Appropriate levels of
staffing and equipment are likely to affect efficiency parameters, while
location of the facility may have some impact on access issues. All these are
structural issues in the quality of care paradigm. On the process side are issues
like technical management, diagnostic testing, preventive medicine, patient
education, general administration and organization, capacity, etc. It is not
always easy to separate structure and process in a complex organization like a

hospital, and often it is convenient to assess both together.
Outcomes
Patient recovery, follow up for treatment, and impact on health status for
different groups of people are some of the outcome issues that are important
for assessing quality. Effectiveness in outcomes can be evaluated by looking
at indicators of patient recovery and survival, or alternatively at mortality
rates in the hospital. Patient acceptability can be assessed by using
indicators of follow up visits for improvement. Cost and case-mix
comparisons over time may give some idea of changes in efficiency. Equity
and access may be assessed by looking at the hospital use across income
groups, gender, age, race, and diseases and conditions treated in hospitals.
Equity
Following Wagstaff and Doorslaer (1993) equity can be defined in terms of
finance and delivery of health care. Equity in the finance of health care refers
to the requirement that “persons or families of unequal ability to pay make
appropriately dissimilar payments” for health care (vertical equity), and the
requirement that “persons or families with the same ability to pay make the
same contribution” (horizontal equity). Equity in the delivery of health care
refers to the requirement that “persons in unequal need be treated in an
appropriately dissimilar way” (vertical equity), and the requirement that
“persons in equal need be treated equally” (horizontal equity). (All quotes
are taken from Wagstaff and Doorslaer, 1993).
Accountability
Accountability was of little concern when hospitals were symbolic of
humanitarian efforts for community welfare. Today, however, with hospitals
using an increasing proportion of scarce resources and not using it so
efficiently and effectively, as Schulz and Johnson, 1990, note, there are
many questions of quality and effectiveness. Accountability, rather than
control is increasingly becoming the important issue, with hospitals being
accountable to consumers, individual patients, government and others who
provide funds, regulatory agencies, and own employees. Accountability is an
important factor in the successful use of public resources for the
improvement of community health. According to Bowen (1973), a good system
of accountability would have a clear purpose of goals and objectives, with an
ordering of priorities; allocation of resources toward maximum return in relation
to goals and objectives; evaluation of actual results; and reporting on evaluation
to all concerned.
End-of-Section Checklist
Check that the following information is collected by the end of this section:
√ List of all public hospitals
√ Government resource allocation to all hospitals
√ Preliminary list of target hospitals
√ Description of the present administrative process in these hospitals
√ Assessment of performance of these hospitals with regard to efficiency,

quality of care, equity, accountability, etc.
√ Final list of target hospitals, prioritized according to some well-defined

criteria
Figure 1.3
Decision Making

DECISION MAKING
PROCESS
DESIGN

AUTONOMY CRITERIA
KEY INTERVENTIONS

SYSTEM
4. Decision Making
If the previous analysis indicates that:

• some government hospitals are generally failing in their bid to maximize
public welfare, or are doing so at high cost; and
• these hospitals consume a large share of the government health budget in
the form of capital infusions, subsidies and operational expenses;
then it can be concluded that:
• public production of health in government owned and managed hospitals,

at least in the present form, is not the most efficient way of using
government resources, and an improvement in the present position is
likely to have a major positive impact.
Two solutions often suggested for improvement of hospital performance and

efficiency are:
• Privatization
• Reforms in the manner of government control and management of

hospitals.
Continued government involvement in the production of health care is

suggested for many reasons:
• Socio-political: There is the popular expectation that governments

should be responsive to the needs of health care for all citizens of the
country.
• Operational: Government investment in production and delivery of

health care has failed to deliver the expected result, not because the
concept was necessarily weak but because it was not implemented
well.
• Economic: Government involvement in health care production and
delivery is justified on many grounds, including the public and merit
good arguments, presence of externalities in health care, and
asymmetry of information.
• Governments are generally believed to be doing the right thing, such
as provide affordable quality health care for all, even if they do not do
it in the right manner. On the other hand, while it is reasonable to
expect that private firms do things right, i.e., efficiently, quickly,
correctly, and innovatively, they may not do the right thing. The ideal
solution thus is to find an institutional combination that does the right
thing and does it right.
Reforms in the manner of government control and management of hospitals

range from fine tuning and marginal reforms in existing structure to more
radical changes such as the provision of functional autonomy to publicly
owned hospitals. While fine tuning and marginal reforms may produce the
necessary improvements in the hospital’s performance if the existing
problems and issues are equally minor, more fundamental situations would
necessarily require more fundamental solutions. One such alternative, though
by no means the panacea (see Govindaraj and Chawla, 1996) is providing the
hospital greater autonomy of decision-making on a host of functions.
A substantial literature exists on the potential benefits and pitfalls of

providing greater autonomy to public hospitals (see reviews by McPake,
1996: Chawla, et al., 1996). While it is not very obvious that the benefits of
autonomy will outweigh the negatives, the popular consensus seems to be
that greater hospital autonomy can lead to significant gains in efficiency,
effectiveness, public accountability, and the quality of care, without a
significant compromise of equity.
• Hospital autonomy may lead to gains in both technical and allocative

efficiency. Various reasons have been cited for these gains: the incentive
structures and other reforms that usually accompany autonomy; the
assumption of greater responsibility by autonomous hospitals; the greater
freedom of autonomous hospitals to choose their optimal production
function, the types and levels of inputs, throughputs, and outputs, and
the overall strategic direction and development agenda.
On the other hand, when autonomy is not associated with incentive

structures, or the incentives are inadequate, the potential benefits of
autonomy may not be fully realized. Autonomy may also lead to a
loss of the benefits of economies of scale and scope, and may thus
increase the inefficiency of the hospital.
• Autonomy is presumed to increase public accountability and consumer

satisfaction. Autonomous hospitals, vested with greater authority,
can be expected to be better able to respond to local community
needs. This is expected to increase public support and acceptance,
and greater community participation in hospital decision-making.
Moreover, the delegation of authority “may be accompanied by a
matching system of control and supervision to ensure the responsible
use of authority”, thereby “leading to improvements in patient
satisfaction” (Chawla and Berman, 1995).
On the other hand, greater hospital autonomy may not be translated
into increased concern and responsiveness to community needs.
Freedom from central control will allow hospitals to place their self-
interest above that of consumers. The most important potential
drawback of providing autonomy to public hospitals may be a
compromise of equity in the financing as well as the delivery of
health care (Chawla and Berman, 1995).
• Autonomy is likely to lead to improvements in the quality of care
provided by hospitals. Greater autonomy accompanied by appropriate
incentives, consumer responsiveness, and public accountability, is
expected to lead to optimal employment of personnel, improvements
in staff performance and attitude towards patients, increased
availability of drugs and services, improved maintenance of facilities
and equipment, etc. - all of which would contribute to improving the
quality of care.
It is important to note that many difficulties can arise when governments
started implementing autonomy, as is brought about in our evaluation of five
countries where hospital autonomy has been implemented (see Govindaraj
and Chawla, 1996 for a summary of country experiences). Our studies
indicate that for the most part governments have relied on legal devices to
ensure that the autonomous concept works as intended. Managerial
autonomy has been secured by making the government hospital legally

distinct from the state (Kenya, India), by placing it under an independent
board of directors (Ghana, Kenya, India, Indonesia, Zimbabwe), or by
excluding their employees from civil service rules and privileges (Kenya), and
allowing them to operate their own bank accounts (Ghana, Kenya, India,
Indonesia, Zimbabwe) and retain surpluses (Kenya, Zimbabwe). In most
cases governments have restricted their own role by legally confining their
role to setting policies and staying out of operational matters, merely
requiring the hospital management to follow government directives on goals
and policies and subjecting them to government audit.
Despite the legal structures in place, however, governments in the ministries

of health and finance dealing with public hospitals have tended to think of
the hospitals as being an extension of the government. Thus, they have been
inclined to focus on issues they are used to controlling in government itself,
such as headcounts, discretionary expenses, etc. Where government
officials have tried to go beyond these issues, they have been constrained by
shortages of time and staff. When government control and supervision has
taken this form, many adverse and dysfunctional consequences have
followed. First, a lot of time is spent and wasted in frequent interventions.
Second, it leaves the managers without any motivation, which reduces
operational efficiency. Third, since so many outsiders make so many internal
decisions, managers cannot be readily held accountable. Fourth, there is a
tendency among managers to spend a great deal of time and effort in finding
ways and means of getting around government rules and controls. And
finally, minor issues consume so much attention that fundamental questions
about objectives and strategy have often remained unaddressed.1
An obvious conclusion seems to be that making the concept of an

autonomous hospital work takes more than just rules and regulations. New
administrative systems, institutions, and personnel are necessary to
coordinate government-autonomous hospital relations, and innovative
methods of managing public hospitals are necessary. The tendency in many
countries of borrowing freely from either private sector (Kenya), or
government management styles (Ghana, India), and using available
institutions and personnel (Ghana, Kenya, India, Indonesia, Zimbabwe) to
manage the newly created autonomous hospitals does not seem to work.
Unfortunately, most of these are not appropriate for the hybrid institution
delivering goods and services that have: a strong underlying public and merit
good component; and established externalities in an environment
characterized by a wide diversity between the levels of information available
with the providers and consumers of the product.
We realize that the limited success of autonomous hospitals in both doing the
right things and doing them right2 has led to general disappointment with
1/ Arguments of a similar nature are found in Jones (1980, 1991)
2/ This terminology is commonly used in the relevant literature on public economics. Our use of these terms is
inspired by Ramamurti (1991).
the concept of autonomy, but maintain that the implementation of autonomy in

these countries is more to be flawed than the concept of autonomy itself. New
implementation systems and processes have to be brought about through a
process of experimentation and creative thinking; otherwise, we run the risk of
losing a potentially valuable tool without having applied it properly.
The decision to give greater autonomy to public hospitals should thus be

governed not only by the problems with the existing setup, but also by
readiness and preparedness of the government to take a number of
innovative, and sometimes harsh, steps driven by the will to give the new
systems a chance to perform.
By the end of this section it is expected that you would have taken a
decision on the future of the hospital. If the decision is to make marginal
reforms in the existing administrative and control structure, then the rest of
the guidelines offer only academic reading. If, however, the decision in
principle is to give the hospital more autonomy, the remaining sections on
design, process and key interventions are useful.
√ Final list of target hospitals, prioritized according to some well defined
criteria.
√ Preliminary decision regarding autonomy taken.
Figure 1.4
Process

DECISION MAKING
PROCESS
DESIGN

AUTONOMY CRITERIA
KEY INTERVENTIONS

SYSTEM
5. The Process
Once the decision to give autonomy to a hospital or a group is taken, the next
step is to create enabling conditions to facilitate implementation. It is important
to recognize that a large number of people and organizations, within the
government, the hospital, members of the public, press, etc. would have the
potential to affect the decision making process, and ignoring their contribution
could well defeat the whole process even before it starts. Within the government
there are the issues of decision-making regarding the type and extent of
autonomy; an assessment of the likely impact of autonomy on government’s
finances, administration and people; political issues such as support and
opposition from different groups; legal issues such as those concerning the
existing laws of the land and the need for change; and personnel-specific issues
that concern government employees in the hospitals.
Within the hospital there are employees’ concerns regarding their future
employment conditions; changing relations between groups of employees,
particularly between medical staff and managerial personnel; union and
collective bargaining issues; scope and nature of the hospital’s services and
expansions; and every mission and goal of the hospital under autonomous
management.
Similarly, within the general public and the press there are concerns regarding:
the role the autonomous hospital will play in meeting community needs and
requirements; changes in resource mobilization strategies that may come about
with autonomy; and the accountability of an autonomous organization to the
community.
Reich (1994) provides a “six-step procedure for describing the issues, key
players, resources, and networks involved in a specific health policy
decision”.
• The first step considers and describes the expected effect of the
health policy along the dimensions of identity, size, timing, and
intensity of the effects.
• The second step identifies the opponents and proponents of the

health policy.
• The third step identifies the major organizations and individuals in the
decision-making processing, and assesses the impact of the policy on
these organizations and individuals.
• The fourth step identifies the formal and informal linkages between
organizations and individuals involved in the policy.
• The fifth step makes an assessment of the major changes in the

responsible organization, and covers the general organizational and
the political environment.
• The sixth and final step analyzes the strategies for influencing the
decision.
The process of implementing decisions regarding autonomy thus involve:
√ Final list of target hospitals, prioritized according to some well-defined

criteria.

√ A clear enunciation of the government’s objectives for implementing
autonomy, and the expected effect of autonomy on the health sector
from a financial and an administrative perspective.
√ Identification of individuals and groups likely to be directly or indirectly

affected by the autonomy decision.
√ Identification and description of transitions and changes occurring in the

government that could affect the proposed decision; identification and

description of transitions and changes occurring in the political and
economic environment that could affect the proposed decision.
√ Identification of the major players in the government, political parties,

non-governmental organizations, the private sector, the academic
sector, international agencies, donor groups, hospital personnel, and
the community, who are likely to play a significant role in the decision
making or implementation process, and the importance of this
decision to them.
√ Analysis of the expected support and opposition from these groups.
√ An understanding of all the processes available to utilize this support

and manage opposition.
Figure 1.5
Design

DECISION MAKING
PROCESS
DESIGN

AUTONOMY CRITERIA
KEY INTERVENTIONS

SYSTEM
6. Design
As we have argued earlier, making the concept of an autonomous hospital work

takes more than just rules and regulations. New and creative management
systems are necessary to effectively administer and coordinate the activities of
the government and the autonomous hospitals. New systems for strategic
planning, financing, budgeting, monitoring and evaluation, and personnel
management in public hospitals need to be developed. In short, in order for
hospital autonomy to work, new systems need to be created (or existing ones
overhauled) that are compatible with, and appropriate for, these complex, hybrid
institutions. And these reforms need to be to be instituted as integrated
components (rather than as piecemeal initiatives) of an overall reform of the
health sector in developing countries.
There are several steps involved in the design of an autonomous organization:
Step 1: Decide the nature and extent of autonomy to be given to the hospital.
Step 2: Identify the role of autonomy in the scheme of health reforms.
Step 3: Decide the level of hospital to which autonomy is to be given.

Step 4: Decide whether any changes are required in the internal organization of
the hospital.
Step 5: Establish a performance evaluation criteria.
Step 6: Take steps toward consensus building.
We will discuss each in turn.
Nature and Extent of Autonomy

Once the decision to give the hospital greater autonomy is taken in principle, the
next step is to decide how much and what type of autonomy is intended to be
given to the hospital. We discuss these issues in Methodological Guidelines
(Chawla et al, 1996), and repeat some of the arguments in the following
section.
Autonomy is defined in the dictionary as “the quality or state of being self-
governing, especially, the right or power of self-government”; “existing or
capable of existing independently”; and “subject to its laws only”. However,
such absolute criteria are of little help in defining hospital autonomy, and the
term “autonomous hospital” has meaning only when used in the sense of
fulfillment of specific criteria for autonomy on which consensus is reached.
In other words, hospitals can only be autonomous within a predefined
context, and in order to gauge the extent of a particular hospital’s autonomy,
it is important to specify the characteristics for each of the hospital’s
management functions of each level of autonomy.
In our framework (see Chawla et al, 1996) we define hospital autonomy
along two dimensions: the extent of centralization of decision-making
(“extent of autonomy”); and the range of policy and management decisions
that are relevant to hospitals (including both policy formulation and
implementation). We believe that these are the appropriate dimensions along
which hospital autonomy should be discussed, for it is the extent of
decentralized decision-making that occurs within the hospital, and the extent
to which such decision-making is feasible for each of the management
functions, that are the relevant considerations.
Table 3 presents our conceptual model in the form of a 6X3 matrix, with the
extent of autonomy and the policy/management functions representing the
two axes of the matrix. Autonomy is conceptualized as a continuum from a
situation where all decisions are made by the owner (public or private), to
one where the system of decision-making and policy formulation is highly
decentralized. We differentiate between decision-making at the macro level, i.e.,
in the national health domain; and the decision-making occurring within the
domain of hospitals. In this continuum, we define 3 stages (1-3) for each of the
policy and management functions.
Table 3
Conceptual Framework for Hospital Autonomy
Policy and Management Extent of Autonomy

Functions
Fully Centralized ---------------------------> Fully Decentralized
Low Autonomy Some Autonomy High Autonomy
a b c
A. Health Domain
Overall Health All decision making Decision making jointly by owner and hospital
Goals entirely by owner management
Hospital Specific All decision making Decision making Decision making

Goals entirely by owner jointly by owner and entirely by hospital
hospital management management
B. Hospital Domain
Strategic Direct control by Governance through a Independently

Management owner: government, board appointed by constituted Board,
parastatal, or private owner, and guided by making independent
owners, but not decisions
subservient to owner
Administration Direct management by Limited powers Independent

owner, who also sets decentralized to management operating
the rules for hospital management; under Board's
management of the owner still weilds directions, with
hospital some influence over significant independent
management decisions decision-making
capacity
Procurement Centralized Combination of Procurement

procurement, with centralized and completely under
owner deciding on decentralized control of hospital
quantities and total procurement management
financial outlay
Financial Full funding by owner; Owner subsidy plus Self-financing; no

Management owner has financial funds through other owner subsidy; funds
control sources, some owner entirely under Board
influence but finances control; significant
generally under independent
Board's control decision-making
capacity for managers
Human Resource Staff appointed by Staff employed by Staff employed by

Management owner; completely Board, and subject to Board; all conditions
under owner's the Board's and regulation set by
regulatory control regulations, but also Board; managers have
subject to owner's significant
regulations decision-making
capacity
Health domain refers to decisions that are made at the level of the government
or at the government-hospital interface, over which hospitals, typically, have
only limited control. Hospital domain,
domain in contrast, refers to those activities
undertaken within the hospital, over which the hospital management usually
exercises much greater control.
The two health domain functions are: formulating overall (national or state)
health goals (e.g., deciding on national health targets, health programs,
allocation of health resources, etc.), and setting hospital-specific goals (e.g.
deciding on hospital roles and functions, reporting requirements, evaluation
criteria, etc.).
The five hospital domain functions, respectively, are: strategic management,

procurement, financial management, human resource management, and
administration. Strategic management refers to the function of defining the
overall mission of the hospital, setting broad strategic goals, managing the
hospital’s assets, and bearing ultimate responsibility for the hospital’s
operational policies. Procurement refers to the purchase of drugs, medical
and non-medical hospital supplies, and hospital equipment. Financial
management refers to the generation of resources for the running of the
hospital, and the proper planning, accounting, and allocation of these
resources. Human resource management refers to the training and
management of the various categories of hospital personnel. Administration
refers to all the other responsibilities (i.e., other than financial, personnel and
procurement management) involved in the day-to-day running of the hospital
and the discharge of the functions defined by the mission statement. In Table
4, we summarize the specific activities that fall under the purview of the
various policy and management functions described in Table 3.
Relationship of Hospital Autonomy and Health Sector

Reforms
As we have argued elsewhere (see, for instance, Govindaraj and Chawla,
1996) hospital autonomy forms an important part of the whole health reform
package and is inextricably linked to other reforms, such as resource
mobilization, increasing competition, encouraging private sector participation,
etc. Moreover, since hospitals consume a substantial share of health budgets
in many developing countries, reforms related to the functioning of hospitals
and the health system overall tend to be mutually reinforcing. Hospital
autonomy thus has many linkages with other components of the health
system, and often the relationship is such that it is difficult to sustain autonomy
without other reforms, or fully realize the potential of other reforms without
autonomy.
Table 4
Activities within Various Policy and Management Functions
Policy and Management Functions Specific Activities
A. Health Domain National goal-setting, Role definition,

Laws and regulations
B. Hospital Domain
Strategic Management Mission definition, Strategic planning,

Operational guidelines, Asset
management
Financial Management Resource mobilization, Resource

planning and allocation, Accounting of
income and expenditures
Human Resource Management Hiring and firing of personnel, Creation

of posts, Determination of employee
rules, Contracts and salaries
Procurement Purchase of drugs and medical supplies,

Purchase of non-medical supplies,
Purchase of equipment
Administration All other day-to-day management

activities required in implementing
hospital mission and running hospital,
such as: time schedules, space
allocation, information management,
consumer relations, etc.
Table 5 below categorizes the relationship between hospital autonomy and

health sector reforms, and illustrates the mutually reinforcing role and nature
of the two.
The objectives and impact of increasing hospital autonomy should therefore
be evaluated not only within the context of other measures to improve
performance of public hospitals, but also within the larger context of health
sector reforms.
Organizational Models
The public hospital system can be reorganized to grant varying levels of
independence to various sub-units. This reorganization could, for instance,
entail the transfer of authority for planning, management, resource
mobilization, and resource allocation from the central government and its
agencies to:
• field units of central government ministries or agencies;
Table 5
Autonomy as a Component of Health Reform
Reform Support Provided to the Support Provided by the

Reform by an Reform for Improving
Autonomous Hospital Performance of an
Autonomous Hospital
1. Resource Mobilization Improves performance of Supports and enables
fee collection and financial autonomy
management of funds
2. Introduction of National Makes budget tracking and Encourages responsible
Health Accounts & Budget control easier and data collection, management
Tracking government expenditure and analysis; improves
more transparent overall hospital management
3. Decentralization & Complements and supports Supports autonomy
Devolution decentralization and
devolution of decision
making
4. Market Competition Provides competition with Contributes to effective cost
private hospitals containment
5. Increasing Private Contribute to the creation of Creates a competitive
Sector Involvement a level playing field environment
• subordinate units or levels of government;

• semi-autonomous public authorities or corporations;
• area-wide, regional or functional authorities; or

• non-governmental private or voluntary organizations.
Reorganization of authority to grant greater autonomy can be done through the
processes of deconcentration and delegation (Rondinelli et al, 1984 and Mills,
1990). Deconcentration,
Deconcentration or the reorganization of authority in general, refers to
the redistribution of some amount of administrative authority to lower levels in
the hierarchy. Within guidelines established by the central agency, district
hospitals are permitted some element of discretion to implement projects and
proposals, and to adjust directives to local conditions. Deconcentration can lead
to two kinds of hospital administration structures: a vertical pattern of local
administration, and an integrated, or prefectural pattern. In the vertical pattern,
the local staff of each ministry are responsible to their own ministry. The public
health and revenue collection officials in a hospital, for instance, would report to
different superiors. Coordinating structures such as a district committee may be
sanctioned in order to ensure alliance between local and central ministries, and
may be permitted financial discretion to some extent. In the second form of

administration, the integrated form, a local representative of the central
government is responsible for the enactment of all government actions within
the hospital. Minimal requirements for this include a specifically defined
geographical sphere for which managers are responsible, at least one senior
staff member with strictly defined powers, a budget and staffing
establishment, and a method of communicating local needs to the central
authority.
Delegation,
Delegation or the reorganization of authority specific to functions, involves
the transfer of decision making and management authority for particular
functions to organizations which are not directly controlled by the central
government ministries. Functions may be delegated from the central
government to organizations such as public corporations and regional
planning and development authorities, and other parastatal organizations
which are not officially within the government structure.
The nature and extent of autonomy would depend on the degree to which
the government continues to retain control over the various functions of the
hospital, particularly important functions such as (a) health policy
formulation and the establishing of national priorities; (b) the allocation of
certain resources, in particular capital funds; (c) control over quality and
licensing; (d) regulation of health personnel, including selection and
recruitment, training, salaries and wages, discipline and discharge, etc.; and
(e) regulation of user-fees, allocation of surplus, and financial accounts and
bookkeeping.
Models of Autonomy
There are two popular models of autonomy that countries in our study
favored:
• Making individual hospitals autonomous and transferring decision
making to independent boards.
• Setting up an organization of hospitals as a quasi-governmental
organization and making this body autonomous.
The parastatal model has many advantages:

• the government has to deal with only one organization instead of many
different autonomous hospitals.
• it is simpler to monitor and regulate one organization instead of many
smaller units.
• one autonomous organization requires only one good management team

as opposed to a much larger requirement of trained personnel for many
autonomous units.
There are many disadvantages also:
• individual hospitals continue to be non-autonomous, and thus the gains

from autonomy do not get fully realized.
• effective autonomy is always in danger of being diluted simply because it

is easy for the government to exercise control over the single
organization.
• an ineffective leadership of one big organization can have larger adverse

consequences and will affect all hospitals in comparison with ineffective
leadership in few small hospitals.
Internal Organization
The internal organization of a hospital may not need to undergo any change after
autonomy, though if a change in the control environment is required for any
other reason, this may well be the appropriate time for a reorganization. A
reorganization with a change in policies, personnel and responsibilities might
bring about new approaches to problem-solving and new attention to chronic
problems. At the same time, the reorganization may be simply necessary to
communicate the message that something is being done, which by itself may
trigger favorable responses. Moreover, organization design is largely an
executive function, and the introduction of a new board and new executive
leadership may also necessitate appropriate changes in the organization.
It is also useful to note that while legitimate authority is vested in clearly

defined centers in the organizational chart, informal organizations can be
more influential and important. Personal influence, expertise, control of
resources, and informal coalitions might portray lines of coordination and
control more accurately. In implementing change the informal sources of
authority and power should be recognized and to the extent possible,
utilized.
An organization brings together all available resources to perform defined
tasks and functions, and thus needs to be arranged in a way that permits
effective and efficient performance. A complex organization like a hospital can
be organized in a variety of ways. Two of the most popular organizational
models are discussed below.
• Functional Organization: Traditionally, small hospitals are organized

along functional lines, with labor divided into departments specialized by
functional areas like finance, buildings and maintenance, professional
services, nursing services, etc. the actual number of functional

departments depend on the size of the hospital (see figure 2).
• Divisional Organization: Large hospitals, particularly teaching hospitals,

are typically organized around traditional medical departments, such as
internal medicine, surgery, gynecology, pediatrics, etc. They can also be
organized around target groups, like women, elderly, cancer patients,
tuberculosis patients, etc. In this model decision making is decentralized
to the service level and each division has its own internal management
structure (see figure 3).
Figure 2
D iv isional Organization
Governing Board
CEO
Medical Director Administrator
Internal Pediatrics Gyneacology Surgery Nursing Finance Administration

Division Division Division
Subspeciality
Physicians Nursing Finance Administration
Performance Evaluation System

Many of the problems of the public hospital can be traced to inadequacies in
performance evaluation. A performance evaluation system is based on goals,
performance criteria and criterion values.3
The goals of a public hospital are difficult to specify due to the problems of
multiple objectives (including commercial and noncommercial objectives) and
plural principals (different organization units having different perceptions of what
the goals should be). If goals cannot be specified, then good managers cannot
be distinguished from bad ones.
A performance criterion is simply a quantification of an enterprise's objectives.

Multiple objectives can be handled by aggregation if they are individually
3/ This section draws heavily from Jones (1991) and Shirley (1991).
Figure 3
Functional Organization
Governing Board
CEO
M edical M edical
Administration
Staff Director
Finance Engineering Nursing Services Other Professional

Services
M edical Records
Accounts Plant
Pharmacy
Purchasing Equipment
Food Services
M aintenance
House Keeping
& Laundry
quantifiable and if there is general agreement on the relative importance of each

objective. The problem arises when some of the objectives are noncommercial
and not quantifiable. The other issue is temporal: single period indicators ignore
future effects, and this is a major weakness. Performance indicators thus must
allow for dynamic effects.
Given the choice of any performance criterion, the still more difficult task
remains of selecting a particular criterion value, i.e., a yardstick against
which the performance criterion can be judged. Some sources of information
that can assist in setting criterion values are: 1. comparison with similar
firms elsewhere, 2. comparisons with the same firm’s performance in
previous years, 3. professional judgement by third parties, 4. professional
judgement at the ministry level, and 5. professional level at the hospital level.
The problem of quantifying noncommercial objectives can be serious,
especially in an organization where most of the output is noncommercial.
One straightforward solution is to eliminate the problem by simply denying
the validity of noncommercial objectives, for it is difficult to impose
commercial discipline on a firm that has recourse to noncommercial
objectives as an excuse for poor commercial performance. While ignoring
noncommercial objectives may be better than recognizing them and allowing
managers an excuse, a better solution is to quantify the cost of the
noncommercial objectives and enter them explicitly into the enterprise accounts.
Thus costs are measured rather than benefits. While this is not the best
solution, costs are usually easier to quantify and value.
A comprehensive performance evaluation criteria would thus have:
• a primary indicator, that would cover static operational efficiency plus

any noncommercial objectives that can be quantified;
• supplementary indicators, that cover dynamic effects and

noncommercial effects that can only be rated, but not monetized; and
• diagnostic indicators, that are used to explain the movements in the

primary indicator.
Performance evaluation of public hospitals is not a simple matter and a

workable system cannot be imposed arbitrarily or overnight. Rather, it must
be a product of an evolutionary process involving both enterprise managers
and government supervisors. Accordingly, a phased system is proposed.
Once an acceptable system is in place, however, an incentive system can be
operationalized in which the welfare of managers and workers is linked to
national welfare by a pecuniary or nonpecuniary bonus system based on
achievement of particular target values.
Consensus-Building and Goal Attainment

The public hospital is a complex organization delivering a wide array of
services, and functions as both a business entity and a government policy
instrument. This “hybrid” organization thus has a number of players at both
the government and the facility level, who necessarily have to interact in the
provision, delivery and finance of hospital services. The other key players
are the medical personnel, who traditionally have been rather independent of
hospital management. And finally, and most importantly, there are the
patients, who are the eventual consumers of hospital services. Each of
these stakeholders plays an important role in decision-making and operations,
and each in its own way contributes to the success of a health sector reform
initiative.
Within any government or hospital, there are several distinct power centers -
each of whom is likely to play a role in the evolution of hospital autonomy,
and the impact of this autonomy on efficiency, equity, revenue mobilization,
public accountability, and patient satisfaction. At the same time, there are
many potential points of conflict between the government and the hospital,
e.g., in defining the relationship between physicians and the autonomous
management, between the various departments of the autonomous hospital
and the various arms of government, etc.
Our research suggests that an important starting point is a broad agreement

between the key stakeholders on the overall mission of autonomy, and on
the specific mandate of the public hospital. Just as important is a focus on
results and outcomes, rather than on rules and procedures. And, finally, it is
critically important to lay out clear and unambiguous guidelines on the roles,
responsibilities, and powers of each player, as well as the sanctions to be
imposed for failure to fulfill these responsibilities.
√ Final list of target hospitals, prioritized according to some well defined
criteria.

√ An understanding of all the processes available to utilize support from
favoring individuals and organizations, and manage opposition from
those not in favor of autonomy.
√ Decision taken regarding the nature and extent of autonomy.
√ Decision taken regarding the level of facility to which autonomy is to
be given, such as primary, secondary, tertiary.
√ Decision taken for creation of a parastatal organization and giving that
organization autonomy, or giving autonomy to individual hospital.
√ Necessary changes made in the internal organization of the selected
hospital.
√ Performance evaluation criteria are established.
√ Appropriate steps taken toward consensus building.

Figure 1.6
Key Interventions

DECISION MAKING
PROCESS
DESIGN

AUTONOMY CRITERIA
KEY INTERVENTIONS

SYSTEM
7. Key Areas
Autonomy may lead to a number of changes in the internal organization of the

hospital, both because an autonomous organization would need to have better
or different systems, and because autonomy has only now permitted the hospital
to implement desired improvements. The areas most likely to require change are:
• Governing Authority and Administration
• Finance
• Human Resources
• Procurement
• Hospital Information Systems

We will discuss each in turn.
Governance and Administration

Perhaps one of the first areas that will be affected by the decision to grant
greater autonomy is governance and administration, for it is difficult to
implement any form of autonomy without affecting changes in the basic
patterns and systems of decision making. Of the many aspects of
governance and administration, we discuss issues relating to the
organizational mission and governing body in greater detail.
Mission
The mission of the hospital, like that of any organization, should identify and
describe the purpose of the hospital and the relationship of the hospital to
the society that it seeks to serve. The mission should be shaped by the
hospital's capabilities, future potential, its role assigned by the government
or by itself, and the demands and requirements of the community. Schulz
and Johnson (1990) suggest that a sound formulation of the mission should
be based on considerations of:
• what services is the hospital providing?
• what is the main purpose and objective for the hospital to be in this
activity?
• what tasks must be carried out to meet community needs?
A mission statement of a public hospital would typically include:
• The treatment of illness and the conservation of life.

• Ensuring courtesy and patient dignity.
• The education of physicians, nurses and other medical staff.
• The training of all medical staff in empathy and caring.
• The promotion of medical research.
• The promotion of preventive health care.
• The promotion of consumer awareness and knowledge of health

issues.
The Governing Board

The governing board of a public hospital is appointed by, and is accountable
to, the government, and must exercise authority to ensure that the hospital
carries out the mission of the government. The main functions of the board
are:
• Control and maintain organizational effectiveness
• Ensure that hospital objectives and policies meet community needs.
• Establish a long-range plan for the hospital.
• Approve the annual budget, and ensure strict control over income and
expenses.
• Monitor performance against plan and budget.
• Manage conflict and resolve major operational problems.
• Have ultimate legal responsibility to patients for quality of care.

• The procedures followed by the governing board should be in
compliance with the bylaws and the standing orders, and should
include:
- Convening meetings and setting agendas.

- Determining in advance the kinds of items that need to be
presented for discussion.
- Using appropriate strategies for routine, creative and
negotiated decisions.
Boards are commonly organized along functional lines, though in some cases
a divisional classification may be more useful. Functional boards, especially
in large hospitals, delegate some of their duties to committees established
for particular purposes. These committees usually have no executive
authority, but make recommendations to the board. There can be many such
committees, and typically they include:
• executive committee, which approves all major purchases, appoints

auditors, appoints medical staff, and transacts urgent business
between board meetings.
• finance committee, which reviews the budget and maintains control
over expenses.
• planning committee, which reviews long range and strategic plans.
• buildings committee, which supervises maintenance and repair to

hospital property.
• personnel committee, which rules on personnel matters.

Boards organized along divisional lines are suitable for large multi-institutional
systems, where each component within the system is a distinct entity by itself.
A typical example is a structure like that of a holding company, where a large
number of hospitals are placed under one parastatal organization. The
divisional model applies to such cases, where the holding company has a board
and each of the constituent hospitals has its own board.
There is no obvious rule regarding the optimal size of the board. A very small
board (2-3 members) has the benefit of coming to quick decisions, but it lacks
the knowledge and expertise of a diverse group of individuals. On the other
hand, a very large board (20 and more) can become cumbersome and difficult to
manage. A 7-15 member team appears to be a good representation of the
community without overburdening members. A 9 or 15 member board has the
added advantage in that it provides for one third of its members to retire each
year, thus ensuring that at any given point in time there are some old members
providing continuity and some new members adding a fresh perspective to
decision-making. In any case, there is a distinct advantage in having an odd
number of members in the group to facilitate voting and avoiding stalemates.
There are no hard and fast rules regarding membership criteria, though it is
generally agreed that the members of the Board
• should represent diverse interests and professional background
• have sufficient time for attending board meetings
• have sufficient time to sit on committees
• have sufficient time to visit the hospital periodically

One possible constitution of the board would include the following members:
• representatives of the community
• representative of the Ministry of Health

• representative of the Ministry of Finance
• representative of the Ministry of Planning
• representative of the private sector (e.g., the CEO of a private

hospital)
• representative of a nongovernment organization
• representative of the medical school
• an expert in financial management, accounting, and evaluation

• an expert in health economics
• an expert in community medicine and public health
The board should be accountable to the community, patients, regulatory

agencies, sponsoring agencies, and those who provide funds. A system of
accountability would have:
• a clear statement of goals and objectives
• clear priorities
• a transparent system of resource allocation
• periodic assessment and evaluation of cost and benefits
• periodic performance evaluation based on established and approved

indicators
• wide public dissemination of findings evaluation
The Chief Executive Officer (CEO, or alternatively, the administrator) could
be the chairman of the Board, a voting member of the board, or an employee
of the owners and not a member of he board. While there are some merits in
all of these arrangements, it is probably in the best interest of the hospital if
the CEO is at least a voting member of the board. The CEO is required to
coordinate and communicate with the board committees and maintain a
trusting and enduring relationship with board members. The CEO is the
operational head of the hospital, and is responsible for developing strategic
plans, creating a work-culture in the organization, negotiating and resolving
conflicts, managing day-to-day administration, communicating with
government authorities and financial agencies, and generally carrying out the
mission of the organization. A CEO who is also a member of the board will
probably have sufficient access to decision-making and thus will carry out
these tasks more effectively as compared to a CEO who is not a board
member.
Finance
Another area where autonomy is likely to bring about significant changes is
the financial management of the hospital. Autonomy is likely to lead to a
change in government financial allocations from line budgetary allocations to
block grants. In addition, there may be increasing opportunities for the
hospital to raise their own resources, through user charges, institutional
finance, donations, etc. At the same time, changes in the procurement and
personnel processes may put additional demands on the financial managers
in the hospital. And finally, reporting and auditing requirements may also be
challenging tasks in an autonomous hospital. Thus, changes in financial
management may become necessary because of:
• change in the budgetary process of allocation
• nongovernment sources of revenue
• changes in procurement, maintenance and inventory control policies
• changes in personnel policies
• changes in audit and reporting requirements
Non-autonomous public hospitals typically have very small finance

departments, since the hospital itself manages very little of its finances. The
needs of autonomy will thus require the management to build up this
department almost from scratch, and this can be a very challenging task. The
areas that will need particular attention are accounting, auditing, budgeting,
financial planning and financial reporting.
reporting
Human Resources Management

Another significant addition that autonomy is likely to bring to the hospital’s
functions is human resources management,
management which is a highly specialized
function in the modern hospital. The principal objective of human resources
management is to create an environment and mechanisms that enable the
hospital management to integrate organizational and employee needs. In a
large and complex organization like a hospital this tends to be a very
significant and specialized function.
The human resources department will be required to perform many activities,
of which probably the most basic and important will be the transition of
erstwhile state employees to the newly created autonomous hospital. The
autonomous hospital may thus be required to transfer all personnel records
from the controlling offices in the government to the hospital, which by itself
will be a huge task. Besides the space requirements that this will entail, the
hospital will need qualified and trained staff to manage these records. Fixing
compensation for hospital employees may also be within the powers of the
autonomous organization.
Another significant new activity will be procurement of employees. The

responsibility of human resource management will range from preparing and
evaluating job descriptions to hiring of employees.
employees The human resources
department should thus be proficient in developing labor market information,
developing and validating selection instruments, screening potential
candidates, and hiring the required number of suitable employees.
The human resource department should also introduce procedures for

evaluation of employee performance,
performance which will entail the preparation of
evaluation instruments, introducing a system of recognition and rewards,
transfers, salary increases, dismissals and resignations.
Training and development is an important activity that the human resource

department coordinates. This requires interaction with departmental heads to
assess their requirements and future needs regarding employee skills.
Public hospitals are likely to be unionized, and the transition to autonomy

may leave some members of the staff dissatisfied enough to be potentially
troublesome for the hospital. Skills in negotiation and labor relations are thus
likely to be of critical importance.
Procurement
Another activity that may be transferred to the hospital is procurement of
medical and nonmedical supplies, including drugs. Non-autonomous public
hospitals seldom purchase their own requirements of consumables, and thus
usually do not have separate procurement departments or procedures. An
autonomous hospital may thus be required to create a new procurement
department, whose primary objectives would be to purchase or otherwise
acquire equipment and materials of quantity and quality consistent with
departmental requirements and good patient care. Centralized purchasing
within the hospital has the advantages of bulk quantity purchasing,
standardization of items, controlled accounting procedures, controlled
inventory management procedures, controlled accounting and audit
procedures, and strong supervision. Decentralized purchasing within the
departments in the hospital has the advantage that specialized departments
can procure supplies in accordance to their specialized needs.
Hospital Information Systems

A commonly used term to describe the total data collection and analysis in
an organization is management information systems.
systems Gillette et al (1970)
suggest that a complex organization like a hospital is composed of at least
eight subsystems (figure 4):
• Patient diagnosis and treatment system, which includes information

derived from various hospital departments such as pathology,
diagnostic radiology, pharmacy, rehabilitation, etc.
• Patient record system, which includes medical records, admissions,

discharges, insurance details, etc.
Figure 4
Hospital Information System
MANAGEMENT INFORMATION SYSTEM

SYSTEM SOURCE APPLICATIONS OUTPUT
Cost For:
Patient Diagnosis •Procedure
Financial
& Treatment •Patient Days
Data •Outpatients
System
Strategic
Planning
Patient Record
System
Standard
Product Finance Utilization
Profiles Analysis By:
Patient Boards •Department
Scheduling & •Physician,
Order System etc.
Control
Standard
Service Service
Patient Profiles
Accounting Concurrent
System Technology Patient
Service
Personnel Review
Expenditure &
Patient
General
Data Internal
Accounting
Control
System
Department
Personnel Service &
System Clinical Statistics
Data
Support Services
System
Planning Performance
Data Reporting
Management
Control System
• Patient scheduling and order system, which includes patient care and
support services, such as food, housekeeping, etc.
• Patient accounting system, which includes all financial accounting

related to patients, credit and collections, subsidies, etc.
• Expenditure and general accounting system, which includes budgeting,

payroll, materials, plant systems, etc.
• Personnel system, which includes information on all employees and

positions in the facility.
• Support services system, which includes information on departments

such as engineering, vehicles, plant management, etc.
• Management control system, which includes organizational

information, inter-group dynamics, internal controls, communication,
etc.
Hospital information systems are expected to fulfill the following important

goals:
• provide key users with access to timely and comprehensive
information about health services delivery, costs and performance;
• provide necessary information for strategic planning;
• provide necessary information to facilitate monitoring and reporting;

• provide concurrent indicators of occupancy, length of stay, repairs,
maintenance, etc.
The success of hospital information systems depends on a variety of factors,

not the least important of which is how easy it is to use the system. Hospital
information systems are in a constant stage of evolution, and interested
users are encouraged to seek out the latest developments in this regard.
√ Final list of target hospitals, prioritized according some well defined
criteria.

√ An understanding of all the processes available to utilize support from

favoring individuals and organizations, and manage opposition from
those not in favor of autonomy.
√ Decision taken regarding the nature and extent of autonomy, level of

facility, organizational model, and performance evaluation criteria.
√ Mission statement for the hospital or the organization is prepared.
√ The governing board is appointed, and its duties and responsibilities

clearly spelt out.
√ A new finance department is established, or the existing one

strengthened, to perform the functions of accounting, auditing,
budgeting, financial management, etc.
√ A new human resources department is established, or the existing one

strengthened, to perform the new functions of hiring, evaluation,
personnel records, etc.
√ A new procurement department is established, or the existing one

strengthened to perform the new medical and nonmedical supplies
procurement functions.
√ A new hospital information system is established, or the existing one
strengthened, to perform the functions of strategic planning,
monitoring and reporting.
8. End Note
These guidelines discuss some broad issues of implementation of hospital

autonomy. Needless to say, there will be many differences between country
situations, and between hospitals within a country. Guidelines such as these
cannot hope to identify in advance all the various issues, and that is not the
intention. The objective is to highlight some of the key issues and to provide
a relevant framework that can be easily adapted and built upon to take into
account country and facility specific situations. Within this caveat, we hope
that these guidelines will be useful for policy makers and hospital
administrators considering hospital autonomy as a means to improving
performance.
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MA.
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Washington, D.C. Oxford University Press.

ARTICLE:
Conceptual
Framework of
Hospital
Dr. Basher Ahmad
11/2/2009

INTRODUCTION
A healthier 21st century is our target which necessitates an overriding priority to
availability of potable or safe drinking water, improved sanitation facilities, family
welfare and quality medicare services. We cannot deny the fact that scientific inventions
and innovations have made possible multi-faceted transformation in the medical sciences
which has made a successful attack on a number of diseases. We have bee successful in
eradicating small pox; we have also been successful in reducing the prevalence and
incidence of leprosy but still polio, tuberculosis, cholera, typhoid and a number of
communicable diseases especially AIDS have been found instrumental in increasing the
death rate. In an overpopulated country like India where a majority of the population is
found below the poverty line, hospitals and healthcare centres are supposed to play an
important role.
In the process of social engineering, no doubt, a number of factors are found

instrumental but of all, it is soundness of our health which occupies a place of
outstanding significance. The human capital formation on which our economic
transformation programmes rest, contributes substantially to the generation process. In
the Indian society, we find healthcare management on the bottom of the welfare agenda.
In almost all the countries, the government hospitals bear the responsibility of sub serving
the social interests by making available quality medical aid. In the Indian perspective, the
government hospitals, except a few selected ones, are found in a depleted condition. We
cannot expect from those social institutions even the basic medical aid then what to talk
of quality services. The ultimate sufferers are the poorer sections of the society since the
affluent sections have been found preferring private hospitals where they get the world
class medical aids In a true sense, when the hospitals are found dying, the society has no
option but to suffer.
Studying medicare marketing attempts to focus on the managerial devices to bring

things on the rail. The hospitals, of course, bear the responsibility of serving the masses,
protecting the precious endowment and even safeguarding their own interests by
enriching the medicare facilities and building a positive image. Creation of a total
'animate' hospital system which encompasses patients, doctors and nurses in a
synchronised manner is, no doubt, a crying need of the hour.
The task is difficult since the exchequer finds it difficult to finance the government
hospitals. The task is much more difficult since the government hospitals are not allowed
to generate finance from the internal sources. At this critical juncture, we talk about
marketing medicare services with the motto of initiating qualitative and quantitative
improvements in the system. The task again is difficult but not as difficult as we think.
Our emphasis is on removing the managerial deficiencies where professional

excellence would play a pivotal role. It is in this context that we advocate in favour of
innovative marketing for improving the medicare services. The first and foremost task
before the government hospitals in particular is to reprioritise their service mix. This
draws our attention on less receptive segment and most dangerous diseases. Child
immunisation, pre and post-maternity care of women and multi-cornered attack,
1
especially on communicable diseases are some of the key issues to be given due
weightage. We need a task force for rural areas and specially for the rural women. It is
right to mention that a special emphasis on the aforesaid issues would contract avenues
for ailments vis-à-vis would minimize pressure on the government hospitals.
We accept the fact that a majority of our population live in the rural areas that are
not aware of the diseases generated by water, bad sanitation and food. If we succeed in
creating mass awareness and take the support of creative advertisements for that very
purpose, the magnitude of problem would be minimized considerably. This gravitates our
attention on the second important sub-mix of the marketing mix where innovative
promotional measures simplify our task fantastically.
The most critical and of course a very challenging task before hospitals is to adopt
a fee structure which on the one hand helps even poorer sections of the society to avail of
the medical aid while on the other and also improves the financial position of hospitals to
get quality inputs for offering quality medical aid. We cannot deny that particularly in the
Indian condition, this dimension of marketing needs more professionalism.
In addition, it is also impact generating that we find the minimum possible gap in
between the funding bodies and the hospitals or healthcare centres so that delay on that
account is checked. The hospitals are supposed to make available emergency services to
the vulnerable segment of the society on a priority basis. We cannot expect that rural
population would come to the hospitals when viral diseases spread like a wild fire. The
hospitals with the support of rural health centres or referral centres are supposed to
channelise their services in such a way that core and para-medical personnel are available
to counter the problem and this necessitates a sound information system.
The application of societal marketing principles would improve the health of

hospitals, presently found in a much depleted condition. The medical aid would thus be
available even to the poorest of the poor.
2
HOSPITAL - A CONCEPTUAL FRAME WORK
At the very outset, it is essential that we go through the concept of hospital. A
number of experts have expressed their views regarding hospital which is found acting
like a social institution. Yesterday, the hospitals were considered alms houses. They were
set up as a charitable institution to take care of the sick and poor. Today, it is a place for
the diagnosis and treatment of human ills, for the education and training and research,
promoting healthcare activities, and to some extent a centre helping bio-social research.
The document of World Health Organisation makes a clear cut exposition of the concept.
It is stated in the document that hospital is an integral part of a social and medical
organisation, the function of which is to provide for the population complete healthcare
both curative and preventive and whose out-patient services reach out to the family in its
home environment; the hospital is also a centre for the training of health workers and for
bio-social research.
The WHO has thus enlarged the functional areas for modem hospitals. It is
against this background that the hospitals re-kindle new hopes and aspirations to the
society. The WHO documents further consider hospital a complex organisation. It is
complex in the sense that multi-faceted developments in the society have made the users
or prospects more conscious of their rights. Of late, they demand modem and the best
possible means of medical care and health education. They want everything not only
within the four walls of the hospital but at the doorstep or in the vicinity of living places.
This has made hospital a complex organisation.
We also consider hospital a social institution for delivering healthcare, offering

considerable advantages to both patient and society. It is considered to be a place for the
diagnosis and treatment of human ills and restoration of health and wellbeing of those
temporarily deprived of. Above all, it is a social institution responsible for protecting the
social interests, of course as a not-for-profit making organisation.
3
Types of Hospitals
The classification is on the basis of objective, ownership, path and size. On the
basis of the objective, we find three types of hospitals, like teaching-cum-research for
developing medicos and promoting research to improve the quality of medical aid.
General hospital for treating general ailments and special hospitals for specialised
services in one or a few selected areas.
On the basis of ownership, there are four types of hospitals, e.g., Government
hospital which is owned, managed and controlled by government, semi-government
hospital which is partially shared by government, voluntary organisations also run
hospitals and in addition, the charitable trusts also run hospitals.
On the basis of path of treatment, we find allopath or say the system which is
promoted under the English system. Ayurveda is based on Indian system where herbals
are used for preparing medicine. Like this we find Unani and others. On the basis of size,
we find variation in the size of hospitals. Such as teaching hospitals generally have five
hundred beds which can be adjusted in tune with the number of students. The district
hospitals generally have two hundred, beds which can be raised to three hundred in the
face of changing requirements. The taluk hospitals generally have fifty beds that can be
raised to one hundred depending upon the requirements. The primary health centres
generally have six beds that can be raised to ten beds.
4
MARKETING MEDICARE A CONCEPTUAL
FRAMEWORK
At the outset, let us go through the conceptual aspect of marketing medicare. By
marketing medicare services we mean making available the medicare services to the
users in such a way that they get quality services at the reasonable fee structure. The
social marketing principles focus on making available the services even to those
segments of the society who are not in a position to pay for the services. It is in this
context that we find marketing medicare a managerial approach to formulate a sound
service mix in the face of latest developments in the medical sciences. The societal
marketing also focuses on promoting the services in the face of target users.
The principles throw light on inculcating mass awareness so that the prospects
change their living conditions, lifestyles, preferences, food habits, found prone to
diseases. Thus contrary to other organisations, the hospitals responsible for making
available to the users the quality medical aid are supposed to minimise the number of
prospects. We cannot deny that most of the diseases are prone to our living conditions. If
we improve the environmental conditions, the avenues for diseases are sizeably
contracted and in due course, we find a decrease in the number of prospects. Thus
marketing medicare is well supported by innovations in promotion. Since we consider
hospitals or healthcare centres to serve as social institutions, it is not just that they make
profits. Against this background, we call them not-for-profit making organisations.
Quality inputs can only deliver quality outputs. If hospitals invest on quality inputs, the
costs on services go up. According to the general marketing principles, we have a
freedom to generate profits and therefore the price setting process is not so difficult. The
societal marketing principles are found a bit different to the general marketing principles.
Since we talk about essential services and are also aware of the fact that a majority of our
prospects are poor, the price/fee setting process is found a challenging task. Against this
background, we advocate in favour of a rational fee structure which would be adjusted iri
proportion to the incomes of the different categories of prospects. The marketing
principles for medicare services also focus on distributing the services to the users in a
decent way and essentially on time. This draws our attention on the distribution channels.
There are a number of agencies for extending financial and technical support to hospitals.
In addition, we find involvement of a number of core and paramedical personnel.

A minor gap in the distribution process may result in grave consequences. The societal
marketing principles suggest a small channel with the minimum possible gap between the
provider of services (hospitals) and the users (patients). In view of the above, it is right to
opine that marketing medicare is a managerial device to satisfy the users so that they help
in promoting the business and the hospitals are found successful in projecting a positive
image.
5
JUSTIFICATIONS FOR MARKETING MEDICARE
Of late, the hospital management has gained prominence the world over. The
management of a not-for-profit making organisation is found significant to deliver goods
to the society. For a successful marketing of services, it is essential that the concerned
organisation is professionally sound. This helps an organisation in many ways, such as an
increase in the organizational potentials to show excellence, a strong base for serving the
poorer sections and a favourable nexus for making it an on-going process. It is against
this background that we apply the societal marketing principles for almost all the not-for-
profit making organisations. The following facts justify marketing medicare services:
1. Users are found satisfied: The first and foremost task before a marketer is to satisfy
the users by making available to them the quality services. We cannot deny the fact that
in the medicare services in addition to the medical aid, a number of other factors also
playa significant role. If the doctors and nurses are found soft, sympathetic, and decent to
the patients; the time-lag for curing a patient is minimised fantastically. Of course, the
medical aid playa pivotal role but the supportive services also play an incremental role
without which the duration of treatment is increased considerably. In the Indian
perspective, the core medical personnel lack this dimension. By marketing medicare
services, we engineer a strong foundation for both, e.g., the best possible medical aid and
a personal touch- in-service.
2. Time honoured service mix: With the passage of time, we find a number of
developments in the medical sciences based on scientific inventions and innovations.
Sophisticated equipment and technologies have now virtually transformed the whole
process of treatment. We call them inputs which playa decisive role in improving the
quality of services. Of course, the sophisticated equipments are found expensive and
therefore in normal course, the hospitals find it difficult to install them. If we talk about
government hospitals, the financial bankruptcy stands as a major barrier. Since the quality
inputs are not available, the quality outputs cannot be possible. Ultimately, the patients
suffer. The marketing principles focus on setting the fee structure in such a way that helps
hospitals in having quality inputs. Here, we find a discriminating pricing policy
instrumental, specially to serve the poorer sections of the society. Thus we rationalise the
fee structure and charge from different users fees, of course in proportion to their
incomes. This paves avenues for the generation of funds from internal sources and
enables hospitals in formulating a sound service mix for making available to the users the
time honoured services. It is also against this background that we talk in favour of
marketing medicare services.
3. Inculcating mass awareness: If the prospects are found unconscious or unaware of

the diseases borne by water, sanitation, food, family planning and environmental
conditions, the cases of ailment would increase. In an Indian environment, the prospects
living in the rural areas are not aware of sensitive issues influencing their health
conditions which increase the cases of ailments. The marketing mix focuses on promoting
the healthcare services. The hospitals with the support of professionals can innovate
advertisements which would inculcate mass awareness vis-à-vis would minimise pressure
6
on hospitals. Thus, to create mass awareness we argue for the application of societal
marketing principles. Of course, it is an incremental role of hospitals which constitutes a
place of outstanding significance.
4. Thrust areas can be identified: Unless we identify the thrust areas, the service
programming cannot be effective. In the context of medicare services, the viral diseases,
communicable diseases, child care, women care are found sensitive areas to be assigned
due weightage. In the Indian condition, it is important that we have a special task force to
make an assault on sensitive problems. We need to activate child immunisation,
vaccination for serious diseases, pre and post-maternity care to women, a crash
programme for malaria, cholera, typhoid, leprosy and so on. The marketing principles
assign due weightage to the thrust areas and programme the services accordingly which
in a very natural way are found effective.
5. Vulnerable segment can be identified: If we. talk about medicare services, there are
some of the areas or segments found most vulnerable, such as backward villages where
infrastructural facilities are not available, rural illiterate segment found less receptive,
women segment mostly found weak and very receptive to diseases, child segment not
immunised and very weak. To make available the best possible medical aid to them, it is
essential that we have detailed information regarding vulnerable segments in Order that
an action plan is prepared to counter their problems. The societal marketing principles
advocate in favour of a transcendental priority to this segment and simplify the task of
providing quality medical aid in time.
6. Behavioural dimension can be given due weightage: To be more specific in majority

of the government hospitals, we find this dimension even not on the bottom of agenda
which complicates the task of satisfying the users/patients. The medical personnel in
general and the front-line personnel in particular need indepth knowledge of behavioural
management. This helps in minimising the duration of treatment. If the doctors, nurses
and other staff are found behaving decently, the users or patients recover very fast. While
marketing medicare services we also study the behavioural profile of different segments.
7. Services can be made cost -effective: Of late, we find medicare services very
expensive. In the Indian setting, we need to minimise the costs on services. Since we
have an action plan, a set goal and a well-thought strategy, the duration of treatment can
be minimised substantially and thus naturally the services costs would also be reduced. In
addition, the time honoured services would minimise the duration of treatment throwing a
telling impact on cost. Since the services are of quality and we have assigned due
weightage to the satisfaction of users, the hospitals would, of course, be successful in
making possible an optimal utilisation of medical personnel and equipment which would
also be helpful in making the services cost effective. Besides, we find a minimum gap
between the provider and users which also makes possible cost-effectiveness.
7
8. A rational fee structure: The societal marketing principles make an advocacy in
favour of a rational fee strategy which provides an opportunity even to the poorest of the
poor to avail the services. Our emphasis is here on a rational fee structure. In this context,
we set the structure on the basis of income. This enables hospitals in generating finance
for initiating qualitative-cum-quantitative improvements in the medicare services. In
addition, such a rational fee structure provides a strong base for mobilising funds from
private external sources, such as donation, charity and grants. Of course, the private
hospitals can be regulated in the same way but so far as the government hospitals are
concerned they have no option but to promote the same.
9. For motivating personnel: Service promotion is an important dimension of marketing

in which we plan to motivate personnel of different echelons. If we expect doctors
showing a personal touch in service, para-medical personnel showing empathy in
behaviour, it is very natural that we assign due weightage to the motivational plan. The
marketing principles also argue for a plan which is linked to efficiency. If a team of para
and core medical personnel launch a camp in the rural area and successfully attack
cholera or other viral diseases, it is very natural that we motivate them suitably. If a team
of personnel have been successful in promoting pulse polio programme, it is essential that
we motivate them. Such a strategy would pave the ways for personal commitment. The
aforesaid facts justify application of societal marketing principles in marketing the
medicare services. Most of us still feel that as and when we talk about marketing; our
emphasis is on commercialising the services. Against this background, it is important to
make it clear that we work here with a different motive. It is related to social/public
interests. We consider hospital a social institution which is not supposed to make profits.
Marketing principles help us in professionalizing the services in tune with the defined
goal and set target. If we talk about marketing medicare services, our emphasis is on
increasing the organizational efficacy to sense, serve and satisfy the user.
8
THRUST AREAS FOR Medicare SERVICES
• Universal Immunization
This is an important area where hospitals and health care centers need concerted
efforts. Vaccines are the most cost-effective agents for control of communicable diseases.
A revolution is needed on the vaccinology front; the immunization programme is to
benefit the society in many ways. A reduction in the infant mortality rate is the result of
child immunization. The Universal Immunization Programme (UIP) has been aimed at a
healthier 21st century. As we cross the threshold of 20th century, we should be able to
eliminate and eradicate polio. This can certainly be achieved if the government, financing
bodies and the core and para-medical personnel take up the programme seriously,
Aggressive marketing is needed and Pulse Polio Programme is a part of this strategy
which has, of course, received a positive response in the urban areas but in the rural
areas, we do not find the same result. The viruses of these diseases have their reservoirs
in the human beings. An intensive use of polio vaccine has led to the elimination of polio
in many countries and we can also make it possible, provided all of us extend to the
programme the best possible cooperation.
Another important problem in the very context is leprosy, at the outset, we have
to eliminate it then eradicate it. Of late, we find three vaccines. Again man is the principal
reservoir of this disease. The most important thing in context is to stop, the chain of
transmission of bacteria. Multi Drugs Therapy is needed to eliminate the disease.
Tuberculosis is a major disease, in India about half a million people are dying this
disease every year and about two and half million new, cases are detected every year. Of
course, we have vaccine like BCG in the immunization programme but it is not found to
be so effective against pulmonary tuberculosis. The need of the hour is to develop more
effective vaccine against tuberculosis.
Cholera is still around and. often appears as an epidemic. The age-old cholera
vaccine is no longer used. It gave only short duration immunity and had many side
effects. We are experimenting Oral Cholera Vaccine.
Typhoid is another problem. For typhoid an oral vaccine developed in Switzerland
is available in the market.
The very sense in promoting immunization programmes is to minimize the pressures on
hospitals and healthcare centers. Amazing to mention that almost though received
satisfactory response in the urban areas, though the same could not be implemented in the
rural areas. We cannot deny that the personnel in the hospitals and healthcare centers are
not motivated in the right direction. This makes it essential that we assign due weight age
to the immunization management and train the personnel vis-à-vis create mass awareness,
especially to the vulnerable areas of the country.
Since we are studying the managerial problem, it is right to focus on the managerial
lapses. Of course, we are making efforts to promote immunization / vaccination, the most
Vulnerable rural segment is yet to get due care. If the Pulse Polio Programme received a
positive response in the urban areas, it was due to aggressive advertising and sensitive
publicity measures. If the same programme received a luke-warm response in the rural
areas of the country, it was due mainly to the failure of administration. We talk very
loudly in favour of social welfare but even after more than fifty years of independence,
9
half a million people have been found dying of malaria every year. We find the same fate
with cholera, typhoid and black fever. This makes it essential that in addition to
promoting research, the hospitals are also required to revamp the operational apparatus.
• Vector-borne diseases
Malaria has come back and we do not have effective medicines to counter. In addition,
we find a number of operational problems and non-availability of matching funds from
States to the Centrally Sponsored Scheme. The tribal area is found most vulnerable since
more than 60 per cent of the more dangerous P. Falciparum malaria are in the tribal
areas.8 The hospitals and particularly their research centres need to promote research to
devise an appropriate solution.
Kalazar and Japanese Encephalitis have emerged as major public health problem in
recent years. In this context, our emphasis should be on vector control by insecticide
spraying. The hospitals and health centres are supposed to identify cases and to assign
due weightage to case management. We cannot deny that doctors fail in monitoring
treatment as a manager. They find cases, start treatment, the patients get incomplete
treatment, the patients relapse, and are alive or dead; the doctors and hospitals cannot
answer. No monitoring, no communication. This is of course an example of managerial
deficiency which has substantially been responsible for a very luke-warm response to
control vector-borne diseases. Thus, it is also an important area to be given due
weightage.
• AIDS
The UNICEF Report on Progress of Nations 1997 states that the developing
countries in general are in the grip of several deadly diseases among which the Acquired
Immune-Deficiency Syndrome (AIDS) occupies a prominent place. In addition, the
United Nation's programme on AIDS (UNAIDS) reports that a mix of poverty, inefficient
public health service, boom trend in population and other like factors make a region
vulnerable to this dreaded disease. We accept that India is a country with the single
largest number of HIV-infected cases in the world and undoubtedly this number is
increasingly rapidly. As per the survey conducted by National AIDS Control Organisation
and its surveillance centres in the country till May 1997, out of total 3.03 million samples
screened from high risk groups and clinically suspected cases of AIDS, 56,409 were
found HIV positive. Dr. Denis Brown, head of UNICEF's Health Section in New York,
pointed out recently that India is sitting on a time-bomb which has already begun
exploding. According to him India has around 5 million HIV positive cases and over 0.1
million cases of AIDS. At the Vancouver World AIDS Conference 1996, the Joint Head of
UNAIDS observed that India has largest number of AIDS infected people.
Indian Health Organisation, a voluntary agency actively engaged in AIDS control

campaign research predicted that the HIV-infected persons in India would rise between
60-75 million people by 2006. The aforesaid facts are a mute testimony to this
proposition that an immediate solution to this problem is a crying need of the hour. In this
context, the most important thing that we find is identification of infected cases so that
10
further infection is checked. This in a very natural way requires the cooperation of
hospitals, healthcare centres in general and the Voluntary Social Organisations in
particular. Of course, the best device to control AIDS is to inculcate mass awareness. A
serious action is required to prevent the spread of the disease either by legislating laws or
by creating mass awareness. For this, a combination of planned strategy and adequate
financial and technical resources are required. The government should target its efforts
more on high risk groups.
Motivating them to change their sexual behaviour and distributing condoms is a

primary step to curb the disease, following it up with speedier action plans for early
treatment of sexually transmitted diseases. These measures would be more effective as
they would target relatively few people in the core groups (such as sex workers and their
clients). Another step is to subsidise the high charge for clinical services rendered by
testing STD as a measure to help the AIDS control programme. Central to all measures
taken for prevention and control of AIDS is the proper awareness among the masses.
To make an assault on the problem, it is important that we touch root of the

problem. We publicise much against AIDS but have never been found trying to touch the
root and branch, of the problem. Very surprisingly, the Churches have been found making
an advocacy in favour of the use of condoms as a protective measure for sexual relations
but have never been found opposing illegal, unethical and irresponsible sexual behaviour.
We doubt the existence of this finest creation of nature on the planet earth in which even
the law makers have been found breaking and recomposing the law of nature. They have
made unisex wedding legal. Do we find it right, ethical and natural? Of course, we find a
correlation between the unnatural sexual relations and AIDS. The root of the problem is
very deep and so the best solution of the problem is to create mass awareness and to
instrumentalise the hospitals and healthcare centres to identify cases and start treatment at
the very early stage.
• Drug-addiction
We cannot deny the positive contributions of industrial economy to the process of social
transformation but at the same time have also tasted the bitterness of haphazard industrial
development found increasing temptation in the society to multiply the material assets.
The race has been an unending process which keeps both wife and husband engaged in
earning more money resulting from which the children in a family are found neglected.
Increasing dependence on the day-care services is not a good sign. The children fail in
getting the due love and affection from parents which generates monotony, changes their
behaviour and thus results in derailment. It is against this background that of late we find
a number of teens and youths, especially on the campus drug addicted. The crying need
of the hour is to bring them on the rail. Here, we talk about medicare services and
therefore our emphasis is on due treatment to be made available to the patients on time.
Of course, the social institutions in general, have to accept this responsibility but the
hospitals in particular are supposed to play an outstanding role. We find it the most
sensitive area for medicare services and the hospitals have to take it on a priority basis.
11
It is right to mention that in addition to proper medical aid, they need love and
affection which would be a right course of treatment. The doctors, nurses, sisters and
other personnel are required to play an important role in order that the addicted persons
make a good-bye to their habits and start a new life and a new chapter. The main thing is
to bring the drug-addicted persons to the hospitals. No doubt, the voluntary social
organisations should accept the responsibility of identifying the cases, contacting the
related parents and motivating both of them to co-operate with hospitals.
No doubt, the patients are required to be given due medical aid and therefore the
medical and para-medical personnel need a task force for the same but at the same time it
is also impact generating that they instrumentalise the process of inculcating awareness.
The media should extend to them the best possible cooperation by advertising, producing
subjective TV serials and motivating parents to spare time for their children. Of course,
the advertisement and publicity measures should be creative to sensitise all.
In this context, the governmental regulations are required to be made more rigid.
The increasing cases of drug trafficking is a matter of great concern for state
administration and they should attempt to regulate it. The sensitive areas are educational
institutions and therefore the identification process would not be so difficult, if we are
really interested in solving the problem. Thus, we need multi-cornered attempts to bring
things on the rail. It is a challenging task and a great social evil and when we talk about
social marketing an overriding priority to the same cannot be overlooked. While treating
drug-addicted patients, the medical and para-medical personnel need to show personal-
touch-in-service. Behavioural dimension plays an incremental role to minimize the
duration of treatment.
12
Marketing-Mix for Hospitals
 Product Mix
Talking about the service mix of a depleted, non-existent, defunct social institution, of
course, is a difficult task. We cannot negate that almost all the governmental hospitals
except a few selected ones are virtually in a dying condition. On the other hand, the
masses have been facing numerous problems on account of poor medicare services. We
find the situations more critical, especially in the rural areas of the country. The prospects
are poor but the medicare services are very expensive. No doubt in it that a majority of
the private hospitals are well equipped but available only to the affluents. The
government hospitals present a very disappointing picture. The exchequer is at a freezing
point and the hospitals are not allowed to generate funds from the internal sources. The
financial crunch and managerial deficiency have made the situations so critical that we
find innovative efforts a must.
Service programming for Hospitals (medicare services)
13
In the above figure, the service programming for hospitals show a clear picture of
different types of services required to protect the public interests. The services have been
classified in three heads, e.g., line services, supportive services and auxiliary services.
The first one line services include emergency services, outdoor and in-door services,
intensive care unit and operation theatre. We also call them core services playing a
decisive role in the medicare services.
Most of us may think so what. The services are emergency and the hospitals and
core, para-medical personnel are well aware of the fact. Do we find anything new? In this
context, it is essential to focus our attention on government hospitals where the
perception of emergency is found a bit different.
1. Do we find emergency services of any use, if the emergency equipment
are not available?
2. Do we find services emergency, if doctors available take it very lightly?
3. What to talk more when we find emergency ward even without
emergency light. Can they negate it?
Thus, our emphasis is here on emergency management. This makes it essential
that all the required emergency services, equipments and infrastructural facilities are
available round-the-clock.
Amazing and really very amazing to note that even after more than fifty years of
independence, the legal formalities are found establishing an edge over the emergency
medical aid urgently needed by an accident victim patient. The doctors avoid attending.
The para-medical personnel avoid touching. All of them are well aware of the fact that
he/she is playing with his/her life and delay of even a few minutes would make the
situation more critical but they are waiting just for the completion of legal formalities.
The emergency management throws light on treatment first - no talk, no
statement, no argument, no discussion. This brings an apparent change in the facial
expression of medical and para-medical personnel attending on a patient. Not only this, a
change in action and behaviour is also natural.
We do not expect anything wrong in his/her treatment decisions since they have
been given suitable training to adjust themselves in tune with the changing working
conditions. Whatever the change that we find in his/her face, action, behaviour would not
influence the quality of services. If we do not find any change, it is almost all clear that
he/she is working against the law of nature.
The supporting services in a true sense determine the quality of services made
available by medical and para-medical personnel. They get a strong base for treatment
since the diagnostic aspect determines a direction. To get the best result from OT, it is
natural that equipment are properly sterilised. In addition, the dresses and clothes are also
required to be made bacteria free. The patients are required to wear disinfected linen
which should be made available. The establishment of laboratories should be between the
OPD and indoor so that both the areas are covered. Clinical pathology, blood bank and
pathological anatomy are important areas to streamline the quality of services. The
radiology department should have hi-tech facilities keeping in view the pressure of work.
Of late, we find sophisticated equipment and unless hospitals are made available the
same, the quality of services cannot be improved. The nursing services are managed by a
matron who is assisted by a sister-in-charge.
14
Thus we find supportive services playing an important role in improving the
quality of medicare. We cannot deny that a number of hospitals lack proper supportive
services partially due to managerial deficiency and partially on account of financial
constraint. They fail in managing the available equipment and technologies which affect
their services adversely and ultimately the users/patients suffer. Besides, the poor
management also influences the life and cost on maintenance in a negative way. In some
of the hospitals, we do not find efficient personnel to operate sophisticated equipments
and technologies. Here, it is also right that in most of the hospitals we have not been
successful in replacing traditional and outdated equipment and technologies due to
financial crunch. The exchequer finds it difficult to finance and the hospitals more or less
are financially bankrupt. Thus the need of the hour is to enrich the supportive services.
The third auxiliary services consist of registration and indoor case records, stores
management, transportation management, mortuary arrangement, dietary services,
engineering and maintenance services. If we turn our attention to these services, it is right
to opine that in most of the hospitals, the auxiliary services are not even on the bottom of
their agenda. The poor management of stores even in an age of computer is a matter of
great concern. We accept the fact that poor management of stores helps authorities in
manipulating funds and therefore they do not assign due weightage to this dimension of
hospital management.
The security arrangements, the supplies, the transportation facilities etc. cannot be
ignored to improve the quality and make the services cost-effective. For a hospital, the
registration is a must since it helps in collecting statistics, e.g., admission, discharge and
average stay of patients in a hospital. With the help of medical records, the admission of
patients is regulated in a proper way. In the hospitals, the dietetics department plays an
incremental role since it provides the menu to meet the needs of patients. In almost all the
government hospitals, this department is found to be a big source for manipulating the
hospital funds. The patients are not supplied the food items according to the chart
prescribed by a professionally sound dietician.
The aforesaid facts are a staunch testimony to this proposition that the services are
mismanaged and ultimately the patients suffer a lot. The need of the hour is to manage
hospitals professionally. When we talk about marketing hospitals, it is very natural that
we are very particular to manage our services in a right fashion. We have focused on
thrust areas keeping in view the changing social, environmental requirements. Unless the
hospitals are satisfied with the quality of services to be made available to the users, the
promotional aspect carries no meaning. Of late, the hospitals need to assign an overriding
priority to the rural prospects. We cannot deny that the most vulnerable segment is yet to
be given due weightage.
15
 Promotion Mix
Promotion is an important dimension of marketing which simplifies the task of
motivating the prospects and transforming them into actual users. In the medicare
services, we focus on two components, e.g., innovating promotional measures and
inculcating mass awareness. We cannot ignore the fact that till now almost all the
hospitals have failed in accepting the second component as an important dimension of
promotion. At the outset, it is clarified that unlike other organisations, the hospitals are
not supposed to create such a situation which influences the impulse of prospects and
forces them to make a positive decision. Indeed, they are supposed to play such a positive
role which in the long run makes the environment disease free and the prospects are
sensitive to adjust even in a rough weather. This is possible when they know some of the
basic facts regarding water, sanitation, food, living and hygienic conditions, first medical
aid, and communicable diseases and so on.
If we find more pressure on hospitals in addition to other aspects, the innocence of
prospects also plays a big role. If they are well aware of some of the important facts,
there would be a decrease in the cases of ailments since in most of the cases our wrong
decisions have been found engineering a strong foundation for the same. It is against this
background that we need an intensive care on inculcating mass awareness. Most of us
advocate that hospitals are not responsible for creating mass awareness. Of course, they
are right but only to some extent. If our users know what to eat, how much to eat; what to
drink and how to drink; how to solve the sanitation problem; how to use the civic
amenities; how to develop aesthetic sense, how to fight the problem at the initial stage;
how to administer sexual behaviour - a good number of diseases would be prevented.
Besides, the users would be very cooperative and the task of doctors and para-medical
personnel would substantially be simplified.
Thus we find a strong justification for inculcating mass awareness and the hospitals
are required to accept this responsibility. While going through promotion, we find two
important measures, e.g., personal and non-personal. For making available right services
to the right users at the right time, it is essential that we instrumentalise the personal
promotion. In this context both the core and para-medical personnel play an important
role. To be more specific the front-line-personnel have been found playing an outstanding
role. If nurses neglect patients, if receptionists miscommunicate prospects/
users/attendants, if doctors do not show human approach; the medical services even after
the availability of most sophisticated equipment and technologies, most efficient doctors
and nurses, most comfortable buildings and infra structural facilities would fail in
delivering goods to the society.
India’s promotion as a sought after medical tourism destination and threatened by the
mushrooming of new hospitals, it is becoming difficult for hospitals these days to depend
on mere word of mouth promotion to attract patients.
Hospital managements are putting extra effort in carving a brand image of the hospital
and improving hospital’s visibility. In other words, many would agree, that hospitals’
marketing has evolved from being subtle to aggressive.
16
This promotion could be through ways like:
Experts opine that healthcare marketing is a complex equation because most often the
producer, that is, the doctor, himself is the marketer.
Events, both indoor and out-reach programmes, play a significant role in marketing of
healthcare institutions. Small but effective steps like these are followed:
1. Awareness sessions for general public,
2. Check-up camps for public,
3. Organizing events on various health days,
4. Conducting interviews of specialists on visual media,
5. Informative and interactive Webster,
6. Continuous medical education,
7. Printing etc. are the commonest marketing tools.
Example:
THE Apollo Hospital, Chennai

To reach the consumers, we rely mostly on public relations. Whenever our doctors
perform pioneering surgeries or winning awards for their achievements, we talk to the
media and when people come to know about our achievements they get confidence to go
for our services. We regularly present various health programmes to the corporates who
form a significant chunk of our customer base. Being a hospital chain, we have the
advantage of leveraging our brandThe hospitals cannot advertise that they have the best
doctors. It will be against the code of conduct. When the consumer wants a medical
product or service, referring doctors and the circle of friends and relatives influence the
consumer’s decision.
Would hospital marketing become more aggressive in the future? “We can no longer rely
on word of mouth for getting patients. Hospitals, mainly the corporates ones, would
definitely get more aggressive to survive the intense competition,” avers Juhi Bhandari,
marketing manager, Hinduja Hospital. However, Nabar disagrees, saying, “Aggressive
marketing is not necessary in healthcare sector as it would not fetch more patients.
Patients’s decision to choose a hospital is based on three factors: facilities available in the
hospital, expertise of doctors and vicinity.”
Will new marketing mantras emerge in the future? The answer lies in the thought
process of the new faces in this sector. According to Manish Sharma, management
trainee, Hinduja Hospital, “As in the West, in future, tertiary care Indian hospitals need to
conduct research so as to segmentise the market and tap that area from which patients are
not turning up.” For instance, if research shows that a hospital is not attracting enough
patients from a particular age group or a disease profile, it needs to strategise to get those
patients.”
Ultimately the personnel determine the magnitude of success not the supporting
forces. All of us are aware of the most depressing contribution of personal promotion to
the development of medicare services, especially in the Indian perspective. This makes it
essential that we go through the problem in depth.
17
 Thrusts Areas In Promotion
A. Inculcating Mass Awareness:
Water, sanitation and food-borne diseases can be regulated substantially, if we
succeed in creating mass awareness. Contaminated water aggravates health problem and
proves to be a source of water borne diseases. We have gone through the problem while
studying the marketing of safe drinking water. Like this, we find a number of diseases
generated by the consumption of unhealthy food items. What to talk of illiterate sections
of the society when we find even educated persons inviting problem on that account. Of
course, we need food for survival but we do not find any sense in making it a source of
disease.
Eating habits play a decisive role in the very context. With the passage of time,
we find a change in our food habits. The latest in the area is fast food for a fast life. Most
of the researches reveal that these food items are not healthy and therefore we should
avoid using fast food. Of course, we need variety in food since no single food provides us
with all the nutrients that we need. Cereals like rice or wheat which form the staple food
of mankind, supply us only with a fraction of our nutritional requirements. We have to
supplement minor quantities of a number of vitamins and minerals. This makes it clear
that the larger our diet sheet, the better our health will be. Carbohydrates, fats, water,
minerals, vitamins are the different nutrients found in food stuff and we need to make
them proportionate to our requirements.
In the given chart we find Energy Requirement Chart which clarifies the
importance of food stuff in the maintenance of a sound health. The given chart gives the
amounts of various foods that make up a balanced diet for the average Indian which
would increase their resistance capacity. In the Indian setting, we find most of us
consuming foods that provide more carbohydrates and fats than proteins. We should
create awareness regarding a balanced diet that is meant a diet supplying all the nutrients
necessary for the normal growth and development of the body. The question what food
we should eat and how much, in a true sense depends on the amount of energy we need.
Food energy is measured in terms of heat units called calories. A physiological calorie,
also called large calorie or kilocalorie (abbreviated as Kcal) is the amount of heat
necessary to raise the temperature of one kilogram of water by one degree centigrade.
One gram of protein or carbohydrates yields 4 calories. One gram of fat yields 9 calories
while the same quantity of alcohol yields 7 calories.
The aforesaid facts make it clear that the food stuff we eat substantially determine
our resistance capacity to fight a disease. Amazing to note that a majority of persons in
the Indian society believe in quantity and thus invite a number of health problems. They
do not know what to eat, how much to eat and at what interval to eat. It is not essential
that we need only expensive food stuff since we find even most of the low-cost items
generally not consumed by us but found highly nutritional. Against this background, we
cannot say that poorer sections of the society cannot maintain a sound health. The only
thing they need to know is the items and quantity they should prefer to eat. In this
context, the doctors and specially the nutritionist can play an important role. If they find
doctors advocating in favour of food regulation, if they find nutritionist warning
prospects; it is very natural that the messages, slogans would have a far reaching effect.
18
Category Age(yrs) Height(cms) Weight(kgs) Energy Proteins
allow Kcal.
Infants 0-0.5 60 6 650 13
0.5-1 71 9 850 14
Children 1-3 90 13 1300 16
4-6 112 20 1800 24
7-10 132 28 2000 28
Males 11-14 157 42 2500 45
15-18 176 66 3000 59
19-24 177 72 2900 58
25-50 176 79 2900 63
51+ 173 77 2300 63
Females 11-14 157 46 2200 46
15-18 163 55 2200 44
19-24 164 58 2200 46
25-50 163 63 2200 50
51+ 160 65 1900 50
Of late, we have sophisticated communication technologies and we need

cooperation of the advertisement professionals who can help us in many ways. The only
thing that we need is to realise the instrumentality of food stuff in aggravating the health
problem, or in maintaining a sound health.
Today, we find communicable diseases spreading like a wild fire and surprisingly
most of us are found insensitive to the emerging problem. In this context, much
publicised AIDS needs an intensive care. Again we find mass awareness essential to
regulate the sexual behaviour of masses. To be more specific the big towns and cities and
tourist centres are found the most vulnerable segments for AIDS. Of course, we find
creative advertisement and publicity measures on / TV and radio but we fail to touch the
root of the problem. If we fail in inculcating ethical values; if we fail in generating moral
values; if we fail in promoting cultural values; if we fail in regulating the sex generating
programme of mass media: to be more specific the TV programme and movies; if we fail
in checking aggressive dresses; if we fail in regulating misuse of women in the
commercial advertisements - no measures can help us in regulating AIDS.
Against this background, our emphasis is on value-engineering process from the
very beginning of education. The doctors would only warn but all of us are well aware of
the insensitivity of warnings found today. Despite all, we find mass awareness important
assault on multi-faceted problems. We should inculcate mass awareness regarding the
effectiveness of "yoga" in enriching healthcare facilities
19
B. Instrumentality of Personal Promotion:
In the context of medicare services, the personal promotion plays a dual role. This
helps in making available to the users the quality medical aids and in addition also
simplifies promotion processes. The personal promoters or say, doctors, nurses, other
front-line personnel are directly involved in the process of offering the services. The
sophisticated technologies, new generation of equipment, modern amenities and facilities,
beautiful and spacious buildings and other infrastructural facilities carry no meaning, if
the personal promoters do not perform in a right fashion.
This in a very natural way magnifies the effectiveness of personal promotion in the
medical services. Against this background, we make an advocacy in favour of having a
team of efficient, dedicated, committed personnel of all categories. This gravitates our
attention on motivation. An important task before the administration is to pay to them
handsome salaries and incentives. In addition, they should also be given the incentives of
job promotion. If we motivate them properly, the generation of efficiency is found easier.
We cannot ignore that commitment; dedication and personal involvement are the bye-
products of lucrative incentives. By having a team of committed personnel, a number of
allied problems are automatically arrested. Further they also take part in promoting the
services of hospitals and virtually act as a hidden sales force. We talk very loudly about
motivation with the hope that such a team of personnel would avoid practising outside at
the cost of their parent institution. Once again, we need to focus on the value engineering
process.
The medical colleges and institutes in addition to making available to the medicos
the education, knowledge and training facilities should also assign due weightage to
inculcate value. We do not hesitate to say that of course we have highly skilled doctors
but very painfully comment that most of them lack values. In given figure we find
programming for promoting medicare services. Our strong emphasis is on rural areas
since almost all the doctors avoid staying in villages where most vulnerable segment
needs their services urgently.
20
C. Advertisement and Publicity:
Of course, we find advertisement and publicity measures sensitive to promote
medical services but in no case we need to welcome the use of these tools for making
profits. At the very outset, it is clarified that hospital is a not-for-profit making
organisation. If we find consultancy organisations or hospital planners advertising in
favour of profit generation process, the masses would suffer sizeably which would be
against the principle of social marketing. No doubt, the hospitals can focus on the quality
of their services; they can also throw light on their contribution to the social
transformation process but in no case are allowed to advertise for generating profits. With
the motto of optimising their promotion budget, we also allow them to develop a rapport
with media for publicising the services.
Promotion Programme for Hospitals(medicare services)
The media should be very reasonable while charging for advertisement but the
hospitals should not misuse this tool. The motives are to inform, persuade and serve not
to generate profits. While advertising, the hospitals and healthcare centres should make
possible creativity in their campaigns, messages and slogans in order that eyen less
receptive segment of the prospects get an opportunity to avail the services. The thrust
areas should be visualised in a proper way. While publicising, they should try to influence
the media so that they focus on their problems and extend to them the best possible
cooperation. It is found helpful in optimising the promotion budget of hospitals.
21
D. Service Promotion:
It is also an important dimension of promotion which is found instrumental in the
generation of efficiency, formation of a team spirit, establishment of a work culture and
more so a personal-touch-in-service. Offering of quality medical services is, of course, a
team work which requires involvement of all the medical and para-medical personnel and
other staff. Here, it is essential that we link the incentive plan to the performance of
hospitals. The users, no doubt, are the best judge to evaluate the performance of
personnel. To be more specific the personnel offering their services to the vulnerable
sections and thrust areas should suitably be rewarded. As and when we find an emergency
like situation in the rural areas, the personnel camping there and processing dedicated
services should be given additional incentives. This would generate a sense of
involvement.
We cannot deny that in the medicare services, the word-of-mouth communication
plays an outstanding role which is the result of a team spirit. The satisfied users act like
an agent or like a hidden sales force. If we have been made available quality medicare
services and are satisfied with the behaviour of personnel working there, it is very natural
that we make it a matter of table talk and communicate our experiences to the friends,
relations and others who are found motivated and prefer to use the services of that
hospital as and when the circumstances necessitate so. This speaks of the fact that the
main thing is the quality of services which is possible when we find a team work as
shown the above figure.
No doubt, other measures of promotion can also be effective but so far the sensitivity of
word-of-mouth recommendation is concerned we do not find even a single exception.
Against this background, the hospitals should concentrate on delivering the best possible
medical aids vis-à-vis the decent behaviour.
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 Price Mix
In the Indian setting where a number of persons are found below the poverty line, it is
a challenging task to formulate such a pricing strategy which is found successful in sub
serving the social interests. Of late, the hospitals need to invest a lot on the sophisticated
equipment and technologies to improve the quality of medical aid. Increasing cost on
inputs is found aggravating the task of setting a fee structure which makes possible a fair
synchronisation of users' and hospitals' interests. Paradoxically in a welfare state, even
the affluent sections of the society expect low cost services from social institutions in
general and hospitals in particular.
This is found complicating the task of innovating the services in tune with the latest
developments in the field of medical sciences. It is against this background that we find
almost all the hospitals, specially managed by government in a depleted condition. The
exchequer finds it difficult to finance hospitals and further the governmental regulations
also close doors for the generation of finance from the internal sources. The ultimate
sufferers are the society and especially the poorer sections since the affluent sections have
an option to avail the expensive medical services made available by the private hospitals.
The societal marketing principles make an advocacy in favour of protecting the public
interests but it is not meant that the hospitals have a uniform pricing/fee structure for all
the users. It is right to mention that the social marketing principles also focus on
increasing the organisational efficacy to delivery the best.
The motive is to improve the quality and this necessitates a big budget for innovation.
Against this background, the hospitals are supposed to adopt such a pricing/ fee strategy
which opens doors for the development of hospitals. We talk about bearing the social-
costs by a social institution but it is possible only when an organisation is sound enough
to bear the burden otherwise the financial health of an organisation is adversely affected.
The fee strategy for hospitals thus should be in proportion to the incomes of users which
would engineer a sound foundation for qualitative or quantitative improvements. In given
diagram the pricing/fee strategy for a hospital focuses on income-based fee.
For a social institution like hospital, we find a discriminatory fee structure
suitable since it provides even weaker sections of the society an opportunity to avail the
quality medical services. Besides, the hospitals are also in a position to innovate the
services to keep pace with the latest developments in the medical sciences. Of course, the
sections used to avail free of charge services would not welcome it but we have no option
since the dying hospitals cannot be healthy or at least be recovered unless we allow them
an opportunity to generate finance from the internal sources.
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Fee structure for hospitals
4 = No income group. He/she is not in a position to earn something and so free of

charge services.
3 = Low income group. He/she earns something and so should contribute a portion of
cost.
2 = Middle income group. He/she earns more than low income group and so should
make up the losses on account of low income group, category 3.
1 = High income group. He/she earns more and so should make up the losses on
account of category.
Such a fee structure would be applicable for normal cases but when we find thrust
areas, the hospitals can bring some improvements but the motive "surplus generation"
should not establish an edge over the motive "public interests."
24
 Place Mix
In the marketing process, we find distribution of medicare services playing a pivotal
role. This focuses on the instrumentality of almost all who are found involved in making
available the services to the ultimate users. We accept that the medical personnel need a
fair blending of two important properties, e.g., they are professionally sound and have
been made available an in depth knowledge of psychology. This would make the services
in tune with the expectations of users: If we divert our attention on the Indian hospitals
except a few almost all the hospitals and their personnel hardly find the behavioural
dimension significant.
It is against this background that even if the users get the quality medical aid, they are
found dissatisfied with the rough and indecent behaviour of doctors. Of course, the
private hospitals have been found assigning due weightage to the behavioural dimension
but so far as the government hospitals are concerned, we find a very disappointing or
depressing picture by and large in all the hospitals. It is right to mention that such a
negative trend is to make an invasion on their positive image. If we link their services to
the users' satisfaction, the trend is reversed.
In some of the cases, the government hospitals fail in offering quality services due tqo
a big gap between the fund-sanctioning authority and the fund-receiving hospitals. The
bureaucracy stands as a barrier and the disbursement of funds to a particular hospital is
delayed. This complicates the process of implementing the development and welfare-
oriented plans. When we talk about the thrust areas, this is found apparent. The family
planning programmes, the child immunisation programme, or vaccination to counter
some of the diseases, the pre- and, post-maternity benefits to the concerned patients are
not implemented properly on account of non-availability of funds from different sources,
e.g., central government and provincial government. This makes it clear that only a sound
hospital planning is not to serve our purpose unless we find a small channel for the time
honoured disbursement and implementation. This necessitates an optimal channel. The
private hospitals do not face such type of problems and therefore they succeed in
implementing the development plans on time which makes possible cost-effectiveness.
An important task before hospitals is to instrumentalise both the medical and
para-medical personnel. It is against this background that we talk about service
promotion schemes for almost all categories of personnel. The motive for introducing
such a plan is to seek the best possible cooperation of a full team meant for that purpose.
Motivational plans bear the efficacy of generating efficiency. The motivated personnel
also simplify the task of promoting the medicare services. To be more specific when that
we talk about rural areas; such a plan has a far reaching effect. Our all efforts for making
available to the society the best possible medical aid would, of course, turn into a fiasco,
if medical personnel extend half-hearted support. No doubt, the private hospitals have
been found offering due incentives but in the government hospitals, this is yet to be given
due weightage.
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Distribution
The most commonly recognized medical facility is probably the hospital. In the past
decade, however, the shift has been away from providing all care in the most expensive
medical environment. As a result, a number of other less expensive options have
developed. There are ambulatory surgery centers, rehabilitation centers, nursing homes
and other residential care facilities, specialty service centers and home care programs,
just to name a few.
1. Medical camps
They are the most common form of distributing the medical services. These camps are
generally held when there is a calamity. As we recently saw, these camps being held at
various parts of Mumbai, in the aftermath of the floods of 26th July. Such camps are
organized on an even larger scale when the calamity is of a very high magnitude. Eg. The
camps that were set up in Gujarat ( areas of Bhuj & Anjar) were huge enough to have
several Operation Theatres in them & they accommodate upto 100 patients at one point
of time. They are equipped with quite a lot of equipments like X ray machine, the ECG
etc. they are manned by nurses, general practitioners, specialists, & other medical
professionals.
2. Air Ambulances
Rooftop heli-pad is available for the emergency airlifting of patients to and from the
hospital for specialized trauma treatment.
These air ambulances have a crew of up to 5 people, which includes one specialized
doctor, a para-medical staff, 3 member rescue team. Family members of the patient are
generally not allowed to accompany him. Though not very common in India, it’s a
regular feature in the hospitals of developed countries. Even in India, these emergency
services are developed. Eg. The Madke Hosital in Mumbai.
3. Ambulances
As we all know, they are the most common mode of transport used in moving in the
patients from the place of illness to the hospitals.
4. Mobile Vans
Mobile Hospital and Research Centre, was flagged off on October 19, 2002 by His
Excellency Dr.APJ Abdul Kalam, President of India.
It has been found to be extremely popular & a practical health care model for
Uttaranchal.
The aim has been to bring advancements in modern medical sciences at the doorstep of
the common man, who otherwise would have been neglected of its benefits. The project
has been conceived, keeping in mind the specific needs of remote hilly terrain of
Uttaranchal where negligible modern health care is available to needy and poor people
who are staying in far-flung areas of Uttaranchal.
26
The main objective of the Mobile Hospital would be to provide:
i) Diagnostic facilities:
ii) Curative health care
iii) Research:
(iv) Educational and awareness programs:
Besides providing medical care it is also proposed to impart the health education through
state-of-the-art of audio visual facilities.Its adoption on wider scale through out the
country will immensely benefit the rural population leading to their overall development
particularly in health sector
The health facilities that India has built with great fervour, and greater expenditure, over
the past fifty years remain beyond the reach of the poor – indeed, beyond a sizeable
proportion of rural residents, rich and poor. They have little access to health care beyond
the occasional ‘check up’.
Despite a large public and even larger private health sector, appropriate and affordable
health care remains inaccessible to several hundreds of millions, particularly women and
children. Large numbers of villages are unconnected by road or public transport within a
reasonable time-distance norm of a health facility or ‘modern’ doctor, public or private.
Within India today, there is a problem of access to medical services as doctors prefer to
live in cities and rural areas have no specialised or quality medical care. Inaccessibility
should not be a reason to deny medical attention.
Access Difficulties to Health Care.
Universal access to healthcare is a norm in most of the developed countries and some
developing countries (Cuba, Thailand and others). In India though, pre-existing inequality
in the healthcare provisions is further enhanced by difficulties in accessing it. These
access difficulties can be either due to
1. Geographical distance
2. Socio-economic distance
3. Gender distance
The issue of geographic distance is important in a large country like India with limited
means of transport & infrastructure.
Those who live in remote areas with poor transportation facilities are often removed from
the reach of health systems.
Incentives for doctors and nurses to move to rural locations are generally insufficient and
ineffective.
27
Statistics:
Problems-of-access.
Fifty-four per cent delivered their babies without the support of trained personnel.
Fifty-eight per cent of children have not completed their immunisation schedule and 14
per cent have not received a single vaccine.
Only one in two women seeks treatment for illness, usually because the nearest health
service is too far away, or it's too expensive.
These examples are only meant to illustrate the fact that people's access to health care is
limited by their ability to pay, as well the availability of services.
The Development of Indian Health Sector.

Healthcare resources in India though not adequate, are ample. There has been a definite
growth in the overall healthcare resources and health related manpower in the last decade.
The number of hospitals grew from 11,174 hospitals in 1991 (57% private) to 18,218
(75% private) in 2000
In 2000, the country had 1.25 million doctors and 0.8 million nurses. That translates into
one doctor for every 1800 people. If other systems including Indigenous System of
Medicine (ISM) and homeopathic medicine are considered, there is one doctor per 800
people. It not only satisfies but also betters the required estimate of one doctor for 1500
population. Approximately 15,000 new graduate doctors and 5,000 postgraduate doctors
are trained every year. The country has an annual pharmaceutical production of about 260
billion (INR) and a large proportion of these medicines are exported
28
 THE PHYSICAL EVIDENCE:
• Provide single-bed rooms in almost all situations.
Studies suggest that single rooms help in reducing the spread of diseases & infections,
reduce medical errors, greatly lessen noise, improve patient confidentiality and
privacy, facilitate social support by families, improve staff communication to patients,
and increase patients' overall satisfaction with health care.
• Reduction in noise levels

New hospitals should be much quieter to reduce stress and improve sleep and other
outcomes. Noise levels will be substantially lowered by the following combination of
environmental interventions: providing single-bed rooms, installing high-performance
sound-absorbing ceilings, and eliminating noise sources (for example, using noiseless
paging).
Provide patients stress-reducing views of nature and other positive distractions.

Eg. Distractions can include certain types of music, companion animals such as dogs
or cats,
• Develop way finding systems that allow users, and particularly outpatients and
visitors, to find their way efficiently and with little stress.
• Improve ventilation through the use of improved filters, attention to appropriate
pressurization, and special vigilance during construction.
• Improve lighting, especially access to natural lighting and full-spectrum lighting.
• Design ward layouts and nurses stations to reduce staff walking and fatigue,
increase patient care time, and support staff activities such as medication supply,
communication, charting, and respite from stress.
• Convenience store, public call booths, coffee vending machines, library, prayer
rooms, information kiosks,internet access points in all public areas
• Separate waiting area with counselors for relatives of patients undergoing surgery
or angioplasty
• Top-of-the-line cafeteria
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 PEOPLE:
So who is a customer of a hospital? A customer from the hospital perspective is any

individual or institution who is an actual, potential or future user of the hospital and its
various services.
The customer from the hospital is very different from the regular customer, the
difference being that he doesn't want to be a 'customer' in the first place.
Unlike customers of other service sectors who use the services provided to them of their
own free will, and part with their money happily, the hospital customer is forced to be a
customer because of his illness and parts with his money unhappily. The hospital
therefore needs to take this difference into account while dealing with their patients.
The second differentiating factor is that the customer of the hospital, unlike other
industries, gets a close look at all the aspects of the hospital. He gets a chance to interact
with practically everybody from the receptionists, admission staff, doctors, nurses, ward
boys, ayahs, ambulance, personnel, billing staff, among others.
Assume that a hospital sees some 10,000 OPD patients a year and each patient
brings in an average revenue of Rs 1000 per year. This amounts to one crore in revenues
annually, which is not a trifling amount. If the average profit margin is 10 per cent, the
hospital would be making a gross profit of Rs.10, 00,000 per year. If you lose 20 per cent
of your customers every year because of a poor relationship with them, you would lose
Rs 20,00,000 worth of business every year which translates in terms of losing Rs
2,00,000 in terms of profit. Since we want patients to be loyal to the hospital over the
coming years, there could be a staggering 'lifetime loss'.
The story does not end here. Customers also bring in their relatives and friends because
they act as our brand ambassadors. They also make donations and bequests.
The hospital attracts a wide range of customers. They could be there just for a
blood test or even a complicated surgery. The time span spend at the hospital also varies
from a few minutes to sometimes few months.
Today, the term customer not only means the traditional customer but every entity
that interacts with you in a significant manner."
The recipient of any kind of product or service provided by an organization, a recipient
inside or outside."
In other words there are internal customers and external customers:
Thus, the patients at the hospital are a customer to the doctors & specialists out there, the
hospitals are a customer to the pharmacy & cafeteria etc.
30
 Procedures:
The Admitting Department, which is located on the ground floor near the Emergency
Department, is staffed 24 hours a day, 7days per week. When being admitted to the
hospital, patients are asked to provide basic demographic information along with any
applicable insurance information. Patients are requested to sign standard consent forms
and are offered the opportunity to complete a health care proxy if one is not in effect
already. In addition, information regarding all hospital services is made available.
Through the admission counter, if you are referred to our hospital by your doctor, and if
urgent medical attention is not required.
Through the Casualty Medical Officer in the Casualty Department, if you are either -
• In urgent need of medical attention, or
• You come without being referred and therefore need to be admitted under the
appropriate consultant doctor.
For Admission -
• Submit details of your case i.e. either -
• Your doctor's reference note [which will contain instructions] or
• The Casualty Medical Officer's note.
• Select the class in which you would like to be admitted.

[Please remember that if you desire a change, immediate transfer to another class
may not be possible.]
• Fill in the following documents -

• Admission Form - This is to ensure you receive appropriate medical
treatment while in our care.
• Consent Form - relating to your treatment, this form is important; it seeks
your acceptance.
 Products:
Such hospital departments as Laboratory and Pathology; Radiology, Nuclear Medicine,

and Other Imaging; Operating Room; Anesthesia; Respiratory Services; Physical Therapy
and Occupational Therapy; Emergency Room; Cardiology; Recovery Room; and
Labor/Delivery Room provide services.
The other items provided by hospitals are medications and medical solutions,
medical/surgical supplies and devices, and blood and blood products.
The tangibility aspect of these services, are the various medicines & reports that are given
to the patients. Example the blood reports for the samples, the X-RAY reports etc.
31
The Five Dimensions of Quality – Rater
 Reliability: The ability of the service provider to meet the promises made by
them accurately. The customer must develop a feeling that they can depend on that
particular service provider for their problem.
1. The staff of the hospital have to be very accurate while performing their job.
Only than the customers would rely on them. For e.g. during surgery the amount
of anesthesia to be given to the particular patient has to be accurate.
2. The service provided should be such that the customers develop a feeling of
loyalty so that the hospitals get the repeat customers as well as new customers.
e.g. if Mr. X goes to Lilavati hospital for the bypass surgery and the surgery is
conducted successfully and he recovers soon, he would not only become loyal to
the hospital but also he will narrate the whole incident to many others thereby
giving Lilavati more customers.
 Assurance: the service provider and the employees must be capable of winning
the trust and confidence of the customers.
1. The customers can be assured by informing them that the doctors, nurses, ward
boys and the other related staff is competent enough in providing them their
expected level of service.
2. The frontline staffs have to be very polite and friendly to the patient and the
relatives.
3. The patient must develop the feel that he is safe in that particular hospital. For e.g.
when a patient is brought to the hospital in emergency he and the relatives must
be attended with courtesy and also the doctors and the nurses must politely tell
them, that “nothing will happen to the patient, we will try our level best” and not
react with abrupt and angry statements. His words should sound empathetic and at
the same time consoling.
 Tangibles: This includes the ambience, the technologies used, the facilities used
to communicate things etc.
1. The ambience of the hospitals must be gentle and clean. The technologies used in
the hospitals have to be latest or updated regularly. Because now a days people do
not buy the product but benefits.
2. The environment of the hospital has to be peaceful. The corridors outside the
rooms should not be crowded. Even in the visiting hours too many people should
not be allowed at a time.
3. The seating arrangements for the patient who have just come for some tests and
the person accompanying him have to be comfortable.
4. The sign boards must be the perfect indicators so that there is no difficulty for the
customer to locate the place, he wants to go to. For eg., in Asian Heart Hospital,
32
the technologies used are latest, the visitors are given two passes so only two
people can go and see the patient in the visiting hours.
 Empathy: the attitude of the service provider should be caring and if possible
individual attention to each customer should be given
1. The attitude of the doctors and nurses should be concerned. They should be
approachable as and when required.
2. The doctors and nurses must have the ability to understand the problem of the
patient and give the solution accordingly.
3. The doctors must communicate well to the patient and the relatives about the
disease the patient is suffering from.
4. The nurse and the ward boy should be assigned to look after the patient.
 Responsiveness: the service delivery should be prompt and up to the mark.
1. The patient should be attended as soon as he comes to the hospital and registers
himself. In case of emergency he should be attended immediately.
2. The nurse should be able to locate the doctor soon if he is needed.
For e.g. a patient suddenly starts sinking or breathing at a faster rate the nurse
should be able to call the doctor immediately. For this, a good intercom facility is
required.
33
PETALS OF SERVICE
1. Information 5. Safe Keeping
2. Consultancy 6. Exceptional - better than
3. Order taking 7. Billing
4. Hospitality 8. Payment
These are the protons and electrons in the nucleus known as service. These are the
materials on which all leading service industries are built on. These thing sums up
the day to day working of these service industries namely Banks, Hotels, Hospitals,
Travel and Tourism, Rents and Repairs etc.
Even in Industries dealing in tangible products make use of these mentioned above.
These eight terms are involved in every step or operation that a company takes up.
These 8 things are so important that a company cannot even function without the
presence of them.
As flower looks its best will all its petals, so does a company dines with all of these 8
petals intact. Take away a single petal from a flower and it looses its beauty, so much
so even a company looses its credibility with even a single of the above 8 petals
missing.
Every company now-a –days has to have a sound balance between these 8 petals.
Missing a single petal could lead a company’s competitor to gain the upper hand in
business. A company needs to strengthen each of these 8 petals to woo its customers.
These petals are not only important for any services but they go hand in hand. E.g. a
Travel Agency needs to inform its customers about the various prices, schedules,
climates, discounts, hotels etc. Of different places to choose from. Consultancy is
also an extended form of information where the consumer is personally briefed by an
employee so as to help him make a better choice. Then comes order taking which is
quite important to get business. Hospitality, the way you treat your customer is also
very important. Safe keeping, preserving the secrecy and privacy plays and
important role in building customer loyalty.
Any service sector knows that the petals are the Life lines for its business. Even
Hospitals and Healthcare centers are dependent on these petals to retain their cliental.
Hospital or Healthcare centers have to follow and keep a check for deformity of the
petals. These petals are the things clients look at while choosing a particular service
distributor.
E.g. why people prefer to go to Breach Candy Hospital over other Government
Hospital is because of these petals.
34
Eight Petals in depth are:
1. Information:
This relates to all the relevant knowledge that a service sector has
to possess regarding its service. Information is particularly important as it’s a tool
for communicating with the customer prior to the service. It sort of acts as an
advertising message.
People come to Hospitals or Healthcare centre seeking information on a whole lot
of things. Please expect a satisfying answer for their queries for which they
phone up, visit your website or even personally show up. Hospitals have to take
notice of these queries and attend to them. Hospitals should have a receptionist
who is well trained and polite and can guide patients. In turn these Doctors
should have good information about their subject.
Healthcare centers are most dependent on Information. Their main strategy to
attract consumers is dependent on how they depart Information. Thousands of
people call them up enquiring about the various treatments available, side effects,
prices etc. So its very important for them to have up to date information on their
Website or have a receptionist for the same.
2. Consultancy:
This refers to the directions given to a consumer on how to go about to acquire a
particular service. It refers to guiding a customer to reach a goal. It includes
advice given to the consumer on which service to take, its price, its usefulness etc.
Hospitals are the key users of this petal. Hospitals have to cater and cater
carefully to the queries of its patients. Patients come about asking many
questions, it’s the responsibility of the hospitals to guide them properly. They
have to update themselves about the various new treatments, prices, effects etc.
They need to have Specialist Consultants for the matter that should not only have
an idea about the service but also about the operation centers, Insurance Payment
etc.
Even Healthcare centers like Kaya Skin Clinic, Berkowits etc. are highly
dependent on Consultancy Patients. They require a quick and effective solution
for their problems. Because of which the centers have to hire professional
consultants who can guide a customer best possible treatment.
This would play an important role in attracting consumers for you.
3. Order taking:
This is where you have to be careful. The specifications given by your customer
and how you follow it may decide that customer is coming back or not.
Hospitals have to be very practical about this. Patients may have to be
provided with various facilities due to which hospitals need to have records of
35
patients, whenever they are undergoing a surgery etc. Patients would prefer
separate room, sea faced room, low air-conditioning, specific diet etc. These
specifications have to be carefully recorded so as the patient does not face any
difficulty and the flow of service is also smooth.
Healthcare centers are also very particular about this petal. When customer
specify a particular treatment by a particular person, then that what they should
get. Any wrong going in this and the customer would walk out.
4. Hospitality:
This can simply be defined as the way you win customers. Hospitality
consists of the way you treat your consumer a big factor for winning consumer
loyalty. Your front office, office design, waiting room, polite employees etc.
constitute your hospitality. This is important because it leaves a mark on the
consumer, thus making him choose you over your competitors. Hospitals have to
have a standard of hospitality to get more and more people to choose their
organization. Due to this Hospitals now have large and neat waiting rooms,
pleasant music, good frontline Office and its design,
Polite and helping employees, etc. constitute your Hospitality. This is important
because it leaves a permanent mark on your consumer, thus making him come
back to you. Hospitals have to have a standard of hospitality to get more and more
people to choose them. Due to this pressure hospitals now-a-days have large and
pleasant waiting rooms, soothing music,, good frontline office, polite and helping
employees, clean environment, peaceful rooms, healthy food, attentive nurses,
etc.
On the other hand hospitality is what that sells in health care centers, etc.
The way you answer your customer’s calls, the seating, music, employees
working there, treatment given to the consumer distinguishes you from your
competitor.
5. SAFE KEEPING:
Privacy and secrecy is very important issue for many people. They cherih
it more than anything. So it’s very important for service sectors like hospitals to
maintain the secrecy of its patients. People trust, form a relationship and spread
good word when they know their privacy is upheld in a particular organization.
Hospitals are very much expected to maintain privacy about their clients.
the treatments given, medicines, ailments treated, etc. of a patient cannot be
disclosed to anyone but his doctor and maybe family members. Patients trust
hospitals, so hospitals have to take utmost care along with their employees to
maintain secrecy. Hospitals who fail at this are badly projected in the market.
With people becoming more and more beauty conscious, it’s extremely
important for health care centers to maintain customer secrecy. People get their
hair done, get skin treatment, etc. which these clients do not want revealed to the
outside world.
Maintaining high costumer secrecy, even though is tough, but generates a
lot of goodwill in the market for the hospitals and health care centers (HCC).
36
6. EXCEPTIONAL SERVICE:
This means how much more quality service can you provide and what else can
you do out of the norm for your costumers. The consumer always looks for something
extra, if that can be provided by you then you score over your competitor. Exceptional
means providing an unexpected discount, taking personal care in the waiting room,
getting the work much faster than expected, etc.
Exceptional service is not what you’re expected to give, it’s something that you
give yourself to impress your customer so that he or she will remember you for it and
would spread a good word.
Hospitals generally are not that keen on providing such exceptional service. Patients
there are satisfied with adequate service also. But now-a-days with increasing
competition even among hospitals, hospitals are very focused in maintaining there brand
name in the market, due to which even they are trying to part high quality service to their
customers. Hospitals now-a-days have to not only provide adequate service meeting the
customer expectation but also have to exceed them. For this reason hospitals now-a-days
have a posh building, modernly designed interiors, well trained and extremely polite
employees, etc. besides these many other services include conducting polio drive,
conducting vaccination drive, free blood donation camp, free distribution of medicines,
sometimes even greeting customers with flowers when they enter the room, etc.
Health care centers are much more under pressure to distinguish themselves from
the others. Well established centers like KAYA SKIN CLINIC, BERKOWITS, etc. are
know because of the service that they provide. These centers not only treat customers but
also know how to impress them, for starters these centers have a very posh office and
environment, hey provide the quickest of services to out do their competitors, they have
the best of employees, their consultancy and information is brief as per consumer
requirement.
With the pressure of competition mounting more and more service sector
industries are induced in providing exceptional service.
7. BILLING:
This comes at the end of your service prior to payment, yet is still very important
to the consumer as well as the organization. It state the price paid by the consumer for
receiving the service. This part has to be handled very carefully by the organization as a
mistake would either a loss to the company or to the customer. Billing is supposed to be
descriptive but not confusing so its very tricky how you present the bill. Billing has to
cover only the compensation for the service agreed and not anything extra.
In hospitals billing is very crucial, as the cost of service incurred by the customer
is generally high. Customers are very particular about what they are being charged for. So
the customers expect a clear bill which they could follow and could put up for insurance
claim. Hospitals should take care to see that the customers are not overcharged and no
unethical billing is practiced. Customers would not hesitate to criticize the hospital if they
are duped, and this would affect the hospitals goodwill. Hospitals also should collaborate
with insurance companies to see that the bills given are easily claimable by the patients or
others.
37
Even health care centers are very particular about billing. Customers there pay
very high prices due to which they require understandable bills.
Hospitals and health care centers should also give some discounts in the bills to
win customer loyalty. Any inconvenience faced by the consumer should be compensated
by the way of providing discounts in their bills.
8. PAYMENT:
This is the actual compensation paid by the consumer for the service received.
This may be paid in the form of cash, cheque, DD, etc. in this petal the company actually
receives the money form the customer, hence is defined to be important. The entire
service is provided with this in objective kept as primary.
Hospitals generally charge some amount in advance and the rest is charged at the
time of discharge. Hospitals have to facilitate the smooth execution of this petal. Some
concessions should also be provided as a gesture of goodwill.
38
STRATEGIC MARKETING FOR HOSPITALS
Present century breeds the next century. We have a long-run target of having a
healthier 21st century and a short-run target of improving the quality of medical aid in
different hospitals and healthcare centres. The hospitals bear the responsibility of
protecting, sensing and serving the human resources considered to be the precious
endowment. The formation of human capital is substantially influenced by the
availability of medicare and healthcare facilities. In the modern society, the marketing of
medicare services is found very difficult since the upward moving input costs have made
the services very expensive. The masses find it difficult to afford and suffer a lot. The
government hospitals are found in a depleted condition and the rural poor cannot afford
the expensive services of private hospitals. The exchequer finds it difficult to innovate
new type of services of hospitals and they are not allowed to generate finance even from
the internal sources for financing the development schemes. At this critical juncture, we
have no option but to market the services in tune with the defined principles of social
marketing. We need an action plan to formulate a sound marketing strategy.
The first task is to improve the quality of services at different rural health centres
where the situation is found very critical. The doctors avoid staying in the rural areas; the
para-medical personnel do not have even first aid facilities, the maternity centres have a
deserted look. The prospects living in villages are poor and so they cannot go outside
even for essential treatment. Despite the financial crunch, the government has to
strengthen the physical facilities at the sub-centres, public health centres and central
health centres so that their performance is improved. The incomplete buildings are to be
completed, the equipment as per the standard list is to be made available, the vacant posts
are to be filled in and the rural medical personnel are to be forced to stay in villages. The
need of the hour is to develop a mechanism to make the rural health services responsive
to the needs of rural masses. Let Panchayati Raj System prove its instrumentality and
control the rural health centres.
We have to think regarding the referral back up so that emergency cases are
transferred. After a certain interval, the rural centres should organise camps to implement
the family welfare scheme. In addition, the blindness control programme is also to be
energised. Let the Voluntary Social Organisations come ahead and regulate the activities
of these centres. Since by and large almost all the villages in the country have been found
facing the infrastructural constraints, the government should also think in the direction of
constructing all-weather proof roads, considered to be the most important aspect for the
development of backward villages. It1s in this context that we talk about "Rurbanisation"
or "Reverse Exodus" which focuses on opening new well developed hospitals very close
to villages or in the outskirts of big towns and cities. The concept throws light on the
development of villages’ vis-à-vis a control on the migration of rural population to the
urban areas. Of course, it is a long-term plan and in addition also capital intensive but
highly sensitive to transform the rural economy and to minimise the problem of urban
congestion.
The strategic decisions throw light on encouraging voluntary organisations and
local bodies to develop partnership and ultimately taking full responsibility for carrying
out these programmes. A model of rural development plans is to be prepared where
39
special emphasis would be on developing healthcare services. The mass awareness is also
to be created since in the rural areas a number of diseases are found generated by
drinking contaminated water, consuming unhealthy foodstuff and poor sanitation
facilities. The maternity centres are to be developed and the post-maternity benefits to the
mother and children are to be given due weightage.
Of late, we find even secondary and tertiary health care services neglected. Along
with the emphasis on consolidation of primary health care, the strengthening of
secondary care services and optimisation of tertiary care services are also to be given due
place. The sub divisional and district hospitals are the secondary level medical care
institutions facing multi-dimensional problems like inadequacy of manpower and
required, facilities to discharge their responsibilities satisfactorily. The medical college
hospitals and specialised hospitals have to be used exclusively as tertiary care centres and
for health manpower development.
We feel the urgency of encouraging private hospitals and the policy decision
makers have to pave ways for the same. Thus, an optimal development of primary,
secondary and tertiary care services with maximum emphasis on rural healthcare is found
significant. Since more than a quarter of our population live in the urban areas, we cannot
neglect them. To be more specific in the slum areas where we find the most vulnerable
urban segment, we find the situation worse than the rural areas. The city planners have to
think over the problem.
The first and the foremost task is to improve the quality of medicare services at
almost all the centres. It is not possible for government to initiate qualitative or
quantitative transformation but we cannot allow the poor rural population to suffer. The
best solution is to promote private sector. Earlier, we have talked about the pricing/fee
decisions and therefore the private hospitals would not face any difficulties if they work
accordingly. The research activities are required to be promoted either by Indian Council
of Medical Research or by other academic institutions.
They need to focus their attention on vaccinology which would benefit the society
in many ways. Augmentation of research activities in specific priority areas, viz.!
Integrated Vector Control Programme for Malaria, Filarial and Japanese Encephalitis,
Integrated control of Non-communicable diseases and development of vaccine for
communicable diseases as well as fertility regulation need due weightage. In addition,
enhancement of research and development of family planning and maternity and child
health also need due care. We should also think regarding collaboration with international
agencies for transfer of appropriate technology to the Indian scientists.
The need of the hour is to innovate the service mix and in this context both the
government and private hospitals are required to innovate their strategic decisions so that
all categories of users get the needed services. Scientific inventions and innovations have
paved the ways for qualitative improvements and we need to innovate the system
accordingly. In the field of genetic engineering, there have been significant developments
and we can use them for improving the medicare and healthcare services. In the coming
years, the vaccine is being developed based on deoxyribo-nucleic-acid (DNA) which has
some special properties of immunising the body against conventional vaccines. The
vaccine may be grown in tomatoes, bananas and rice or in crops that can yield antibodies.
The advantages in modern science are complemented by a higher stress on
naturopathy. In the Indian setting, naturopathy can be very useful and even cost-effective,
40
specially to serve the interests of poor masses. Even in the most developed countries of
the world, we now find a change in the trend. They have been found returning to nature to
have a mor4 healthy life style. The benefits of a healthy living, with healthy natural foods
and exercises are being disseminated. No doubt, we find a change even in the Indian
setting but only to a few selected ones since the masses are till now found liberal to the
capsule and bottle culture.
The development of personal care services needs an intensive care to promote
naturopathy and Yoga. The revived interest in “Yoga” is something which is welcome
even by the most sophisticated system of modern treatment. Yoga does have a scientific
basis. It is our previous heritage which have not been utilised properly whereas the rest of
the world has been found taking the advantage of this system and integrating the same
with the modern medical sciences. In a true sense, we find Yoga a beneficial system and
an elegant way of regulating and exercising the mind, the brain, the respiration and vital
functions of the body. Proper Yoga can give us a feeling of well-being in the systems
which no drug can give.
Amazing note is that where the so-called western countries have been found
promoting Yoga, we are still ignoring it. The need of the hour is to promote Yoga and to
give benefit of it to the poor Indian society who is not in a position to afford expensive
medicare and healthcare services. No doubt, we find good auguries since some of us have
developed a temptation to this neglected Indian heritage but we need to promote it on a
very large-scale. The doctors, experts realise the outstanding merits of Yoga and therefore
they are supposed to motivate the prospects not aware of the outstanding merits of the
same.
Of late, we have developed devices to predict abnormalities in child at an early
stage of pregnancy. We can identify hereditary disorders like thalassemia, Downs's
Syndrome, muscular dystrophy and so on. This gives the parents a choice to terminate the
pregnancy at a safe stage and prevent the predictable. Let's hope that our family planning
and family welfare programmes adopt the system and prevent the abnormalities in a
child. This would benefit the parents and the society in many ways. The aforesaid
developments necessitate an innovation in the service mix of hospitals so that the users
get quality medicare and health care services. It is the responsibility of hospitals to spread
mass awareness regarding significant developments.
In an age of information explosion, we find a number of sophisticated devices for
the same. The Bombay Hospital Institute of Medical Sciences has successfully used
international tele-conferences to spread awareness of latest techniques among Indian
gynaecologists and obstetrics. The main thing is to transmit the information to the related
individual/institution so that prospects are benefited. In the strategic marketing, we have
an important task to promote the medicare and healthcare facilities. This is also
significant to create mass awareness and inform and sense the prospects regarding
innovation in the service mix.
The rural segment is not found so receptive and therefore we should prefer to use
sophisticated communication technologies for that purpose. Audio/visual exposure
regarding the thrust areas and the preventive measures to counter viral and communicable
diseases would serve the rural masses in many ways. By inculcating “mass awareness”,
we can regulate a number of diseases and protect the society. Besides, the increasing
pressure on hospitals would also be minimized considerably. We consider this dimension
41
of marketing an important one to sense and serve the masses. The main thing is our
positive attitude to innovate the process.
There are a number of advertisement agencies and we can use their services for
preparing the advertisement layouts, composing the advertisement slogans and messages
and can make them more creative. If we succeed in increasing the sensitivity of our
promotional efforts, the mass awareness would be created which would help prospects in
ordering their life styles, in managing their food habits and in regulating their sexual
behaviour. We have talked about the instrumentality of naturopathy and Yoga. The
masses do not know about the positive contributions of Yoga in managing the biological
systems. The media should be used for that purpose. If doctors and medical experts
advocate, the impact on prospects/users would naturally be far reaching.
Here, it is important to clarify that the motive of promotion is not only to inform
the prospects regarding the latest developments in the medical sciences or new medicare
facilities available in a particular hospital but also to inform the society the devices which
would be helpful to them to maintain a sound health by regulating the lifestyles. This is
likely to throw a long-run impact on the prospects which would prevent a number of
diseases. The private hospitals of course have been promoting effectively but even they
are not found visualising sensitive issues instrumental in regulating the biological
systems.
According to the defined principles of social marketing, a hospital is also supposed to
play this role since our lifestyles, food habits, sense of sanitation, drinking water quality,
civic sense, aesthetic sense playa very effective role in increasing our resistance capacity
to counter the health problem. They should not work with the motto that a decrease in the
number of users would affect their business adversely. Contrary to it, they are supposed
to promote in such a way that helps masses in minimising the demand of medical aid and
curtailing the family medical budget. Till now, the government hospitals have been
offering almost free of charge services.
Of course, it is to sub serve social interests but of late almost all the hospitals are
found in a depleted condition. They are not getting adequate financial assistance from
government which is found affecting their development plans expensive medicare
services of private hospitals. We do not find any justification in regulating government
hospitals to generate finance from the internal sources to be more specific when the
exchequer is found in red. Thus, the decisions related to fee structure occupy a place of
outstanding significance. We have two options, viz., to pay nominal fees for quality
services or to get free of charge poor services. It is right to mention that we need to be
loyal to the poor and weaker sections of the society by offering to them subsidised or
even free of cost but the quality services.
To improve the quality of medicare services, it is essential that we make the
distribution channel small. Of late the government hospitals suffer a lot since the present
system of distribution of funds consumes much more time and the implementation of
development-oriented plan is delayed on that account. The immunisation programme, the
family welfare programme, the child care programme, the blindness control programme,
the AIDS control programme etc. suffer a lot due to a big gap in the system of
distribution.
42
A number of global funding agencies are involved in the process and they are not
satisfied with the implementation process. We have complicated the entire process of
distributing funds and have been inviting a number of problems to the hospitals or
healthcare centres responsible for the implementation. If we make the channel small, the
funds would be available on time; the implementation process would be energized and
the cost effectiveness would be made possible. Not only this, the minimum possible gap
in the distribution system would avoid confusion and misunderstanding and the
accountability would be fixed to an individual/institution responsible for the delay.
Besides, the task of performance evaluation would also be easier.
In view of the above, we find innovation in the process a must. The motive is to
serve the society; the motive is to improve the quality; the motive is to make the services
cost-effective; the motive is to minimise the medicare needs and in due course to
minimise the pressure on hospitals. A solution is to market the services in a right fashion.
Zone of tolerance
The zone of tolerance concept, in particular, is of importance in examining

responsiveness since the width of the zone is likely to differ with regard to the element of
responsiveness under consideration. The zone of tolerance with regard to basic amenities
for example, could also vary from country to country, depending on the general standard
of living. For instance the concept of floor patients is perhaps more alien to those in
developed countries to whom sleeping on the floor is not an acceptable condition whereas
it is the norm in many poor tropical countries. These characteristics would lead to the
tolerance zone regarding inpatient facilities being much wider in the latter context as
compared to the former. In the case of responsiveness, given the acceptance of universal
legitimate norms the question arises as to how wide the zone of tolerance could be
allowed to be. It is also clear that in such a context the zone of tolerance for basic
amenities is likely to be much wider than that for dignity.
43
SERVICE ENCOUNTERS
The most vivid impression of a service occurs in the service encounters, which is
very important in the customer point of view. These encounters which customers receive
gives them a snapshot of organizations service quality, and it also contributes to the
customers satisfaction and willingness to do business again with the organization. Some
services have few encounters while some have many. But the organization has to be
cautious while each encounter as even if there is a failure in one encounter it may lead to
dissatisfaction in mind of the customer. The following points are of importance in case of
encounters of hospitals or healthcare centers:
 In case of hospitals if the customer is a first timer the initial interaction is very
important as it forms an impression in the minds of the customer and he forms a
perception of the quality of service in his mind for example the first interaction
may be a phone encounter with the receptionist in order to take an appointment
or for emergency service to call for an ambulance. The encounter may be face
to face with the receptionist and physical evidence such as the waiting room the
lobby, the dress of the employees, cleanliness around etc. And if the customer is
dissatisfied at the initial encounters it may prove critical and the customer may
have a bad impression of the organization.
 It is not that only one encounter is important but all the encounters are
important to build strong relationship with the customer for example if the
interaction with the receptionist was bad, but the encounter with the doctor and
the nursing staff was more than satisfactory, while the food provided was ok
and the interaction with the billing staff was ok then the consumer has a
confused perception of the organization in its mind and one may go to the
competitors thus it is necessary for the organization to make each encounter
pleasant for the customer.
 Even though all encounters must be pleasant for the customers but there are a
few encounters which are of at most importance in hospitals the most important
is the encounter with the doctor and nursing staff these encounters must be
more satisfactory as they influence the customer more while the meal and the
discharge staff encounters if are ok then it wont dissatisfy the customer.
 There are few positive and negative momentous encounters, which make either
customer, bind to the organization for lifetime or the organization may loose the
customer for lifetime. In case of hospitals if during emergency the critical
equipment fails then this leads to a momentous negative failure but if the staff
apologizes for it and arrange for the equipment immediately then there will be
positive momentous encounter.
There are different types of encounter in case of hospitals and healthcare centers may
be phone encounter or face-to-face encounter. Thus it is very essential that while
dealing with these encounters the following themes may influence customer behavior
such as recovery, adoptability, spontaneity etc.
44
BLUE PRINT OF HOSPITALS
The biggest block in starting new service or improving existing service is inability
to describe or depict service as a concept. Thus in order to match to the customer
expectation and to make the role played by employee, customer, manager in the service
delivery clear there remains a need to design the intangible service. Blue printing is a tool
of designing which portrays the picture or a map of a service so that the employees can
understand their part better and that changes to make service more efficient or better can
be made.
The blue print that is prepared looking at the basic working of the hospital is
attached. This blueprint is a very simple showing only the basic steps of the service at a
hospital. But complex diagrams can be developed for each step and back office work can
be further explained in detail.
In this blue print the customer comes in initial contact either through phone
whereby if he needs to take appointment then he comes into contact with the receptionist
or else for general information he contacts the customer care back office. If the contact is
face to face then the first contact is with the physical evidence like the reception desk, the
building, décor and then with the receptionist.
Then the patient or customer needs to register by filling some necessary forms
and making some advance payment. The form then goes through various levels as every
aspect it has is checked by the back and front office.
Then the customer meets the assigned person who checks and examines the
patient and then sends him to his room. Here the dress, the cleanliness, assurance of
doctor is very important. Then the décor of room the nursing staff must be polite in order
to create a good impression of the hospital in minds of customer.
After the tests such as X-Ray, ECG etc depending is done and laboratory tests are
done backstage which are important but not with direct contact with the customer.
Another interaction is that with the canteen staff this depends upon the hygiene of
the food and delivery time etc. After this the last and final interaction is with the
discharge department or the payment department. Accounts department in the back office
prepares the bill and the cashier has to collect the payment from the customer.
There are many other stages of which blue print can be prepared but then it will
become too complex. Thus given is a simplified format of blueprint.
It is necessary for the hospital to take minimum time in registration process and
also entertain patients on time with appointments so that the initial encounter is
successful. Then the most important diagnosis must be done with most care. Hospitals
must have all equipments in good shape to avoid any delays as it is a profession, which
involves “playing with lives”, and people practicing it are termed “Gods”.
45
BLUE PRINT OF HOSPITAL SERVICE
Exterior of the The waiting room, Assurance Hospitality

Hospital & the cleanliness etc given, & cleanliness The payment
Lobby etc. dressing etc décor of room Hygiene desk.
EAT desl
PAYMENT
CUSTOMER ARRIVAL REGISTERAT- GO TO
CALLS & ION & ADVANCE ASSIGNED GO TO FOOD OF BILL
PAYMENT PERSON
ENQUIRY ROOM
RECEPT- REGITRATION
DESK AND DOCTOR NURSING CASHIER
ION STAFF
PROCESS
DIFFERENT
TECHNICAL CANTEEN RECIEPT
CUSTOMER
SERVICE
DEPARTMENTS STAFF MAKING
REGISTERAT- X-RAYS, ECG, CANTEEN ACCOUNTS

ION SYSTEM LABORATORY DEPART- DEPARTME
FORMAT TESTS ETC MENT -NT
SERVICE RECOVERY
Key factors towards effective service recovery programs:
1. Emphasize the importance of listening.
 Hear the patient.
 Empathize with the patient.
 Apologize to the patient.
 Respond to the patient.
 Thank the patient for bringing the concern to the patient.
2. Empower the employees to take control of service recovery efforts.

 By empowering any employee to take some action to the service failure patients
can receive an immediate response to any complaints. Thus the perception of the
hospital might add to the customer loyalty towards the hospital.
 Focus on selected departments with high visitor interactions.
3. Solicit immediate feedback - Effective programs typically incorporate some sort of

proactive solicitation of patient’s feedback. This may take the form of comment cards
in the patients room or hospital lobby, staff rounding around hospital beds, or using
interactive television or bedside Internet facilities to solicit patient comments.
4. Equip employees with service toolkit or make sure they all know where they could
obtain the necessary tools and equipment incase of emergencies
5. Track and review all patient complaints.
6. Generate staff support in the service recovery process.

COMPLAINT HANDLING
‘’To err is human, to recover divine’’
The first law of service productivity and quality might be De it right the first time.
But we cannot ignore the fact that failures continue to occur, sometimes for occasions
outside the organization’s control. These failures may have a direct or indirect effect with
the customers doing business with that firm. These failures may be sometimes quite
serious and may leave a permanent scar on the customer’s perception of that firm. Many
a times these failures may not be seen by the Company, only when the customers
complaint would the company know about them. So how well a firm handles complaints
and resolves problems determines whether it builds customer loyalty or watches former
customers take their business elsewhere.
May it be any service sector that you go to, chances are there would be at least
some disappoint in the service offered to you. Let it be Banking, Insurance, Travel and
Tourism, Education etc. Some or the other minor mishaps do occur. The question here is
do your customers complain about the occurrence or just ignore it.
One of the surest signs of a bad or declining relationship is the absence of complaints
from the Customer. No body is ever that satisfied, especially over an extended period of
time.
If your Customers are complaining its good, because that shows that they are still
connected to your firm had have not just passively walked away. That shows that they
are hoping for a better service from you next time. The way you handle these complaints
and how do you cater to future complaints may determine the fate of your firm in the
long run.
Complaints and Complaint handing in the Health Care Industry:
The healthcare Industry namely Government and Private Hospitals, Gyms, and
other Body Building Centers, Personal grooming and treatment Centers etc. Are very
sensitive to the Customers that they serve these services provided by them has a direct
impact on the customers health and well being. Any failures or wrong doing on their part
the customers would not only have a physical part but a deep rooted emotional scar as
well.
Health Care Industries have to be most careful while offering services because
mishaps in their services could lead to a fatal error. Due to which the equipments and
personnel used in hospitals and other health care industries are all critically picked. The
equipments are properly checked and tried before purchase and the personnel working on
these equipments and departing other services are very well trained.
These firms have to keep a check on the level of customer satisfaction attained in
order to retain customer loyalty. Customer feedback and Complaint forms a very
important part of their daily function, so as to compare themselves with their competitors
in gaining the upper hand.
The Health care industry is more prone to get feedbacks and complaints as they
are in direct contact with the customers, more than any other service industry. In other
service industry customers could find information or get their job done over the phone or
the internet, but the service department in health care industries is from person to person,
thus physically and mentally involving the customer.
Customer Complaints:
‘’You don’t have to be worried when your customers are complaining, its when they are
not complaining that there is a problem.’’
As mentioned before customers are seldom fully satisfied. There are always minor
glitches that are left in a service. At time like these the image of the Company, the way it
treats its customers and its complaints, handling capacity plays an important role in
determining whether the customer would complaint or not. Often customers do not
complain because they fell that there is nobody to hear them out and solve them in the
Company.
The three ways of Customer Responses to Service failure are:
1. Take some form of public action (including complaining to the firm or third party
such as Court).
2. Take some form of private action (including abandoning the supplier).
3. Take no action.
The Customers may pursue any three of the above responses in case of a service
failure. A Manager has to be aware of the impact of these responses on the firm including
the fact that these customers may often tell other people about their experience and this
may lead to a bad word of mouth towards the service industry like hospitals whenever a
patient is left unattended he may feel dejected and become more and more afraid about
his condition of not catered to by a doctor for a long time.
If such service failure occur the Hospital or any other Service Sector should have
strong complaint handling skills, so as to repay the loss occurred to the customer and
make him feel satisfied, that the hospital is concerned about him.
Home Services
There are times when a health condition demands the medical resources and round-the-
clock attention of a hospital. But at other times, the familiar surroundings of a person's
own home and the presence of family members can help speed recovery or ease the
transition at the end of life. Thus, many acute medical care services are now available at
home for people discharged from the hospital. Home health providers are helping the
chronically ill, aged and disabled regain and retain their independence. Although home
care is associated with the elderly, it can be a major help to people of all ages, including
children and families. Most major hospitals today provide home services to give that little
extra to their customers as the need for homecare is felt pretty often like Hinduja Hospital
Home care services that are available:

Home care services can range from fairly sophisticated high tech care (similar to
what a patient would get in a hospital) to help with the activities of daily. Each person's
home care program must be tailored to match his or her needs with appropriate services.
A variety of home care workers could be involved in an individual's plan for home care
services. The two main types of home care are:
1. Rehabilitative home care is provided to people who are recovering from an illness
or are in a rehabilitation program. Many of these patients have been recently
discharged from a hospital. The rehabilitative health care team may include a
physician, nurse, nutritionist, homemaker, home health aide as well as various
types of therapists.
• Skilled Nursing is the most common rehabilitative home care service.
Nurses change dressings, administer drugs and monitor patients for
complications or serious changes in health. They also teach newly
discharged hospital patients and their families how to perform skilled
nursing procedures so they can eventually perform them themselves.
• Therapists make up another part of the spectrum of home health care
providers. Their role: To restore, maintain or enhance the abilities of those
under their care. There are several different types of therapy. Physical
therapy focuses on enhancing physical movement. Speech therapy works
on communication problems. Occupational therapy helps people overcome
problems of daily living at home or at work.
2. Basic home care refers to the kinds of services provided to patients who otherwise
might be unable to remain at home because of a disabling health condition.
Continued health supervision with an emphasis on health promotion enables these
patients to maintain both a stable state of health and relative independence.
Homemaker and home health aide services are the least expensive home care
service. Many of the recipients of such care have a chronic illness or disability.
• Homemakers, also referred to as companions, are responsible for a wide
variety of tasks that keep the home clean and safe, and they generally
contribute to a person's well-being. A homemakers responsibility include
basic housekeeping (tidying rooms, vacuuming, making and changing the
bed, preparing and serving meals, shopping for food) and personal care
(helping patients to wash and dress).
• Home Health Aides perform three general types of services: personal care,
basic nursing and incidental homemaking. Aides cannot provide skilled
nursing care. For example, although they can take and record your
temperature, pulse and respiration rate, and make sure you follow simple
medical recommendations such as getting more exercise, they generally
cannot administer drug injections.
Health Clubs
Guys take pride in flaunting a well-toned body and girls an hourglass figure. But this
growing consciousness is not limited to looks alone. The increasing number of health and
fitness centres, aerobic classes and gymnasiums are a proof enough to understand the
increasing level of health awareness among people. “There has been a tremendous
increase in health awareness.
In these days of stress and irregular lifestyles, even minor ailments might take a
serious turn if ignored at the right time. Exercises become a precautionary step. It is an
extension of medical help,” says Dr Siddhartha Shah of Bodyline health club. Shah gave
up his full-time medical practice in order to promote the idea of a healthy lifestyle which
he does through his club where apart from his guidance and personal advices, his clients
also get facilities like steam bath, yoga, aerobics, weight loss and weight gain
management and of course the modern equipment.
“We want to help people plan a healthy lifestyle and revert back to life,” he says.
But such a mission remains futile unless you have an equally enthusiastic group of people
who believe in the age old adage of ‘health is wealth’. “Who wants to look and feel like a
40-year-old at the age of 23? I want to respect my body while its functional so that I don’t
face any problems in the future,” says Sumit Kashyap, an engineering student. There are
many more like Kashyap who believe in regular work-outs more for the fitness part rather
than the fad.Transcription, but would be more for processes like medical billing, claim
processing, disease coding and forms processing which easily gives returns of USD 16-
18 per person per hour, much higher than the billing rates in other BPO verticals.
According to a Frost and Sullivan Study, the Indian medical hardware market
(equipment and devices) is estimated at Rs 65.32 billion in 2001, growing at 12 per cent
per annum, which is almost double the market size in 1993.
With India becoming a healthcare destination, the Health Tourism Industry, stands
at Rs 1200-1500 crores and growing at a rate of 30 per cent annually, it is bound to grow
at a more faster rate. Lower production costs and skilled workforce have attracted
multinationals to set up R & D and production centres in India. In the long run these
R&D centres will help develop low-cost medicines for the Indian market. The Astra-
Zeneca centre in Bangalore is a testament to this.
Bindi Pathak, a young student, already knows that regular exercise is a key to
healthy living. Pathak says, “Initially, I went to a gym in order to get rid of the excess fat
but there are other benefits also. It provides you with a regular lifestyle and a healthy
routine which has long term benefits.” Though youngsters form the biggest chunk of the
gym-goers yet they are not the only ones. “Though for the past few months we have
closed the SOI gymnasium yet the inquiries are keep coming without any age or sex bar.
This clearly shows how conscious people have become. This is indeed a very positive
trend,” says Sonali Shah of SOI beauty clinic. Mitul Mistry, the health club manager at
Ellisbridge Gymkhana says, “Most people come to me with problems like diabetes, blood
pressure and weight loss. There is a different exercise routine for everybody. We plan
routines only after testing endurance power, muscle strength and flexibility. On an
average we have 100 to 120 people coming in everyday.” The decision is yours. “Be a
saath saal ke bhude or saath saal saath saal ke jawaan
Medical Tourism
India’s super specialty hospitals have earned their reputation as world-class institutions,
with the state-of –the art technology, yet prices that are attractively low in comparison
with the West. As a result, there has been a rapid growth in international patients from the
Middle East and the Far East, as well as Europe, visiting India for medical treatment for
cardiac and other major surgery. While this saves insurance companies claim related
costs, it also reduces waiting times for patients by providing options to use approved
medical facilities outside their own country. Some hospitals are gearing up for the
international market and are obtaining accreditation under international hospital standards
and referral arrangements with global insurance companies.
India offers a cost-competitive base (70-75% lower costs) for carrying out clinical
trials for new drugs. The recent amendments in the Drugs Act have made regulations
easier for foreign companies to carry out their clinical trials in India, simultaneously with
other countries, for new drugs and formulations to be introduced in the world market.
Business Process Outsourcing
US regulations necessitate maintenance of hospital records involving the
extensive use of IT. Transcriptions, patient records and claims processing are increasingly
being outsourced to other countries including India, and the market opportunity is
projected to be Euro 45 billion by 2006.Opportunities are interesting for companies
willing to pass HIPAA (Health Insurance Portability and Accountability Act of 1996)
accreditation norms of the US and similar norms in other countries.
The MBPO (medical business process outsourcing) will be the next boom the Indian
knowledge economy will witness as it has massive potential for outsourcing within the
US healthcare industry. This time outsourcing won’t be the once fashionable and now
dead medical.
Hospitals and Healthcare Centers:
As mentioned before Hospitals and Healthcare centers have the most direct contact with
their customers while serving them. This contact is both physical as well as mental;
hence even the ratio of customer’s dissatisfaction here is very high.
For instance if a patient who is in urgent need of operation or accommodation is asked to
fill out a thousand forms is highly dissatisfied for the lack of service when most needed.
He is obviously would fell like complaining and if valid also get a compensation for the
service failure occurred.
Similarly a customer in a health care center needs some body part or skin, modification
urgently, is asked to make a hundred phone calls to the center, obviously is dissatisfied
and need an answer from that center for the service failure.
Because of such service failures customers complaint and they complain to get fairness
i.e. compensation for the time, money and energy lost due to the service failure.
They complaint to
a. to obtain Compensation
b. Vent their anger
c. Help improve the Service
d. To prevent other customers from undergoing the same service failure.
It is also known that customers with higher socio-economic strata i.e. higher income
or education trend to complain more than the other counter parts. Therefore the
chances of complaints in private hospitals is much higher than in Government
hospitals due to which private hospitals need to have a complaint handling
department to cater to the complaints. They should have better complaining facilities
e.g. A Receptionist to listen to the complaints of customers and to solve more
complaint ballot boxes or have complaint operating phone lines so as to help the firm.
They should have a department to resolve these complaints quickly and in fairness.
Even Healthcare centers like Kaya skin Clinic should have a Receptionist, Phone,
Website etc. so as to know the customer complaints and to solve them. If these
private health centers do not satisfy their customers quickly then they ten to loose
them to the competitors.
Whenever customer complains Hospitals etc. should take care of:
1. Outcome Justice: to the compensation that a customer receives as a result of
service failure. E.g. If a patient is not catered, the first time to assure the same and
offer some discount.
2. Procedural Justice has to do with the policies and rules that any customer
Will have to go through in order to seek fairness.
E.g. patients should be asked to fill minimum number of forms when getting
a refund in Hospitals or Healthcare centers
3. Inter-actual Justice: Involves the firms employees who interact with the customer
for service recovery
Employees should all the time be polite and encourage complaints, so that the
customers feel that they are heard.
These customers should not be taken for a ride when they complaint for in places like
Wockhart hospital, Lilavati hospital, Hinduja hospital etc., where high profile people
come expecting high quality service. Whenever they are disappointed, they should be
encouraged to complain and seen to that their complaints are dealt with swiftly. The
procedures they undergo to recover the loss should be minimal. Compensation
offered should be fair and be treated with at most respect. Preserve the complaint
documents for future reference. Lean from the mistakes made and not to repeat them.
A Passage to Indian Health Care

We know that it is routine for x-rays and many diagnostic tests to be interpreted
overnight by medical professionals in India. In a fairly new development, though, it's not
just the tests that are headed off to the subcontinent for diagnosis, but the patients
themselves -- and they're going in droves.
Medical tourism to India started fairly recently when NRIs (non-resident Indians
-- those living and working in the West) began to go "home" to India seeking not just
their roots, but root canals. They returned with killer smiles and tales of the staggering
savings in costs -- even factoring in airfares -- and excellence of treatment. NRIs, aware
from their families of India's state-of-the-art technology and the level of surgical skill,
also head off "home" for more critical treatment, like kidney transplants, hip
replacements and open heart surgery. Indeed, India's 20 million diaspora returning to the
US and Britain after successful treatment are India's best ambassadors.
Britons plagued by their socialist and inefficient National Health Service waiting
lists (people diagnosed with cancer or degenerative heart disease can wait for an
operation for a year or even more) and Americans who didn't keep up their health
insurance after retiring -- or never had any -- are now choosing their hospitals and
surgeons on the internet and booking their flights to India. And to make it even easier,
there are medical tourism companies in India who will take care of all these details for
them.
Now, some enterprising hospitals offer greet-and-treat services with an all-
inclusive health-tourist package, including the desired medical procedure, hotel, air
travel, bookings and admissions to popular tourist attractions. And India has the
overwhelming advantage being Anglophone.
A full cycle of IVF treatment followed by a bracing vacation amid the majesty of
the Himalayas! Or get your mouth completely redesigned, your teeth recapped by a
dentist employing the latest technology and pop over to the exotic pink city of Jaipur in
Rajasthan to practice your new smile … all at a fraction of the cost of the medical
procedure alone in the West.
If you need more serious treatment, you can have your kidney transplant or spinal
surgery in a hospital that is as hygienic and well-equipped as most hospitals in the West --
and a good deal better than some. Hip replacement recuperation may not include a hike to
the base camp of Mount Anapurna, but you'll be well attended by skillful and qualified
people and you'll return home with the same results you would have achieved in the West
for around a quarter of the cost - or sometimes much less.
What kind of cost savings are we talking about? A fairly dependable rule of thumb
is, if you're an uninsured American, you'll have paid approximately 25 percent, or less, of
the cost you'd have forked out for identical treatment in the US. If you're British, you'll
have avoided a National Health waiting list that may have kept you in line for two years.
Of course, many British nationals with urgent health problems are opting for private
treatment, but it is pricey. Again, costs in India for identical procedures are roughly 25
percent of private treatment in Britain. Some procedures in India cost as little as one-
tenth what they cost in the West.
Access to open heart surgery in India is immediate, and it will cost, without
complications, around $10,000 - against around $50,000 in America or privately in
Britain. A biopsy for a brain tumor will cost around $1,000 and surgery around $6,000.
Hip replacements using the newest techniques cost in the neighborhood of $6,500, with
no waiting lists. There are hospitals specializing in nothing but spinal and joint surgery.
Kidney treatment runs around $45 per dialysis using technology identical to that
in the West, against $300 or more per dialysis in the US. A full range of sophisticated
kidney treatment is available at specialized kidney clinics. A kidney transplant will cost
around $7,000.
Regarding above-mentioned IVF treatment, Dr. Hrishikesh Pai, an infertility
specialist, notes, "Our technology is only about six months behind that of the West." (Or
perhaps not; there may have been no substantial new developments in six months or a
year.) An in vitro fertilization cycle in a reputable Indian fertility clinic with highly
qualified specialists will cost the visitor around $1,200 with the same treatment in the US
costing $6,000 per cycle.
Medical tourism is set to become an important contributor to India's economy and
is predicted to earn $2 billion in foreign revenues by the year 2012. After that, I suspect it
will be Katy-bar-the-door as people become more frequently exposed to friends and
colleagues who've been treated to their satisfaction in India.
Most British and Americans are accustomed, anyway, to being treated by
expatriate Indian doctors. And now, even the South Americans are finding it more
economical to have their cosmetic surgery done in India than at home. Most big Indian
cities have several hospitals that are on the A list by any reckoning. Even Hyderabad, a
big city, but not one of India's famous tourist destinations, has around 10 world class
hospitals. The BBC notes, about a hospital visit in Bombay, "Walking in from the frenetic
streets of Bombay, the Hinduja hospital is certainly a surprise. Its spotless corridors and
state-of-the-art equipment could be those of the best hospitals in London or New York."
Even England's cranky, leftwing Guardian newspaper has reported on India's
success as an alternative to dying-while-u-wait on the British National Health. It cites 73-
year-old George Marshall, a violin repairer who was diagnosed with coronary disease and
told he would have a six month wait for an operation. He considered private treatment,
but it would have cost £19,000 (approx. $35,000). Instead, he flew to Bangalore, "where
surgeons at a specialist hospital and heart institute took a piece of vein from his arm to
repair the thinning arteries of his heart." The cost was $9,000, including the flight.
Marshall said he would not hesitate to come back.
From the US, 64-year-old San Francisco real estate consultant Robert Walter
Beeney, who had been unable to walk due to a stiff hip, underwent a successful hip
replacement surgery using an anatomic surface replacement at an Apollo hospital.
Despite the fact that the device used was manufactured in the US, its use hadn't yet been
cleared by the FDA. Beeney had considered going to Britain or Belgium for treatment,
where it had been cleared for use, but the costs were too high. The cost for this advanced
treatment was $6,600. Had he been in a clinical trial for the not-yet-approved procedure,
he would have paid $24,000.
Zakariah Ahmed, an analyst who helped compile a report for the Confederation of
Indian Industry and McKinsey Consultants, says last year some 150,000 foreigners
visited India for treatment, with the number rising by 15 percent a year.
The Indians are very aware that the infrastructure of some of their larger cities
does not inspire technological or hygienic confidence -- despite the fact that inside a
modern hospital is a million miles from the chaos on the sidewalks outside. As The
Hindu, one of India's major daily papers, notes, writing from Chennai (Madras) "A task
force comprising representatives from the Health and Tourism Ministries and the
Confederation of Indian Industry is accrediting hospitals and spas, which will figure on
India's health tourism map", the Union Minister of State for Tourism, Renuka Chowdhury
said today. He added, "The accredited hospitals and spas would be rated on quality to
ensure that patients from other countries had a reliable system to put their money in."
E.M.Najeeb, writing in India's travel business magazine, makes similar points.
And Dr D. Premachandra Sagar, vice-chairman and CEO of Bangalore's Sagar Apollo
Hospital, told India Daily that "there is not one medical procedure that cannot be done in
our hospital which is done abroad. And the success rate of cardiac bypasses is of 98.7%
in India, as opposed to only 97.5% in the United States." Yet, he admitted that India's
image as a high tech health destination needs more public relations work.
The implications are mind-boggling. Already, it is being suggested in Britain that
the National Health Service send patients to India for cataract and hip-replacement
surgeries. Again, it is possible that once this catches on, which is happening at the speed
of light, insurance giants in the West will soon funnel patients to India for, say, bypass
operations or organ transplants. A sign of both quality and acceptance is the fact that
already, Blue Cross and Blue Shield will insure patients treated at some groups of Indian
hospitals. The British health insurer BUPA also insures treatment at the same chain.
Finally, I quote a letter in London's The Telegraph from a prominent consulting
surgeon commenting on the National Health Service's inevitable vulnerability to political
opportunism (the Labour government wants to reduce the time taken to train a surgeon to
just four years). He closed with, "For my part, if I need major surgery in the future, I will
go to India, whence many of my best trainees have qualified and returned."
Health Modernity in Tribals of South Bihar*

On a stratified random sample eight hundred rural tribal males and females the Health
Modernity Scale was administered to measure scientifically correct information, attitudes
and behaviour in relation to physical and mental health, diet and nutrition, family
planning, child care and breast feeding and health habits. The extent of health modernity
on these dimensions varied from zero to two percent. The near-absence of health
modernity was due to poverty and illiteracy and it reflected in unhygienic living
conditions, faulty food habits, high prevalence of diseases and disabilities and
malnutrition in children under five years.
Popular Usages of Modernity
In popular usages the word 'modernity' is used to describe latest scientific discoveries and
innovations as well as current fashions. It indicates something new and contemporary as
against Indian. It also refers to the levels of industrialisation, urbanisation and education.
The usages of modernity cover many aspects of life and society from dress and food to
social and political institutions. The popular usages of modernity are generally concern
with the external aspects of society and person. The urban metropolis with sky-scrapers
and neon lamps are considered ipso facto to be modern. Jeans are modern while
dhoti/saree is not; cake is modern while sewai is not. The disco-swinging, bobbed hair,
jean-clad girl is considered to be the ultimate symbol of modernity. Needless to say, that
this is a trivial and even perverse description of modernity, but nonetheless this forms the
mental image of any persons.
Social Science Usages of Modernity
However, in social sciences the term modernity has heels used to describe the inner
qualities of the individual. Modernity refers to the psychological predispositions of the
individual consisting of his attitudes, values and motivations. It is the psychological
prerequisite for social, political and economic development. The concept of modernity
includes such traits as rationality, internal locus of control, openness to new experience,
equality of sexes, social equality, respect for opinion- variations and work-ethics.
Democratic institutions fail in the absence of democratic personalities and attitudes.
Economic developments is obstructed by non-economic factors of unproductive social
customs, feudal inter-personal relations and indifferent work-ethics. The individual is the
architect of society and society is what the individuals make of it. The psychological
qualities constituting the concept of modernity transcend time, place and culture. The
external appearances may be misleading and deceptive. The Arab Sheikh with his air-
conditioned car may have feudal attitude. The Chinese leaders with latest military
equipments have proved to be inhuman and brutal in suppressing the pro-democracy
demand of the students. Gandhi, with his old watch tucked in his loin cloth, was more
modern in having time-punctuality than most of the Indian politicians today with
imported electronic watches.
Definition of Health Modernity
The concept of health modernity has been defined as,
'Scientifically correct information, attitudes and behaviour in relation to physical and
mental health, diet and nutrition, family planning and child-care including breast feeding,
personal hygiene and environmental sanitation and such other issues which are essential
pre-requisites for healthy living and, therefore, for human and social development.'
Health Modernity Scale (HMS)

The Health Modernity Scale measures seven dimensions, namely Physical Health (MH),
Diet and Nutrition (DN), Family Planning (FP), Child Care (CC), Breast Feeding (BF),
and Health Habits (HH). There are ten items in each of the seven Dimensional Scales and
they have been coded to have a range of 0 to 50 each; the higher scores indicating higher
modernity.
The Aims of the Present Study
The present study aims to find out the extent of health modernity in the rural tribal
Population of Chotanagpur and Santal Parganas in South Bihar and to identify the areas
of ignorance and misconceptions in the seven dimensions of health modernity.
The Tribal Population in Bihar and India
The tribal constitute about 7.53 per cent of the total Indian Population. Bihar, with it’s
5,810,867 tribals, accounts for 11.26%, of the total tribal population in India and 8.31%
of the total general population in Bihar. The tribals in Bihar are mainly concern in
Chotanagpur and Santal Pargana. The districts of Ranchi (56.41%), Singhbhum (44%),
and Santal Pargana (36.8%) have large tribal population. The tribals in India and in Bihar
are overwhelmingly rural, illiterate and poor. The tribals are more backward than even the
scheduled castes in literacy, income and nutrition.
Sample Design
The sample consisted of 800 cases selected on stratified random basis. The stratification
involved a factorial design of 4 (age) X 2 (sex) X 2 (place of residence). The cases were
selected from villages in Jamtara and Narainpur blocks of Dumka district in Santal
Pargana and Kanke and Namkum blocks of Ranchi district in Chotanagpur.
Characteristics of the Sample
Majority of the sample (83%) were illiterate and Poor, with 22% having no income and
71% with monthly income of upto rupees four hundred. Majority of them (72%) had
occupations with low prestige such as daily wage earners. They lived in unhygienic
conditions. Only 19% had wells, most of which were kachcha and were without any
parapet. Very few houses had a chimney for the outlet of smoke (1.25%), ventilation in
the sleeping rooms (12.5%), or sewage for waste-water disposal (4.38%). Most of them
used the fields for defection, and almost none had septic latrines. At the time of the
survey 20% of the families reported ailments of eyes and 9% reported ailments of ears.
Almost half of the children under-5 were severely malnourished as measured by the arm
circumference and another 32% were moderately malnourished.
Areas of Ignorance and Misconceptions
The areas of ignorance and misconceptions have been identified by item-wise analysis of
the seven dimensions of health modernity, The percentage in relation to each item has
been computed for four categories of responses: very low modernity (0-25%), low
modernity (26-50%), high modernity (51-75%) and very high modernity (76-100%). The
items which fall into the first two categories, that is, very low and low modernity have
been reported. On these items at least half of the sample was ignorant or had
misconceptions.
The importance of this analysis is its utility in planning intervention for improving health
modernity by focussing on items failing in the categories of very low and low modernity.
A few facts from the seven dimensions of health modernity may be highlighted.
Physical Health
i. Almost all, except 1% of the sample, had scientifically correct information about
the necessity of diet and nutrition during illness. Almost all (99%) believed that
better to fast during illness because the patient did not have the power to digest.
ii. Majority (87%) had fatalistic attitudes towards illness and believed that life and
death depended on God and medical treatment could do nothing.
iii. Majority (79%) had superstitious beliefs regarding prevention of illness and
though that diseases could be avoided by pacifying the planets by prayers.
iv. Majority (84%) had negative attitudes towards health services and felt that one
should keep away from hospitals unless was an emergency.
Mental hospital
An overwhelmingly large majority had misconceptions about the cause of mental illness.
They believed that mental illness was caused by:
i. loss of semen (94%)
ii. Disorder of menstruation (82%), and
iii. Evil spirits (82%)
Majority of the sample also had misconception about the treatment and prognosis
of mental illness. They believed that mental illness can be cured by:
iv. sadhu/fakir and magic (68%)
v. pilgrimage (61%), and
vi. insane person can never become a normal person (63%).
Diet and Nutrition
i. nearly the entire sample (98%) did not know that vegetables should not be cut into
small pieces as it destroyed the nutritional value.
ii. They did not know the nutritional value of pulses and green vegetables (93%).
iii. They had no knowledge of the amount of food required by a child (92%).
iv. They approved of drinking liquor at home (85%).
v. They believed in unrestrained eating (70%).
Family Planning
Lack of modernity was related to son-preference, sex-determination of the child, birth-
spacing, early marriage and contraceptives.
i. Majority believed that a son was necessary for the continuation of lineage (82%).
ii. Majority did not know that the sex of the child was completely dependent on the
semen of the father and the mother had no role in it (66%).
iii. Almost all believed that vasectomy caused impotency (94%).
iv. They also felt that condoms destroyed sexual pleasure (92%).
Breast Feeding
The ignorance and misconceptions were related to, age of weaning. advantages of breast-
feeding and the first breast-milk after child birth:
i. Overwhelming majority did not know about the importance of supplementary
food (95%).
ii. They were ignorant about the advantages of the first breast milk after child birth
(70%).
iii. They did not know the contraceptive value of breast-feeding (63%)
iv. They believed that breast-feeding during illness was harmful to the child (73%).
Child Care
The lack of modernity in the area of Child Care was related to the understanding of
child's personality at birth, medical care during pregnancy, importance of weight for a
growing child, an information related to immunisation, dehydration and developmental
milestones. Almost the entire sample did not know that the human brain starts
developing even before birth (94%). They believed that the weight of the child was not
related to his/her health (89%). Most of the sample was ignorant about the age at which
specific immunisation should be given (93%). They were ignorant about the average
weight of a normal child from birth to 12 months (90% to 99%). Majority of the sample
was ignorant about developmental milestones and signs of dehydration. Majority
believed that fasting was the best medicine for diarrhoea (58%). They were against giving
any injection to a pregnant woman (58%).
Health Habits
The lack of modernity in health habits was related to immunisation, breast feeding, use of
birth-control methods, personal hygiene and food habits.
i. The immunisation of children varied from1% to 9%.
ii. Only 8% of children were breast-fed.
iii. 92% were not using any contraceptive.
iv. Only 9% were boiling drinking water.
v. 93% were drinking haria (rice beer).
vi. 84% were taking tabacco.
vii. Not even 1% were eating meat, fish and eggs and drinking milk.
viii. 72% did not take bath daily.
Conclusions
The present study, as other studies reported by the authors and their associated on health
modernity in tribals, has confirmed the very low extent of modernity. The present study
has also confirmed the unhygienic living conditions faulty food habits, lack of personal
hygiene and environmental sanitation, and high intake of haria (rice-beer) and tobacco.
The low level of health modernity is a consequence of their illiteracy and poverty. It is
also due to absence of health education.
EMERGING TRENDS IN MEDICARE
Of course, a number of spectacular successes have been achieved in India in

respect of medicare services. Small-pox stands eradicated and plague is no longer a
problem. Morbidity and mortality on account of malaria, cholera and various other
diseases have also declined considerably. Despite a number of constraints, we have also
been successful in devising sophisticated world class medical aid. The Crude Birth Rate
and Infant Mortality Rate have also been found showing a downward trend. At the same
time, it is important to mention that we still have the largest number of leprosy patients in
the world. Cholera is still around and often appears as an epidemic. There is a lot of talk
about AIDS but tuberculosis is greater killer than AIDS. We talk very loudly about
expanding hospitals and rural health centres but we have one doctor for 2,165 people
whereas in Italy it is only for 195. Malaria which had been eradicated or dramatically
reduced in 37 countries in the 1960s has now returned to India and the available
medicines are found ineffective. Black fever is found spreading like epidemic. Dengue
has been found aggravating the magnitude of the problem. Thus, we come to this
conclusion that Health for All (HFA) by 2000 AD was not at all a successful vision.
If we turn our eyes on hospitals and healthcare centres supposed to make

available to the society quality medical aid, it is amazing that government hospitals are
found dying and the rural health centres have virtually become nonexistent. Buildings are
there, equipments are there, patients are there but the doctors, of course, on record they
are also there but actually they are busy in their private clinics. The patients do not get
medical aid since even minor surgical items are not in the stores. The premises have a
dirty look and the environmental conditions are prone to diseases. The sweepers,
gardeners got their salaries but beautify and clean the private houses of doctors and other
officers. Thus, financial crunch and managerial deficiency have made hospitals virtually
nonexistent.
We find the situation more critical in the rural areas since poorer sections of the
society fail in getting the services of rural health centres. We consider it the most
vulnerable segment, especially with the viewpoint of viral and communicable diseases
but when hospitals in towns and cities are in a depleted condition, we can easily imagine
the potentials of rural centres. Of course, the urban population could get the benefit of
pulse polio activated under aggressive marketing strategy but a very few of the rural
population could avail the benefit. Malaria, black fever, cholera are spreading like wild
fire but the policy makers are found satisfied with the fake data.
In view of the above, it is right to observe that even on the verge of completion of
Tenth Five Year Plans (1951-2007), we have not been successful in making available to
the society even basic medical aid then what to talk of quality medicare services. The
non-existent or depleted government hospitals have engineered a strong foundation for
the development of private hospitals. The expensive inputs for world class medicare
services are used in some of the selected hospitals but the poorer sections find it difficult
to avail. To be more specific in the decades 1980s and 1990s, we have witnessed frequent
innovations and inventions in the medical sciences but the sophisticated developments
remained confined to the cities precincts only.
We cannot deny that some of us are now more conscious to physical fitness and
therefore also conscious to the living conditions, nutritional awareness naturally. But the
most vulnerable and less receptive rural segment is yet to be motivated. The policy
makers could hardly evince interest in promoting hospitals in the outskirts or villages
which raised the pressure on big cities and the environmental problems aggravated. We
could neither prevent diseases nor could make suitable arrangements for medicare. It is
right to say that a number of diseases are prone to water, sanitation and food. The
educational institutions, the municipalities, the local bodies, the corporations, the
government and private hospitals and even the voluntary social organisations failed in
inculcating mass awareness. What to talk of rural population even urban population and
surprisingly some of the so-called ultra modem urban elites have played a big role in
making the environment disease-prone.
The aforesaid facts are a mute testimony to this proposition that during the yester
decades, we have failed in improving the medicare facilities keeping pace with the
growing requirements but have been successful in making the environment unhealthy
which is found raising the pressure on both the government as well as the private
hospitals. It is against this background that we find an apparent increase in the cases of
ailments. As all the four metropolises are reeling under heavy pollution, we find the
environment prone to some of the special diseases. In Delhi 12 per cent of children in the
age group of 5 to 16 are suffering from bronchitis. In Calcutta, 10647 people suffered
premature death due to air pollution. In Mumbai, too we find the air toxic. The
concentration of lead and respirable dust in the city's air has reached dangerous levels
exceeding limits prescribed by National Ambient Air Quality Standards and the WHO. Of
course, we find Chennai in a bit advantageous position. Even small cities with big
industrial complexes like Bhopal, Kanpur are found heavily polluted and turning into gas
chambers.
In view of the prevailing conditions, we expect much more from hospitals

government or private. They are supposed to play an outstanding role. We cannot serve
others unless we are strong enough to face rough and tough weather. This necessitates
managerial proficiency. By marketing medicare services, the hospitals would only not
serve masses but would also be efficacious in inculcating mass awareness to prevent
ailments and to decrease the number of prospects. Contrary to other organisations, the
success rate of a hospital is coiled in the essence of creating mass awareness and playing
an incremental role in preventing ailments and minimising the number of prospects.
A thought for mind!!!
‘Do doctors make good hospital administrators?’

Administration ability
Hospital management professionals are of the opinion that doctors should restrict
themselves to clinical practices and leave administration to professionals.
Administration is a serious business. Casual approach will not bring the desired results.
The following points must be deliberated upon before coming to any conclusion in the
matter:
1. A doctor spends a period of nine to ten years before he is conferred the degree of
Masters in a discipline of medicine. Having spent such a long period in acquiring the
professional degree, he must be properly utilised. His utilisation will be proper as well as
optimal if he is able to concentrate on clinical matters and adds to his medical knowledge
by the experience he gains in treating the patients. He will be doing justice with both the
medical profession as well as himself.
2. The doctor may not have the necessary skills, knowledge and experience to deal with
the matters pertaining to complex management situations. Hospital management is a
serious business and the person who is at the helm of affairs must have necessary aptitude
for it. The doctor may not have the aptitude for management due to lack of training and
he may not be able to analyse the various complex situations. Also, improper handling of
situation may prove disastrous for the organisation.
3. Today, health sector is being professionalised. There is demand for trained hospital
administrators. The person equipped with the MBA degree or the degree/diploma in
hospital management will definitely be the right choice for the job. Since, they have
specialised in the science of the management, they will learn the art of management
easily. They will be career oriented, too and will work with their heart at the job. This will
benefit all. The similar may not be case with the doctor who may consider the job of
administration not as his main job and such an approach will not serve the purpose.
4. Our experience tells that doctors being appointed as administrators have not yielded
desired results. Unlike UK & USA, where management job has been entrusted to
management professionals, hospitals in India have been dependent on doctors only. This
has been a major roadblock in improving the efficiency and productivity of healthcare
sector. The changes are being introduced but the resistance to change is also there.
Healthcare sector has not responded to the liberalisation policy of the Government to the
extent it should.
5. Unlike other streams of knowledge, medical fraternity has not understood the
importance of management. Their response to the MBA curriculum is not so favourable.
The ’B.Tech + MBA’ combination has become the order of the day and the engineering
sector, therefore, does not have dearth of techno -management talent. But the same is not
the case with healthcare sector. The ’MBBS + MBA’ combination is not so popular. It
shows the lack of management aptitude on part of the medicos. If it is the case, how can
they be good management professionals?
So, keeping in mind the ground realities, it will be proper if qualified health professionals
are encouraged to come forward and take responsibility to run the affairs of the hospital.
6. To manage the healthcare delivery system in the countries like India, we need trained
hospital administrators in good number. Doctors must not be encouraged for the job
because it will add unfavourably to ’doctor - patient ratio’ which is already very low.
Also, by employing doctors as administrators, we shall not be doing justice with anyone -
organisation, doctor and patient.
Keeping in mind what is aforesaid, let us not argue whether doctors can make good
hospital administrators or not. They may or may not. But entrusting doctors two jobs at a
time clinical and administration is similar to standing with one leg on one boat and the
other on the second boat. Such a situation does not bring results but creates instability in
the system, breeds in-efficiency and lowers productivity of the organisation. Now let us
conclude by answering the question Is the doctor best choice for the administration. The
answer should be ’No’. Then, do we have better alternative?
Yes, we have. Ninety percent of the job of hospital administration does not require
medical knowledge. It is application of management knowledge pertaining to basic
functions of management. However, ten percent of his job may have to say with medical
matters and necessary training can be imparted for the same. So, there is no need for
doctors to occupy the position of administrators for the simple reason that ’right person in
right job theory’ is violated. He can be best utilisied for clinical matters for the reasons
which do not require any explanation. The graduates with post-graduate diploma/degree
in personnel management/HRD/ Hospital administration/Healthcare Management/
Psychology are better choices and they must be encouraged to take the lead and handle
the affairs of a hospital.
FAVOURS:
I strongly feel that Doctors TRAINED in management will make good administrators as
they have a long background of having worked in hospital environment.
Its just like a engineer turned IIM graduate will make good CEO in his/her respective
field. The major advantage doctors have is that they are better suited to deal with
doctors/technicians and even dealing with patients as they understand the field realities
better than non-doctors.
The respect one gains a ‘Physician administrator’ is immeasurable, when compared to a

non-medical administrator.
it is easier for a doctor to command respect from his own colleagues and the rest of the
medical community which, may not be possible for a non-medico to do.
1. A comparative analysis of some of the major traditional characteristics of

differences between a doctor as a hospital administrator and a non-medical
hospital administrator as below provides an insight into the overall hospital
administration attributes.
2. A doctor administrator is autonomous and makes decisions alone, where as a non-
medical administrator, has to use team work and is also probably involved in line
reporting.
3. A doctor administrator works one-to-one where as non-medical hospital
administrator works primarily in groups.
4. A doctor administrator is totally patient oriented which is of primary importance
in a hospital administration, where as a non-medical administrator is organisation
oriented.
5. A doctor administrator is empathetic, where as the non-medical administrator a
long range planner, and the management of crisis is one of the most important
aspects in a hospital functioning and patient care management.
6. A doctor administrator is quality oriented where as a non-medical administrator is
cost oriented.
7. A doctor administrator is a doer; where as the non-medical administrator
delegates and gets things done through others.
8. A doctor administrator reacts, a non-medical administrator pro acts.
9. A doctor administrator is a classical scientist; a non-medical administrator is a
social scientist.
10. A doctor administrator is discipline oriented, a non-medical administrator is more
a socially oriented.
The success of the organisation/hospital functioning requires effective decision making in

an environment of synergism between both the medical and the non-medical management
components of the institution/hospital.
On economic front, getting control over the hospital expenditure is difficult to be
accomplished without the treating doctors’ involvement. The good will of the public will
be served by a blending of clinical practice, patient care and smooth management
concerns.
As a manager/administrator, the doctor has some unique attributes, skills and experience
to offer. Medical administrators have demonstrated their ability to function in all types of
positions and at all levels of organization. The pioneer of corporate sector hospitals in
India.
AGAINST:
• Hospital is one of the examples of complex structured organizations amongst all

industries at present. The scenario was entirely different about 20-25 years ago.
Because of IT revolution, consumerism and specialization in different fields,
hospital as an organization has got a new dimension.
• All of us have observed that what a dramatic, revolutionary change has taken
place after the opening of first corporate hospital in our country, i.e. Apollo
hospitals by Dr P C Reddy. More and more private hospitals are coming up in all
the cities of India. Why? Is it indicating the insufficient infrastructure of
government hospitals?
• We can’t blame those health administrators entirely for this situation, because we
can see the outlay of our finance, we can study our fiscal policy where we can
see the percentage of GDP ALLOTMENT FOR HEALTHCARE INDUSTRY;
and compare the same with the outlay for nuclear weapon.
• The field of hospital administration is growing up very fast. The question may
arise who should be trained in that field? Definitely we can’t say it is only the
doctor or some other class of population. But if a doctor becomes administrator
his approach sometimes may be narrow because of his inclination towards
medicine.
• On the other side we see, being a professionally trained person in medicine, a

doctor is not fully utilised in his profession if he is in administration. When there
is a lack of healthcare specialists in the country, why should we misuse doctors,
one of our valuable resources by involving them in administration?
It will be one of the example like selection of engineering graduates of top
colleges for the bureaucratic post in our administration.
• For this reason it is advisable to recruit /hire people from the specialised
professional group for the administrative job in the healthcare sector for the
proper utilisation of human resources. Moreover, manpower, finance, materials,
etc. are not simple terms in this sector now a days , these are all playing a vital
role in this era of competition where competence is the key word.
This is the reason why the Apollo Institute of Hospital Administration has a
specialised Master’s level course in hospital management spanning two and a
half years, recognised by All India Council of Technical Education: it involves
study of 23 subjects including finance, accounts, health economics, and human
resource management among others. A six-month internship in any Indian
hospital is also part of the study program.
• On the other hand, a large number of management cadres’ feel that doctors largely
are not able to handle the non-medical side of hospital administration. Basically,
there are two sets of hospital administrators emerging these days one group
comprises the medicos who have branched out into hospital administration after
completing their medical education. The other group comprises the non-medicos
who choose to specialise in hospital administration. It is the latter group that is
better able to handle issues such as HR, marketing and other peripheral aspects of
the healthcare business. So, in my opinion, it would always be better to choose a
non-medical person as the administrator of any hospital.
VISIT TO PAARTH HOSPITAL

We visited Paarth Hospital opposite to swimming Kandivali West; this was very
useful as the people there were very helpful they provided us with information, which
helped us to understand the subject of Service Sector Marketing much better. The doctors
themselves they have not hired any professionals as they work on a small base manage
their hospital.
Though it is a small hospital it has many doctors such as Gynec etc. The
information given by them helped us to prepare blue print, as we were able to know the
process better. They also helped in other areas of working. They also outsource certain
laboratory test and other reports, as they do not have such good infrastructure.
The hospital is on one floor with facilities for all kinds of operation they have a
big waiting room to make it convenient for the patients to wait with their family
members. In the waiting room they also have books and magazines on different subjects
and also awareness pamphlets so in order to make it as a facility for the customers.
They do not have any marketing strategies and neither do they spend on
advertisements they basically work on word of mouth of customers. But they take part in
medical camps so as to be active and in action in the medical scenario.
Thus the visit to the hospital is quiet useful and the employees there are quiet
helpful. We are really thankful for the time and help they gave us.

ARTICLE:

Hospital and Health care

services

By: Kripa Kalro
11/2/2009

TYBMS - SEM V - SSM
Compiled by Kripa Kalro
SECTOR 1: HOSPITAL AND HEALTHCARE

SERVICES
CHAPTER CONTENTS:
 4 Characteristics
 Innovations
 Technology
 Segmentation
 Classification of hospitals
 8 P`s
 PEST Analysis
 Additional matter
INTRODUCTION:
Healthcare industry is a wide and intensive form of services which are related to well being of
human beings. Health care is the social sector and it is provided at State level with the help of
Central Government. Health care industry covers hospitals, health insurances, medical software,
health equipments and pharmacy in it. Right from the time of Ramayana and Mahabharata, health
care was there but with time, Health care sector has changed substantially. With improvement in
Medical Science and technology it has gone through considerable change and improved a lot.
The major inputs of health care industries are as listed below:
I. Hospitals
II. Medical insurance
III. Medical software
IV. Health equipments
Health care service is the combination of tangible and intangible aspect with the intangible aspect
dominating the tangible aspect. In fact it can be said to be completely intangible, in that, the services
(consultancy) offered by the doctor are completely intangible. The tangible things could include the
bed, the décor, etc. Efforts made by hospitals to tangiblize the service offering would be discussed in
details in the unique characteristics part of the report.
4 CHARACTERISTICS OF HOSPITAL INDUSTRY
1) Intangibility: Health care services being highly intangible, to beat this intangibility the irony of
modern marketing takes place such as use of more tangible features to make things real and
believable.
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Ways to overcome this drawback:
Visualization: The industry has to make available visualization so that, search and experience
qualities are crystallized.
E.g. Press releases, distribution of brochures and leaflets, newsletters, digital marketing and media
campaigning.
Physical representations: To overcome these more tangible features such as logos, colors are
needed to be used.
E.g. Apollo hospital logo – A lady with a torch
Documentation: Quality assurance certificates by service institutions and publishing of annual

reports, balance sheets, publishing of customer satisfaction index and ranking numerations.
2) Inconsistency: Quality of service offered differs from one extreme to another. This is because of
total dependence on human interactivity or playing human nature, i.e. because human beings can
never mechanize or replicate themselves.

Training: A scheduled Training of the employees in respect of the work/service can prove to be the
best solution to this drawback.
E.g. American Medical Association makes it mandatory for its member doctors to undergo 6 weeks
of training every year or 6 month of training every 6 years.
Automation: The service providers analyze that, human quality deteriorates with repetition of work;
this has an ill effect during the final delivery of the service.
E.g. Automatic blood testing equipments ensuring safety and accuracy
3) Inseparability: Service transaction becomes unique because it mandates, during transaction, the
physical presence of the provider and the consumer.

Training: This is the best way out for the setback. As the provider of one service can not be made
available at two different places at the same time if the situation demands so, unlike, in the case of
products where the producer of the same need not be present at all times where the transaction takes
place.
E.g. Wockhardt & Duncans Gleneagles International as set up a dedicated teaching centre for
paramedics, particularly, nurses and also provide higher-end courses for doctors.
4) Perishability: Services are intangible, they cannot be packed & neither can be stored nor can they
be inventoried. The implication is that the service has to be produced and consumed instantly; there
is no scope of storage.
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Managing demand & supply: That is to say that, there has to be provision for all sorts of
stipulations at all times to the greatest possible extent.
E.g. Service developments according to market needs.
INNOVATIONS IN HOSPITAL INDUSTRY

• Auto check-in and check out
• Specialty hospitals
• Aromatherapy at Apollo.
• Biventricular pacing.
• Bone bank at AIIMS.
• Hospital administration.
• Medical records management.
• Oxygen under pressure treatment at Apollo.
• Waste management.
• Telemedicine.
• Virtual Hospitals
TECHNOLOGIES IN HOSPITAL INDUSTRY

• Same day OPD
• Online reports
• Imaging/ MRI Scan
• Key Hole Surgery
• Medical transcription
• Biotechnology
• Nanotechnology
• SST: Self checking Machines/ equipments
MARKET SEGMENTATION FOR HOSPITALS
A market is composed of different users having different responses to market offerings. This makes
it essential that hospital organizations, especially for making a microscopic study of users’ needs and
requirement, make possible grouping of markets. The marketing strategy formulated on the basis for
segmenting the market is income. To some extent regional considerations may also be adopted as a
base for segmenting the market. The below is the segmentation on the basis of regional
consideration:
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Regional Segmentation
Rural Users Urban Users
 Educated  Educated
 Illiterate  Illiterate
 Poor  Poor
 Rich  Rich
The aforesaid segmentation makes it clear that doctors would find a variation in the living habits of
both the segments.
Another important base for segmenting hospital services may be income group. This helps hospital
organisations in identifying the status of the users of services. It is essential as the marketing
principles recommend different pricing strategies on the basis of level of income.
Segment
No- Income Low - Income Middle- Income High -Income
This would help hospital organisations in charging more from high and middle income groups,
charging equal to cost from the low income group and making available free services to the no –
income group. Another important advantage of this segmentation is concerned with implementation
of modernization and expansion plan for the hospitals.
CLASSIFICATION OF HOSPITALS
The classification of Hospitals on the basis of objective, ownership, path and size.
1) On the basis of the OBJECTIVE there are three types:
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• Teaching cum research for developing medicines and promoting research to improve
the quality of medical aid.
• General hospital for treating general ailments.
• Special hospitals for specialized services in one or few selected areas.
2) On the basis of the OWNERSHIP, there are four types:

• Government hospital, which is owned, managed and controlled by government
• Semi-government hospital, which is partially shared by the government.
• Voluntary organisations also run hospitals.
• Charitable trusts also run hospitals.
3) On the basis of PATH OF TREATMENT, there are:

• Allopath which is the system promoted under the English system.
• Ayurved, which is based on the Indian system where herbals are used for preparing
medicines.
• Unani
• Homeopath
• Others
4) On the basis of the SIZE, there are:

• Teaching hospitals – generally have 500 beds, which can be adjusted in tune with
number of students.
• District hospital – generally have 200 beds, which can be raised to 300 in contingencies.
• Taluka hospital – generally have 50 beds that can be raised to 100 depending on the
requirement.
• Primary health centers – generally have 6 beds, which can be raised to 10.
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ISM/ 8 P`s WITH REFERENCE TO HOSPITAL
I. PRODUCT
The main product in a hospital maybe any of the following:
 Medical Services
 Medical Training
 Medical Education
 Medical Research
The main products of hospitals are medical services. The services rendered by hospitals or public
health centers occupy a place of significance, especially while designing the product mix. In addition
to medical care, some hospitals also impart education; training and research facilities and some
hospitals also educate and train paramedical officers, nurses and other technical staff. It is thus clear
that the nature of the hospital governs the designing of product mix
Medical services can further be classified as follows:

 Emergency
 Out-Patient
 In-Patient
 Intensive Care
 Operation
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SUPPORTIVE SERVICES
To enrich the hospital services certain supportive services are found to be important e.g. sterilization,
supply and maintenance of instruments, materials and garments etc. The catering department
comprises the kitchen, bulk food stores and dining rooms and supplies meals in the hospital. Heated
trolleys have to be used to transport meals to patients. Pharmaceutical services also occupy a
significant place as they influence the treatment programme of a hospital. An official laundry is
essential to provide bacteria free garments and clothes. The patients need to be provided with
disinfected and clean linen. The laboratories need to be properly manned and proper diagnosis needs
to be given by them to enable right medical prescription. The establishment of laboratories should be
between the OPD and indoors so that both areas are covered without delay or disruption. Clinical
pathology, blood bank and pathological anatomy are important areas to streamline functional
management of hospital laboratories. The radiology department should have hi-tech facilities
keeping in mind patient load of the hospital. Currently ultrasound scanning and CAT scanning have
been found significant in improving services of the radiology department. The nursing services are
also important among supporting services. Nursing services are managed by a matron who is assisted
by a sister-in –charge. The norms accepted by the Indian Nursing Council should be followed. An
ideal nurse-patient ratio is 1:5 which is hardly found in Indian hospitals.
AUXILIARY SERVICES
Auxiliary services consist of registration and indoors case records, stores management, transportation
management, mortuary arrangement, dietary services, engineering and maintenance service etc. It is
important that these services are maintained properly which would govern the successful operation
of a particular department. The security arrangements, supplies, transport facilities etc cannot be
ignored. For a hospital registration is a must as it helps in collecting statistics for a hospital e.g.
admission, discharge and average stay of patients in the hospital. The central store issues bulk items.
There are different types of stores like pharmacy stores, chemical stores, linen stores, glassware
stores, surgical stores etc. For carriage of supplies and patients trolleys, wheelchairs and stretchers
are used. The hospital also needs a cold storage or mortuary for preservation of dead bodies till they
are claimed by relatives or for post-mortem. The dietics department plays a vital role as it provides
the hospital menu to meet the needs of patients. The services of well-qualified and trained dieticians
help in providing nutritious diets. The engineering and maintenance services are concerned with
hospital building, furniture and other equipment. A security force is essential to provide protection to
the hospital property. Personnel related with defense or police should be given preference while
appointing the security force.
Thus the line services, supportive services and auxiliary services are mainly concerned with
Medicare facilities available in a hospital. The designing of product mix is meant to make suitable
arrangements for improving the level of services in all concerned areas and in this context the
medical education, training and research services play a significant part.
Other Auxiliary services provided by some hospitals include
 Rehabilitation center
 Physio therapy
 Occupational Therapy: Occupational therapy trains individuals on activities of daily living
which will allow them to return home after getting cured from long drawn diseases
 Speech Therapy:
 De-addiction & mental health:
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TYBMS - SEM V - SSM
 Volunteer services: A few examples of areas volunteers can work include:
 Community Education
 Emergency Department
 Environmental Services
 Information Desks
 Marketing and Community Relations
 Medical Records
 Nutritional Services
 Patient Care
MEDICAL EDUCATION: TRAINING AND RESEARCH

The teaching hospitals are mainly engaged in offering medical education facilities. Research and
training facilities are also made available in these hospitals where patients are used as inputs for
teaching and research both by the teachers and by those who are taught. Medical institutes and
medical colleges both offer education, training and research activities with one difference being that
the institutes are specialized in a particular field and colleges are generalized.
Levels of Service:
CORE PRODUCT
 Treatment of human ills
EXPECTED PRODUCT
 Infrastructure to support reasonable number of beds
 Operation theatres
 Equipments – like Cardio-respiratory supportive equipment
AUGMENTED PRODUCT
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TYBMS - SEM V - SSM
 Ambience:
 Central Air-conditioning
 Automation equipments (X-Ray Scanners, Printers, Photo Scanners, etc
POTENTIAL PRODUCT
 TeleMedicines & Preventive Care
Service Flower
II. PRICE
Price is one of the most prominent

elements in the marketing mix. Price charged must be acceptable to the target customer and it
should co-ordinate with other elements of the marketing mix. Price charged by the hospitals
usually depends on treatment prescribed by the respective consultants and the facilities offered to
the patients. As the service is intangible it is very hard for determining the price of the particular
service rendered on admission, an initial deposit will be collected at the impatient billing
counter. The amount depends on the category of room and the treatment/surgical planned.
Various category of rooms, ranging from the general ward, which attends to the need of the lower
classes to the deluxe suite, which attends to the need of the middle and the upper classes. The
prices vary from Rs. 250 for the general ward to Rs 20,000 for the deluxe suite. A hospital does
not believe in profit maximization, it aims at providing quality for its customer at a reasonable
price.
Government hospitals
fee/charge
Free for no Subsidized (for low

income group (1) income group) (2)
Discriminatory
pricing
Cost + losses Cost + surplus to
from 2 make up the losses
(Middle-income of 1 (high income
group) (3) group) (4)
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TYBMS - SEM V - SSM
1 = No income group. He/she is not in a position to earn something and so free of charge services.
2 = Low-income group. He/she earns something and so should contribute a portion of cost.
3 = middle-income group. He/she earns more than low-income group and so should make up the
losses on account of low-income group.
4 = High-income group. He/she earns more and should make up the losses on account.
Pricing methods in private hospitals

1. Cost based pricing
2. Competition based pricing
3. Demand based pricing
Differential pricing also takes place:
 EXTERNALLY (BETWEEN TWO HOSPITALS) &

 INTERNALLY (WITHIN A HOSPITAL)
Externally: - Between 2 hospitals even to provide the same treatment, the prices differ. Even though
the operation to be might be the same, pricing differs due to the kind of the service provided pre-post
operation cost is associated with the kind of service you provide & so the hospital is bound to charge
the patient for it. Lilavati believes that it is not only a service organization but also a business
organization but Nanavati believes that providing health care service is a charity it provides 250 free
beds thus differentiating it. Lilavati’s location, the training provider hygiene/ ambience all is other
contributing factors.
Internally: -There is a price differentiation even between the 2 wards of the same hospitals. There is
a difference between general ward and special ward where the rooms are air-conditioned and extra
services are provided. Thus the pricing would be different even the doctors visiting/consultation
charges are different. Sometime if the patient is very poor then the doctor may wave his fees.
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III. PLACE
In hospitals, distribution of Medicare services plays a crucial role. This focuses on the
instrumentality of almost all who are found involved in making services available to the ultimate
users. In case of hospitals the location of hospital plays a very important role. The kind of services a
hospital is rendering is also very important for determining the location of the hospital.
Eg. Tata memorial hospital specializes in cancer treatment and is located at a centre place unlike
other normal hospitals, which you can find all over other places.
It can be unambiguously accepted that the medical personnel need a fair blending of two important
properties i.e. – they should be professionally sound and should have in-depth knowledge at
psychology. A particular doctor might be famous for his case handling records but he may not be
made available for all the patients because of the place factor. Now in this case the service provided,
that is the doctor may be a visiting doctor for different hospitals at different locations to beat the
place factors.
Unlike other service industries, under hospital marketing all efforts should be for making available to
the society the best possible medical aid. In a country like India, which is geographically vast and
where majority of the population lives in the rural areas, place factor for the hospitals play a very
crucial role. A typical small village / town may be having small dispensaries but they will not have
super specialty hospitals. For that they will have to be dependent on the hospitals in the urban areas.
IV. PROMOTION
Customers need to be made aware of the existence of the service provided. Promotion includes
advertising, sales promotion, personal selling & publicity.
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Hospitals generally do not undertake aggressive promotion; they rely a lot on a favorable word of
mouth. To increase the clientele, a hospital may continuously introduce different health services.
Hospitals conduct camps in rural areas to give medical check ups at a reasonable price so that they
approach the hospitals in the future. They generally advertise in the health & fitness magazines.
As hospitals spend millions of rupees in technology and infrastructure, it becomes necessary, that
they attract patients and generate funds. In order, to do the same, the hospitals follow various
marketing and brand building exercises. Some of them are listed below:
1. Many hospitals have eminent personalities from the industry in their Board of trustees. This
indirectly leads to increase in, inflow of patients, working in the companies of these Trustees.
Besides the presence of eminent personalities creates a sense of confidence in the minds of people.
2 Private hospitals can attract their shareholders by offering discounts. For example, a special
discount of 20 percent on all preventive health checks is offered to all shareholders of Apollo
Hospitals Limited.
3. Hospitals have a long-term understanding with PPO’s (Preferred Provider Organization), which
further have understanding with corporates. Any case of sickness found in the employees of these
corporates refer them to the PPO’s which further sends them to the hospital for check-ups and
treatment.
4. The success rate of crucial operations and surgeries, reflect the technological and knowledge-
based edge of the hospital over the’ competitors. Such successes are discussed in health magazines
and newspapers, which become a natural advantage for the hospital.
5. Some hospitals by means of their past track record have created a niche market for themselves.
For example, Hinduja is known for its high-quality healthcare at reasonable rates, whereas Lilavati
Hospital is known for its five star services.
6. Hospitals hold seminars and conferences relating to specific diseases, where they invite the
doctors from all round the country, for detailed discussion. This makes the hospital well known
amongst the doctors, who could in future refer complicated cases to the hospital.
7. Hospitals can also promote medical colleges. This helps them to generate extra resources in form
of fees using the same infrastructure.
12
TYBMS - SEM V - SSM
V. PEOPLE
In hospitals, the marketing mix variable people includes all the different people involved in the
service providing process (internal customers of the hospitals) which includes doctors, nurses,
supporting staff etc. The earliest and the best way of having control on the quality of people will be
by approving professionally sound doctors and other staff.
Hospital is a place where small activity undertaken can be a matter of life and death, so the people
factor is very important. One of the major classifications of hospitals is – private and government. In
the government hospital the people factor has to be specially taken care of. In Indian government
hospitals except a few almost all the hospitals and their personnel hardly find the behavioral
dimensions significant. It is against this background that even if the users get the quality medical aid
they are found dissatisfied with the rough and indecent behavior of the doctors.
VI. PHYSICAL EVIDENCE
It does play an important role in health care services, as the core benefit a customer seeks is proper
diagnosis and cure of the problem. For a local small time dispensary or hospital physical evidence
may not be of much help. In recent days some major super specialty hospitals are using physical
evidence for distinguishing itself as something unique.
Physical evidence can be in the form of smart buildings, logos, mascots etc. a smart building
infrastructure indicates that the hospital can take care of all the needs of the patient. Examples: -
1. Lilavati hospital has got a smart building, which helps, in developing in the minds of the people,
the impression that it is the safest option among the different hospitals available to the people.
2. Fortis and Apollo hospitals have a unique logo, which can be easily identified.
Three Aspects of Physical Evidence are:
13
TYBMS - SEM V - SSM
Ambient Factors: Smell in the hospital, Effect of Colors used on walls
Design Factors: Design of the rooms, plush interiors, ICU location, etc.
Social Factors: Type of Patients that come to the Hospital
VII. PROCESS
It is the way of undertaking transactions, supplying information and providing services in a way that
is acceptable to the consumers and effective to the organizations. Since service is inseparable, it is
the process through which consumers get into interaction with the service provider. Process generally
forms the different tasks that are performed by the hospital. The process factor is mainly dependent
on the size of the hospital and kind of service it is offering.
Blue print of Hospital
VIII. PRODUCTIVITY AND QUALITY
RELIABILITY Ensuring that Doctors are well trained and

experienced
ASSURANCE Trust, the number of successful treatments
TANGIBLES Gate of bldg, surrounding area, Surgery

equipments, Rooms
EMPATHY Courtesy shown by nurses, ward boys etc
RESPONSIVENESS Emergency responsiveness
PEST ANALYSIS
14
TYBMS - SEM V - SSM
1) Political Analysis:
• The government is reducing its hold on subsidies.

• There are particular pressure groups which tend to have an influence on government hospitals
• The cost of medicines also tends to affect hospitals besides affecting the pharmaceutical
industries
• Relationships between neighboring countries also affect the hospital sector
2) Economic Analysis:
• Increase in income would lead to an increase in the standard of living. Thus people’s
lifestyles changes and health is better understood. Thus there is a room for specialized
treatment, doctors, and hospitals
• Government has made loans easily available and thus people with limited means could avail
better/specialized treatment
3) Social Environment Analysis:
• Medical facilities have increased since there is more awareness of healthcare among the
population
• Certain percentages of beds have to be kept for poor people. E.g. in Bombay 20% of beds has
to be kept reserved for poor people.
• Look after the needs of local poor people.
• Open counseling and relief centers.
• Teach hygiene, sanitation among the poor masses.
• Safe disposal of hospitals wastes like used injection needles, waste blood etc. and taking due
care of environment.
• Spreading awareness about various diseases through campaigns and free medical check ups.
4) Technological Environment Analysis:
• Breakthrough innovation in the field of specialized equipment

• Communication has managed to bridge the gap between places located at long distances
• Test tube babies
• Mobility of medical services
• Mobile phones, credit cards (for payment purposes) etc have made doctors and medical facilities
easily available
ADDITIONAL MATTER
1) MAJOR CORPORATE PLAYERS
15
TYBMS - SEM V - SSM
The Apollo Group of Hospitals: The Apollo group is India's first corporate hospital, the first to set-
up hospital outside the country and the first to attract foreign investment. With 2600 beds, Apollo is
one of Asia's largest healthcare players. The recent merger between its 3 group companies, Indian
Hospitals Corporation Ltd., Deccan Hospitals Corporation Limited and Om Sindoori Hospitals
Limited, will help the group raise money at a better rate and by consolidating inventory; it will save
around 10% of the material cost. The group is planning to invest Rs.2000 crore, to build around 15
new hospitals in India, Sri Lanka, Nepal and Malaysia.
Fortis Healthcare: Fortis is the late Ranbaxy's Parvinder Singh's privately owned company. The
company is a 250 crore, 200 bed cardiac hospital, located in the town of Mohali. The company also
has 12 cardiac and information centers in and around the town, to arrange travel and stay for patients
and family. The company has plans of increasing the capacity to around 375 beds and also plans to
tie up with an overseas partner.
Max India: After selling of his stake in Hutchison Max Telecom, Analjit Singh has decided to invest
around 200 crores, for setting up world class healthcare services in India. Max India plans a three tier
structure of medical services - Max Consultation and Diagnostic Clinics, MaxMed, a 150 bed multi-
specialty hospital and Max General, a 400 bed hospital. The company has already tied up with
Harvard Medical International, to undertake clinical trials for drugs, under research abroad and
setting up of Max University, for education and research.
Escorts: EHIRC located in New Delhi has more than 220 beds. The hospital has a total 77 Critical
Care beds to provide intensive care to patients after surgery or angioplasty, emergency admissions or
other patients needing highly specialized management including Telecardiology (ECG transmission
through telephone). The EHIRC is unique in the field of Preventive Cardiology with a fully
developed programme of Monitored Exercise, Yoga and Meditation for Life style management.
Wockhardt & Duncans Gleneagles International: They are South Asia's first Journal of Clinical
Investigation accredited super specialty hospitals. Have associations with Harvard Medical
International, which gives them access to the best hospitals in the US for knowledge and research.
Leader in medical tourism in India
2) MEDICAL TOURISM: Medical tourism (also called medical travel, health tourism or global
healthcare) is a term initially coined by travel agencies and the mass media to describe the rapidly-
growing practice of traveling across international borders to obtain health care. Such services
typically include elective procedures as well as complex specialized surgeries such as joint
replacement (knee/hip), cardiac surgery, dental surgery, and cosmetic surgeries. As a practical
matter, providers and customers commonly use informal channels of communication-connection-
contract, and in such cases this tends to mean less regulatory or legal oversight to assure quality and
less formal recourse to reimbursement or redress, if needed.
Leisure aspects typically associated with travel and tourism may be included on such medical travel
trips. Prospective medical tourism patients need to keep in mind the extra cost of travel and
accommodations when deciding on treatment locations.
16
TYBMS - SEM V - SSM
Factors that have led to the increasing popularity of medical travel include the high cost of health
care, long wait times for certain procedures, the ease and affordability of international travel, and
improvements in both technology and standards of care in many countries.
3) PROBLEMS FACED BY THE INDUSTRY
 Low public spending on health

 Lack of adequate beds in the hospitals
 Lack of emphasis on prevention
 Enforcing standards of medical care rendered by hospitals and private health practitioners
 Extremely low bed : people ratio
 Dominated by Government and Charitable Hospitals
 Excessive overlap across primary, secondary and tertiary care
 Skewed towards urban populace
 Lack of adequate corporatization
 Insurance to provide financial protection from catastrophic events
 More research, awareness and communication and greater public involvement in
understanding health issues.
17

ARTICLE:
Health Care System

Around the World
Alyssa
Kim Schabloski, JD, MPH
11/2/2009

HEALTH CARE SYSTEMS
AROUND THE WORLD
CANADA ▪ DENMARK ▪ FRANCE

GERMANY ▪ ISRAEL ▪ JAPAN
THE NETHERLANDS ▪ SWEDEN
SWITZERLAND ▪ UNITED KINGDOM
Alyssa Kim Schabloski, JD, MPH

for
Insure the Uninsured Project
© 2008
Page
TABLE OF CONTENTS
INTRODUCTION .................................................................................................................................................... 1
CANADA ............................................................................................................................................................... 2
DENMARK ............................................................................................................................................................ 5
FRANCE ................................................................................................................................................................ 8
GERMANY .......................................................................................................................................................... 11
ISRAEL................................................................................................................................................................ 16
JAPAN ................................................................................................................................................................. 18
THE NETHERLANDS........................................................................................................................................... 22
SWEDEN ............................................................................................................................................................. 25
SWITZERLAND ................................................................................................................................................... 28
UNITED KINGDOM ............................................................................................................................................. 31
APPENDIX .......................................................................................................................................................... 35
ALPHABETICAL LIST OF REFERENCES ............................................................................................................. 38
NOTES ................................................................................................................................................................ 42
TABLE OF FIGURES
Figure 1. Health care systems in Canada ...................................................................................2
Figure 2. Obligatory Provisions of the Regional Health Agreements to Coordinate Treatment,
Prevention, and Care ............................................................................................................5
Figure 3. Ministry of Health Regulatory Functions.....................................................................8
Figure 4. Statutory Health Insurance (general scheme) Revenues in 2000..................................9
Figure 5. Statutory Health Insurance Benefits ..........................................................................10
Figure 6. German internal subsidy model.................................................................................12
Figure 7. 2007 Health Reform Financing Model.......................................................................13
Figure 8. National Health Insurance Law (1994) Benefits Coverage ........................................16
Figure 9. Flow of funding in Japan’s health care system ..........................................................19
Figure 10. Upper ceiling for patient copayments in Japan........................................................20
Figure 11. Three Main Functions of the Health Care Insurance Board.....................................22
Figure 12. Financial flow under the Dutch Health Insurance Act of 2006.................................23
Figure 13. Deductible levels for reduced premiums ..................................................................28
Figure 14. Structure of NHS Authorities and Trusts..................................................................31
Figure 15. Features of NHS Trusts ...........................................................................................32
Figure 16. Health Expenditures by Country (2006) ..................................................................35
Figure 17. Health Care Resources by Country (2006) ..............................................................35
Figure 18. Mortality Data by Country in Years (2006) .............................................................36
Figure 19. Pharmaceutical & other medical devices as % total expenditure on health (TEH)...37
Insure the Uninsured Project © 2008 i

INTRODUCTION
Too long-abandoned after failed Clinton-era reform efforts in the 1990s, universal health
coverage is once again at the fore of political issues in the United States. Now, more than 46
million Americans are without health insurance, and 6.6 million of them reside in California
alone.i The skyrocketing costs of health care and the number of uninsured in the United States
show no sign of slowing. Ironically, Americans spend more than 16% of the gross domestic
product (GDP) on health care, yet health outcomes in the United States consistently rank on the
lower rungs compared to other Western industrialized countries with developed economies. The
various figures in the Appendix compare health indicators across the countries presented here.
In debating the creation of an American universal coverage model, examining universal health
systems around the world provides helpful insights into what does and does not work for other
countries. One of the most striking features is the willingness of other nations to modify their
systems. The last serious effort at major health care reorganization in the United States was well
over decade ago. Another remarkable feature is the sense of solidarity, which underlies the
European systems in particular. The citizenry and government strongly support, both
ideologically and financially, the notion that universal access to health care is an entitlement.
Whether the government is the primary provider of health care differs across countries; however,
the underlying values structuring the different systems are remarkably similar.
Although each of the ten systems presented provide universal coverage to their residents, all are
affected by similar challenges. These challenges are fast becoming universal to all health care
systems, including that of the United States. For example, increasing health care costs are
quickly becoming a problem worldwide. Health care expenditures are mounting worldwide, in
part because of aging populations, the prevalence of chronic disease, and increasing
pharmaceutical costs. Coping with the rising cost of health care requires reconciling the oft-
competing goals of health services; namely, the social goal of providing equal access, the
medical goal of providing the highest quality care, the economic goal of cost containment, and
the political goal of guaranteeing patient choice and getting input from medical professionals.1
There are many lessons to be learned from the health systems of the ten countries presented here:
(1) Canada; (2) Denmark; (3) France; (4) Germany; (5) Israel; (6) Japan; (7) the Netherlands; (8)
Sweden, (9) Switzerland; and (10) the United Kingdom. This report provides a basic overview
i
If the city of San Francisco’s health insurance program meets its goal of covering its 73,000 uninsured residents,
none of California’s uninsured will reside in San Francisco. Healthy San Francisco provides health care services at
the city’s twenty-two community-based clinics and public hospitals. This program is financed through state and
federal funds, as well as employer and sliding-scale patient contributions. Currently, both the Bush administration
and employers in the city are challenging the employer assessment in federal court. Bill Ainsworth, Health Plan for
All Being Fought by Bush Administration, Restaurants, SAN DIEGO UNION TRIB. (May 25, 2008), available at
http://www.signonsandiego.com/news/state/20080525-9999-1n25sfhealth.html. The ordinance was recently upheld
in the Ninth Circuit Court of Appeals. Golden Gate Restaurant Ass. Vs. City and County of San Francisco (Sept. 30,
2008)
© 2008 Insure the Uninsured Project 1

of the core features of each system. Links to more detailed information are included at the end
of each country’s section.
CANADA
Canada provides universal access to health care to the 33.2 million people who reside there
through a mixture of public, mixed, and private health care systems. The amalgamation of
systems is due to the varied systems that have influenced Canadian health policy throughout the
years—in particular, the United States and the United Kingdom. Figure 1, below, illustrates
some of the basic features of the Canadian systems.
Figure 1. Health care systems in Canada
Funding Administration Delivery
Public: Canada • Public taxation Universal, single- • Private
Health Act (hospital payer provincial professional
and physician system under • Private not-for-
services); public provincial legislative profit
health framework • Private for-profit
• Public facilities
Mixed: Goods and • Public taxation Targeted public • Private
services, e.g., • Private insurance services, usually professional
prescription drugs, • Out-of-pocket welfare-based; private • Private not-for-
home care, payments services regulated by profit
institutional care government • Private for-profit
• Public facilities
Private: goods and Private insurance Private ownership and • Private
services, e.g., dental, Out-of-pocket control; private professional
vision, OTC drugs, payments (in full, co- professions; self- and • Private for-profit
alternative medicine payment, deductible) public regulation
Source: EOHSP Canada (2005)
Policy and Management
The Canadian provinces and territories set much of their own health care policy and
manage their own health services delivery, although the federal government oversees care
for certain components and populations. Canada’s health care system is highly decentralized.
The country’s ten provinces and three northern territories are primarily responsible for health
care in Canada, collectively called the Medicare systems. They set social policy regarding
health, education and social assistance, and other social services. The provinces and territories
also govern their respective single-payer systems for universal hospital and medical services,
paying for hospitals either directly or through global funding for regional health authorities. In
addition, the provincial governments negotiate physician fee schedules with the provincial
medical associations. However, rarely do the provinces directly deliver health care. Most of the
health services organization and delivery in Canada are through the regional health authorities.
The federal government does retain jurisdiction over certain aspects of the health care system,
notably regulating prescription drugs and financing and administering health benefits for
indigenous peoples, the armed forces and the Royal Canadian Mounted Police, veterans, and

inmates in federal penitentiaries. Health Canada, the federal department of health, also plays a
critical role in health services research and public health and protection.
Financing
Canada finances its health system primarily through tax revenues, but copayments and
reimbursements from private insurance also make a significant contribution. Tax revenues
at the provincial, territorial and federal governments account for nearly 70% of total health
expenditures.2 These general revenue funds generally come from income, consumption, and
corporate taxes. The provincial and territorial governments set the tax rates of their respective
jurisdictions. Patient out-of-pocket copayments and private insurance reimbursements cover
much of the remainder at 15% and 12%, respectively. The final 3% comes from myriad sources,
including social insurance funds, such as workers compensation, and charitable donations.
In 2004, the C$130 billion spent on health care went to:

• 43% on hospital (30%) and physician (13%) services
• 23% on provincial social service programs
• 30% on private health care services
• 4% to direct federal services
Canada spent approximately C$4548 per capita on health care in 2006.3 However, spending
varies throughout the country. Per capita spending in Alberta and Manitoba in 2006 was higher
than in any other province or territory at C$4924 and C$4901, respectively. Yet Prince Edward
Island and Québec spent the least per capita in 2006, only C$4225 and C$3976, respectively.
Payors
Regional health authorities purchase most health services, but private insurance pays for
services that Medicare does not cover. The regional health authorities have become the
primary payor of health care services. The regional authorities organize services and allocate a
global budget for the defined population. Funding methods vary among the provinces and
territories. Regional authorities have great freedom in allocating funds to best serve the particular
needs of their population.
Private health insurance mostly covers goods and services not covered by Medicare. Private
insurance covered 33.8% of all prescription drugs, 21.7% of all vision care, and 53.6% of all
dental care in 2004.4 Six of the provinces—British Columbia, Alberta, Manitoba, Ontario,
Québec,ii and Prince Edward Island—go so far as to outlaw insurance that attempts to provide
alternative or faster access to health care already covered by Medicare.5 Most private health
insurance is group-based, sponsored by employers, unions, or other like organizations. Although
ii
In 2005, the Supreme Court of Canada ruled in Chaoulli v. Québec that when an individual suffers seriously
comprised health because of a lengthy wait for Medicare services, which could have been redressed through private
health insurance, but cannot access private insurance because of Québec’s ban on such insurance, the Medicare law
was inconsistent with the Charter of Human Rights and Freedoms of Québec. The Court gave Québec one year to
amend its Medicare law to be consistent with its Charter.

employer-based insurance is part of the benefits package, this insurance is mandatory and thus
most provinces do not tax those benefits.
Providers
General practitioners as well as regional health authorities act as providers in the

Canadian system. The regional health authorities manage the delivery of care. They hire
salaried staff at a majority of acute care facilities. They also contract with some private
providers for specialized ambulatory care services. However, most of Canada’s 1.5 million
general practitioners and specialists work under fee-for-service arrangements.6 Fee-for-service
payments account for 79.5% of physician income.7 Providers are discouraged from performing
services in both the public and private spheres, although it is not illegal to do so.
Hospital funding comes from global budgets transferred by regional health authorities. Although
hospitals historically have been private, not-for-profit institutions, hospitalization has created a
substantially integrated relationship between hospitals and provincial governments. Most
hospitals rely almost entirely on the global budget monies allocated by the regional health
authorities.
Access
Canada provides universal, medically necessary care for its residents free of charge, but its
essentially single-payor system has created a bottleneck for timely access to services. The
Canada Health Act makes all residents of a province or territory eligible for medically necessary
services without charge.8 Insured services include virtually all hospital, physician, and diagnostic
services as well as primary care services covered under the provincial Medicare plans. Although
financial barriers to care have essentially disappeared with the elimination of most Medicare user
fees, access to timely care is a problem with which the provincial and territorial governments
continue to struggle. On the one hand, a single-payor system is much more administratively
efficient than a multi-payor one. On the other hand, it can create a bottleneck for access to
services. Organizations within the country, such as the Western Canada Waiting List Project and
the Canadian Medical Association, have developed waiting time benchmarks. Under the federal
Wait Time Guarantee Trust Fund, each province and territory had to specify a patient wait time
guarantee in order to qualify for federal funding.9
Other Health-Related Social Welfare Services
Canadian provinces and territories provide long-term care and other social services
benefits to their populations. Options range from residential care facilities, which provide
some assisted-living services, to chronic care facilities, which provide intensive services for
patients with high-needs. Home-based care is also available in both the public and private
sectors.
Systemic Challenges
Canada struggles with administrative efficiency and service quality. Waiting lists are a point
of dissatisfaction with care and erode public confidence in the system. The country as a whole
also must address the rising costs of health care to ensure the sustainability of its programs.

Related Links:
Health Canada: http://www.hc-sc.gc.ca
Statistics Canada—Health: http://cansim2.statcan.ca/cgi-win/cnsmcgi.pgm?Lang=E&SP_Action=Theme&SP
_ID=2966
Canadian Institute for Health Information: http://www.cihi.ca
DENMARK
All of Denmark’s approximately 5.5 million residents are entitled to health insurance coverage.
Although health insurance did not develop in the country until the second half of the nineteenth
century, Denmark has a long history of providing social welfare services. This tradition dates
back to the eighteenth century, predating both the social democratic parties and organized
philanthropy.10 Historically, the central government set policy related to social benefits and the
regional and local authorities implemented them. Taxes levied at all levels of government paid
for the services. The country recently enacted some changes to this basic structure, though the
framework itself remains mostly intact.
The 2005 reforms created a more decentralized relationship between the federal, regional,
and local authorities, yet retained some federal oversight. The Health Act of 2005
(Sundhedsloven) reorganized the administration of the Danish health care system along three
administrative levels. Implemented in 2007, the former Ministry of the Interior and Health was
split and the Ministry of Health and Prevention now oversees all health policy and sets goals for
health care delivery. The decentralized system delegates implementation and management to the
five regional and ninety-eight local authorities. The regional authorities administer and deliver
hospital services, while the local authorities purchase those services using state block grants.
Local authorities also generally Figure 2. Obligatory Provisions of the Regional
manage social welfare services. To Health Agreements to Coordinate Treatment,
facilitate cooperation and coordination Prevention, and Care
between the new administrations, the 1. Hospital discharge for weak, elderly patients
National Board of Health has required 2. Patient treatments during hospital admission
the regions and their municipalities to 3. Aids and appliances for handicapped persons
enter into regional health agreements. 4. Rehabilitation
Not only must the agreements contain 5. Health promotion and preventive services
certain provisions, listed at Figure 2,11 6. Social services for people with mental disorders
but also they must be submitted to the Source: Strandberg-Larsen (2007)
National Board of Health for approval.

Financing
Financing for Denmark’s health care system has become more centralized through
taxation only at the national level. Unlike the Canadian county-based system, the new regional
authorities have no power to levy taxes. National health care tax revenues make up 81% of the
funding for the Danish health care system. The government funds the regional authorities
through state block grants. Copayments make up the remaining 19% of the overall health care
budget. These payments cover mainly pharmaceutical products, dentistry, and physiotherapy for
the majority of residents.
Payors
Local authorities are the primary purchasers of health care in Denmark; however, a small
private insurance market exists. Voluntary health insurance traditionally covers patient fees for
dental services and medical drugs and devices. About one-third of Danish residents purchase
complementary insurance to cover these services.12 A small number of Danes—approximately
5% of the population—purchase supplementary insurance to move to the head of queues. The
popularity of supplementary insurance is increasing due to tax incentives for employer-based
coverage.
Providers
While most of Danish hospitals are publicly operated, Danish physicians are mostly private
practitioners in solo or group practices. The overwhelming majority of hospitals in Denmark
(98%) are publicly funded and operated. Hospitals primarily operate on global budgets, but there
are some, albeit limited, services paid on a Danish diagnostic-related group classification.13
There are about 3400 general practitioners in Denmark, and each cares for approximately 1600
patients.14 The distribution of general practitioners is regulated according to population size in a
narrow geographic area to ensure an even distribution across the country. Entry is tightly
restricted—not only must general practitioners complete sixty months of training, but they can
only enter practice by purchasing the goodwill of a retiring physician or obtaining permission
from the regional authorities. One-third of general practitioners have a private solo practice,
while the others work in some form of group practice.
Health care providers at public health care facilities are salaried civil servants. General
practitioners and private specialists are self-employed but bargain collectively through the
Association of Private Specialists to contract for services with the regional authorities. General
practitioners are paid on a mixed capitation and fee-for-service basis. The same fee schedule
applies to all patients in both systems; however, as providers do not receive a capitation payment
for the smaller of the two Danish health insurance plans, they are allowed to charge these
patients a reasonable fee. The approximately 1200 specialists also negotiate a fee schedule but
receive no capitation payments.15
Access
All permanent residents of Denmark are entitled to coverage under the health system,
including primary and hospital care, which are free at the point of service; however, many

also choose to purchase private insurance supplements. Danish residents must choose
between one of two health insurance plans. Ninety-eight percent of residents choose Group 1
insurance. These patients have open access to their general practitioner but must get a referral
from their general practitioner to access specialist or hospital care (except to see an Ear, Nose
and Throat doctor, an ophthalmology specialist, or to seek emergency care).16 Group 2 patients
can access specialist care without a referral but must pay a copayment for all non-hospital based
services. Both groups must obtain a referral to access hospital services. Generally, patients are
free to choose the hospital where they would like to receive care. In the event that a patient must
wait longer than one month for public hospital care, the government will finance treatment at a
private or foreign hospital.
Patients may choose a new general practitioner every six months. Children under 16 years of
age are covered under the same insurance as their parents.17 At 16, they are enrolled
automatically in Group 1 unless they opt for Group 2 coverage. Reimbursement for
pharmaceutical products is based on individual needs and also depends on the patient’s prior
consumption in the previous year.18
About 30% of residents purchase private insurance to cover statutory copayments.19 Danmark, a
non-profit health insurance association, offers four levels of supplementary coverage.20 Two-
thirds of members have “insurance” that covers half the cost of pharmaceutical copayments.
About 500,000 members opt to cover operations at private hospitals. Around 400,000 passive
members join not for immediate reimbursement of copayments, but for the option to obtain
copayment reimbursement at a later date without age limitation or health certificate.
Social Welfare
Denmark is strongly committed to social protection and inclusion. The country spends
30.7% of its GDP on social protection programs.21 Welfare programs for the aging and
vulnerable, disadvantaged, or socially excluded groups are key targets. Local government
authorities provide long-term care services, financed through local taxes and state block grants.
Systemic Challenges
The new Danish reforms have yet to perfect some systemic issues. The new administrative
organization has disrupted the previous formal and informal networks. Adapting to change and
ensuring that the new structure helps and not inhibits the system, in order to attain its goals of
quality, effectiveness, and efficiency will be a major challenge. Denmark also must make sure
that it can sustain universal coverage while satisfying increasing demand due to the aging
population.
Related Links:
Ministry of Health and Prevention (Ministeriet For Sundhed og Forebyggelse): http://www.sum.dk/sum/
site.aspx?p=34

FRANCE
The French government provides health care for all 64 million residents under its jurisdiction,
nearly 60.9 million of whom live in France proper; the remainder live in French Guiana,
Guadeloupe, Martinique, and Réunion. France has implemented several statutory changes in the
past decennial that have substantially changed its health care system. First, the 1996 Juppé
reforms changed the funding scheme from a tax on earned income to a tax on total income. In
addition, the reforms increased the oversight of the parliament, which set definitive health policy
and finance goals, and created regional hospital agencies (agences regionales hospitales).
France now provides universal health coverage to all its residents.
Responsibility for health services is split

between the national, regional, and Figure 3. Ministry of Health Regulatory
Functions
departmental levels of government. At the
• Allocating national funds among the
state level, the parliament sets the national sectors and regions
ceiling for health insurance expenditures every • Price setting
year and adopts new provisions regarding • Approving negotiated fee schedules
benefits and regulation through the Act on • Establishing safety standards in hospitals
Social Security. The Ministry of Health • Controlling supply-side elements, such as
regulates much of the health care system. See the number of students to admit to
Figure 3 for a list of its most important medical school each year (numerus
functions. At the regional level, regional clausus)
hospital agencies are responsible for allocating • Defining national priorities in health
Source: EOHSP France (2004)
funds to public hospitals, adjusting taxes for
private for-profit hospitals, and planning for
all types of hospitals. These agencies report to the Minister of Health. Finally, the general
councils provide social, health, and public health services at the departmental level.
Financing
Tax revenues from a variety of sources fund the bulk of the French health care system. The
vast majority of health insurance revenue, 88.1% in 2000, came from the general social
contribution tax and the contributions of employers and employees. Contributions to the social
security system differ according to the source of the income. Each resident pays a general social
contribution (contribution sociale général) based on total income. The health insurance rate for
earned income, capital gains, and gambling winnings is 5.25%, while benefits such as pensions
or social allowances are taxed at a rate of 3.95%. Earnings-based contributions are levied at
0.75% of gross earnings. The remaining funds are provided through state subsidies and
specifically earmarked taxes, such as car usage and alcohol and tobacco consumption.
Pharmaceutical companies also contribute, mainly via a tax on advertising. See Figure 4 for a
breakdown of the source contributions in 2000.22

Figure 4. Statutory Health Insurance (general scheme) Revenues in 2000
€
Source of Revenue % of Total
(millions)
Employee contributions 3.4 3.4
Employer contributions 49.8 51.1
Total Contributions 53.2 54.5
General social contribution (CSG) 33.8 34.6
Specific taxes 3.3 3.3
Pharmaceutical industry taxes 0.7 0.8
Total Taxes 37.8 38.7
State compensation for losses due to policy changes 4.8 4.9
Adjustment between health insurance schemes 0.3 0.3
Other 1.5 1.6
TOTAL REVENUE 97.6 100.0
Source: EOHSP France (2004)
Payors
French insurance schemes are organized according to employment type. Working together
under the umbrella of the national union health insurance fund (Union nationale des caisses
d’assurance maladies—UNCAM), three insurance funds make up the French health care system:
(1) the national health insurance fund for salaried workers (Caisse nationale d’assurance
maladie des travailleurs salariés—CNAMTS); (2) the agricultural scheme (Mutualité sociale
agricole—MSA); and (3) the national health insurance fund for independent professionals
(Caisse nationale d’assurance maladie des professions indépendentes—CANAM).23 Each
national health insurance fund distributes monies to regional and local funds. The funds contract
for services with self-employed providers and negotiate the level of charges.
CNAMTS covers approximately 85.6% of the population.24 Members include both employees in
commerce and industry and their families (84%), as well as those eligible under the Universal
Health Care Act (1.6% as of 2001). The agricultural scheme, MSA, covers farmers and
agricultural employees, amounting to approximately 7.2% of the population. Non-agricultural
self-employed people, about 5% of the population, are covered under CANAM.
Under the statutory health insurance plan, the reimbursement of health care costs accounts for
84.9% of total expenditures.25 The remaining 15.1% is paid out as cash allowances for maternity,
illness, work-related injuries, or disability. Reimbursements are made either to the patient, who
paid out-of-pocket, or to the provider. Increasingly, pharmacy and laboratory benefits are being
paid directly by the insurers.
To cover the cost of “copayments”—i.e., the cost of coverage that is not reimbursed under the
statutory health insurance scheme, 86% of the population purchased voluntary health insurance
in 2000.26 However, only 43% opt for voluntary insurance of their own initiative—employers
purchase most coverage through a group contract.

Providers
The French health care system supports both public and private providers. Approximately
4000 hospitals operate in France.27 Public hospitals account for about 25% of all hospitals
(1000). Non-profit private hospitals number 1400, about one-third of all French hospitals.28
Private for-profit hospitals are most numerous at 1750, but tend to specialize in particular
medical, surgical, or obstetric procedures.
Although all hospitals receive a per diem, the services covered in that rate vary based on hospital
type. Public hospitals receive a single per diem rate that covers all services provided, while
private for-profit hospitals bill medical fees and other items, such as prostheses, separately.
Patients also contribute €10.67 per day of hospital stay.
The number of general practitioners and specialists in France is almost evenly split—of the
194,000 physicians in France in 2000, 51% were specialists and 49% provided primary care.29
One-half of specialists and 29% of general practitioners are salaried, both working mostly in the
hospital setting. Notably, private general practitioners in France still make home visits, which
account for about 25% of their care activities. Providers receive payment from patients at the
time of service; thus, providers negotiate with insurance schemes over the unit value to apply to
the fee schedule to determine the rate of each procedure.
Access
French residents may consume as much health care Figure 5. Statutory Health Insurance
as they like; however, to increase their price Benefits
sensitivity, they pay for their care upon receipt and • Hospital services for health care,
do not receive full reimbursement. Although France rehabilitation, or physiotherapy
provided nearly all of its residents with health insurance • Outpatient care from GPs, specialists,
prior to 2000, the Universal Health Care Act dentists, and midwives
• Prescribed diagnostic services and
(Couverture Maladie Universelle) expanded coverage
care
to all French residents. Single residents whose taxable
• Prescribed eligible pharmaceutical
income falls below a certain amount per year (€8774 drugs and devices
for 2008-09) are entitled to free coverage.30 For a list of • Prescribed health care-related
some of the covered benefits, see Figure 5.31 transport
• Certain preventive care practices
The system is quite liberal in that patients may choose Source: EOHSP France (2004)
to see any licensed practitioner at any time without
limit. The French average 4.7 contacts with a general practitioner, and not necessarily the same
one, each year.32 To make consumers price sensitive at the time the service is provided, most
patients pay the full cost of services out-of-pocket and request reimbursement from the statutory
plan, with the exception of those requiring hospitalization and low-income beneficiaries under
the Universal Health Care Act. Typically, patients receive only partial reimbursement and thus
pay the equivalent of a copayment for services. Patients without supplementary insurance
typically receive a reimbursement rate of 70% for physician and dentist services and 60% for
auxiliary and laboratory services. There are exemptions for patients with a certain chronic or
debilitating health status, those receiving a certain type of care, or due to the status of the patient

(such as pregnant women or those injured in the workplace). Out-of-pocket payments accounted
for 11.1% of total health care expenditures in 2000.33
Social Welfare
France also provides services for other health-related services. France provides expansive
coverage for those with mental illness and addictions as well as for the elderly and disabled. The
local authorities have the primary responsibility for administering these types of services.
Systemic Challenges
Like other health systems, the French scheme must overcome issues related to increasing
health care costs and increased demand due in part to the aging population. The WHO has
ranked France as the best health care system in the world. Yet even France must address
challenges relating to sustainable financing and meeting growing demand due to aging
populations.
Related Links:
Division of Health—Ministry of Health: http://www.sante.gouv.fr/ministere/index.html
Ministry of Health, Youth, Sports, and Associated Life (Ministère de la Santé, de la Jeunesse, des Sports et de la Vie
associative): http://www.sante-jeunesse-sports.gouv.fr/
GERMANY
Germany has a population of 82.4 million with a life expectancy of 81.9 years in women and
78.7 years in men.34 On other measures, however, quality in Germany is comparatively low,
particularly given its cost. In 2004, Germany spent US$3635 per person on health care. The
US$300 billion total represents 10.6% of the GDP. Prior to 2007, the Social Health Insurance
system (gesetzliche Krankenversicherung—GKV) covered approximately 88% of the population
(72.5 million people), while 9.7% (8 million) purchased private health insurance (private
Krankenversicherung—PVK) in the marketplace. The remaining citizens were covered through
other special state programs, such as care for military personnel. Germany has approximately
200,000 uninsured residents.
The German system, known as the Bismarck model, is the oldest in the world and was
established in 1883.35 Although it has undergone many substantial changes since then, the basic
structure remains. Within this framework, Germany enacted another significant reform
(Gesundheitsreform) to its healthcare system in 2007. The reform had four target goals: (1)
mandatory universal health insurance coverage; (2) improvement of medical care; (3)
modernization of sickness funds; and (4) reform of the health fund, the base of health care
financing in Germany.36 As different parts of the reform will take effect at different times, this
section describes both the previous system and the impact of the new reform.

The German government controls most of health policy development and health care
delivery. The Ministry of Health (Bundesministerium für Gesundheit) introduces and executes
health policy for the country. Major policies require approval of both houses of government—
the First Chamber (Bundestag or Parliament) and the Second Chamber (Bundesrat, which
represents the German states or Länder). The current policy emphasizes solidarity, i.e., the idea
that all citizens should have equal access to high quality health care, regardless of ability to pay.
The Ministry also administers the health solidarity fund, which will be reorganized as of January
1, 2009, under the 2007 reform. The Social Health Insurance system, a coalition of sickness
funds that provide a standardized package of benefits, also falls under government regulation.
Financing
The German model is currently in a state of transition, reorganizing its internal subsidy
model to be more streamlined. Health care financing in Germany currently follows an internal
subsidy model.37 In this system, consumers pay both their solidarity tax and health insurance
premium directly to the applicable sickness fund. The sickness fund then remits the solidarity
fund contribution to the government health fund, while the solidarity fund distributes premium
subsidies to the sickness funds. At present, the government subsidizes premiums for certain low-
income or special classes of residents, in keeping with the solidarity principle. Basically, the
total government subsidy to the sickness funds equals the difference between the aggregate
solidarity contributions and premium subsidies. The model is illustrated in Figure 6 below.38
Figure 6. German internal subsidy model
Source: Van de Ven et al. (2003)
Solidarity Fund
Solidarity
contribution
Premium
subsidy
Purchaser Sickness Fund

Income-based Contribution:
Premium + Solidarity

Under this current model, both employees and employers pay their contributions directly to the
applicable sickness fund. Contributions are calculated based on a percentage of wage or salary,
and differ among sickness funds. At the individual level, employers and employees divide the
contribution payment equally. On average, though, employees contribute 7.6% of their salary
for health insurance and employers contribute 6.6%.39 Premium subsidies are available for
workers who earn less than US$60,000 per year, retired persons, students, and those who are
unemployed, disabled, or homeless.40
The 2007 reform will reorganize the financing system. Rather than a progressive percentage
based on income contributed to a sickness fund, individuals and their employers will contribute a
flat percentage rate directly to the health fund (Gesundsheitsfonds) starting on January 1, 2009.41
Federal subsidies also will be paid directly to the new fund. The fund will then distribute monies
to the insurance plans on a capitation basis; however, payments will be risk-adjusted based on
age, sex, and disease status. Well-managed, efficient insurance plans can remit excess monies
back to the insured or provide additional benefits not included in the standard package.42
Insurance plans that run at a deficit have the option of levying an additional premium on the
insured, but it is capped at 1% of gross income. However, if the plan imposes the second
premium, the insured is immediately free to change plans. The 2007 reform model is displayed
at Figure 7 below.43
Figure 7. 2007 Health Reform Financing Model

Source: Welcome to Solidarity (2007)
Insured
(Versicherte)
Reimbursement or Second premium
additional services cannot exceed 1%
if excess funds Social health insurance companies of income
(Gesetzliche Krankenkassen)
Risk-adjusted capitation payments
Health fund
(Gesundheitsfonds)
State Consumer Employer

Federal subsidies Flat-rate contribution Flat-rate contribution
The 2007 financing reform has several goals. First, it attempts to increase transparency for
consumers. It also standardizes the contribution rate for the mandatory insurance program. Flat-
rate contributions already exist for long-term care, retirement, and unemployment insurance;
now they will exist for the mandatory insurance program. The reform also tries to ensure

equitable risk-sharing by risk-adjusting capitation payments. More importantly, the reform
increases competition among insurers. For example, insurers have additional tools, such as
discount negotiation rights and optional contribution rates, to increase their ability to economize.
Further, the expansion of consumer-choice through the immediate ability to change plans if the
company imposes additional costs also incentivizes companies to use monies efficiently.
Payors
Germany offers residents coverage through the statutory system with the option to
purchase supplemental private insurance. Germany had 253 nonprofit sickness funds in
2006, which is a substantial decrease from more than 1200 in 1991. In 2004, the Social Health
Insurance system spent US$168 billion on health care, or 56.3% of total spending that year.44
The top three expenditures were for: (1) inpatient care—US$70 billion or 34.1% of spending; (2)
outpatient care—US$27.7 billion or 15.3%; and (3) pharmaceuticals—US$26 billion or 14.5%.
The country also supported 49 private health insurers during that time, which provided mainly
substitute and supplementary coverage. Private health insurance charges risk-based premiums,
so they may or may not be more cost-efficient for some consumers.
To contain costs, patients may shoulder costs in addition to the premium and solidarity fund
contributions. Copayments and direct payments are not uncommon, and are still allowed under
the 2007 reform.
Providers
Health care in Germany is delivered in both the public and private sectors. Both public and
private providers deliver in-patient hospital care. The majority of hospitals are enrolled in a
hospital plan, which means that hospitals receive funding through the same mechanisms no
matter the ownership (except psychiatric care, which is reimbursed on a per diem schedule).
There are two primary channels of hospital financing.45 Sickness funds provide approximately
93% of the total funds, covering recurrent expenditures and maintenance costs. In addition, the
sixteen state governments plan investments in hospitals, which are financed by both the state and
local governments. These investments cover the remaining 7% of hospital financing. Hospital
reimbursements are based on the German diagnosis-related groups. DRG over- or under-
payments are adjusted marginally, at 65% withholding in the subsequent year and 60%
reimbursement at years end, respectively.46
Private, for-profit providers deliver ambulatory care in Germany. German physicians number
133,000; of those, 118,000 are authorized providers in the Statutory Health Insurance system.47
Half of these providers are family practitioners, while the other 59,000 provide specialty care.
Presently, seventeen regional associations of social insurance physicians (Kassenärztliche-
vereinigungen) negotiate annual contracts for ambulatory care on behalf of their members. Each
association receives a lump sum, which it then parses into two funds—one for the primary care
providers and one for specialists. Individual physicians receive payment based on an invoice of
total services provided and calculated according to a relative value scale.48 The morbidity risk-
adjustment of the 2007 reform will decrease the disparity between services provided and
reimbursement levels, but will not likely significantly change overall provider reimbursements.49

Access
The 2007 reforms mandate universal coverage but look to past coverage to determine how
individuals satisfy the mandate. Currently, certain classes of citizens are insured by law.
Workers who earn less than US$60,000 per year as well as pensioners, students, and persons
who are unemployed, disabled, poor, or homeless are covered under the Social Health Insurance
system. All insured in this system have equal access to benefits and services—in fact, statutory
plans cannot refuse any applicant.50 Benefits include inpatient and outpatient care, all necessary
medication, rehabilitation therapy, and even dental benefits. These plans include family
insurance, so unemployed spouses and children of workers are coinsured for no additional
charge.
Access to private insurance is limited. Individuals who have made more than US$60,000 per
year for three consecutive years or the self-employed may opt-out of social insurance and
purchase private insurance instead. Civil servants are eligible for a 50% reimbursement on their
health care costs if they purchase private insurance to cover the remainder.51 However, choosing
private insurance coverage may be disadvantageous. In addition to risk-based premiums for all
family members, opting for private coverage makes reenrolling in the social system difficult.
The German mandate for universal coverage takes effect intermittently. Plan eligibility depends
on the type of plan the uninsured person was eligible for prior to coverage termination. Those
eligible for the Social Health Insurance plans must have re-enrolled by April 1, 2007. Those
who previously had private health insurance were guaranteed eligible for private health insurance
starting July 1, 2007, and must have minimum coverage by January 1, 2009. The 2007 health
reform also excludes children from the social insurance plans; however, children are not
abandoned. The reform merely switches funding for dependents to a different source —from
social insurance financing to subsidies derived from federal taxes.52
The reforms attempt to keep solidarity ideals intact. Standard social insurance benefits will be
similar to current ones. All eligible applicants must be accepted, and physicians have an
obligation to treat. If patients are unable to pay their premiums, the welfare system will cover
the payments. In addition, private insurance premiums will be capped at the average maximum
contribution in the statutory system.53
Systemic Challenges
The transition to the universal mandate poses the most immediate challenge to the German
system. Germany must vigilantly monitor the progress of the 2007 health reform
implementation. Unexpected and unintended consequences may arise, and the health ministry
must be prepared to meet unanticipated challenges. In addition, the Organization of Economic
Cooperation and Development has criticized the plan for not doing enough to alleviate the rising
costs of health care in Germany to the detriment of the population.54
Related links:
German Ministry of Health: http://www.bmg.bund.de
The 2007 Reform: http://www.die-gesundheitsreform.de

ISRAEL
The health care system in Israel existed well before even the state itself. The British Mandate
authorities and the Jewish community built the foundation of the current health care network
between 1918 and 1948.55 This framework has evolved into a highly technologically advanced
system that provides universal coverage to all of its 6.4 million residents. Israelis enjoy high life
expectancy at birth, reaching 82.6 and 78.5 years for females and males, respectively.56 The
infant mortality rate is low, with 5.4 deaths per 1000. Israel spends approximately US$1890 per
person on health care, which comprises about 9.1% of the GDP.57
The population growth in Israel has been due in large part to immigration.58 After the Holocaust
and World War II, waves of immigrants increased the population size substantially. The end of
the Cold War raised population size by another 14% and brought Soviet physicians, which
doubled the size of the Israeli physician corps. Today, 80% of the population is Jewish, with
people of Arab descent comprising another 15%, and Christians and Druze making up the rest.
Although the various populations have differences in health status, the health system itself does
not differentiate between them. In fact, under the Geneva Conventions, the Israeli government is
responsible for the health of the Palestinian territories.59
Policy and Management Figure 8. National Health Insurance Law (1994)

Benefits Coverage
The Israeli Ministry of Health is ▪ Medical diagnosis and treatment
responsible for licensing, super- ▪ Preventive medicine and health education
vising, and planning all health ▪ Hospitalization (general, maternity, psychiatric,
services. It sets policy objectives and chronic)
oversees their implementation.60 The ▪ Surgery and transplants
▪ Preventive dental care for children
Ministry also regulates national ▪ First aid and transportation to a hospital or clinic
medical standards and food and drug ▪ Medical services at one’s workplace
quality. In addition, the agency ▪ Medical treatment for drug or alcohol abuse
promotes medical research and ▪ Obstetrics and fertility treatment
evaluates health services. ▪ Treatment of injuries caused by violence
▪ Medication ordered by a ministry of health provider
Furthermore, the Ministry performs ▪ Treatment for chronic illnesses
public health functions concerning the ▪ Physical, occupational, and other therapies
environment and preventive medicine. Source: Holtz (2008)
Although the government provides universal coverage for its residents, it rations care to control
costs, as do many nations. Government mandates do not offer totally comprehensive health care
coverage. The national health insurance plans do not cover adult dental services, private
physician fees, or privately ordered medications. The sickness funds provide a standard bundle
of services, listed in Figure 8.61

Financing
Employer contributions, tax revenues from residents and the national budget fund the
Israeli health care system. Funding for health services primarily comes from two sources: (1) a
monthly health insurance tax of up to 4.8% of income; and (2) employer contributions.62 The
government also subsidizes health care costs through allocations in the national budget.
Consumers make no premium payments by law. The National Insurance Institute serves as the
central collection point and allocates the monies to the four sickness funds based on a capitation
model. Premiums paid to each fund are risk-adjusted according to member age and disease
status.63 Sickness funds receive 3.5 times more money per person aged 75 years or older than for
younger members.64 The plans also receive additional premiums payments for five specific
diagnoses: (1) thalassemia; (2) Gauche’s disease; (3) end-stage renal disease; (4) multiple
sclerosis; and (5) HIV/AIDS.
Payors
Four sickness funds purchase care in Israel. Israel passed the National Health Insurance law
in 1994 to create universal access to health services for all residents of Israel.65 Three of the
sickness funds are privately held, while remaining one, General Health Services, is government-
run. Residents may choose from one of four sickness funds, which are precluded from denying
any eligible applicant, as often as every twelve months. Enrollment periods begin on the first
day of January and July of every year.66 The sickness funds share risk with consumers through
copayments, which are quite high compared to those in the European community.67
Providers
Both public and private providers offer health care services in Israel. A total of 354 general
and specialty hospitals operate in Israel.68 The government network of hospitals provides
approximately half of all beds in the country. The sickness funds also provide primary and
secondary care through a number of outpatient clinics and other health-related centers. Most of
Israel’s 26,000 physicians work as salaried employees of hospitals and sick funds. Israel has a
physician-population ratio of 4.6 physicians per 1000 residents.
Access
Israel provides universal coverage for a specific basket of benefits but allows insurance
companies to offer supplemental insurance to enrollees. The Israeli government provides its
citizens with universal coverage for a specific bundle of health care services, noted above.
Patients unable to afford copayments are not denied access; instead, government subsidies ensure
that care is provided based on need, not ability to pay.69 Low-income enrollees are exempt from
copayments.70 Approximately 50% of the population chooses to purchase supplementary
insurance to cover services not offered through sickness funds. The same insurance companies
that administer the sickness funds are permitted to sell supplementary plans. Patients who
purchase these plans tend to be wealthier and better-educated.

Social Welfare
The National Insurance Institute administers many social welfare programs in addition to
health care. Old age and survivor pensions account for 38% of the Institute’s distributions.71 To
fight poverty, the agency provides benefits to those whose income falls below a certain
minimum. Combined with child allowances and maternity grants, 33% of the Institute’s benefits
go toward increasing individual and family resources. The Institute also administers programs
related to disability of all kinds, unemployment insurance, and reserve service payments.
Systemic Challenges
In addition to the standard problems of sustainability and the aging population, Israel also
faces health care issues related to violence in its jurisdiction. Like many developed nations,
Israel’s health system faces challenges due to rising health care costs and the aging population.
Older adults in Israel make up 19.5% of the total population—a proportion higher than any
country in the European Union or in the United States.72 The volatile political situation also
impacts health. Daily security fears increase stress and anxiety.73 Children are particularly
vulnerable to psychiatric disorders following violence.
Related links:
Ministry of Health: http://www.health.gov.il/english/
Gertner Institute at the Ministry of Health: http://www.health.gov.il/english/Pages_E/default.asp?maincat=2
JAPAN
Japan has a population of about 127.3 million, and the third largest economy in the world. The
Health Insurance Law of 1922 first provided public health insurance to private sector
employees.74 The coverage was quite limited in scope and duration. Not until just before World
War II did the government make a concentrated effort to expand and improve the health
insurance system. Now, Japan has broad health insurance coverage, featuring a private delivery
system with a public financing scheme.
Quite centralized, the Japanese system favors the national government’s role in both health
policy and administration. The Ministry of Health, Labor and Welfare performs functions
related to policy development, data collection, and health status and sector monitoring. The
Ministry administers some of Japan’s health insurance funds and undertakes quality and cost
control initiatives. Among its most important functions is regulating the social insurance funding
system. The Ministry facilitates negotiations about reimbursement levels. A national, fixed
reimbursement schedule is one of the hallmark cost-containment measures in Japan. Nearly all
health services are paid at the same fee-for-service rate, no matter who provides them or where
they were provided. Certain hospitals, mostly long-term care or geriatric facilities, are

reimbursed according to both the fee-for-service schedule and the Japanese diagnosis-procedure
combination (DPC) group.75
Financing
Japan’s universal health care system is financed by a combination of public and private
funds. The system is organized around three types of insurance: (1) the Society-Managed
Health Insurance (SMHI) and Mutual Aid Association (MAA) plans, which cover employees of
large companies and public sector employees, respectively; (2) the Government-Managed Health
Insurance (GMHI; Seifukansho Kenko Hoken) plan, which covers employees of small and
medium enterprises; and (3) Citizens Health Insurance (CHI; Kokumin Kenko Hoken), which is
made up of prefectural-level plans that cover the self-employed or retired.76 Figure 9, below,
displays the financing scheme.77
Figure 9. Flow of funding in Japan’s health care system

Sources: Ikegami (2007); Ikegami & Creighton Campbell (1999); Ito (2004)
ER = Employer
EE = Employee
Employees Non-employees
SMHI, MAA GMHI CHI

Patient Copayments (30%)
(source of govt. subsidies)
General Tax Revenues
[100%] [86%] [50%]

Premium = 6– Premium = 8.6% Municipal premium:
9.5% of monthly of wages based on income,
income ▪ ER pays 50% family size, assets
▪ ER pays at of premium
least 50% ▪ EE pays 50%
▪ EE pays of premium [50%]
balance Govt. subsidies
[14%] Govt. subsidies
National Fee Schedule Elderly Care Pool
Consumers do not have a choice of plan. Premiums vary based on income even though the
entitlements and their reimbursement rates are standard. Only GMHI and CHI plans receive
government subsidies. All plans, however, contribute to the elderly care pool according to the

proportion of elderly enrolled in a plan compared to the national average. For example, if the
national average of elderly enrollment across plans is 9% and the elderly population of Plan A
equals 3%, then Plan A would contribute 3 times more to the elderly care pool, in order to bring
its costs in line with the national average. The government implemented this cost-sharing
structure because a disproportionate number of elderly were enrolled in CHI.
Patient cost sharing varies based on age, income, and disease status. Premiums can vary from 6-
9.5% of monthly income, while copayments typically range from 10-30%. All residents, with the
exception of children, the elderly, and those with certain chronic diseases, have a 30%
copayment.78 Most of those aged 70 and older contribute a 10% copayment. Children age 3 or
younger pay 20%. The government insulates patients from excessive costs by capping
copayments based on patients’ ages and incomes. The upper ceiling on cost-sharing is displayed
in Figure 10, below.79
Figure 10. Upper ceiling for annual patient copayments in Japan

< 70 yrs ≥ 70 years 70–74 years (as of 2008)
(Income > US$13,442)
(Income ≥ US$4913/mo)
High income ▪ Outpatient: US$412
US$1391 per year + 1% of
. ▪ Inpatient: US$743 per year + 1% of annual costs in
costs in excess of $4636
excess of $2476
US$743 + 1% of costs in ▪ Outpatient: US$111 ▪ Outpatient: US$228
Middle income
excess of $2476 ▪ Inpatient: US$412 ▪ Inpatient: US$576
Low income
▪ Outpatient: US$74
(exempt from US$328
local tax) ▪ Inpatient: US $228 or US$139
Source: Fukawa (2007)
Payors
Reimbursements in Japan are set nationally without regional variation. The government-
imposed national fee schedule fixes the amount payors will pay for a given service. Every two
years, the cabinet revisits the global reimbursement rates for services, drugs, and other health
necessities.80 A twenty-member council composed of payors, providers, and academics set the
new reimbursement levels. More than 3000 service fees are revised individually to control
utilization rates. Typically, fees for high-tech or over-utilized services are decreased—even
below cost—to discourage their use, while rates for under-utilized, necessary services, typically
found in ambulatory care, increase and even exceed cost.81 Drug prices are revised to reflect the
volume-weighted average market price, which has created a downward spiral in drug prices.82
New drugs are reimbursed according to their innovation and effectiveness. Because benefits and
reimbursement rates are standard across the country, insurers do not actively compete for
patients for any of the standard benefits.
Providers
Physicians are key players on the provider side, both in their own practices and as hospital
staff, owners and administrators. One-third of Japanese physicians work in office-based

practices, called clinics. Ninety-four percent of the clinics are privately operated.83 Because
these practitioners rarely have hospital admitting privileges, they tend to focus on primary care.
The remaining two-thirds of physicians are hospital staff members and, with the exception of the
physician owners, receive fixed salaries. Because hospital-based physicians are salaried and do
not share hospital profits, they have little incentive to provide care based on profitability.
Physicians also own a majority of the hospitals in Japan—in fact, the chief executive officer of
any hospital must be a physician. Approximately 80% of hospitals are privately operated;
however, the most prestigious are public sector or university-owned hospitals. In addition to
their acute care function, many hospitals in Japan have long-term care units. Some have become
de facto nursing homes.
Reimbursement through the fixed fee schedule is the only method available. Balance billing is
strictly prohibited. Moreover, should a physicians give unlisted care, the patient is responsible,
out-of-pocket, for all costs associated with the service, not just the unlisted care.84 Exceptions are
made for “specified medical costs,” known as Tokutei Ryoyohi, such as hospital rooms with
additional amenities or emerging technologies.
Access
The universal Japanese system has no gatekeeper component.85 Patients have free access to
any provider at any time. The standard reimbursement system allows patients to seek care at a
hospital or private clinic as they see fit. Financially, however, access is less equitable. Lower-
income patients pay a larger percent of their total income toward premiums and copayments,
even with government assistance. The regressive nature of the system may make health care less
affordable as costs continue to rise.
Social Welfare
Health insurance is only one part of the social insurance program. Japan also provides cash
allowances for maternity and pension and sick leave benefits in its social insurance package.
Systemic Challenges
Japan faces several challenges in sustaining its health care system. The aging population
may affect Japan more than other countries. More than one-third of all health expenditure is
spent on health care for the elderly.86 Japan’s elderly population is also increasing at a faster rate
than other countries in this report. In addition, the Japanese cannot continue to increase patient-
cost sharing. At 30% copayments on top of employment-related taxes, Japanese patients bear a
high burden of their health care costs.
Related links:
Ministry of Health, Labour, and Welfare: http://www.mhlw.go.jp/english/index.html
Social Insurance Agency: http://www.sia.go.jp/e_old/index.html
Citizens Health Insurance Organization: http://www.kokuho.or.jp/english/index.htm

THE NETHERLANDS
A country of approximately 16.6 million, the Netherlands recently enacted changes to its health
insurance system. The Health Insurance Act (Zorgverzekeringswet—Zvw, 2006) is the most
current of a string of market-oriented reforms that began in the early 1990s and is based on Alain
Enthoven’s managed competition model. The government enacted a gradual yet steady series of
reforms to transition the system from supply-side regulation to managed competition. The
Netherlands is the first nation to fully implement his construct, making it likely that health care
stakeholders around the world will watch closely to see how the Enthoven model performs in the
Dutch setting.
The national government works in conjunction Figure 11. Three Main Functions of
with an independent board to allocate and the Health Care Insurance Board
distribute health care funding. The Minister of 1. Risk-based budgeting: allocate risk
Health, Welfare and Sport (Ministerie van equalization payments to insurers
Volksgezondheid, Welzijn en Sport) oversees the
mandatory Dutch insurance scheme. Dutch residents 2. Care for special groups: implement
the provisions and regulations for
are required to purchase two kinds of health-related
Dutch citizens who live abroad and
insurance: (1) insurance under the 2006 Health Dutch residents who either refuse to
Insurance Act; and (2) insurance under the enroll in health insurance or refuse
Exceptional Medical Expenses Act (Algemene Wet to pay their contributions
Bijzondere Ziektekosten—ABBZ).
3. Benefits package management:
monitor and adjust the basic
The Health Care Insurance Board (College voor benefits package
zorgverzekeringen—CVZ), is responsible for ensuring
that each of these insurance schemes offers the basic Source: Cvz: Taking Care of Health Care (2008)
package of care and that the care is accessible and

affordable. The Board acts independently as a non-departmental government body, even though
the Minister of Health, Welfare and Sport appoints its three-member Executive Board. One of
the Board’s three primary tasks is the calculation and allocation of payments to insurers from the
€15 billion risk equalization fund. These payments are risk-adjusted based on age, sex, disability
and socioeconomic status, as well as pharmacy-based cost groups, diagnostic cost groups, and
self-employed status. See Figure 11 for an overview of its three main functions.
Financing
The 2006 reforms completely reconfigured the flow of health care financing. A graphic of
the new model is reproduced in Figure 12 below.87 Financing for the new system primarily
comes from two sources. Employees contribute one-half of all revenues directly to the risk
equalization fund through an income-based contribution calculated at 7.2% (or 4.4% for the self-
employed and elderly) of the first €31,200 of annual income (2008).88 Whether the employers are
legally obligated to pay this sum on behalf of their employees is unclear;89 however, employers
are responsible for deducting the contribution directly from wages or allowances.90 Any

compensation employers give toward this contribution is treated as taxable income and may be
capped.91
Individual adults contribute 45% of the costs of the system in the form of community-rated
premiums fixed according to province, which averaged €1100 per year in 2008.92 Under the 2006
Act, all adults also have a €150 per year deductible, excluding general practitioner services and
maternity care. Those willing to assume more risk can lower premiums by paying a higher
deductible, limited to €650 per year.93 For lower-income families, the state provides a “care
allowance” (Zorgtoeslag). About two-thirds of Dutch households receive the care allowance,
which is triggered when the average community-rated premium exceeds a percentage of income
(4% for single adults).94 The state also finances the premiums for children aged 18 years and
younger.
Private insurers may both receive funds from and pay into the risk equalization fund. The Health
Care Insurance Board allocates funds to the insurers based on their case-mix severity, allocating
additional funding for the high-risk insured. If, however, the insurers have low-risk insured
profiles, they must pay an equalization amount back into the fund.95 Insurers can offer partial
rebates to those consumers who claim less than €255 per year, excluding visits to general
practitioners.96 In 2005, almost 4 million insured consumers received a rebate of the fixed
premium.
Figure 12. Financial flow under the Dutch Health Insurance Act of 2006
Source: The New Care System in the Netherlands (2006)
Employee / Income-dependent Health Insurance

Employer Risk Equalization
contribution (50%)
Fund Equalization payment
State State contribution (5%)
Health care allowance

Individual premium (45%)
Health care Private health
consumer insurer
Reimburse costs, if no claims, personal excess
Payment of health care bills Health care

provider
Payors
The 2006 Act privatized health insurance in the Netherlands. All fourteen Dutch health
insurance companies are now privately owned. Under the Act, they have the increased ability to

negotiate average, fixed prices for many predefined diagnosis/treatment combinations. No
longer obligated to contract with every provider, insurers can negotiate for discounts with
particular providers and use incentives to encourage patients to see preferred providers.
Although each offers the same legally prescribed benefits package, they can adjust the coverage
levels of the statutory benefits scheme. Insurers also may offer group discounts of up to 10% to
members of any legal entity. However, they are not allowed to risk-adjust premium rates for
consumers nor deny any applicant for basic coverage.
Providers
General practitioners provide primary care and act as gatekeepers for specialist and
hospital care. They are paid on both a capitation and consultation fee basis. Specialists receive
a salary, a service fee, or both. Most work in hospitals and are self-employed.
General practitioners also have expanded their traditional gatekeeper role. While each insured
consumer must still register with a single general practitioner to authorize access to and
coordinate care across specialties, these providers are also contracting directly with insurers,
increasingly turning to integrated care. Integration with the insurance plans seeks to control
costs, with forms of integration ranging from being on staff at an insurer-owned primary care
center to participating in financial incentives, such as prescribing generics over brand-name
drugs, and even risk-sharing.
More than 90% of Dutch hospitals are privately owned; those that are publicly funded are
typically university hospitals.97 A case-mix method has replaced the former budgeting system.98
Hospitals can now set prices and selectively contract with insurers for services categorized as
Diagnostic Treatment Combinations, which comprised 20% of all hospital revenues in 2008.99
Access
The Dutch mandate provides a basic package of benefits; no one can be denied coverage.
For those who cannot afford the premium, the government offers a subsidy to help cover the
cost. To cover benefits excluded from the basic plan, such as adult dental care, eyeglasses,
alternative medicine, or cosmetic surgery, 90% of consumers choose to purchase a
supplementary policy.100 This supplementary policy does not have to be purchased from the
same insurer that provides basic coverage, but patients often do purchase a combination package.
To increase competition among insurers, patients are allowed to change plans every January 1.
Social Welfare
Local authorities are responsible for long-term and other social support services. Long-
term care is funded through the Exceptional Medical Expenses Act (Algemene Wet Bijzondere
Ziektekosten—AWBZ). The Social Support Act (Wmo) delegates many responsibilities to the
municipalities. Provisions covered under these acts include primary care, home care, assisted
living, and nursing home care.
Systemic Challenges

Full implementation of the 2006 reforms is the major challenge the Netherlands faces now
and in the near future. Controlling costs is one of the main reasons the Dutch enacted health
care reform. The 2006 Act is expected to stem the 4.4% annual increase in health care costs
from 2001–2006.101 Health care costs are projected to increase to 5.5% annually during 2008–
2011. The government intends the reform to slow this growth and even reduce health spending.
Enforcement of the coverage mandate, one of the primary tasks of the Health Care Insurance
Board, is also problematic. About 1.5% of the insured have not made any premium payments for
six months.102 In the event of default, the insurer is allowed to terminate the policy and refuse
coverage for the next five years; however, other insurers must still accept the defaulter. The
government hopes to combat premium defaults by allowing premiums to be deducted directly
from wages or allowance, as are the income-related contributions. The penalty for triggering this
mechanism will consist of paying a premium higher than any in that market.
Also, even in light of the risk equalization payments, risk selection is a concern. Should the risk
equalization formula prove inadequate, insurers will attempt to select only healthy, low-risk
consumers into their risk pool. Finally, now that the Dutch have an institutional framework
encompassing both universal coverage and managed competition, the Netherlands must develop
quality, integrated delivery networks that meet consumer preferences.
Related Links:
Ministry of Health (Ministerie van Volksgezondheid, Welzijn en Sport): http://www.minvws.nl
MinVWS – Health insurance information: http://www.minvws.nl/en/themes/health-insurance-system/default.asp
National Health Insurance Board (College voor zorgverzekeringen): http://www.cvz.nl/default.asp?verwijzing=/
speciaal/english/index.asp
SWEDEN
The goal of health care in Sweden is to provide equal access to good quality health care for all of
its nine million citizens.103 Quite successful in meeting this goal, the Swedish system is the
model of an effective and efficient universal health care system. Sweden delivers high-quality
care at a modest cost. The country consistently ranks at or near the top for nearly all health
outcomes when compared to other industrialized countries,104 with a particularly low infant
mortality rate of 3 per 100,000 live births105 and a particularly high life expectancy (78 years for
men and 82.8 years for women in 2005).106
Sweden achieves these superior outcomes at a relatively low cost. Data based on figures from
2002 indicate that, while the United States spends US $5267 per capita on health care, Sweden
spends less than half that amount (US $2517 per capita) yet achieves vastly better health
outcomes.107

Highly decentralized, the Swedish health care system delegates both health services
management and health care financing to regional and local authorities. Twenty county
councils and 290 municipalities handle both the financing mechanisms and the health care
delivery services needed to provide quality care, including pharmaceutical services.108 Individual
municipalities provide elder care and social support services for the physically and mentally
disabled.109 The county councils’ mandate includes purchasing health care delivery. Altogether,
the county councils are responsible for nine regional hospitals, seventy county and provincial
hospitals, and 1000 health centers across the country.110
While the councils have broad power to provide and manage the delivery of health care, health
policy directives are made at the national level in Government and Parliament.111 On behalf of
the county councils and municipalities, the Swedish Association of Local Authorities and
Regions (Sveriges Kommuner och Landsting, SKL) negotiates with the national-level authorities,
notably, the National Board of Health and Welfare (Socialstyrelsen).112
Financing
Sweden funds its health care system through multiple levels of taxation. Health care costs
consume approximately 9% of the total Swedish GDP (US $196.8 billion).113 Seventy-one
percent of funds are raised through local income taxes levied by the county councils, taxed, on
average, at 11% of income. The state subsidizes approximately 16% of overall health care costs
through national taxation. Patient contributions account for a mere 3% of all health care funds,
with the remaining 10% coming from other sources.
Payors
The county councils are the primary purchasers of health care services. The councils
contract with both the county and private hospitals and doctors in the area. Although the
councils monopolize the purchasing of health care services, council members are elected every
four years, which helps to legitimize the process.114
Patient contributions to care differ by the type of service. Hospital per diems are set at SEK80
(approximately US$13.24) per day. County councils determine the rates for outpatient services.
The cost of a primary care visit may range from SEK100 (US$16.56) to SEK150 (US$24.83).
Patient contributions are capped at SEK900 (US$149.01) in a twelve-month period.115 This fee
ceiling aggregates all contributions made for all members of a family.116 Similarly, for
prescription medication, patient costs are limited to SEK1800 (US$298.01) every twelve months.
Providers
The county councils and municipalities also provide the vast majority of health services in
Sweden. Municipalities contract for services with both private and public providers. Private
providers deliver only about 10% of health care services, mainly in primary care.117 The counties
contract with private primary care centers, which make up about 25% of all primary care centers.

Access
Sweden provides universal health coverage to its citizens, but limits choice outside the
home region in the absence of a referral. Within their own county council, patients are
generally free to choose where to receive care. Referrals may be necessary if a patient wishes to
receive care outside the home region, but referrals to specialists are not required within the
council’s jurisdiction.
Prior to 2005, patients in Sweden experienced scheduling delays exceeding three months for pre-
planned care such as cataract or hip replacement surgery. Patient dissatisfaction led the county
councils and national government to establish a care guarantee. The 2005 guarantee promised
that, if three months expired after the provider determined the necessary care, the patient could
receive care elsewhere and the home county council would pay for both the care and any
associated travel expenses.
The county councils also provide other relatively comprehensive services. Basic services
include comprehensive dental and mental health care.118 Other services include sex education,
family planning counseling, and abortions.
Social Welfare
Sweden offers social welfare benefits through social insurance. Swedish Social Security
Insurance provides old age pensions for its elderly citizens.119 It also supports those who cannot
work due to illness or childcare needs. In addition, Sweden provides guaranteed, free child care
for all children ages 1–5 years. Each parent is entitled to 480 days paid leave of absence over the
period from the birth of a child to its eighth year.
Systemic Challenges
Although ranked one of the best in the world, the Swedish health care system has
weaknesses related to care provision and coordination.120 Hospitals provide a
disproportionate share of primary care,121 exacerbated by a shortage of primary care providers
and short working hours for physicians. The decentralized system creates varying levels of
efficiency, quality, and patient safety across the counties. Coordinating care between the
municipal and county level is also difficult. Finally, the financing system is quickly becoming
less sustainable. The income tax base may not grow quickly enough to support the aging
population, and the flat cost-protection ceilings may need to be reassessed according to income
or realigned with the real value of services.
Related links:
The Government Offices of Sweden: http://www.sweden.gov.se
National Board of Health and Welfare: http://www.sos.se
Swedish Association of Local Authorities and Regions: http://www.skl.se
Swedish Institute: http://www.sweden.se

SWITZERLAND
Although united under one flag, Switzerland is a confederation of twenty-three fiercely

independent cantons. The cantons generally fall within one of four regions, based on the
predominant languages of French, German, Italian, or Romansh. Cultural differences among the
regions are also evident in health care. Utilization varies significantly, with the French-speaking
region often having the highest health services density and specialist utilization.
Federalism and liberalism are guiding principles in both Swiss law and policy. National
authorities may legislate only as permitted under the constitution.122 Moreover, the element of
liberalism provides that the government may act to guarantee health care only when the private
markets fail. Given this dynamic, the extreme decentralization of the Swiss system is not
surprising. Although the federal tier of government set the standard basket of benefits required
for each resident under the Federal Health Insurance Law, the organization and administration of
the health care system falls within the purview of the cantons.123
Cantons are responsible for regulating and financing health care as well as accrediting hospitals.
The cantons also engage in disease prevention and health regulation. The cantonal authorities
delegate responsibility for nursing and home care services (Spitex) to the 3000+ local authorities
under their collective jurisdiction.
Financing
The Swiss model of health care financing is inconsistent between the cantons and has
minimal government regulation. Sickness funds collect most of the financing directly from the
insured. All members of a fund contribute a flat premium based on broad age categories (0 to 18
years; 19 to 25 years; and 26+ years).124 The federal government does not limit the amount of the
premium contribution required of enrollees, and premiums can vary wildly in the same region.
Although the contribution is determined according to age group, it is not truly risk-adjusted, as it
is community-rated and not modified directly based on disease status or health risk. In addition,
premiums are regressive in that they are not based on ability to pay. In fact, only one-third of
funds collected are based on ability to pay. However, those whose premiums exceed 8–10% of
their income receive state assistance.125 In some cantons, more than 40% of the population
receives means-tested subsidies.126
Figure 13. Deductible levels for reduced
Patient copayments take the form of an annual premiums
minimum deductible (franchise). The lowest Franchise amount Premium reduction
deductible, the franchise ordinaire, starts at
SwF230 None
SwF230 (US$200).127 Consumers are allowed
to hedge risk and take a higher deductible for a SwF400 Up to 8%
decrease in premiums (franchise à option). The
SwF600 Up to 15%
maximum allowable deductible is capped at
SwF1500 (US$1315). The percent premium SwF1200 30%
deductions are displayed at Figure 13.
Spending in excess of the deductible incurs an SwF1500 40%

additional contribution of up to SwF600 (US$525). A flat SwF10 (US$9) per diem is charged
for inpatient hospital stays.
Most of the tax monies for health care are levied and collected at the cantonal and local levels of
government. The Confederation contributes a mere 20% to the overall budget.128 The level of
acceptable costs for which the government will provide subsidies is the funds’ actual costs. The
subsidies are given retrospectively.129 Notably, voluntary employer contributions are generally
absent in the Swiss system.130 The extreme decentralization of the Swiss federalist model
complicates the financing structure, which make managing and controlling expenditures
generally more difficult.
Although the sickness funds provide nearly half of the direct cost reimbursement, patient
contributions, through premiums and copayments, make up 65% of total health care financing,
according to WHO data from 1997.131 Direct reimbursements from patients through copayments
account for about 24% of all payments for care.
Payors
Sickness funds often act in concert with general practitioners to control costs. About
ninety-three sickness funds operated in Switzerland in 2002. Each canton typically supports
between forty to seventy sickness funds. Within the canton, funds engage in different tactics to
minimize their risk exposure.132 Some funds offer plans through life insurance companies, which
may inquire into health status. Others use managed care and physician gatekeepers to control
cost. As in the United States, sickness funds are sometimes able to deny coverage for certain
treatments. Some even go so far as to close offices in high-cost, unprofitable cantons.
Competition among payors varies mostly on premium price and deductible levels, since the basic
benefits package is set in law. All of the funds now offer HMO-style insurance for which the
premiums are approximately 10–20% less expensive than the franchise ordinaire.
Providers
While physicians are allowed to participate in managed care arrangements, hospitals

cannot. The sickness funds are required by law to contract with any physician. To help control
costs, the funds and providers are allowed to enter into managed care arrangements.133 Two
preferred provider models are relevant in Switzerland.134 In the first, physicians generally work
on a salary basis for the insurance fund itself. While the fund-owned model is most common,
physician-owned HMOs do exist. The second model is a network of independent providers who
act as gatekeepers for the sickness fund to prevent unnecessary hospitalizations. The physicians
are independent providers who contract with the funds under a risk-sharing agreement. The
network physicians share in the yearly profit or loss. Losses are capped at SwF 10,000 per
physician per year.
Hospitals are excluded from managed care arrangements.135 Because the cantons provide half of
the financing for public hospitals, they alone hold the authority to enter into contractual price
arrangements. The cantons also determine with which hospitals the sickness funds must contract
on a national level. Competition in the hospital sector is thus stifled.

Access
The standard benefits package covers a wide scope of health care services, with patient
choice centering mainly on premium price. Coverage ranges from inpatient and ambulatory
care to unlimited inpatient nursing home and hospital stays for the elderly and physically and
mentally handicapped or disabled. Diagnostic and pharmaceutical treatments as well as
complementary and alternative medicine are also guaranteed. Services that are not already
included must be appropriate, clinically effective, and cost-effective to be offered as part of the
standard benefits package.
Typically, between forty and seventy sickness funds operate in a given canton. Shopping around
for the best rate is encouraged. Coverage for family members is not included in the standard
benefits package, but sickness funds have low premiums for dependent children. Consumers are
free to switch sickness funds twice yearly—open enrollment occurs as of the first of January and
July. Funds must notify members of premium increases two months in advance. Should a fund
increase member premiums, enrollees must give the plan one-month advance notice that they
intend to switch.136
Approximately 70% of the population in Switzerland purchases non-mandatory, supplemental

health insurance for additional benefits not covered by the standard scheme.137 The Swiss courts
forbade tie-in sales, so consumers are free to choose a supplementary insurer other than their
primary sickness fund.138
Social Welfare
Switzerland requires contributions to social insurance. The Swiss provide sickness, old age,
and/or disability insurance. The premiums for this insurance are income-based, and employer
contributions are mandatory.
Systemic Challenges
Switzerland must carefully weigh the costs and benefits of its highly decentralized system.
The benefits of the decentralized Swiss system do make national policy setting extremely
difficult. Because cantonal health care regulation varies so significantly, reforming the system is
exceedingly difficult. Timely reforms would help increase competition among providers, which
in theory should increase health care quality. Increasing costs on a national scale is a problem
that is more difficult to address with the variance in regulation.
Related Links:
Federal Office of Public Health – Health in Switzerland: http://www.bag.admin.ch/index.html?lang=en
Federal Office of Public Health – Health Insurance: http://www.bag.admin.ch/themen/krankenversicherung/
index.html?lang=en
Federal Social Insurance Office: http://www.bsv.admin.ch/index.html?lang=en
Swiss health insurance: http://www.ch.ch/private/00045/00047/index.html?lang=en

UNITED KINGDOM
The National Health Service Act of 1946 set the framework for the health services finance and
delivery system of the United Kingdom (UK). The National Health Service (NHS) began
operating in 1948 under the principle that the state had the collective responsibility to provide
equal access to a comprehensive health system free at the point of service.
The Department of Health oversees health policy, while health care delivery falls under the
purview of the trusts. The responsibility for health and personal social services of each of the
constituent countries of the UK lies with the Department of Health, which oversees local
planning, regulation, inspection, and policy development. The secretary of state for health
answers directly to the UK parliament. The central government sets health priorities for NHS as
a whole and controls the overall pool of funds; NHS authorities, in turn, provide planning
guidance to the health authorities in terms of service and financial networks. The ten strategic
health authorities manage health care and disburse funds on a regional basis, linking the
Department with the NHS.
The NHS is divided into primary and secondary care services. Primary care services are
delivered by primary care trusts. The primary care trusts contract with local general
practitioners, surgeons, dentists, and opticians to delivery primary care. These trusts receive
about 75% of the overall NHS budget. Secondary care, or acute care, essentially refers to either
emergent or elective care. Acute trusts manage the delivery of care in hospitals and ensure that
hospitals deliver care efficiently. The 209 NHS hospital trusts oversee 1600 NHS hospitals and
specialty care centers. Figures 14 and 15 below display the structure and features of the NHS.
Figure 14. Structure of NHS Authorities and Trusts

Source: NHS, http://www.nhs.uk/aboutnhs/HowtheNHSworks/Pages/NHSstructure.aspx

Figure 15. Features of NHS Trusts
Type of Trust Entity concerned Features

Acute trusts Hospitals • Monitor quality of care
• Efficient use of resources
• Strategy and development
Ambulance trusts Emergency transportation • Category A: immediate, life-threatening
• Category B, C: non-life-threatening
Care trusts Health, social care • Social care
• Mental health services
• Primary care services
• Integration of health and social care services
Foundation trusts Hospitals • Locally managed
• Tailored to needs of local population
• Decentralized public services
Mental health trusts Primary care provider, • Health and social care for mental health
specialist problems
Primary Care Trusts Physicians, out-patient • Health care purchasing and management for
clinics, hospitals the region
• Coordinate integration of health and social
care
Special health Varied • Nationwide health services, e.g., National
authorities Blood Authority
Strategic health Administrative • Manage local NHS staff for secretary of state
authorities • Develop strategy to improve local health
services
• Monitor quality and performance
• Increase local capacity
• Integrate national priorities into local service
plans
Financing
With a budget of more than £90 billion, the NHS is the largest publicly funded health
system in the world.139 The NHS relies primarily on general tax revenues. In 2006, 87% of
health spending was financed by public funds—nearly 80% of the total budget is disbursed to
primary care trusts. 140 The Consolidated Fund of general tax revenues provided 81.5% of NHS
financing in 1997.141 National Insurance contributions comprised another 12.2%. Patient charges
accounted for 2.1%, and the remaining 4.2% came from repayments of NHS trust interest
bearing debt (3.0%) and other sources (1.2%). That year, private funds accounted for 14.6% of
total health expenditures.
Payors
Health care in the UK is mostly purchased through the primary care trusts and the
insurers. The UK reduced the number of primary care trusts from 303 to 152. Primary care
trusts oversee 29,000 general practitioners and 18,000 NHS dentists. The trusts are responsible

for assessing the health care needs of its population and contracting for the appropriate level of
services to meet those needs, all within a fixed budget.
Private health insurance is mainly of two kinds: employment-based and individual insurance.
More than half of those with private insurance have employer-based plans—around 59%.
Individuals may purchase private insurance in the market, which is how 31% of those with
private plans acquired them. The final 10% is comprised of umbrella organizations whose
members voluntarily purchase coverage. Private coverage is drastically skewed toward those of
higher socioeconomic status. Only 10.8% of the population had private insurance in 1996.142
Providers
The overwhelming majority of providers operate in the public sector. General practitioners
are the entry point to the NHS. More than 99% of the population has a registered general
practitioner, and about 90% of all patient contact is with a general practitioner.143 These
providers are generally self-employed—they work for the NHS as independent contractors rather
than salaried employees. Contract negotiations occur between doctors’ representatives and the
government. Very little primary care in the UK is privately offered.
District general hospitals are the foundation of hospital care in the United Kingdom. These
hospitals are widely disbursed throughout NHS. Highly specialized tertiary facilities operate on
more regional or supra-regional levels. Patients enter tertiary care facilities after being referred
from the district hospitals. Community hospitals often provide long-term care, particularly for
the elderly. More than 300 private hospitals operate in the United Kingdom. At times, NHS
patients do have access to these private facilities.
Access
All UK residents are eligible for care through the NHS. Services are provided free of charge
at the point of care unless expressly authorized under the law, namely, the Health Service Act of
1977. Patients are free to choose their general practitioner within their region. Only through
their general practitioner do patients have access to specialist care, unless in an emergency
situation.
The NHS does allow patients to upgrade their services without acquiring private insurance.
Patients may receive an “amenity room,” typically a private room, through the NHS for an
additional fee. For privately insured patients who need care, NHS trusts also may offer these
“pay beds” at NHS facilities.
Social Welfare
Although the local governments have primary responsibility for social services, the NHS
also contributes to the provision of these services. The UK also provides social care for those
with mental illness, learning disabilities and for the elderly. Care ranges from long-term
residential or nursing home care to domiciliary services provided in the home. The local
government and social services departments share responsibility for these services with the NHS.

Systemic Challenges
Sustainability and improved quality are two of the major challenges facing the NHS.
Although patient satisfaction with primary care is generally high, delays in receiving specialist
care decrease consumer confidence in the system.
Related Links:
UK Department of Health: http://www.dh.gov.uk
National Health Service: http://www.nhs.uk

APPENDIX
Figure 16. Health Expenditures by Country (2006)

Source: OECD Health Data (2008) except as indicated
Total Expenditures on Health (TEH) Public Expenditures

Rank % GDP Rank $’s Per Capita Rank % TEH
c
Canada 7 10.0 9 3678 5 70.4
a
Denmark 6 9.5 5 3349 10 82.9
France 9 11.1 8 3449 7 79.7
Germany 8 10.6 6 3371 6 76.9
b b b
Israel* 1 7.8 1 2143 4 66.5
b b b
Japan 2 8.2 2 2474 9 82.7
a
Netherlands 5 9.3 7 3391 3 62.5
Sweden 4 9.2 4 3202 8 81.7
Switzerland 10 11.3 10 4311 2 60.3
United Kingdom 3 8.4 3 2760 11 87.3
United States 11 15.3 11 6714 1 45.8
* = WHO Statistical Information System
a b c
= 2002 data; = 2005 data; = 2007 data
Figure 17. Health Care Resources by Country (2006)

Physician Acute care MRI units CT

density beds (per scanners
Rank (per 1000) Rank (per 1000) Rank million) Rank (per million)
e
Canada 11 2.1 8 2.8 8 6.2 7 12.0
d d d
Denmark 4 3.6 6 3.1 4 10.2 5 15.8
France 7 3.4 4 3.7 10 5.3 8 10.0
Germany 6 3.5 2 6.2 6 7.7 4 16.7
†, b †, b
Israel 3 3.7* 3 6.0* 11 1.4 11 6.3
e c
Japan 11 2.1 1 8.2 1 40.1 1 92.6
e e
Netherlands 2 3.8 7 3.0 7 6.6 9 8.2
e ‡, a ‡, a
Sweden 6 3.5 11 2.2 5 7.9 6 14.2
Switzerland 2 3.8 5 3.5 3 14.0 3 18.7
United Kingdom 8 2.5 11 2.2 9 5.6 10 7.6
United States 9 2.4 9 2.7 2 26.5 2 33.9
† ‡
* = WHO Statistical Information System; = Sharona et al.; = OECD Health Data – Sweden (2006)
a b c d e
= 1999; = 2000; = 2002; = 2004; = 2005

Figure 18. Mortality Data by Country in Years (2006)
Life Expectancy at Birth Life Expectancy at Age 65

Population Females Males Females Males
a
Canada 80.4 82.7 78.0 21.1 17.9
Denmark 78.4 80.7 76.1 19.2 16.2
France 80.9 84.4 77.3 22.6 18.2
Germany 79.8 82.4 77.2 20.5 17.2
†
Israel 80.6 82.8 78.5 -- --
Japan 82.4 85.8 79.0 23.4 18.5
Netherlands 79.8 81.9 77.6 20.1 16.7
Sweden 80.8 82.9 78.7 20.8 17.6
Switzerland 81.7 84.2 79.2 22.1 18.5
a
United Kingdom 79.1 81.1 77.1 19.5 17.0
a
United States 77.8 80.4 75.2 20.0 17.2
†
= CIA World Fact Book source
a
= 2005

ARTICLE:

Health Care at the Cross

Roads: Guiding Principles for

the Development of the

Hospitals of the Future
By ARMAK
11/2/2009

H EALTH C ARE AT THE C ROSSROADS :
Guiding Principles for the

Development of the Hospital
of the Future
With support from Aramark

© Copyright 2008 by The Joint Commission.
All rights reserved. No part of this book may be reproduced in any form or by any means without written permission from the publisher.
Request for permission to reprint: 630-792-5631.

H EALTH C ARE AT THE C ROSSROADS :
GUIDING PRINCIPLES FOR THE

DEVELOPMENT OF THE HOSPITAL
OF THE FUTURE
G UIDING P RINCIPLES FOR THE D EVELOPMENT OF THE H OSPITAL OF THE F UTURE
Joint Commission Public Policy Initiative
This white paper emanates from The Joint Commission’s Public Policy
Initiative. Launched in 2001, this initiative seeks to address broad issues
relating to the provision of safe, high-quality health care and, indeed, the
health of the American people. These are issues that demand the attention
and engagement of multiple publics if successful resolution is to be
achieved.
For each of the identified public policy issues that it has addressed, The Joint
Commission already has relevant state-of-the-art standards in place.
However, simple application of these standards, and other one-dimensional
efforts, will leave this country far short of its health care goals and objec-
tives. Thus, this paper does not describe new Joint Commission require-
ments for health care organizations, nor even suggest that new requirements
will be forthcoming in the future.
Rather, The Joint Commission has devised a public policy action plan that
involves the gathering of information and multiple perspectives on the issue;
formulation of comprehensive solutions; and assignment of accountabilities
for these solutions. The execution of this plan includes the convening of
roundtable discussions and national symposia, the issuance of this white
paper, and active pursuit of the suggested recommendations.
4
Table of Contents
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Part I. Economic Implications for the Hospital of the Future . . . . . . . . . . . . . . . . . . . . . . . . . 10
The High Cost of Doing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
More Red Than Rosy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Beyond Borders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Home Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Part II. Technology for the Provision of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
More Than the Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Mighty I.T. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Buy or Beware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Part III. Achievement of Patient-Centered Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
The Main Point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Nothing Without Me . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Momentum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Custom and Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Serving the Underserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
On The Rise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Patient-Centered Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Part IV. The Staffing Challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Wide and Deep . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
A Global Predicament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Stops and Starts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
High Touch, High Tech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
A Changing of the Guard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Team-Based Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Part V. Design of the Physical Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Safe by Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Flat World Phenomena . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Standardized Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Place of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Being Green . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
End Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Preamble
The concept of the hospital has evolved over the cen- inpatient care at the expense of community-oriented
turies. In his history of the U.S. hospital system, care.7 An understanding of the patient’s social and
Charles Rosenberg writes that in the 18th century, the family environment, these critics contended, was neces-
last place any respectable person would want to find sary to fully understand the cause of illness and to pre-
themselves was in an “almshouse” – the predecessor to scribe its remedy.8 The overarching sentiment of the
the hospital.1 Almshouses housed the indigent, time was that medicine had to be brought out of the
orphaned, mildly criminal, and the sick for whom there hospital, into the community, and into the home to the
was no other place to go. Overcrowded, chaotic, extent possible.9
filthy and teeming with those considered to be
depraved, almshouses provided unwelcome company A century later, contemporary hospitals find themselves
for respectable citizens who were alone, ill and down with similar challenges as well as opportunities. Long
on their luck. For this reason, Benjamin Franklin since their origination, hospitals today are leaders in
agreed to cofound the Pennsylvania Hospital in 1752, the development and delivery of care to patients.
the nation’s first hospital, to replace almshouses in Indeed, hospitals are the stewards of health profes-
2
serving the “poor and deserved.” sional education and are actively engaged in promoting
better health in their communities. Hospitals, which
For the next hundred years, even as hospitals became pool health care talent from across all professional
closely aligned with medical education, they continued disciplines, are significant progenitors of major clinical
to mainly serve the poor and those desperately ill who innovations that save the lives of so many. While there
could not avoid what was widely considered to be is much variation in the size and scope of hospitals, all
3
“medical experimentation” conducted in hospitals. It hospitals have the opportunity to lead in the improve-
was not until after the Civil War – when military med- ment of health care delivery so that the right care is
ical care sped advances in clinical techniques as well as delivered in the right place at the right time for every
methods for safely treating patients in high volume -- patient.
that hospitals began to resemble modern-day
hospitals.4 The call for hospitals from a century ago echoes today.
The rise in the number of patients who are aged and
By the late 19th century, hospitals were becoming part those who are chronically ill, challenge hospitals to
of the fabric of their communities and sources of civic extend the parameters of hospital-based care from
5
pride. Hospitals were large institutional buildings by inside the medical center, to the community and into
this time, which helped to foster the growing percep- the home.
tion that hospitals were cold and impersonal places to
receive care. Indeed, during the Progressive Era (1890-
1920), critics warned that hospitals had “an increasing
concern with acute ailments and a parallel neglect of
the aged, of chronic illness, of the convalescent, of the
simply routine.” 6 They warned of a socially insensi-
tive and economically dysfunctional obsession with
6
Introduction
Human lives weigh in the balance every day in hospi- try, the local hospital is the largest employer and most
tals. For hospital patients and their families, the hospi- valuable economic asset.
tal experience is often a central point in their life –
where their child was born, their beloved died, where Consumer attitude toward hospitals waxes and wanes,
they received life-saving treatment, rejuvenating therapy seemingly with some dependence on hospital news
or care to overcome an episode of illness. The hospi- that makes headlines,11 such as traumatic medical
tal is the setting of oft-told tales among friends and errors, rampant hospital-acquired infection, and
family through the generations. It is no wonder that unscrupulous billing practices. There is no doubt that
hospitals are often used to depict human drama – and hospitals face greater scrutiny over the issues that can
even comedy -- for popular consumption across the erode public trust. In order to secure the public’s trust,
panorama of entertainment media. hospitals will need to become highly reliable -- ensur-
ing patients’ safety, providing clinically effective care,
In reality, hospitals are the setting where cutting-edge and embodying the ethical ideal that has long been the
medical advances relieve suffering, and bring healing expectation of the public.
and even new life for those whom, even a few short
years ago, there would be little hope. Featherweight Hospitals will have to meet the high expectations of
babies, born eight weeks prematurely can now survive the public and all stakeholders in an increasingly chal-
and even thrive. Minimally invasive surgeries allow lenging environment. There are many issues with
patients to heal quickly with less risk of complication, which hospitals must now contend. These include
and speed their journey home. The evolving science escalating health care costs that are no longer publicly
of organ transplantation brings a second shot at life for – or politically – tenable, changing trends in reimburse-
an increasing number of people whose lives would ment for services, demands for transparency of cost
otherwise be foreshortened. and quality data, and workforce shortages. At the same
time, the conditions and care needs of hospitalized
In addition to their impact on human life, hospitals are patients are more complex. The rise in patients with
a major driver of the U.S. economy. The hospital chronic illness, older age adults, and medical interven-
industry is the second largest private-sector employer in tions and therapies, are already influencing hospitals
the U.S. and contributes nearly $2 trillion of economic today and that influence will deepen well into the
10
activity. In many small communities across the coun- future.
The rise in patients with chronic illness, older age adults, and medical interventions
and therapies, are already influencing hospitals today and that influence will
deepen well into the future.
7
7
The importance of hospital-based care will not dimin- This white paper represents the culmination of the
ish in the future. However, changes in the social and Roundtable’s discussions. The proposed principles for
economic environments in which hospitals operate, as guiding future hospital development are summarized
well as medical and technological progress require hos- below.
pitals to be equally transformative as the future unfolds.
Principles to Support Economic Viability:
There has been a hospital building boom underway –
• Encourage the alignment of hospital meas-
fueled by increasing demand for health care services
urement and payment systems to meet qual-
and increasingly obsolete hospital plants. Though
ity and efficiency-related goals
economic conditions are expected to slow its pace, the
• Apply process improvement tools to
continuing investment in hospital construction offers
improve efficiency and reduce costs
the opportunity to remake the hospital -- its design,
• Pursue coverage options to ensure patient
culture and practices – to better meet the needs of
access to, and affordability of, health care
patients and families and the aspirations of those that
services
provide their care. But, unless there are principles to
• Address the disequilibrium between the bur-
guide the development of the hospital of the future,
dens of general acute hospitals and specialty
hospitals may simply freeze into place the status quo
hospitals in fulfilling the social mission for
of today.
health care delivery
In order to identify these principles, The Joint

Commission appointed an expert Roundtable panel
Principles to Guide Technology Adoption:
comprising hospital administrative and clinical leaders,
as well as experts in technology, health care econom- • Establish the business case and sustainable
ics, hospital design and patient safety. The Roundtable funding sources to support the widespread
was charged to evaluate the current health care envi- adoption of health information technology
ronment and identify the elements of the future hospi- • Redesign business and care processes in tan-
tal that will position it to play an appropriate role or dem with health information technology to
roles in meeting the needs of patients and publics. ensure benefit accrual
Among specific issues that were addressed by the • Use digital technology to support patient-
Roundtable were socio-economic trends, technology, centered hospital care and extend that care
the physical environment of care, patient-centered care beyond the hospital walls
values, ongoing staffing challenges, and the global con- • Establish reliable authorities to provide tech-
fluence of these issues and their impact on the hospital nology assessment and investment guidance
of the future. for hospitals
• Adopt technologies that are labor-saving and
integrative across the hospital
8
Principles to Guide Achievement of Patient- • Educate health professionals to deliver team-

Centered Care: based care and promote teamwork in the
hospital environment
• Make adoption of patient-centered care val-
• Develop the competence of health profes-
ues a priority for improving patient safety
sionals to care for geriatric patients
and patient and staff satisfaction
• Incorporate patient-centered care principles
into the activities of hospital oversight bod-
Principles to Guide Design:
ies and transparency initiatives
• Address barriers to patient and family • Incorporate evidence-based design princi-
engagement, such as low health literacy and ples that improve patient safety, including
personal and cultural preferences single rooms, decentralized nursing stations
• Eliminate disparities in the quality of care and noise-reducing materials, in hospital
for minorities, the poor, the aged and the construction
mentally ill • Address high-level priorities, such as infec-
• Improve the quality of care for the chroni- tion control and emergency preparedness,
cally ill through adoption of care models in hospital design and construction
that encourage coordinated, multi-discipli- • Include clinicians, other staff, patients and
nary care families in the design process to maximize
• Use robust process improvement tools to opportunities to improve staff work flow
improve quality and safety, and support and patient safety, and create patient-cen-
achievement of patient-centered care tered environments
• Design flexibility into the building to allow
for better adaption to the rapid cycle of
Principles to Address the Staffing Challenge: innovation in medicine and technology
• Incorporate “green” principles in hospital
• Address the maldistribution of health care
design and construction
workers across the globe by instilling fair
migration and compensation policies for
affected countries
• Expand health professional education and
training capacity to accommodate the grow-
ing demand for health care workers
• Create work place cultures that can attract
and retain health care workers
• Support the development of health profes-
sional knowledge and skills required to care
for patients in an increasingly complex
environment
9
9
I. Economic Implications for the Hospital

of the Future
The High Cost of Doing Business
In 2007, the national expenditure on health care insurance. Overall, 2.4 million fewer people have
was over $2.2 trillion, or $7,500 per U.S. resident.12 private health insurance, a drop of six percent.
Health care spending accounts for 16.2 percent of Year to year more people are uninsured. Today,
Gross Domestic Product (GDP). More than one- that figure stands at approximately 47 million
third of national health spending is for hospital people.
care, compared to approximately 20 percent for
physician services and 10 percent for pharmaceuti- Meanwhile, public health insurance programs are
cals.13 While health care costs are rising globally, in experiencing the squeeze of the current economic
no country are costs rising at the high rate of those scenario. High health care costs, a poorly perform-
of the U.S. Overall, U.S. per capita health care ing U.S. economy, diminished tax revenue, a
spending is more than 50 percent higher than any booming Medicare-eligible generation, as well as
other country.14 Among the most significant rea- growing ranks of uninsured are factors in the
sons for this contrast are higher income and higher expected insolvency of the Medicare program by
medical prices in the U.S.15 Indeed, the U.S. pays 2019.19
More Red Than Rosy

much higher prices for pharmaceuticals, hospital
stays and physician visits.16 For its level of invest-
ment, the U.S. does not receive a more favorable While many hospitals are today enjoying relative
rate of return as far as higher quality care, patient prosperity – in one survey, hospital systems report-
satisfaction or population health status compared to ed an increase in patient revenues of nearly 8.5
other industrialized nations.17 percent in 2007 from the previous year 20 -- the con-
ditions upon which these gains are made are
Higher health care costs that are borne by health expected to dramatically change in the coming
care purchasers, payers, and consumers are becom- years. And, while some hospitals experience
ing untenable. As a result, health care purchasers healthy profit margins, an uncomfortable number
are focusing on health benefit cost containment of hospitals continue to be unprofitable. There is a
strategies, mainly by shifting more of the cost bur- growing gap between have and have-not hospitals
den to employees. Job-based health insurance pre- that may very well widen as the future unfolds.
miums rose 10-times faster than incomes from 2001
to 2005, according to a report from the Robert
Wood Johnson Foundation.18 The amount employ-
ees paid for family coverage rose 30 percent, while
their incomes rose by three percent. Fewer pri-
vate-sector businesses offer coverage (-30,000) and
as a result, 4.1 million fewer employees are
working in private-sector jobs that offer health
10
Hospitals are not invulnerable to current economic employer-sponsored insurance and unabated
conditions. While health care has long been growth in the numbers of uninsured, hospitals can
thought to be “recession-proof” because of an end- expect more Medicaid patients and uncompensated
less supply of sick patients and reliance on govern- care. In essence, there will be more competition
ment payment, health care organizations are as vul- for the fewer patients to whom costs may be
nerable to the tightened credit market as any indus- shifted.
try. According to a report in Modern Healthcare,
even before the economy started to falter this year, There is another wrinkle in the cross-subsidy fabric.
hospital and health system bond rating downgrades In order to address escalating health care costs,
were on the upswing, while upgrades were on the stakeholders are demanding transparency of the
downswing. In fact, about 50 percent of short- costs and quality of care. For its part, the federal
term, acute-care hospitals are either insolvent or government has been taking steps to encourage
near insolvency, according to a recent report from price and quality transparency as one way to spur
Alvarez & Marshal Healthcare Industry Group.21 competition and encourage value-based health care
Financial issues are mainly arising from the instabil- purchasing decisions. An August 2006 Executive
ity of funding sources, including government subsi- Order requires federal agencies that administer or
dies and charitable contributions.22 Moreover, hos- sponsor health programs to make information
pital capital expenses are underfunded by up to available to consumers on the quality and costs of
$20 billion.23 services provided by doctors and hospitals. The
Executive Order also requires agencies and their
By and large, many hospitals are able to achieve a contractors to promote the use of interoperable
positive bottom-line through cost-shifting – subsi- health care information technology products so that
dizing services that do not cover costs with more data can easily be shared. The Order further
favorable remunerative services. For treating requires federal agencies to offer health insurance
Medicare patients, hospitals receive $.91 of every programs that reward consumers who choose
dollar expended; for Medicaid patients they receive health care providers based on value and quality.
$.86 per dollar.24 Uncompensated care accounts for
approximately six percent of hospital costs on aver-
age – in 2006 that amounted to $30 billion.25 Yet,
from private payers, hospitals receive $1.22 for
every dollar spent.26 Hospitals depend on having
robust numbers of privately insured patients in
order to be able to treat the under- and uninsured
and still remain in the black.
This scenario will be increasingly difficult to sus-

tain. With the demographic trend pointing to a
growing elderly population, hospitals can expect to
have more Medicare patients. Absent any major
health reform, with the continuing decline in
11
11
Based on the Executive Order, the Health and ness in the first place. This could be an important
Human Services Secretary launched the Value- leveler since surgery and procedure-related treat-
Driven Health Care Initiative, the agenda for which ment has long been known to attract a higher
includes four “cornerstones” – transparency of qual- financial reward than providing medical care, and
ity information, transparency of pricing information, has therefore created its own set of incentives.
promotion of health information technology adop- This action, though, will not require specialty hos-
tion, and creation of incentive mechanisms to pro- pitals to share in providing care that is solely for
mote quality and efficiency. the public good. Further, it will lower the reim-
bursement rate that all hospitals receive for per-
Transparency of pricing will likely foster what is forming these same services and further erode
now absent in health care – a price-sensitive con- future hospital revenue that provides coverage for
sumer. While it is unclear how hospital pricing – mission-related services.
and all of its irrational complexity – will be translat-
ed for consumer understanding, the net effect may In the meantime, hospitals are readying for “no pay
be a flattening of health care pricing, and dimin- for preventable events.” As of October 2008,
ished opportunity for cross-subsidization to cover Medicare no longer reimburses hospitals for a
money-losing procedures and patients. growing list of hospital-acquired conditions, such as
surgical-site infection and pressure ulcers, as part of
Transparency in both price and quality may, how- its Value-Based Purchasing Initiative. Private-sector
ever, boost the market position of specialty hospi- payers are quickly following suit.
tals. Specialty hospitals act as “focused factories,”
serving a subset of patients to perform specific pro- CMS is also looking at ways to equalize payment
cedures, such as cardiac care and orthopedic sur- by using hospital costs rather than charges to set
gery. As such, they focus on delivering well-pay- rates. It recently began adjusting payment to better
ing services to an insured pool of patients. With- recognize severity of illness and the cost of treating
out departments such as emergency, trauma and Medicare patients by increasing payments for some
intensive care, specialty hospitals are free of the services and decreasing payments for others. Fiscal
regulatory and social obligations that general hospi- pressures will also keep the pressure on future
tals are held to. And, with high margins, focused Medicare and Medicaid provider reimbursements,
expertise and high volume, specialty hospitals can and it is expected that CMS will continue to seek
be very competitive on price and quality. more avenues to not pay for “preventable condi-
tions” that occur in health care organizations.
The market and financial advantages of specialty
hospitals have not gone unnoticed, and even
spurred a moratorium on any new development for
awhile. Now that the moratorium has been lifted,
the Centers for Medicare & Medicaid (CMS) has
proposed correcting inequalities by lowering the
reimbursement rate for the diagnostic-related group
(DRG) codes that attracted specialty hospital busi-
12
Beyond Borders
High health care costs and inadequate access to patients for the cost of acute care received outside
specialized care are fueling fast growth in medical of their country of origin on a case-by-case basis.
tourism. Would-be patients in developed countries For some European countries, shortening waiting
are traveling thousands of miles – most often to lists may mean exporting patients to elsewhere in
India and Thailand -- to receive high-quality care at the EU, or it may mean importing health care serv-
dramatically lower costs and with no wait. Medical ices to bolster the volume of services provided and
tourism is now a multi-billion-dollar industry. In quicken turnaround times.
years past, a medical tourist was someone seeking
services that were not covered by health plans, The phenomenon of the medical tourist seeking
such as cosmetic surgery. Today, a medical tourist complex and necessary care for their well-being
is as likely to be seeking full or partial joint outside of their own “health jurisdiction” raises
replacement, cardiac surgery or even stem cell important concerns for the hospital of the future.
therapy. Typically, U.S. citizens that have gone On one hand, such medical tourism may represent
abroad have either been uninsured or under- an elaboration of an individual’s right to choose.
insured and therefore, price-sensitive to the cost of But, it may also exemplify the failure of a society to
their needed surgeries. The profile of the U.S. fulfill its social contract with its citizens.
medical tourist is changing, however, as self-
insured employers and third-party payers are A global health care marketplace is an increasing
beginning to add coverage for treatment received competitive threat for U.S. hospitals. A new study
abroad as a means to lower their own costs. from Deloitte finds that the number of patients
leaving the U.S. for medical treatment is growing at
Rather than wait months or years for an elective a faster rate than the number coming for treatment.
surgery, patients in some European countries are The study projects that U.S. health care providers
crossing borders for more immediate care. As a will lose nearly $16 billion in revenue this year to
result, some European Union (EU) countries, such outbound medical travel.27 That figure is expected
as the United Kingdom (UK), are reimbursing to grow to $68 billion by 2010, a 325 percent rise.28
Hospitals depend on having robust numbers of privately insured patients in order to

be able to treat the under- and uninsured and still remain in the black.
This scenario will be increasingly difficult to sustain.
13
13
Hospitals are “flattening” for a variety of reasons in The national focus on health care cost containment
addition to globe-trekking patients. The outsourc- strategies and increasingly unstable sources of
ing of services to offshore entities, such as for radi- funding are providing strong influence on hospitals
ology, is another way in which hospitals are to drive out waste and inefficiencies. Hospitals are
becoming more global and horizontally configured. increasingly relying on quality improvement tools
But, there are domestic factors that are influencing such as Lean and Six Sigma to create efficient,
the flattening of hospitals, as well. Specialty hospi- high-quality care processes. In addition to
tals “disaggregate” hospital services that were once improved patient safety and higher quality, many
integral to the hospital. In response, hospitals are organizations are experiencing cost savings through
striking up partnerships with physicians in these these efforts. For whom these costs are saved
ventures so that they can retain some share of the remains an issue. Many of the savings, such as
market. those derived from processes that reduce utilization
of higher cost services, accrue to health care payers
The Home Team and are revenue losers for hospitals. A realigned
Despite the impact of globalization and “disaggre- and rational payment structure that provides incen-
gation,” hospitals have a mission to fulfill to society. tives for waste reduction must accompany efforts
No new specialty hospitals or offshore services are aimed at creating an efficient – and equally effec-
being developed to serve the poor, elderly and tive – hospital industry.
under- or uninsured. With the coming squeeze on
health care pricing and increased competition, hos- New payment schemes, such as pay-for-perform-
pitals will need to adapt. They will have to learn ance, are providing hospitals with incentive to
to do more with less by squeezing out inefficien- focus on specific priorities and maximize quality
cies in care delivery. Without the prospect of related to the various measures these programs
higher reimbursement rates, hospitals will have to track. These programs will increasingly focus on
reduce their costs in order to achieve equilibrium creating efficiencies in care delivery. But, more
in the ratio of payments received to costs alignment of economic incentives with quality goals
expended. – such as improved care for the chronically ill -- is
needed. The key challenge for the hospital of the
There are some seemingly irrational health care future is to be able to fulfill its social mission in an
expenditures, that on the surface, cry out for a environment of constrained federal payment while
more efficient approach. End-of-life care is an oft- also investing in new technologies and capital
mentioned example. In the U.S., highest per capita improvements.
health care expenditure occurs in the last months
of life. Several other countries perform markedly
better by this measure and spend less on care at
the end of life. However, “to do as they do” is not
as easy as it seems. Differences in social norms,
laws, regulations and litigation trends are among
the reasons why there are no easy answers to this
complex problem.
14
Principles to Support the Economic Viability of

the Hospital of the Future:
• Encourage the alignment of hospital meas-

urement and payment systems to meet
quality and efficiency-related goals
• Apply process improvement tools to
improve efficiency and reduce costs
• Pursue coverage options to ensure patient
access to, and affordability of, health care
services
• Address the disequilibrium between the bur-
dens of general acute hospitals and specialty
hospitals in fulfilling the social mission for
health care delivery
For More Information on Hospital Economics:
• American Hospital Association,

www.aha.org
• Health Care Financial Management
Association, www.hcfma.org
• Center for Studying Health System Change,
www.hschange.org
15
15
II. Technology for the Provision of Care

More Than the Building
“…no matter what your profession – doctor, lawyer, monitoring technologies enable disease manage-
architect, accountant -- …you better be good at the ment questions and objective data – for instance,
touchy-feely service stuff, because anything that can
be digitized can be outsourced to either the smartest blood glucose levels of a diabetic patient – to be
or the cheapest producer, or both... ‘Everyone has to uploaded to their Electronic Health Record (EHR)
focus on what exactly is their value-add.’” daily. Care coordinators, who are usually nurses
-- from The World is Flat by Thomas Friedman and social workers, use these data to prioritize who
among their patients needs active care manage-
With digital technology, radiologists in Bangalore, ment. CCHT enables a single care coordinator to
India do not have to come to the U.S. to practice, support a caseload of between 120 and 150
U.S. radiology films can go to them. Even more patients depending on case mix. In selected
profoundly, digital technology is changing the locus patients, videoconferencing capabilities even allow
of care delivery and allowing for more care -- care for virtual physician office visits in the home, which
that may fall under the umbrella of the hospital -- is especially beneficial for patients living in remote
to occur outside of the hospital’s walls. areas.
In the U.S., the Department of Veterans’ Affairs This application of technology is not intended to
(VA) is on the cutting edge of using digital technol- replace the high-touch aspect of care delivery.
ogy to better meet the needs of a growing number Because of the heavy emphasis on disease man-
of military veterans, both those who are reaching agement and vital sign monitoring, CCHT helps to
their senior years and those newly returned from reduce disease complications, and allows patients
current conflicts. The VA’s national Care and caregivers to recognize sooner when a doctor’s
Coordination Home Telehealth (CCHT) Program visit or a hospital admission may be necessary.
was first implemented in 2004 to bring about a Currently, the CCHT program supports the care of
transition of institutionally based care and chronic 33,883 patients in their own homes. Outcomes
care management from hospitals and clinics to data from a cohort of 17,025 patients showed a 20
patients’ own homes when indicated and appropri- percent reduction in hospital admissions and a 25
ate. Telehealth applications combined with disease percent reduction in hospital bed days of care.29
management methods and a comprehensive elec-
tronic health record (EHR) support VA care coordi-
nators to remotely monitor patients and thereby
enhance and extend care and management.
The emphasis of CCHT is on patient self-manage-

ment and providing a program of care, rather than
the traditional episodic approach to care. Remote
16
The efficiencies and quality improvements gained patient located in a vastly different place than
through the VA’s CCHT program are helping the VA where its facility is located.
to serve more patients and change the location of
care in accordance with patient preferences. As an integrated, single-payer system, standardiza-
Veteran patients receiving CCHT care have a mean tion and innovation is perhaps easier to achieve in
satisfaction score of 86 percent.30 CCHT is part of the VA system than in hospitals and other health
a larger transition in the location of care for care providers that operate in a more fragmented
patients that is making care more accessible and environment. Implementation of new models of
convenient for veteran patients. In 1995, the VA care like the CCHT involve changes in clinical prac-
system had 50,000 hospital beds; today it has tice, technology infrastructure and business
18,000 with the addition of over 1,000 sites of care processes. Given the underlying need to care for
in local communities that provide primary and greater numbers of patients with chronic disease,
ambulatory care. In the intervening period, the VA telehealth and remote patient monitoring could
has become markedly more efficient with a rela- have the same evolutionary impact outside of the
tively modest increase in clinical staffing, but a dra- VA as it has had within.
Mighty I.T.
matic rise in the number of patients served –
increasing from 2.5 million to 5 million in the same
time frame. Like its counterparts in the non-federal At the core of the VA’s Care Coordination Program
health system, the VA has to do more with less. is a comprehensive electronic health record system
that is in standard use across VA health delivery
The migration of care from the hospital bed and sites, including remotely delivered care in the
physician office to the home that is allowed home. In fact, the VA has the largest enterprise-
through technology invites the redefinition of the wide health information system in the U.S. Outside
hospital. Rather than being defined by its number of the VA, only approximately 11 percent of non-
of beds, the “value-add” of the hospital of the federal hospitals31 and 12 percent of physician
future may be its intellectual property. A hospital practices 32 have implemented comprehensive
will be able to lend its expertise to the care of a electronic health records.
Rather than being defined by its number of beds, the “value-add” of the hospital
of the future may be its intellectual property.
17
17
Many other countries, including the United For its part in advancing the adoption of electronic
Kingdom, Germany, Denmark, Australia and health records, the federal government created the
Canada have moved ahead of the U.S. in deploying Office of the National Coordinator for Health
health information technology. In fact, the U.S. Information Technology (ONC) within the
lags a dozen years behind other industrialized Department of Health and Human Services (HHS).
countries in health information technology (HIT) ONC’s primary purpose is to coordinate the devel-
adoption.33 opment of standards that will allow for interoper-
ability between systems, and a national health
In all of the countries that have implemented information network through which health informa-
national HIT programs, the costs have been paid tion can be exchanged.38 In 2005, HHS created the
by the government and health insurers, and not by American Health Information Community (AHIC).
the health care providers.34 These countries have This federal advisory committee includes represen-
viewed their investment in HIT as a public good, tatives from both the private and public sectors and
the benefits of which – reduced costs and is charged to provide recommendations to HHS on
improved quality -- will mainly accrue to health making health records digital and interoperable, as
care payers and patients.35 Implementation chal- well as capable of protecting the privacy of patient
lenges in these countries are also far easier to over- information. HHS is now in the process of transi-
come given their relatively simple payer structures tioning the AHIC to a successor organization under
and centralized decision-making capacity as com- funding to the Brookings Institution and LMI
pared to the U.S. With fewer payers – and in some Consulting. It is envisioned that the AHIC-2 will
cases, such as in the U.K., centralized vendor selec- not start from whole cloth, but will learn from and
tion -- the ability to standardize nomenclature and enhance the work of the existing AHIC’s efforts to
build an interoperable platform is made easier. promote electronic interchange of information.
AHIC-2 is expected to be even more inclusive than
In the U.S., attempts by payers, coalitions and over- AHIC and may also involve some regional loci for
sight bodies to influence the rate of adoption of its work.
HIT have had mixed results. Following the IOM’s
release of To Err is Human in 1999, the Leapfrog
Group – a consortium of large employers – estab-
lished its first “leaps” in patient safety for hospitals
serving their employees to meet. Among this first
set of standards was the requirement that hospitals
implement computerized physician order entry
(CPOE) systems. Although this requirement came
in 2000, still only about five percent of all U.S. hos-
pitals have a CPOE system.36 Clearly, this leap has
fallen short. Leapfrog attributes this to the sheer
cost of implementing CPOE and resistance by
physicians.37
18
In the meantime, HHS has launched demonstration Issues of interoperability remain generally unsolved
projects through which it provides financial incen- as of today. While health care policymakers and
tives for health care practitioners to use HIT. The standards bodies hammer out solutions for achiev-
Medicare Care Management Demonstration, in part, ing interoperability of systems that will allow for
provides additional payment to physicians who use data sharing between separate entities, many health
an EHR certified by the Certification Commission care providers see this as a reason to wait to invest
for Healthcare Information Technology (CCHIT) to in HIT. Unsolved issues around data privacy and
electronically submit performance data on 26 meas- fear of system obsolescence further fuel their hesi-
ures. The most recent demonstration project tancy. In the meantime, lack of interoperability
allows CMS to make bonus payments to small between HIT systems and medical devices that
physician practices that use a certified EHR for clin- have an HIT component – such as hospital beds
ical documentation and e-prescribing. Payments that take readings of vital signs but do not integrate
are determined based on the practices’ perform- with the EHR – slow the workflow of care
ance on specific quality measures. providers. Indeed, nurses are often the “integra-
tors” of patient information between HIT systems.
It may be that many hospitals still need to be con- As new technologies are added to the workplace, it
vinced of the value of HIT. While there is a strong is essential that they be labor-saving in order to
evidence base supporting claims that such HIT sys- conserve already stretched professional resources.
tems yield significant benefit for the safety and
quality of health care, there has been insufficient Buy or Beware
research conducted to support the return on invest- With a well-funded biotechnology industry, new
ment from HIT.39 And, the level of required invest- technologies are constantly being created with the
ment can be substantial. Initial implementation hope of creating a new disease market or need.
costs may range from several hundred thousand This constant barrage of technology purchasing
dollars for initial implementation in a physician decisions may be difficult to navigate since any
office to millions in a community hospital to tens of new purchase creates an opportunity to increase
millions of dollars in an academic medical center. costs – and waste -- in the system. Adding certain
Annual maintenance of the systems can cost tens of new technologies into the health care work place
thousands to several million dollars. can be very disruptive to work flow and exacerbate
inefficiencies. Technologies that are not integrative
Many are also wary of the work flow disruptions with other technologies add very little value to the
that a full-scale IT implementation can cause. patient’s care and the health care worker’s practice.
Enhancing work flow and care process redesign
needs to be part and parcel of the implementation
plan. Failure to do so can serve to codify already
broken or defective care processes. Involving clini-
cal staff who will be using the technology – at the
patient’s bedside, in the office, pharmacy, lab and
home – in its development and providing follow-
on training are key to its success.
19
19
With a plethora of cutting-edge information and Principles to Guide Technology Adoption for
clinical technology purchasing decisions to be the Hospital of the Future:
made under a tight budget, health care profession-
• Establish the business case and sustainable
als could use an objective authority to help guide
funding sources to support the widespread
their value-based investments.
adoption of health information technology
• Redesign business and care processes in tan-
From 1974-1995, the Congressional Office of
dem with health information technology to
Technology Assessment (OTA) provided Congress
ensure benefit accrual
with objective analysis of contemporary issues
• Use digital technology to support patient-
involving science and technology. OTA reports
centered hospital care and extend that care
were highly authoritative and well respected.40
beyond the hospital walls
Similar functions in other countries were even
• Establish reliable authorities to provide tech-
modeled after the OTA.41 But, these reports were
nology assessment and investment guidance
sometimes unpopular, especially when their con-
for hospitals
clusions ran counter to the interests of affected
• Adopt technologies that are labor-saving and
industries. The OTA lost its funding in 1995.
integrative across the hospital
The loss of the OTA has left a void. In 2004, a

new bill to re-establish some of the capabilities of
For More Information on Hospital-related
the OTA was defeated; however, many feel that
Technology:
Congress would benefit from expert analyses of
many of the complex scientific and technological • Office of the National Coordinator for
issues that are often a source of debate. Health Information Technology,
www.hhs.gov/healthit/onc/mission
Though there are private-sector sources for infor- • American Medical Informatics Association,
mation to support technology decision-making, the www.amia.org
OTA served as a public source for much-needed • Health Information Management Systems
information. Society, www.himss.org
• Health Technology Center,
www.healthtechcenter.org
20
III. Achievement of Patient-Centered Care

The Main Point
At Cincinnati Children’s Hospital, family members When it comes to their health, patients often do
are included in patient rounds in the pediatric not act alone on their own behalf, but their health
intensive care unit and the hospital encourages care decisions are intertwined with those closest to
family-centered rounds on all of its clinical units.42 them – their family members or others to whom
MCG Health System in Augusta, Georgia relies on they are emotionally tied. Family, then, is the third
its Patient and Family Advisory Council to inform part of the triumvirate in the health care partner-
the physical design of its care environments and ship.
even its compliance with Joint Commission
National Patient Safety Goals.43 Across its various The Institute for Family-Centered Care defines the
advisory councils, the University of Washington core concepts of patient-centered care as:45
Medical Center recruits patient and family member 1. Dignity and Respect – Health care practitioners
volunteers to interview and select residency candi- listen to and honor patient and family perspec-
dates, and to develop patient educations materials tives and choices. Patient and family knowledge,
and other supportive programs for patients and values, beliefs and cultural backgrounds are
family members.44 incorporated into the planning and delivery of
care.
As a result of revelations concerning patient safety, 2. Information Sharing – Health care practition-
hospitals have had to look inward at practices, ers communicate and share complete and unbi-
policies and even the cultures and attitudes that are ased information with patients and families in
prevalent in their delivery settings. In so doing, ways that are affirming and useful. Patients and
there is now renewed emphasis and acceptance families receive timely, complete, and accurate
that it is the patient who is at the center of care. information in order to effectively participate in
Not only is the patient the main point, but the care and decision-making.
patient has the greatest stake in their care and as
such, should be respected as an equal partner in
their care. The elevation of the patient to partner
is not a ceremonial title bestowed for a “feel good”
moment, but has significant implications for the
quality and safety of patient care.
The elevation of the patient to partner is not a ceremonial title bestowed for a “feel
good” moment, but has significant implications for the quality and safety of patient care.
21
21
3. Participation – Patients and families are Another study of patients hospitalized for acute
encouraged and supported in participating in myocardial infarction found that patients who rated
care and decision-making at the level they hospitals poorly on Picker Institute measures of
choose. patient-centered care had poorer health outcomes
4. Collaboration – Patients and families are also than those who experienced more patient-centered
included on an institution-wide basis. Health care.48
care leaders collaborate with patients and fami-
lies in policy and program development, imple- The experiences of MCG Health System in Augusta,
mentation, and evaluation; in health care facility Georgia attests to the prospects for patient-centered
design; and in professional education, as well as care in improving quality and safety. In 2003, the
in the delivery of care. health system redesigned its intensive care unit for
neuroscience patients to allow patients’ families to
Another resource for patient-centered care guid- stay with them at all times.49 The observances of
ance is Planetree. Planetree is a non-profit organi- family members were valued by the unit’s clinical
zation that provides education and information to staff. Owing to these insights and improved com-
health care organizations to facilitate the delivery of munications, medication errors in the unit
patient-centered care. Planetree’s Patient-Centered decreased 62 percent, length of stay decreased 50
Care Designation Program recognizes hospitals that percent, and the staff vacancy rate fell from 7.5 per-
meet its criteria for patient-centered care. These cent to zero.50 Patient satisfaction ratings increased
criteria have been compiled based upon the expe- from the tenth percentile to the 95th.51 In the words
riences of hospitals who have achieved patient-cen- of an MCG staff member, the families “helped us
tered care, as well as the feedback of patients. The help their loved ones.” 52
criteria are used to measure organizations’ struc-
tures and functions that support patient-centered
care concepts; human interactions; patient educa-
tion and community access to information; family
involvement; nutrition; the architecture and interior
design of the healing environment; art programs;
spirituality and diversity; integrative therapies; com-
munity health; and measurement.46
Nothing Without Me
Engaging patients in their care has real implications
for the quality and safety of patient care. A large
study of adult patients with chronic or serious con-
ditions who were engaged in a collaborative care
model had better control of their blood pressure,
blood glucose levels, and serum cholesterol than
patients who had less confidence either in their
doctors or their ability to care for themselves.47
22
Engagement of patients and families empowers being similarly engaged.54 The World Health
patients to participate in care decisions, provide Organization (WHO) has also made patient and
self-care, and protect themselves from potential family engagement in patient safety improvement a
harm. In fact, The Joint Commission’s National major priority of its World Alliance for Patient
Patient Safety Goal 13 specifically requires health Safety, launched in 2004.55
care organization staff to encourage patients’ active
involvement in their care as a patient safety Patients and families are also driving momentum.
strategy. Goal 13 further requires staff to identify Several patient advocacy organizations, such as
ways in which the patient and his or her family can Partnerships for Patient Safety (p4ps) and PULSE
report concerns about safety and encourage them are organized around the goal of advancing
to do so. The rationale for this goal states that patient-centered care and improving patient safety.
“communication with the patient and family about
all aspects of care, treatment, and services is an Social momentum for patient-centered care is also
important characteristic of a culture of safety. When likely to increase with the growth of consumer-
the patient knows what to expect, he or she is directed health plans and health savings accounts
more aware of possible errors and choices. The (HSAs). Such health plans increase the health care
patient can also be an important source of informa- consumers’ responsibility for making value-based
tion about potential adverse events and hazardous health care purchasing decisions.
conditions.” The aspect of patient empowerment
within patient-centered care has led to the notion Technology is another momentum-building factor.
of “nothing about me, without me.” The advent of personal health records (PHRs) will
provide patients with “point and click” access to
Momentum their own health records as well as enhanced com-
In addition to Joint Commission standards and munications capabilities with their care providers.
safety goals, other organizational and professional Technology that is allowing patients to receive
accrediting bodies increasingly emphasize the higher levels of care in their homes underscores
importance of engaging patients in the delivery of the need for a patient-centered approach to care,
care. In the U.S., the inclusion of information per- especially as their role as “partner” in care delivery
taining to patients’ perspectives of care on the CMS becomes a 24/7 endeavor. These patients and fam-
Web site, Hospital Compare, provides a powerful ilies need personalized education and training, as
incentive for hospitals to better meet the expecta- well as a professional support system so that the
tions of patients. The survey – called H-CAHPS – transition to home-based care is safe and effective
addresses issues such as the quality of nurse and for all involved.
physician communications with patients, discharge
instructions, and medication education. In the
international arena, the U.K. National Health
Service (NHS) is requiring its hospitals and primary
care clinics to engage patients and family in quality
improvement efforts.53 Across Canada, patients are
23
23
Custom and Culture

While momentum is certainly building and the con- For the hospital of the future, care must be increas-
cept of patient-centered care is widely embraced, ingly customized to the personal expectations, cul-
much is still getting lost in the execution. There tural beliefs and traditions, and language needs of
are barriers, not the least of which is the height- the patient. In eliciting patients’ needs and expec-
ened need for patient education when practitioners tations of their care, hospitals may need to perform
seemingly have less time to spend with patients – an intake interview that covers these topics at the
ala the 10-minute office visit. There are also issues time of admission.
of health literacy – in the U.S. alone, nearly half the
population lacks the skills necessary to obtain, Instilling patient-centered care is not just about
process, and understand basic health information changing policies and practices; it is about chang-
and services needed to make appropriate health ing culture, which is never easily done. For staff to
decisions.56 be empathetic to patients, the hospital must also
have an empathetic culture for staff. Staff members
The focus in patient-centered care on transparency need to be supported through systems that protect
can make hospital risk managers uneasy. Yet, sev- them from harm – and from doing harm. In the
eral studies have revealed that what patients really absence of such cultures and work environments,
want – open disclosure, communications and col- staff members may become overburdened and
laboration – nurtures, rather than harms, patient increasingly demoralized. To achieve a culture that
and caregiver relationships.57 is patient-centered and supportive of staff, hospital
leadership and staff must share common beliefs
It is also important to underscore what patient-cen- and values. Coming to these common beliefs and
tered care is not. In some countries, the term is a values may be the hardest part of achieving cultural
euphemism for a lower tier of care, where the de change.
Serving the Underserved

facto caregiver is the family – not in partnership
with practitioners – but on their own. There are
other cultural differences to patient-centered care. In the U.S., there are specific populations who are
In Thai culture, the family will stay at the patient’s the least likely to receive patient-centered care. For
bedside round-the-clock and help with feeding and minority groups and the poor, disparities in health
personal support. But, neither a Thai patient nor care quality and access persist. The 2007 National
family member will generally participate in deci- Healthcare Disparities Report issued by the Agency
sion-making -- that is the province of the physician, for Healthcare Research and Quality reveals that,
whose level of education is held in high esteem. overall, disparities have not been reduced despite
In any country, it is also important to recognize the growing body of evidence of their existence,
that not every patient wants to be a partner in their though there have been small gains.58 Positive
care, nor do they wish their family to be. The level examples include the adequacy of hemodialysis for
of partnership may vary – some patients may wish Black and for White patients, and the hospital
to be 50/50 partners, others may wish for much admission rate among Hispanics and the poor and
less. their White, affluent counterparts for perforated
appendix.59
24
These small gains are offset by the persistence of year. In a 2007 AHA survey, 42 percent of hospi-
wide disparities in health care quality that have tals reported an increase in boarding behavioral
resulted in disproportionate numbers of minorities health patients in the emergency department.67
and poor who have AIDS, lower immunization
rates, and lack access to prenatal care, among other The boarding of psychiatric patients brings its own
examples of unequal treatment.60 particular strain and costs. Crowded emergency
departments, with staff and resources stretched
Sometimes it is the provenance of their illness that thin, cannot provide the intense care and monitor-
creates disparate access to quality health care for ing psychiatric patients in crisis need, which is best
patients. Mentally ill patients are perhaps the most provided in an appropriate setting and by specially
underserved patient population today. A report trained health care workers.
On The Rise
from a special commission to President Bush claims
that half of Americans who need mental health
care are not getting it, even if they have sought it.61 Today, half of all hospitalized patients have one or
Mainly due to a payment system that does not sup- more chronic condition, such as diabetes, heart dis-
port the provision of psychiatric care, many hospi- ease and asthma. The prevalence of chronic illness
tal-based and free-standing psychiatric services is expected to steadily increase. By 2030, it is esti-
have closed or reduced their number of beds.62 In mated that 171 million people will have at least
fact, from 1995 to 1999, the number of psychiatric one chronic illness.68 By this same year, older
beds in this country shrunk by 38 percent.63 All the adults will account for more than 20 percent of the
while, demand for inpatient psychiatric care has population.69 While older adults are expected to
climbed,64 leaving the mentally ill often with live longer, this will not be without personal health
nowhere else to turn but to the hospital emergency challenges. More than 75 percent of adults over
department for care. In fact, emergency depart- age 65 suffer from at least one chronic condition,
ments across the country report an influx of men- and many have multiple conditions.70 Among cur-
tally ill patients coming through their doors.65 rent Medicare beneficiaries, 20 percent have five or
With so few alternatives to place these patients in a more chronic conditions.71
psychiatric bed, the emergency department often
holds these patients for hours, even days.66
Though the roots of the problem began more than
a decade ago, it is a problem that worsens year to
For the hospital of the future, providing patient-centered care means better meeting the
needs of all of its patients, including the underserved, the aged and the chronically ill
who will fill its beds in greater numbers.
25
25
Aging is not the only factor driving the burgeoning Patient-Centered Transformation
ranks of the chronically ill. Owing to its significant- To increase their reliability in delivering patient-
ly higher rates of obesity and smoking, the U.S. has centered care, hospitals can turn to the process
a significantly higher rate of associated diseases – improvement tools -- such as Six Sigma and Lean,
such as diabetes, hypertension and heart disease – among others -- that have proved effective for
than European countries.72 According to the transforming other industries. A glimpse of that
Centers for Disease Control and Prevention (CDC), transformation can be seen at hospitals like Virginia
80 percent of diabetes, heart disease and stroke Mason Medical Center in Seattle, which has applied
could be eliminated through reductions in smoking these tools to improve the quality of care for
and obesity.73 patients with low back pain and other conditions,
increase adherence to evidence-based care, and
There is widespread recognition that care for the decrease costs.80 In ThedaCare hospitals in south-
chronically ill in the U.S. is falling short. An oft- ern Wisconsin, application of these methods to
cited report from RAND indicates that the chroni- general medical units has allowed the hospitals to
cally ill receive approximately half of recommend- reduce medication errors, the average amount of
ed care.74 At the root of this issue is the predomi- time these patients are hospitalized, and the fees
nant organization of the health delivery and pay- charged for certain procedures.81 New York-
ment system to support the diagnosis and treatment Presbyterian Hospital used these tools to reduce
of acute, or episodic, conditions.75 Patients with average length of stay for patients undergoing car-
chronic illness, especially those with multiple con- diac and orthopedic procedures, reduce medication
ditions, often receive care from multiple providers errors and patient falls, and increase patient satis-
and take many medications.76 Because this care is faction rates.82
uncoordinated, patients may experience duplicative
services and testing, avoidable hospitalization, and
adverse drug events.77 As a result, care is often
fragmented, ineffective and costly for people with
chronic diseases.78 Optimal care for people with
chronic diseases involves coordinated, continuous
treatment by a multidisciplinary team of health care
professionals.79 These patients need education and
tools to support self-management, and connections
to community resources for their social, mental
health and home health needs.
For the hospital of the future, providing patient-

centered care means better meeting the needs of
all of its patients, including the underserved, the
aged and the chronically ill who will fill its beds in
greater numbers.
26
Principles to Guide Achievement of Patient-

Centered Care in the Hospital of the Future:
• Make adoption of patient-centered care val-

ues a priority for improving patient safety
and patient and staff satisfaction
• Incorporate patient-centered care princi-
ples into the activities of hospital oversight
bodies and transparency initiatives
• Address barriers to patient and family
engagement, such as low health literacy
and personal and cultural preferences
• Eliminate disparities in the quality of care
for minorities, the poor, the aged and the
mentally ill
• Improve the quality of care for the chroni-
cally ill through adoption of care models
that encourage coordinated, multi-discipli-
nary care
• Use robust process improvement tools to
improve quality and safety, and support
achievement of patient-centered care
For More Information on Patient-Centered

Care:
• The Institute for Family-Centered Care,
www.familycenteredcare.org
• Planetree, www.planetree.com
• Partnership for Patient Safety (p4ps),
www.p4ps.org
• PULSE, www.pulseamerica.org
• Institute for Healthcare Improvement,
www.ihi.org
27
27
IV. The Staffing Challenge

Wide and Deep
Hospitals rank second as a source of private-sector relat-ed mortality, failure to rescue, and higher risk
jobs nationwide.83 In urban areas, hospitals are of complications, among other negative patient out-
among the top ten employers, and are often the comes.92 In addition, beds that are not staffed can-
largest employer in rural areas.84 Health care, not be filled by patients, undermining the admis-
broadly, contributed more jobs to the economy sions process, especially admissions from the emer-
than any other industry in the last several years.85
gency department (ED). Nearly half of all hospital
Still, the demand for certain health professionals
emergency departments report being at or over
outstrips supply.
capacity, and the majority of urban hospitals expe-
rience time on diversion – when they are closed to
Workforce shortages have persistently plagued hos-
pitals over the last several years. In 2007, as well incoming ambulances.93 The primary reason for
as in previous years, it has ranked in the top five going on diversion is a lack of staffed critical care
issues confronting hospital CEOs according to a beds.94 Staffing shortages, overall, are among the
poll conducted by the American College of top five conditions that lead to ambulance
Healthcare Executives. Staffing problems are wide- diversion.95
spread across health care professions. Therapists –
physical, occupational and speech – are in espe- In addition to ED overcrowding and diversion,
cially short supply and increasingly difficult to about half of hospitals report that staffing shortages
recruit from year to year.86 Vacancy rates for these contribute to decreased staff satisfaction.96
positions exceeded 11 percent by year-end 2006.87 Decreased patient satisfaction, reduced numbers of
Registered nurses, pharmacists, nursing assistants, staffed beds, increased length of stay, increased
licensed practical nurses, and laboratory and imag- wait times for surgery, as well as cancelled surger-
ing technicians all have vacancy rates in the range ies also follow in the wake of staffing shortages.97
of six percent for technicians to eight percent for
RNs.88 There is also growing national concern over Low staff satisfaction is a persistent problem for
shortages of physicians – already a problem in sev- many hospitals. Hospital-based nurses, for
eral states – that is expected to worsen as demand instance, have job dissatisfaction rates that are three
outstrips supply. By 2020, the U.S. may be short to four times higher than the average U.S. worker.98
85,000 physicians.89 It is not just the frontline clini- Low dissatisfaction rates among nurses is not an
cians that are difficult to hire and retain. Hospital American phenomenon, but occurs in other coun-
executive positions have high turnover. As many as tries where it has been studied, such as Canada,
half of nurse executives,90 and 14 to 18 percent of England and Scotland.99 Yet, the sentiment is not
chief executive officers,91 will leave their jobs in a universal.
year.
Nurses employed in facilities that have been award-
Pervasive staffing problems challenge the ability of ed Magnet Recognition® from the American Nurses
the hospital to perform its most fundamental func- Credentialing Center (ANCC) report being more sat-
tions. Studies show that there is an association isfied with their work. In addition to higher staff
between registered nurse staffing and hospital- satisfaction, Magnet status strengthens nursing
recruitment and retention efforts.100
28
Independent studies show that patients in Magnet The practice of health care worker importation and
hospitals have shorter lengths of stay, lower mortali- exportation is, of course, unsustainable. But, it begs
ty rates and higher satisfaction, and benefit from a the question: Who will staff the hospital of the
richer staff mix.101 future?
A Global Predicament Stops and Starts

As perhaps the most in-demand health care resource In the U.S., a poor economy is driving people back
across the globe, plenty of nurses are being “in- to work and providing some optimism for a more
sourced” into other countries. The U.S. has long robust nursing workforce. New research finds that
depended on migrating nurses to fill its growing gap after a net loss of more than 10,500 nurses in 2004
between nurse supply and demand. This practice and 2005, health care gained roughly 18,700 nurses
also occurs in other highly developed countries, at in 2006.108 In 2007, the industry added 84,200 nurs-
the expense of the less developed, where many es despite a drop in real wages.109 Current projec-
migrating nurses originate. tions for the shortage of nurses in the U.S. puts the
number at 340,000 by 2020, which is significantly
Nurses are not the only migrating health care fewer than previous projections of 760,000.110
worker. Physicians, pharmacists and lab technicians
are on the move as well. The WHO reports that the An important distinction of the evolving shortage is
situation of migrating workers is most desperate in that the nurses who have stepped forward to help
poor countries and continents. Africa, for instance, fill the gap are markedly older – in their late twen-
holds 11 percent of the world’s population, but it ties and early thirties – whereas the number of new
hosts 25 percent of the disease burden, and yet, it entries in their early to mid-twenties is at the lowest
employs three percent of all health care workers.102 level in 40 years.111 As the average age of the
Twenty-five percent of African-trained doctors work nurse moves upward, there are implications for
in wealthy Organisation for Economic Co-operation hospital design and ergonomics that are needed to
and Development (OECD) countries.103 In Ghana, support the health and longevity of the nurse on the
40 physicians graduated in 2004 from the govern- job.
ment-financed medical education system, but only
two remained in the country.104 The others left for During the first year on the job, the average volun-
either the U.S. or U.K. to practice.105 The shortage tary turnover rate of new hospital nurses is 27 per-
of health care workers is exacerbating the devasta- cent.112 This likely reflects the combination of inad-
tion wrought by the AIDS crisis in Africa.106 equate educational preparation of the nurse for the
realities of practice, as well as longstanding work
According to the WHO, because of the shortage of environment issues that have contributed to low
health care workers at least 1.3 billion people satisfaction rates of hospital-employed nurses.113
around the world have no access to basic health Among these issues are long shifts and persistent
care services.107 In response, the WHO is pressing fatigue; lack of leadership that empowers nursing
countries across the globe to address the ethical and staff; unavailability of supportive technologies; and
financial impacts of worker migration, as well as lack of innovation in redesigning and improving the
efforts to retain workers within their country of role and workflow of the nurse.
origin.
29
29
A recent time and motion study to determine how Administration (FDA) has approved more than
medical-surgical nurses spend their time found that 500,000 new medical devices. At the same time,
nearly three-quarters of nurses’ time was spent on ever-increasing developments in pharmaceuticals,
documentation, medication administration and care biologics and genomics are expanding the knowl-
coordination, but only one-fifth of their time was edge demands of practitioners. While many
spent on direct patient care.114 Further, nurses advances in technology help to improve patient
walked between one mile and five miles every shift outcomes, the sheer volume of technologies and
in an effort to “hunt and gather” needed supplies the attendant knowledge required has made health
or information.115 The inordinate amount of time care delivery vastly more complex. Additionally,
spent on documentation – almost one-third of all of new technologies often provide new, sometimes
their time – points to the need to examine the role unforeseen, opportunities for error.
of the nurse and its inherent processes. Few nurs-
es would cite “paperwork,” as necessary as it is, as The impact of this developing complexity weighs
the reason they chose nursing as their profession. heavily on the hospital-based clinician. One way
in which the nursing profession has responded is
A major bottleneck in efforts to add new nurses to by the creation of the Clinical Nurse Leader™ role.
the workforce remains a lack of capacity at the The American Association of Colleges of Nursing
educational level. According to data from the (AACN) has developed this new nursing role to
American Association of Colleges of Nursing better prepare nurses for clinical leadership in all
(AACN), enrollment in entry-level baccalaureate health care settings. These masters’-prepared
nursing programs increased by almost five percent nurses are expected to be direct caregivers, manag-
from 2006 to 2007. While this increase represents a ing the care of patients within clinical microsys-
positive enrollment trend over the past several tems. The Clinical Nurse Leader™ certification
years, more than 30,000 qualified applicants were process ensures that these nurses bring evidence-
denied entry into baccalaureate nursing programs based practices to care settings and are able to
in 2007 due primarily to an intensifying shortage of apply quality improvement principles to the meas-
nurse faculty. The gap between supply and urement, assessment and improvement of patient-
demand in the nursing workforce will be difficult care outcomes. According to the AACN, currently
to fill without resolution of the crisis in nursing about 60 colleges and universities offer the master’s
education capacity. degree program that prepares the Clinical Nurse
Leader.™
High Touch, High Tech
As patients’ needs and health care delivery become
ever-more complex, it is difficult for clinicians to
keep pace. Hospitalized patients have higher acu-
ity and are more likely to have comorbidities, while
hospital stays have shortened. Average length-of-
stay for hospitalized patients has declined by 25
percent since the 1980s.
Since the late 1990s, the Food and Drug
30
Scientific progress, such as new developments in in a greater reliance on trained and certified phar-
biologics, genomics, robotic preparation and auto- macy technicians, who assist with the preparation
mated distribution, is affecting the level of techno- and delivery of medications.119
A Changing of the Guard

logic expertise that the hospital pharmacist must
have. In fact, the profession raised the entry-level
degree for a pharmacist to a doctorate (Pharm.D) A changing of the guard has been occurring in
to ensure a better-prepared pharmacist workforce. hospitals over the last several years, a change that
Many pharmacists who practice in hospitals also is likely to become the standard in hospitals of the
complete residency training.116 The downside of future. Hospitalists – physicians who practice pri-
this higher standard is that it created a roadblock marily hospital-base care – have been increasingly
for the entry of new pharmacy students. Indeed, staffing U.S. hospitals. It is estimated that by 2010,
hospitals surveyed by the AHA reported an eight 30,000 hospitalists will be staffing U.S. hospitals.120
percent vacancy rate for pharmacists at the end of As hospitalists are gaining prevalence, the concept
2006.117 is also expanding from general practice and inter-
nal medicine to include medical and surgical
The role of the hospital pharmacist is expected to specialists.
change as well. Always a valued member of the
health care team, the role of the pharmacist is The recent growth of the hospitalist movement in
likely to become more visible in patient-centered the U.S. can be attributed to a number of factors.
care delivery as a way to combat the high volume Fewer office-based primary care physicians choose
of medication errors that occur in the hospital to provide hospital-based care. Work hours for res-
setting. As hospital pharmacists become more idents, who have traditionally provided 24/7 hospi-
involved in direct patient care, there is a requisite tal care, have been reduced in recent years. Hosp-
need to accommodate new learning in the educa- italists fill these gaps by providing acute care
tion and training of pharmacy students. There are expertise to patients throughout their hospital stay.
concerns that hospitals and health systems may not A recent study in the New England Journal of
have the capacity to accommodate the growing Medicine found that patients cared for by hospital-
numbers of pharmacy students who will require ists have average lengths of stay in the hospital and
this experiential education.118 The involvement of associated costs that are slightly reduced.121
pharmacists in direct patient care has also resulted
As patients’ needs and health care delivery become ever-more complex, it is difficult for
clinicians to keep pace. Hospitalized patients have higher acuity and are more likely to
have comorbidities, while hospital stays have shortened.
31
31
Team-Based Care
With staffing shortages still looming in the hospital As the number of older adults and patients with
of the future, hospitals may need to accomplish one more chronic illness rises, so too, must the
more with fewer health professionals. Well func- competencies of those who provide their care.
tioning teams can get more done than any one Hospitals play a key role in fostering the compe-
individual. Teamwork also has a significantly posi- tence of all health care workers in caring for geri-
tive impact on the safety of health care delivery.122 atric patients.127 Hospitals must also increase the
Studies show that well functioning teams make recruitment and retention of geriatric specialists and
fewer mistakes than do individuals.123 caregivers.128
Acquisition of team skills does not occur by hap- Team-based care models may be expanded and
penstance. Health professionals must be educated bolstered by the potential payment model
and trained to value and demonstrate desired team advocated by the Medicare Payment Advisory
behaviors. To that end, knowledge of teamwork Commission (MedPAC). MedPAC recommends a
components and the competencies required to bundled Medicare payment approach, under which
effectively participate as team members should be physicians and hospitals receive a fixed payment
introduced early in health care professional educa- for a select set of episodes of care. An episode is
tion and fostered throughout professional training defined as the hospital stay plus 30 days after
and continuing education. Further, teamwork discharge.129 Today, physicians and hospitals are
skills, knowledge and performance should be paid separately under different payment schemes
incorporated into the oversight and assessment of by CMS for hospital-based care. A bundled
health professionals and organizations in order to approach, it is believed, will reduce variation
ensure and sustain its widespread adoption. Both in costs and quality and encourage joint
classroom and simulator-based methodologies can accountability. This concept will be tested by
be used for team training. CMS beginning in January 2009 with its Acute Care
Episode (ACE) demonstration, which will offer
In addition to team skills, members of the care-giv- bundled payment for 28 cardiac and nine orthope-
ing team must have the requisite knowledge and dic inpatient surgical services in four states.130
skills to effectively care for older adults and the Among the many expectations for bundled pay-
chronically ill. Today, older adults account for 35 ment is that it will influence physicians and hospi-
percent of all hospital stays, 26 percent of all physi- tals to closely integrate their services, which will be
cian visits, and 34 percent of all prescriptions.124 necessary in order to accept bundled payments.
Yet, less than one percent of registered nurses and
pharmacists are certified in geriatrics.125 While
more than 7,000 physicians are currently certified in
geriatrics, the need is much greater. By 2030, it is
estimated that 36,000 geriatricians will be needed to
care for the burgeoning population of older
adults.126
32
Principles to Address the Staffing Challenge of

the Hospital of the Future:
• Address the maldistribution of health care

workers across the globe by instilling fair
migration and compensation policies for
affected countries
• Expand health professional education and
training capacity to accommodate the grow-
ing demand for health care workers
• Create work place cultures that can attract
and retain health care workers
• Support the development of health profes-
sional knowledge and skills required to care
for patients in an increasingly complex
environment
• Educate health professionals to deliver team-
based care and promote teamwork in the
hospital environment
• Develop the competence of health profes-
sionals to care for geriatric patients
For More Information on Hospital Staffing:
• Robert Wood Johnson Foundation/Institute

for Healthcare Improvement, Transforming
Care at the Bedside, www.rwjf.org/appli-
cations/solicited/npo.jsp?FUND_ID=54244
• American Hospital Association, In Our
Hands, www.aha.org/aha/resource-cen-
ter/Statistics-and-Studies/ioh.html
• Institute of Medicine, Retooling for an Aging
America: Building the Health Care
Workforce, www.nap.edu/catalog/12089
• American Nurses Credentialing Center,
Magnet Recognition Program,
www.nursecredentialing.org/Magnet
33
33
V. Design of the Physical Environment

Safe by Design
Though the recent economic downturn and a tight- transfers, among them – can be mitigated through
ened credit market has slowed hospital construc- evidence-based design. Better lighting and reduced
tion in the U.S., there has been a remarkable hospi- noise levels can help avoid distractions that often
tal building boom underway fueled by increasing lead to caregiver errors in the medication process.
demand for health care services and increasingly Decentralized nursing stations allow nurses to bet-
obsolete hospital plants. In 2007, $35.4 billion in ter see and hear the patients under their care and
health care construction projects were completed, observe changes in skin color and breathing, as
more than a $10 billion increase from the previous well as to prevent falls that occur when a patient is
year.131 Projections foresee the health care industry unobserved. Rooms that are designed for the
among the only bright points for construction in patient bed and bathroom entrance to be seen
the next couple of years.132 This investment offers from the hallway also enhance observation. Multi-
the opportunity to remake the hospital -- its design, acuity beds that reduce the number of transfers, or
culture and practices – to better meet the needs of “hand-offs,” of patients from one unit to another, in
patients and families and the aspirations of those turn, reduce the opportunity for errors to occur.
that provide their care.
The regulatory infrastructure can stifle design inno-
Building more of the same will freeze into place vations meant to reduce the risk of patient injury.
persistent problems with which hospitals must Though multi-acuity beds that allow a patient to
already contend -- such as unsafe care, hospital- remain in the same bed while their care level is
acquired infection, and worker fatigue – that other- stepped down from critical care to medical-surgical
wise could be mitigated through the application of nursing may make sense, in some states they do
evidence-based design. Several hundred studies not meet state licensure stipulations regarding
have revealed hospital design characteristics that patient bed designations and thereby are disquali-
work for improving patient safety and health care fied for reimbursement.
outcomes, and providing a supportive environment
for hospital staff.133 Single-patient rooms may have the single most
important impact on patient safety. In addition to
Yet, most new hospitals are not being built “safe by enhancing patient privacy, allowing for confidential
design.” New hospitals will increasingly care for discussions and accommodating family members,
more elderly patients. And, as more care moves single rooms help protect patients’ health.
out to ambulatory and home settings, hospitalized
patients will be the sickest and most vulnerable.
More than ever, hospitals will need to be designed
to safely accommodate these fragile patients.
Prominent threats to patient safety – medication

errors, patient falls, and errors made during patient
34
Spread of infection is a daily risk in every of hospi- when some 80 percent of the raw materials that go
tal. When patients are isolated from one another, into pharmaceutical drugs sold in America come
there are fewer chances for microbes to be spread. from overseas suppliers, and when the rubber that
In addition to patient-to-patient spread, caregiver- keeps surgical masks tight on your face comes
to-patient spread is common. Well-placed sinks through a just-in-time supply chain that starts in
and alcohol gel dispensers can prompt caregivers Indonesia or Africa, stretches through Europe, and
to wash their hands, which is an essential part of then skips over to America – our ability to cope
any infection control program. Single rooms fur- with any pandemic would be sharply reduced.”134
ther improve the rate of hand-washing when cross-
ing the barriers between patient rooms prompts Thanks to the ubiquity of airline travel, an infec-
caregivers to wash their hands. Whereas, in a dou- tious disease can move quickly in a flat world.
ble patient room, the transition from one patient to Once SARS appeared in rural China, it spread to
the next is quick and barrier-free; too little time to five countries within 24 hours.135 In a matter of
stop and think about hand-washing. Single rooms months, it had spread to 30 countries on six conti-
also allow for better air quality management and nents.136 With the SARS epidemic, hospitals that
can be more thoroughly decontaminated between were sought for care became the vectors for SARS
occupancies. transmission. Open bay intensive care units (ICUs),
Flat World Phenomena

public waiting areas, and emergency departments
all became central stations for contracting SARS.
Infection control, always a high priority for any Tuberculosis has also been known to be similarly
hospital, becomes paramount in the face of a spread.137
potential global epidemic. Emergency prepared-
ness is a key priority to be addressed in the design The good news is that hospitals can be designed to
of the hospital of the future. mitigate these risks. The transformation of the
physical environment of care must also take into
In today’s ever-flattening world, individuals are consideration future needs such as achieving surge
more globalized – they travel more, both virtually capacity in response to disaster.
and in person. The supply chain is also more
globalized and could easily be disrupted by a glob-
al epidemic: “…when the world is flattening –
The lengthy cycle of design and construction is often overtaken by the rapid cycle of
innovation in medicine and technology. As a result, some buildings are partially obsolete
when they open, and nearly every health care structure will be obsolete in some way
before it has completed its useful life.
35
35
Standardized Flexibility
Standardization reduces complexity, which is of loose-fit is to design with larger spaces that
important when flexibility is needed, as is the case can be used for more than the minimum func-
for increasing surge capacity. Importantly, stan- tion originally proposed, and to arrange them in
dardization is a key strategy in human factors departments or groupings that allow for future
design as a means to reduce the risk of error and adjustments.
improve quality.138 Human factors design focuses • Adaptable flexibility: Spaces can be designed
on improving the human-system interface by to adapt to multiple uses. An example is a
designing better systems and processes. For hospi- patient room that can be adapted for the pur-
tals, standardization of patient rooms, treatment pose of simple procedures such as a line inser-
rooms, equipment and care processes,139 reduces tion. The different function can be accommodat-
reliance on short-term memory.140 In room design, ed by simply adapting the space because it has
standardizing details such as the location of bed been planned to serve a range of possibilities.
controls, light switches, and even, which cupboards • Convertible flexibility: Another type of flexibili-
store latex gloves, for instance, are important con- ty is when, with relatively low effort, time,
siderations for optimizing the human-system inter- and/or cost, a space can be converted to anoth-
face.141 er use. Examples of this type of flexibility
include a storage space with a knockout panel
The lengthy cycle of design and construction is in the slab to allow for a future elevator, or a
often overtaken by the rapid cycle of innovation in patient room with plumbing, gasses, and electri-
medicine and technology. As a result, some build- cal systems in the wall for future conversion to
ings are partially obsolete when they open, and critical care.
nearly every health care structure will be obsolete • Robust utilities: In order to offer flexibility in
in some way before it has completed its useful life. design, the utility and communication infrastruc-
Design for flexibility is a way to reduce the incon- ture of a health care facility should be capable of
venience and cost of these inevitable disruptions.142 expansion and upgrade. Availability of utility and
• Master planning strategies: Every design network capacity simplifies and dramatically
should have planned zones for future growth. reduces the cost of future projects.
These can appear as a dotted line on the site • Plug-and-play infrastructure: Just as all the
plan, or may be developed as constructed but utilities of the city are uninterrupted when one
unoccupied shell space, or as structural capacity property undergoes a construction or demolition
to allow for future vertical additions to a project, a hospital should be designed so that
building. the utility and primary horizontal and vertical cir-
• Loose-fit design: Many designs make an effort culation infrastructure remains in service while
to design precisely to the absolute minimum departments, wings, or entire buildings are
square footage justified by the program of space added or removed.
requirements, yet such designs are the first to
reveal difficulties when new programs appear, or
existing programs grow or shrink. The concept
36
Place of Work
In addition to protecting patients, hospital design is embraces patient and staff safety, and collegial
integral to protecting hospital workers and enhanc- health care delivery.
ing the work they do.
Being Green
About one-third of a nurse’s time on shift is spent Global climate change and harm wrought from
walking.143 Not only is this time spent walking chemical contamination are no longer speculative.
between the centralized nursing station and patient In congruence with their mission, hospitals in the
rooms, but on hunting and gathering various sup- future must be healthy places to be in and live
plies. Decentralizing nursing stations and supplies – near.
bringing both closer to the patients – would reduce
wasted time and fatigue. Other physical stressors In 1996, the Environmental Protection Agency
include noise, that when reduced, as previously (EPA) declared medical waste incineration to be the
mentioned, results in less fatigue and reduced risk greatest source of dioxin contamination in the
of error. A great deal of heavy lifting, turning, and atmosphere.145 At that time, there were 5,000 med-
transporting patients goes on in hospitals that could ical waste incinerators. Today there are fewer than
be alleviated by proper hoists and other ergonomic 100 still in operation. That momentum needs to
technologies. continue and be broadened to include the elimina-
tion of toxic materials used inside the hospital.
Involving staff in the design process is essential for
creating a physical environment that improves The chemical compound polyvinyl chloride (PVC)
work flow. In the future, the application of design is ubiquitous in the hospital environment. It is
improvements to time-consuming nursing tasks, used in I.V. and blood bags, plastic tubing and an
such as medication administration and documenta- array of other medical supplies.146 When PVC-
tion, may yield new gains in efficiency. As phar- based products, such as nasogastric tubes, are used
macists increasingly counsel patients on drugs and invasively, they can leach toxic chemicals that enter
therapeutic regimens, the physical environment of the body. One of these chemicals has proven to
the pharmacy must be made to accommodate these be a reproductive toxicant, which led the National
confidential discussions. New design concepts Toxicology Program to declare that infants in hos-
have been shown to give hospital clinical staff pitals are at risk from this chemical.
more time to spend with patients, while also allow-
ing the hospital to expand its capacity to treat PVC, which is also commonly used in hospital
patients. building materials, emits toxins into the air, putting
patients and staff at risk. Interior exposure to PVC
Designing a hospital with safety in mind helps to has been definitively linked to asthma.147 With the
create a safety culture. Involving patients and fami- prevalence of PVC exposure, as well as exposure
lies, in addition to staff, in the design of the physi- to other noxious chemicals such as cleaning agents
cal environment also helps to assure the patient- and pesticides, it is no wonder that poor air quality
centeredness of the organizational culture.144 The is the most frequent cause of work-related asthma
culture of the workplace can be transformed by the in health care workers.148
physical demonstration that the organization
37
37
Hospitals are huge consumers of energy – natural undermine health. Large health care systems, such
gas and electricity -- second only to the food-serv- as Kaiser Permanente and Catholic Healthcare
ice industry in energy consumption.149 The costs of West, have led the way in implementing policies
such energy consumption will increasingly com- that require healthy food choices for patients and
prise an unaffordable portion of the hospital budg- also support sustainable farming practices – food
et. These costs plus growing concern over global production that is local, humane and environmen-
warming are influencing hospitals to use cleaner, tally protective.152
more efficient sources of energy and to reduce
their global footprint. Accordingly, hospitals will
need to use fewer resources and produce less
waste.
One hundred U.S. hospitals are finding it easier to

be green by piloting the Green Guide for Health
Care (GGHC), standards modeled on those of the
U.S. Green Building Council’s Leadership in Energy
and Environmental Design (LEED), in their con-
struction projects.150 The GGHC standards actually
exceed LEED standards and align environmental
health considerations with health system priorities.
The GGHC has received strong endorsement –
Kaiser Permanente has committed to using it for
building projects across its system, and the City of
Boston is recommending it to city hospitals that are
embarking on expansion plans.151
A healthy hospital environment also extends to the

food that is served in that environment. Food that
is served in hospitals should promote and not
Designing a hospital with safety in mind helps to create a safety culture. Involving
patients and families, in addition to staff, in the design of the physical environment also
helps to assure the patient-centeredness of the organizational culture.
38
Principles to Guide the Design of the Hospital

of the Future:
• Incorporate evidence-based design princi-

ples that improve patient safety, including
single rooms, decentralized nursing stations
and noise-reducing materials, in hospital
construction
• Address high-level priorities, such as infec-
tion control and emergency preparedness,
in hospital design and construction
• Include clinicians, other staff, patients and
families in the design process to maximize
opportunities to improve staff work flow
and patient safety, and create patient-cen-
tered environments
• Design flexibility into the building to allow
for better adaption to the rapid cycle of
innovation in medicine and technology
• Incorporate “green” principles in hospital
design and construction
For More Information on Hospital Design and

Safety:
• The Center for Health Design,

www.healthdesign.org
• John Reiling, Safe by Design: Designing
Safety in Health Care Facilities, Processes,
and Culture, published by Joint Commission
Resources, and available through
www.jcrinc.com
• Health Care Without Harm,
www.noharm.org
• Leadership in Energy and Environmental
Design (LEED), U.S. Green Building Council,
www.usgbc.org
39
39
Conclusion
A century ago, people advocated for hospitals to be That said, the physical design of the hospital has
less institutional and impersonal in their approach significant implications for the ability of the hospital
to patient care. They worried about neglect of the to meet its goals for care that is safe, patient-cen-
aged and the chronically ill. The vision was tered, clinically effective and collaboratively deliv-
expressed for a system of care, led by hospitals, ered. It also represents the physical manifestation
which encompassed patients’ family and social of the hospital’s commitment to environmental
needs. People foresaw the need for hospital care health and sustainability.
to migrate from within the hospital’s four walls, out
into the community, even into the home. There are factors that will be -- to lesser and greater
extents -- out of the hospital’s control as the future
Everything old is new again. The increasing preva- unfolds. Fair and rational payment strategies that
lence of chronic illness among patients served by align with national quality goals can be advocated
hospitals and an aging population should compel for, but they cannot be assured. In the meantime,
hospitals to pursue models of care that would best hospitals must do their part to reduce error and
meet the needs of patients across the care waste, and increase efficiencies as a means of
continuum, wherever those services are delivered. improving safety and containing costs. The princi-
In this, hospitals are ideally positioned to lead ples put forth here are meant to guide the hospitals
efforts to create a true “system” of care delivery. to be better prepared to accomplish what is being
asked of them.
In hospitals that embrace the concepts of patient-
centered care and support the development of their
workforce, no one should be neglected. The appli-
cation of digital technologies is already extending
the reach of hospital care into the community and
into the home. The hospital of the future may one
day be defined by its intellectual property, rather
than its physical facility.
...hospitals are ideally positioned to lead efforts to create a true

“system” of care delivery.
40
Acknowledgements
The Joint Commission sincerely thanks the Roundtable members for providing
their time and expertise in the development of this report.
Peter B. Angood, M.D., The Joint Commission Stephan L. Kamholz, M.D., North Shore University
Hospital and Long Island Jewish Medical Center
Wade Aubry, M.D., Health Technology Center
Linda Kenney, Medically Induced Trauma Support
James Jerome Augustine, M.D., F.A.C.E.P., Emory Services
University
Otmar Kloiber, M.D., World Medical Association,
James R. Castle, The Ohio Hospital Association Inc.
James B. Conway, Institute for Healthcare Claudio Luiz Lottenberg, M.D., Hospital Israelita
Improvement Albert Einstein, Sao Paulo, Brazil
Mark Covall, National Association of Psychiatric Philip D. Lumb., M.B., B.S., F.C.C.M., University of
Health Systems Southern California, Keck School of Medicine
Adam Darkins, M.D., M.P.H., F.R.C.S., Veterans Henri Manasse, Jr., Ph.D., Sc.D., American Society
Administration of Health-System Pharmacists
Robert Dickler, Association of American Medical David Marx, M.D., University Hospital, Prague,
Colleges Czech Republic
Rita Munley Gallagher, Ph.D., R.N., American Lawrence McAndrews, National Association of
Nurses Association Children’s Hospitals and Related Institutions
Lillee Gelinas, R.N., M.S.N., VHA, Inc. Kathleen McCann, R.N., D.N.Sc., National
Association of Psychiatric Health Systems
John Glaser, Ph.D., Partners Healthcare, Inc.
Peter McKeown, M.D., VA Medical Center,
William A. Hazel, M.D., American Medical Department of Surgery
Association
Gary Mecklenburg, Northwestern Memorial
Ann Hendrich, R.N., M.S.N., F.A.A.N., Ascension HealthCare
Health
Tommy Mullins, Boone Memorial Hospital
A.J.M. Hoek, International Pharmaceutical
Federation Dennis O’Leary, M.D., The Joint Commission
Russell Holman, M.D., F.A.C.P., Society of Hospital

Medicine
Howard Isenstein, Federation of American Hospitals

(formerly)
41 41
Judith Oulton, International Council of Nurses
Herbert Pardes, M.D., New York-Presbyterian

Hospital
Kenneth Raske, Greater New York Hospital

Association
John G. Reiling, Ph.D., Safe by Design
Uwe Reinhardt, Ph.D., Princeton University,

Woodrow Wilson School
William Robertson, Adventist HealthCare, Inc.
David Shactman, Brandeis University
Curtis Schroeder, Bumrungrad Hospital
Steven Sharfstein, M.D., Sheppard Pratt Health

System
Per Gunnar Svensson, International Hospital

Federation
Ronald Tankersley, D.D.S., American Dental

Association
Roger S. Ulrich, Ph.D., Texas A & M University,

College of Architecture
Bruce C. Vladeck, Ph.D., Ernst & Young
Laurence Wellikson, M.D., Society of Hospital

Medicine
William Zellmer, M.P.H., American Society of

Health-System Pharmacists
Craig Zimring, Ph.D., Georgia Institute of

Technology
42 42
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Injure Millions of Americans, Lifeline Press, May 2003
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43 43
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67
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disease care,” Research Brief No. 6, Center for Studying Health System Change, June 2008
69-71
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72 -73
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U.S.-European health care spending gap,” Health Affairs, October 2, 2007
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America,” RAND Research Brief, RB-9053-2 (2006)
75-79
Tynan and Draper
80
Robert Mecklenburg speaking at the Joint Commission conference, Overuse, Underuse, Misuse: Reducing Waste and
Improving Efficiency in Health Carey, March 27-28, 2008, Chicago
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82
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tice,” Joint Commission Journal on Quality and Patient Safety, October 2005, 31:10
83-84
American Hospital Association, TrendWatch: Beyond Healthcare: The Economic Contribution of Hospitals, April 2008
85
Mandel, Michael, Weber, Joseph, “What’s really propping up the economy,” Business Week, September 25, 2006
86-88
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American College of Healthcare Executives
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93-97
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Affairs, May/June 2001
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and non-Magnet hospitals. Journal of Nursing Administration, 37(4), April 2007
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isfaction,” JAMA, (288)16, 2002
102-107
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108-109
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110-111
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of later entry into nursing,” Health Affairs, Jan/Feb 2007
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Affairs, May/June 2001
44 44
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NEJM, 357:2589, December 20, 2007
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funded by the Robert Wood Johnson Foundation
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Institute for Healthcare Improvement, December 2007
145-152
Cohen, Gary, “First do no harm,” Designing the 21st Century Hospital: Environmental leadership for healthier
patients and facilities, Center for Health Design, RWJF, 2006
45 45
11/08

ARTICLE:

Human resource

management,

institutionalization and
organizational performance
By: Paul Boselie, Jaap Paauwe and Ray Richardson
11/2/2009

HUMAN RESOURCE MANAGEMENT, INSTITUTIONALISATION AND
ORGANISATIONAL PERFORMANCE: A COMPARISON OF HOSPITALS, HOTELS
AND LOCAL GOVERNMENT
PAUL BOSELIE, JAAP PAAUWE AND RAY RICHARDSON
ERIM REPORT SERIES RESEARCH IN MANAGEMENT

ERIM Report Series reference number ERS-2002-41-ORG
Publication April 2002
Number of pages 28
Email address corresponding author boselie@few.eur.nl
Address Erasmus Research Institute of Management (ERIM)
Rotterdam School of Management / Faculteit Bedrijfskunde/
Rotterdam School of Economics
Erasmus Universiteit Rotterdam
P.O.Box 1738
3000 DR Rotterdam, The Netherlands
Phone: +31 10 408 1182
Fax: +31 10 408 9640
Email: info@erim.eur.nl
Internet: www.erim.eur.nl
Bibliographic data and classifications of all the ERIM reports are also available on the ERIM website:
www.erim.eur.nl
ERASMUS RESEARCH INSTITUTE OF MANAGEMENT
REPORT SERIES
RESEARCH IN MANAGEMENT
BIBLIOGRAPHIC DATA AND CLASSIFICATIONS

Abstract The relationship between Human Resource Management (HRM) and firm performance has
been a hotly debated topic over the last decade, especially in the United States (e.g. Osterman,
1994; Huselid, 1995; MacDuffie, 1995). The question arises whether the domination of USA
oriented models, however appropriate they might be for, say, the USA, hold in other for
example more institutionalised contexts. Now we have the opportunity to study recent empirical
data on the effectiveness of human resource management in the Netherlands, using Control
versus Commitment HR Theory (Walton, 1985; Arthur, 1994) in combination with New
Institutionalism (Dimaggio and Powell, 1983). We were able to include three different Dutch
sectors/branches of industry i.e. Health care, Local Government and Tourism. Empirical results
suggest that the effect of HRM is lower in highly institutionalised sectors (hospitals and local
governments) than in a less institutionalised sector like hotels.
Library of Congress 5001-6182 Business
Classification 5546-5548.6 Office Organization and Management
(LCC) 5548.7-5548.85 Industrial Psychology
HF5549 Personnel management
Journal of Economic M Business Administration and Business Economics
Literature M 10 Business Administration: general
(JEL) L2 Firm Objectives, Organization and Behaviour
M 12 Personnel management
European Business Schools 85 A Business General
Library Group 100B Organization Theory (general)
(EBSLG) 120 C Personnel management
Gemeenschappelijke Onderwerpsontsluiting (GOO)
Classification GOO 85.00 Bedrijfskunde, Organisatiekunde: algemeen
85.05 Management organisatie: algemeen
85.08 Organisatiesociologie, organisatiepsychologie
85.62 Personeelsbeleid
Keywords GOO Bedrijfskunde / Bedrijfseconomie
Organisatieleer, prestatiebeoordeling
Personeelsbeleid, prestatiebeoordeling, institutionalisme, hotels, ziekenhuizen, plaatselijk
bestuur
Free keywords HRM, Performance, Institutionalism, Hotels, Hospitals & Local Governments
Human Resource Management, Institutionalisation and
Organisational Performance: a comparison of hospitals,
hotels and local governments
Paul Boselie1, Jaap Paauwe2 and Ray Richardson3 (2002)
Rotterdam School of Economics
Erasmus University Rotterdam (EUR)
1. Dr Paul Boselie, Tinbergen Institute/Department of Business and Organisation, H15-10,

Rotterdam School of Economics, Erasmus University, Burg.Oudlaan 50, 3062 PA Rotterdam,
The Netherlands, Tel.+31-10-4081347, Fax +31-10- 4089169, e-mail: boselie@few.eur.nl
2. Prof.dr Jaap Paauwe, Department of Business and Organisation, H15-8, Rotterdam School
of Economics, Erasmus University, Burg.Oudlaan 50, 3062 PA Rotterdam, The Netherlands,
Tel.+31-10-4081366, Fax +31-10- 4089169, e-mail: paauwe@few.eur.nl
3. Prof.dr Ray Richardson, Department of Business and Organisation, H15-8, Rotterdam

School of Economics and London School of Economics (LSE), Erasmus University,
Burg.Oudlaan 50, 3062 PA Rotterdam, The Netherlands, Tel.+31-10-4081366, Fax +31-10-
4089169, e-mail: richardson@few.eur.nl
1
Abstract
The relationship between Human Resource Management (HRM) and firm performance has
been a hotly debated topic over the last decade, especially in the United States (e.g. Osterman,
1994; Huselid, 1995; MacDuffie, 1995). The question arises whether the domination of USA
oriented models, however appropriate they might be for, say, the USA, hold in other for
example more institutionalised contexts. Now we have the opportunity to study recent
empirical data on the effectiveness of human resource management in the Netherlands, using
Control versus Commitment HR Theory (Walton, 1985; Arthur, 1994) in combination with
New Institutionalism (Dimaggio and Powell, 1983). We were able to include three different
Dutch sectors/branches of industry i.e. Health care, Local Government and Tourism.
Empirical results suggest that the effect of HRM is lower in highly institutionalised sectors
(hospitals and local governments) than in a less institutionalised sector like hotels.
2
Introduction
The majority of empirical scientific research in the area of HRM and performance stems
from the USA1 and, to a lesser extent, from the UK2. Empirical results on HRM and
performance are presented in special issues of international journals like The Academy of
Management Journal (4:39, 1996), Industrial Relations (1996), The International Journal of
Human Resource Management (3:8, 1997; and 7:12, 2001), Human Resource Management
(Fall, 1997), and The Human Resource Management Journal (Fall, 1999). Global seminars
and conferences3 all demonstrate lasting attention for the topic. The outcomes of worldwide
research suggest significant impact of HRM on the competitive advantage of organisations.
Prior empirical research, summarised and classified in the work of Delery and Doty (1996),
Guest (1997) and Boselie et al. (2001), suggests significant impact of HRM on the
competitive advantage of organisations. The question arises whether the USA oriented
models, however appropriate they might be for, say, the USA, hold in other contexts (see
debate in special issue of The International Journal of Human Resource Management, 7:12,
2001). The mainstream 'best practices approaches', also labelled universalistic mode (Delery
and Doty, 1996) and 'high performance' work practices (Guest, 1997), do not seriously take
into account differences in culture and institutional settings (Paauwe, 1998).
Research findings from European countries like Germany (e.g. Backes-Gellner, Frick and
Sadowski, 1997), France (e.g. d'Arcimoles, 1997), and the Netherlands (e.g. Leijten, 1992;
Schilstra, 1998) are interesting because they reflect the so-called Rhineland model of
industrial relations, in which legislation, institutions and stakeholders, like trade unions and
works councils all play an important role in shaping HRM policies and practices. This study
will be built on the theoretical assumptions of Delery and Doty's (1996) configurational
mode, represented in the work of Walton (1985) and Arthur (1994). The configurational mode
(e.g. Arthur, 1994; MacDuffie, 1995) is rather more complex than the universalistic mode or
'best practices' approach (e.g. Pfeffer, 1994) and the contingency mode (e.g. Schuler and
Jackson, 1987). The configurational mode assumes that the optimal organisational design,
including human resource management, depends on external (e.g. branch of industry,
technology level and market situation) and internal factors (e.g. cultural heritage, structure of
ownership and path dependency). Wood (1999) makes a distinction between two fundamental
approaches in the HRM and performance debate: (a) the best-practices stream and (b) the
best-fit stream. The universalistic mode corresponds with Wood's (1999) best-practice stream,
while the contingency and configurational mode match with the best-fit stream. In the
contingency mode 'best-fit' is mainly focused on external fit: fit between organisational design
(e.g. HRM) and external contingencies like the market situation. The outside-in approach in
strategic management was quite popular in the eighties under the direction of the work of
3
amongst others Porter (1980) and Miles and Snow (1984), but appears to be overruled by the
introduction of the resource based view (e.g. Wernerfelt, 1984; Barney, 1991; Wright et al.,
1994; Barney and Wright, 1998), that led to a shift in strategic management thinking from
'traditional' outside-in to 'emerging' inside-out thinking. The configurational mode unites
'traditional' strategic management theory, in terms of taking into account external factors that
affect the organisational design (e.g. characteristics of the branch of industry), and resource
based elements, in terms of internal factors like the uniqueness of the organisational
configuration (in terms of for example organisational structure, culture and systems), and is
therefore preferable in our opinion (see for example the human resource based theory of
Paauwe, 1994). To do justice to the Dutch Rhineland context it is necessary to add an
alternative approach to the configurational mode: new institutionalism (Dimaggio and Powell,
1983). Thus, we set out to partly replicate the US research of Arthur (1994) and partly to
modify the model to continental standards with respect to the industrial relations model with
the help of new institutionalism (Dimaggio and Powell, 1983).
Theorising: Control and Commitment HR Systems

The operationalisation of commitment oriented systems in our study is based on the work of
Walton (1985) and Arthur (1994). Together with the work of Huselid (1995) and MacDuffie
(1995), Arthur's (1994) study is one of the most quoted articles on the added value of HRM in
the nineties. Arthur's (1994) approach is theoretically rooted in the classical work of
McGregor (1960) on theory X and theory Y, and the Harvard Business Review article of
Walton (1985) on control versus commitment strategies of organisations. Walton's (1985)
conceptual model hypothesises that commitment work systems outperform traditional work
systems in organisations. Traditional (control) work systems are characterised by narrowly
defined jobs, specialisation of employees, close supervision and monitoring of employees by
management, hierarchical structure, centralisation of power and a focus on cost reduction
strategies. In contrast, the commitment work systems encompass broadly defined jobs, job
rotation, evaluation by peers, non-hierarchical structure, decentralisation of power and a focus
on differentiation strategies (see table 1).
4
Table 1 Traditional- versus High-Commitment Work Systems
‘Traditional Work System’ ‘High-Commitment Work System’

narrowly defined jobs broadly defined jobs
specialization of employees rotation of employees through jobs
pay by specific job content pay by skills mastered
evaluation by direct supervision evaluation by peers
work is under close supervision evaluation by peers
assignment of overtime or transfer team assigns members to cover
by rule book vacancies in
flexible fashion
no career development concern for learning and growth
employee as individuals employee in a team
employee is ignorant about business teams runs a business; business data
shared widely
status symbols used to reinforce hierarchy status differences minimized
employees have input on few matters broad employee participation
Source: Walton in Beer et al. (1984)
Arthur's (1994) control- and commitment HR systems are based on the idea that "the closer an
organisation's HR practices resemble the correct prototypical system (for its business
strategy), the greater the performance gains (Delery and Doty, 1996)". The two systems in
Arthur’s (1994) approach are labelled commitment- and control human resource systems. The
correct HR system or bundle from a 'best practice approach' (e.g. Osterman, 1994; Pfeffer,
1994) is presumed to be the commitment variant. Low scores on direct supervision, individual
bonus or incentive payments in combination with high scores on decentralisation, employee
participation, general training, skill development, social activities, due processes, high wages
and employee benefits represent commitment HR systems in this approach. The opposite
applies for control HR systems (see table 2).
5
Table 2 Control- versus Commitment HR Systems
‘Control HR Systems’ ‘Commitment HR Systems’

centralisation decentralisation
no participation participation
no general training general training
no skills training skills training
no social activities social activities
no due process due process
low wages high wages
no employee benefits employee benefits
direct supervision no direct supervision
individual bonus or group bonus or incentive
incentive payments payments
Source: Arthur (1994)
Arthur's (1994) empirical results on the effectiveness of HR control- versus HR commitment

systems suggest that commitment systems outperform control systems in USA steel mills.
Organisations with a commitment oriented HR system have significant higher scores on
productivity and lower scores on employee turnover than the control oriented steel mills.
Arthur's (1994) analysis however is on organisational level. The study was based on data of
30 USA steels mills and the data stem from HR managers. The work of Wallace (1995)
covers corporatist control and organisational commitment among lawyers working in law
firms, with the analysis on employee level. Activities in Wallace's research, that fit the
commitment HR system of Arthur (1994) like co-worker support, promotional opportunities
and employee autonomy, have a positive effect on employee satisfaction. The basic
assumptions in these approaches have their roots in McGregor's (1960) theoretical distinction
between Theory X and Theory Y. The traditional management view (Theory X) assumes that
employees dislike work, avoid responsibility, lack ambition, and the only way to motivate
people is the application of external control and punishment. In this view 'poor performance'
of an organisation is presumed to be a result of the human nature of an employee. Since the
sixties this view is overruled, at least in contemporary science, by what McGregor (1960)
calls Theory Y. This perspective has a different starting point. Poor performance of
employees is not the result of their human nature but an outcome of an imperfect work
system. By nature each individual wants self-direction and self-control, seeks and accepts
responsibility, perceives work as a source of satisfaction, and needs self-direction and self-
6
control. In our opinion Theory Y incorporates a strong argument for the application of a
commitment oriented work system.
Theorising: New Institutionalism

Of course it is possible to apply the theoretical framework of control versus commitment in a
Western-European or Dutch setting. At the same time we need to take into account the
differences in context from an economic and industrial relations point of view. The Rhineland
model is a stakeholder and consultation oriented type of industrial relations system, in which
legislation, social partnership, CBA regulations, trade unions and works councils have a
major say in the shaping of HR policies and practices (Paauwe, 1998; Schilstra, 1998),
whereas the USA based system is more associated with strategic goal orientation towards
shareholder value. For this reason we are in need of additional theorising in the area of HRM
and performance. The dichotomy of control versus commitment oriented HR work systems
needs embeddedment in a theoretical framework, which will enable us to account for the
influence of institutions etc. Dimaggio’s and Powell’s (1983 and 1991) New Institutionalism
might be able to offer us the indispensable elements for explaining variations in the
relationship between HR systems and performance in a Western-European setting. Dimaggio
and Powell (1983) state that rational actors make their organisations increasingly similar as
they try to change them (homogenisation). The concept that best captures the process of
homogenisation is isomorphism. Isomorphism is a constraining process which, say Dimaggio
and Powell (1983), forces one unit in a population to resemble other units which face the
same set of environmental conditions. There are two types of isomorphism: competitive and
institutional. Competitive isomorphism assumes a system of rationality which emphasises
market competition, niche change, and fitness measures, and is most relevant where free
markets and open competition exists. "It explains parts of the process of bureaucratisation that
Weber observed, and may apply to early adoption of innovation, but it does not present a fully
adequate picture of the modern world of organisations." (Dimaggio and Powell, 1983). For a
full understanding of organisational change the authors focus on an alternative perspective:
institutional isomorphism. Three institutional mechanisms are said to influence decision-
making in organisations:
- coercive mechanisms, which stem from political influence and the problem of legitimacy,
- mimetic mechanisms, which result from standard responses to uncertainty, and
- normative mechanisms, which are associated with professionalisation.
In the Dutch context, coercive mechanisms include the influence of social partners
(employers’ organisations, trade unions and works councils), labour legislation, and
7
government; examples are the Law on Works councils (WOR), Law on CBA and the Law on
Contingent labour and Security (Flexwet). Mimetic mechanisms refer to imitations of the
strategies and practices of competitors as a result of uncertainty, or hypes in the field of
management. It is difficult to determine whether the implication of a certain practice or policy
is the result of pure blind imitation. Implementation of, for example, 360-degree feedback
systems, the balanced scorecard, and employability or Learning Organisation principles may
either have a strategic foundation or may simply be a result of imitation. Normative
mechanisms refer to the relation between management policies and the professional
background of employees in terms of educational level, job experience and craftsmanship.
This mechanism assumes that the degree of professionalisation of employees affects the
nature of a management control system and its related practices. In figure 1 the three
institutional mechanisms of Dimaggio and Powell (1983) are translated to the field of human
resource management. We assume that the mechanisms influence HRM strategy, goals and
policies (see figure 1). Based on both a control versus commitment theory and institutional
theory we will develop our key issues and hypotheses and research design in the following
sections
Figure 1 HRM and New Institutionalism
Coercive: HRM Mimetic:

Implementation Strategy/ Imitation as a
as a result of Policy/ result of
institutional Goals uncertainty
forces
Imitation as a
Normative: result of
Management trends/hypes
control system
depending on
the professio-
nalization of an
employee
category
Sources: Dimaggio and Powell (1983) and Boselie et al. (2001)
Key issues and Hypotheses

Referring to USA and UK based research in the area of HRM and performance we first of all
would like to find out whether replicating empirical research with respect to control versus
commitment oriented HR systems in a Dutch setting will generate the same kind of results as
for example the research done by Arthur (1994). Arthur's (1994) results reveal positive
8
impact of commitment (versus control) oriented HR systems on organisational performance in
USA steel mills. Hypothesis 1 is based on Arthur's assumptions and research findings.
Hypothesis 1: Organisations with commitment human resource systems will have better
organisational performance than organisations with control human resource systems.
Since we only have one steel mill in the Netherlands we can replicate the study, but we will
have to include another type of organisations in other branches of industry (see section on
Methods). Our second and related key issue involves the role of the institutional context.
Does the context interfere with the relationship between HRM and Performance and what
possible effects might the institutional context have on the two different HR systems of control
versus commitment. The institutional context (for example legislation, CBA regulations,
works councils with their legal prerogatives, rate of unionisation) might limit the available
alternatives for designing and implementing HR policies and practices and will in this way
limit the opportunities for differentiation between companies in order to achieve a
competitive advantage from a HRM point of view. In this respect it is interesting to note that
Pfeffer's so-called 16 best practices, which claim to make a positive difference in an on
average ‘hire and fire’ climate in the USA, hardly contribute to a competitive advantage in the
Dutch setting. Due to legislation, CBA regulations and the lasting influence of works councils
and trade unions since the seventies ten to twelve of Pfeiffer’s ‘best practices’ are quite
common in the majority of companies in the Netherlands (Paauwe, 1998) (see table 3).
9
Table 3 Pfeffer's 'Best Practices' and Paauwe's Comments
Best Practices (Pfeffer, 1994): HR Practices that are common in the
Netherlands since the seventies
(Paauwe, 1998):
1) Employment Security Yes
2) Selectivity in Recruiting --
3) High Wages Yes
4) Incentive Pay --
5) Employee Ownership Yes
6) Information Sharing Yes
7) Participation and Empowerment Yes
8) Self-managed Teams Yes
9) Training and Skill Development Yes
10) Cross-utilization and Cross-training --
11) Symbolic Egalitarianism --
12) Wage Compression Yes
13) Promotion from within Yes
14) Long Term Perspective Yes
15) Monitoring of Practices --
16) All-embracing Philosophy --
Sources: Pfeffer (1994) and Paauwe (1998)
This simply implies that at the level of the individual company the possibilities for achieving
a competitive advantage by using these so-called best practices is not feasible or will only
have a marginal effect. In this respect, however, it is important to take into account in our
research design the differences in the degree of institutionalisation per branch of industry.
Some sectors in the Netherlands (e.g. metal industry, construction building, public sector,
health care) face a larger institutional impact than other sectors like for example financial
services, tourism and those emerging in the so-called new economy (e.g. ICT-business), who
have a low degree of institutionalisation. The degree of unionisation, the strength of works
council power and the extent of the CBA coverage are possible indicators for
institutionalisation. High degrees of unionisation, strong and proactive work councils, and
extensive CBA's represent a high degree of institutionalisation. The opposite holds for a low
degree of institutionalisation. We will give a more detailed description of the concept of
institutionalisation further on in this paper. The research of Klandermans and Visser (1995) in
the Netherlands suggests that the following factors lead to high degrees of institutionalisation:
10
1. organisational size; large organisations reveal higher scores on 'degree of unionisation'
and 'works council installed' than small and medium-sized organisations
2. nature of the sector; non-profit organisations are more institutionalised than profit
organisations
On the basis of the prior research on institutionalisation in the Netherlands (Klandermans and
Visser, 1995) we formulate the following hypotheses:
Hypothesis 2a: Small organisations are less institutionalised than large organisations in the
Netherlands.
Hypothesis 2b: Profit organisations are less institutionalised than non-profit organisations in
the Netherlands.
When we are capable of determining which organisations are 'high institutionalised' and
which of them are 'low institutionalised', we are able to study possible moderating effects on
the relationship between HRM and performance. New institutionalism (Dimaggio and Powell,
1983) argues that high institutionalisation affects the relationship between HRM and
performance. In this study HRM is defined by Walton's (1985) and Arthur's (1994) concepts
on control and commitment systems, which we will label 'work systems'. Homogeneity, the
result of institutional mechanisms, of organisations leads to less impact of HRM, here defined
as work systems, on the performance of the organisation (see hypothesis 3).
Hypothesis 3: The impact of a work system (commitment and control human resource
systems) on organisational performance is smaller in an institutionalised context than the
impact of a work system (commitment and control human resource systems) on
organisational performance in a less institutionalised context.
Methods
Apart from selecting companies and branches of industry in which we expect a variation in
the application of control versus commitment HR systems, we also have to include variation
in the degree of institutionalisation. As indicators we used the rate of unionisation and the
degree of extensiveness of CBA regulations. We were able to include three different
sectors/branches of industry (from the Netherlands) i.e. Health care, Local Government and
Tourism. Data have been collected by means of questionnaires (N=132). HR managers were
asked to fill in the forms for their business unit. All data are collected in the year 2000 and
2001. See table 4 for a more detailed description of our research approach.
11
Table 4
Hospitals Hotels Local Governments
Number of 38 25 69
Observations
Response Rate 31% 19% 40%
Focus on Employee nurses waiters, cleaners, civil servants

Group receptionists, and
kitchen helps
Excluded Employee managers/ managers/ managers/

Groups supervisors, supervisors, supervisors,
staff staff staff
Average Size of 1605 89 238

Organisation in
sample (employees)
Minimum Size 291 23 100
Maximum Size 4270 275 417
Hospitals, representing the health care industry, and local governments are medium-sized to
large, non-profit organisations in contrast to hotels, representing the tourism industry in the
Netherlands. As a result of the relatively small size of the Netherlands and therefore limited
number of organisations in specific branches of industry, we were not able to replicate
Arthur's (1994) approach on Dutch steel mills, simply because there is only one steel mill in
the Netherlands. 38 hospitals (response rate = 31%), 25 hotels (response rate = 19%), and 69
local governments (response rate = 40%) are included in this analysis. The questions in the
survey are aimed at specific groups of employees within the firm in order to control for large
variances between employee groups within one organisation. The respondents were asked to
fill in the survey list with a focus on employees on 'shopfloor level', more specifically: (a)
nurses in hospitals; (b) waiters/cleaners/ receptionists/kitchen helps in hotels; and (c) civil
servants in local governments. Managers and staff personnel were excluded.
12
Measures
Human Resource Systems. The application of Arthur's (1994) model in the Netherlands
implies some practical problems. As stated before (see table 3), a lot of USA oriented 'best
practices' are common in the Netherlands since the seventies. Arthur's (1994) research
concepts like (employee) participation, due processes, high wages, and employee benefits are
institutionalised by collective bargaining agreements and other labour laws. Performance
related pay, related to Arthur's (1994) concept of incentive payments, is not very common in
most Dutch sectors as a result of trade union resistance. The operationalisation of the human
resource systems in this research is therefore focused on: employee influences, general
training, participation in seminars, skill training, social activities, job rotation, and direct
supervision (see table 5 for detailed descriptive information on the HRM items in this
analysis).
13
Table 5 Descriptives (N=132)
Name Description Means Standard
Deviation
Infl_1 Degree to which employees monitor quality, costs, 3.06 0.70
productivity, and execution of work
Infl_2 Degree to which employees determine order of tasks 3.10 0.79
among each other
Infl_3 Degree to which an employee has room to invest in 2.07 0.74
new materials and technology
Infl_4 Degree to which employees have influence over their 3.39 0.76
own activities
Training Degree to which employees participate in general 2.65 0.94
training programs in social skills such as a presentation
and communication training
Seminar Degree to which employees participate in seminars and 2.90 0.85
conferences every year
Skill Degree to which employees are offered opportunities 3.58 0.71
for further development of specific skills
Social Degree to which the employer organizes social events 2.96 1.01
for employees
Rotation Degree to which employees are in a job rotation 1.87 0.82
program
Superv_1 Degree to which the supervisor monitors the activities 3.11 0.74
of the employees
Superv_2 Degree to which the supervisor gives orders to 2.93 0.88
employees on a daily basis
Superv_3 Degree to which the supervisor influences an 3.11 0.80
employee's planning
Part_1 Degree to which employees are involved in decision- 3.69 0.97
making with respect to selection of new colleagues
Part_2 Degree to which employees are involved in policy 3.23 0.80
making
Team Degree to which employee operate in autonomous 2.26 1.09
teams
Reward_1 Degree to which employees can earn individual 2.25 1.07
performance related pay
Reward_2 Degree to which employees are rewarded for 1.81 0.86
participation in teams
Reward_3 Degree to which employees have the opportunity to 1.14 0.61
participate in profit sharing
Qual_1 Degree to which employees have to deal with external 2.08 1.24
quality control, for example ISO certificates
Qual_2 Degree to which employees have to deal with internal 2.63 1.05
quality control or peer evaluation
Scale: 1 = very little 2 = little 3 = reasonable 4 = much 5 = very much
Principal component analysis was used to determine underlying factors. The application of
principal component analysis on the 20 HRM items leads to 6 underlying factors on the basis
of eigenvalues > 1.000. But if we look more closely at the percentage of variance explained
by each component (or factor) we find that component 1 explains 23% of the variance,
component 2 explains over 17% of the variance, and the following components explain each
less than 8% of the variance (see table 6).
14
Table 6 Principal Component Analysis on HRM items
Component Initial Percentage of Cumulative
Eigenvalues: Variance Percentage of
Total Explained Variance
Explained
1 4.658 23.292 23.292
2 3.481 17.407 40.699
3 1.602 8.008 48.707
4 1.171 5.856 54.563
5 1.048 5.239 59.802
6 1.034 5.169 64.971
7 0.878 -- --
8 0.782 -- --
9 0.737 -- --
Principal Component Analysis, Varimax rotation, rotation converged in 31 iterations
These findings suggest a possible 2-factor-solution. If we remove the items 'social', 'rotation'
and 'part_1' we find strong statistical evidence for a 2-factor-solution. Factor 1 represents
employee influence, employee training, attendance of seminars, skill development, employee
participation, teamwork and reward systems with a Cronbach a of 0.80 (see table 7).
Table 7 Rotated Component Matrix of a 2-factor-solution on HRM

Name Component/Factor 1 Component/Factor 2
"commitment "control
HR systems" HR systems"
Infl_1 0.53 0.16
Infl_2 0.37 0.25
Infl_3 0.64 0.05
Infl_4 0.55 0.00
Training 0.58 0.11
Seminar 0.61 -0.39
Skill 0.54 -0.02
Superv_1 -0.11 0.73
Superv_2 -0.18 0.81
Superv_3 -0.13 0.73
Part_2 0.59 -0.31
Team 0.60 -0.10
Reward_1 0.60 -0.05
Reward_2 0.77 0.16
Reward_3 0.48 0.41
Qual_1 0.20 0.49
Qual_2 0.32 0.63
Cronbach a (0.80) (0.72)

Principal Component Analysis (varimax – 2-factor solution)
Factor 2 represents direct supervision and quality control with a Cronbach a of 0.72 (see table
7). These (statistical) findings tend to reject the idea the existence of one dimension (control-
versus commitment strategies in the approach of Walton and control- versus commitment HR
systems in the approach of Arthur). Prior (conceptual and theoretical) work of Fleishman and
15
Peters (1962), Blake and Mouton (1964), Karasek (1979) and Simons (1995) also suggest a
multidimensional reality with respect to management control of employees. Blake and
Mouton's (1964) Managerial Grid focuses on leadership style, using a 2-dimensional
framework with on the x-axis "attention for (production) tasks" and on the y-axis "attention
for human relations". Karasek (1979) makes a distinction between the two dimensions "job
control" (e.g. possibilities for self-control, autonomy, job decision latitude) and "job
demands" (e.g. workload, responsibilities). We now claim to have both statistical- and
theoretical arguments to build on a 2-factor-solution with respect to HRM in this study.
Further analyses with respect to the HR bundles/systems are built on the two constructed
factors labelled commitment HR systems (factor 1) and control HR systems (factor 2). These
findings however might lead to problems with respect to hypothesis 1, as a result of the fact
that hypothesis 1 assumes a 1-dimensional construct with respect to HRM.
Institutional- or Coercive Mechanisms. The concept of coercive mechanisms was

operationalised with the help of 6 items that reflect the influence of works councils and trade
unions on conditions of employment and employees' development. Three other items on the
impact of labour legislation (collective bargaining agreements and other labour laws) were
excluded because of a lack of consistency and correlation between the different items. Again,
principal component analysis (varimax rotation) was applied to construct two new factors:
- 'works councils' (Cronbach a = 0.74)
- 'trade unions' (Cronbach a = 0.75)
The means and standard deviations of all individual HR items are summarised in table 8.
16
Table 8 Descriptive Institutional Mechanisms
Means s.d. a
Works Councils 0.74

Degree to which working conditions such as safety,
hygiene and quality of work are influenced
by the works council (wc_1) 3.02 0.92
Degree to which labor conditions such as wages and
rewards are influenced by the works council (wc_2) 2.16 0.90
Degree to which the employees' development is influenced
by the works council (wc_3) 2.52 0.80
Trade Unions 0.75

Degree to which working conditions like safety,
hygiene and quality of working life are influenced
by trade unions (trad_1) 1.79 0.84
Degree to which labor conditions like wages and
rewards are influenced by trade unions (trad_2) 2.69 1.20
Degree to which the employees' development is influenced
by trade unions (trad_3) 1.78 0.74
scale: 1 = very little; 2 = little; 3 = reasonable; 4 = much; 5 = very much
Control variables. The research design of this study controls for a lot of issues, but the two
major control variables in this study are: sector and size of the organisation. Sector is
controlled by the distinction between hotels, hospitals, and local governments. Size is
measured by the number of employees working in the organisation (see table 9).
Table 9 Control Variables

Means s.d.
Size of the organisation: 607 826

(number of employees)
Hotel (dummy: yes = 1, no = 0): n = 25

Hospital (dummy: yes = 1, no = 0): n = 38
Local Government (dummy: yes = 1, no = 0): n = 69
Dependent variables. In this analysis we use 'typical' HRM outcomes as performance

indicators: (1) absence due to illness; (2) average duration of absence due to illness; and (3)
17
employee turnover rate (see table 10). In the framework of Paauwe and Richardson (1997)
HRM activities like recruitment, selection, planning and rewards affect HRM outcomes like
employee satisfaction, motivation and retention. HRM outcomes affect firm performance like
profit, market value and market share. There are some direct effects of HRM activities on
firm performance (see for example Huselid, 1995), but the distance between HRM activities
and firm or organisational performance is generally too large (Kanfer, 1994; Guest, 1997).
Results
Descriptive Statistics. The means on several of the individual HR items (employee influence,
training, seminar, social, and rotation) are relatively low (see table 5). The same applies for
the impact of trade unions and works councils on different conditions of employment and
employees' development in organisations (see table 8). The organisations in the sample differ
on size (number of employees). Hospitals have an average of 1605 employees, local
governments an average of 238 employees, and hotels are relatively small with an average of
89 employees. See table 4 for more detailed information. Hospitals and local governments are
basically non-profit organisations with traditionally a high degree of institutionalisation in
terms of works councils' and trade unions' influence in combination with a strict observance
of labour laws. Hotels are profit organisations, characterised by a relatively limited influence
of trade unions together with frequently occurring absence of a works council. Only 50% of
the hotels in this sample have a works council. All hospitals and local governments in this
sample have a works council installed. There's a negative relationship between hotels (in
comparison to both hospitals and local governments) and "the impact of a works council" (t =
-2.51*) and "the impact of trade unions" (t = -2.58*). In other words, the respondents of
hotels perceive less trade union and works council influence than the respondents of local
governments and hospitals. Thus, we assume hospitals and local governments to be highly
institutionalised in contrast to hotels with respect to the impact of institutional mechanisms on
the shaping of human resource management. Both hypothesis 2a on size of the organisation
and the degree of institutionalisation and hypothesis 2b on nature of the sector (non-profit
versus profit organisations) are accepted with respect to Dutch hospitals, local governments
and hotels. In further analyses the variable 'high institutions' is a dummy with value '1' in case
of an hotel and value '0' in case of a hospital or local government. On average the
organisations in the sample have an absence due to illness of 7%, an average duration of
absence due to illness of 13.67 days, and an average employee turnover rate of 12% (see table
10).
18
Table 10 Dependent Variables
Means s.d.
Absence due to illness (ill): 0.07 0.02

(percentage absence due to illness of last year)
Duration of absence (dur_ill): 13.67 7.71

(average number of days of absence due to illness in days)
Employee turnover (turn): 0.12 0.11

(percentage employee turnover of last year)
Correlation matrix. The correlations between the relevant variables are summarised in table
11. Absence due to illness has a positive correlation with duration of absence due to illness
(0.40***) and negative correlation with control HR systems (-0.21*). Control HR systems
also negatively related to average duration of absence due to illness (-0.32**). Employee
turnover is positively related to control HR systems (0.43***). Hotels seem to have a negative
relation with duration of absence (-0.23*) and a positive relation with employee turnover
(0.63***). Local governments reveal a negative relation with employee turnover (-0.40***)
and a negative relation with control HR systems (-0.58***). Hotels have a positive relation
with control HR systems (0.65***) and hospitals reveal a negative relation with commitment
HR systems (-0.25**). Commitment HR systems are positively related to both the impact of
works councils (0.24*) and the impact of trade unions (0.21*). It is hard to make any
statement about the causal relationship of this latter remark. Do coercive mechanisms (like
the impact of works councils and trade unions) affect the factor commitment HR systems
positively, or does it work the other way around? Overall, there is some evidence that HR
systems (more specifically "control HR systems") affect HR outcomes like absence due to
illness and employee turnover.
19
Table 11 Correlations
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
1.Illness 1.00
2.Duration 0.40*** 1.00

Illness
3.Turnover 0.02 -0.16 1.00
4.Hotel 0.00 -0.23* 0.63*** 1.00
5.Hospital -0.04 0.02 -0.11 -0.31** 1.00
6.Local 0.04 0.18 -0.40*** -0.51*** -0.67*** 1.00

Governm.
7.Size 0.02 0.15 -0.17 -0.30** 0.77*** -0.48*** 1.00
8.Commit. -0.03 -0.11 0.05 0.11 -0.25** 0.12 -0.28** 1.00

HR systems
9.Control -0.21* -0.32** 0.43*** 0.65*** 0.05 -0.58*** -0.02 0.00 1.00
HR systems
10.Works -0.01 -0.07 -0.10 -0.24* 0.08 0.08 0.05 0.24* -0.12 1.00
Council
11.Trade 0.16 0.07 -0.26 -0.24* -0.17 0.31** -0.04 0.21* -0.11 0.00 1.00
Union
N =132 * p < 0.05 ** p < 0.01 *** p < 0.001
20
Table 12 Regression Analysis
Ill Dur_ill Turn
"absence due to illness" "average duration absence" "employee turnover"
(1) (2) (3) (4) (5) (6)
Constant 0.07*** 0.07*** 14.98*** 20.18*** 0.13*** 0.13***

Commitm. HR systems 0.00 0.00 -0.65 -1.45 0.00 0.00
Control HR systems -0.01* -0.04*** -2.36* -6.36** 0.00 0.00
Size 0.00 0.00 2.32= 2.83* -0.01 -0.01
Hotel 0.02* 0.06*** -- -- 0.14** 0.13***
Hospital -- -- -4.37 -10.32* -- --
Local Government 0.00 0.01 -0.03 -4.52 -0.06= -0.06=
Commitm. HR systems x
High Institutions -- 0.00 -- 2.12 -- 0.01
Control HR systems x
High Institutions -- 0.04*** -- 5.40* -- 0.00
N 132 132 132 132 132 132

Adj.R2 0.04 0.23 0.10 0.14 0.38 0.37
F 1.86 5.68*** 2.92* 3.01* 13.98*** 9.98***
= < 0.10, * p < 0.05, ** p < 0.01, *** p < 0.001

all variables in the analyses are standardized
21
Regression Analyses. We have already mentioned the consequences for hypothesis 1 when
building a model based on a 2-factor-solution with respect to HRM. Actually, building on a 2-
factor-solution on HRM makes it methodologically impossible to test hypothesis 1. We
therefore focus on explorative empirical results with respect both control- and commitment
HR systems, and testing hypothesis 3 about possible moderating (institutional) effects. In
table 12 the results of simple ordinary least squares (OLS) are presented. In regression (1) we
find a negative relationship between control HR systems and absence due to illness, although
the F-statistic (1.86) reveals a poor model fit. In regression (2) we added an interaction term
to look for mediating effects as stated in hypothesis 3. Again we find a negative relationship
between control HR systems and absence due to illness, but we also find a significant
interaction effect (control HR systems x high institutions). Regression (2) shows a better
model fit (F = 5.68***). The dummy hotel is significant in both regressions indicating
significant differences between hotels versus hospitals and local governments with respect to
absence due to illness.
Regression (3) and (4) reveal similar results. Control HR systems are negatively related to the
average duration of absence due to illness and we also see a significant interaction effect
(control HR systems x high institutions) in regression (4). Hospitals reveal lower scores on
average duration of absence due to illness, but this effect might be overestimated because we
also see a positive effect between size of the organisation and the dependent variable. And we
know that hospitals are significantly larger than both hotels and local governments.
Regression (5) and (6) do not reveal any shocking significant results with respect to both
commitment- and control HR systems, or any possible significant interaction effect. The
analyses show that hotels just score significantly higher on employee turnover than
organisations in the other two branches of industry. Overall we come to the conclusion that:
- control HR systems have a negative effect on both absence due to illness (Ill) and average
duration of absence due to illness (Dur_ill)
- commitment HR systems do not reveal any significant relationship with the three HR
outcomes in this study
- there are significant interaction effects with respect to control HR systems and
institutionalisation (control HR systems x high institutions) in relationship to both
absence due to illness (Ill) and average duration of absence due to illness (Dur_ill)
The latter remark supports hypothesis 3 that the impact of a work system (commitment and
control human resource systems) on organisational performance is smaller in an
institutionalised context than the impact of a work system (commitment and control human
resource systems) on organisational performance in a less institutionalised context.
22
The negative effect of control HR systems on absence due to illness and average duration of
employee absence is smaller in high institutionalised organisations (hotels and local
governments) than in low institutionalised organisations (hotels) in the Netherlands.
A striking side-effect is the fact that the variable 'size' does not play a (strong) significant role
with respect to the performance of the organisation, the degree of institutionalisation, and the
type of work systems as you would expect when taking into account prior research on HRM
and performance (see overview Paauwe and Richardson, 1997; and Boselie et al., 2001) and
existing literature on contingency theory (e.g. Woodward, 1960; Pugh and Hickson, 1976).
Discussion and Conclusion

The most important findings in this study can be summarised as follows. First, we find
evidence for a 2-factor-solution with respect to the operationalisation of HR systems instead
of Walton's (1985) and Arthur's (1994) assumption that control- and commitment systems can
be represented on a 1-dimensional continuum. We can conclude that the supposedly single
dimension of control versus commitment in reality consists of two dimensions. Apparently
work systems, aimed at strengthening commitment and empowerment, need at the same time
to be embedded in a control systems. In this respect we refer to Simon's Control in an Age of
Empowerment (1995) who demonstrates the necessity to link commitment and belief systems
to so-called boundary systems (made up of rules and procedures) and interactive and
diagnostic control systems (amongst others by using direct supervision, feedback/evaluation
and key performance indicators). In older leadership theories we see these two dimensions as
well being represented. For example the managerial grid by Blake and Mouton (1964), who
distinguish two dimensions, whereas Fleishman and Peters (1962) make a distinction between
the dimensions of initiating structure and consideration. Karasek's (1979) distinction between
the two dimensions "job control" (e.g. possibilities for self-control, autonomy, job decision
latitude) and "job demands" (e.g. workload, responsibilities) resembles our distinction
between the dimensions commitment- and control HR systems.
Secondly, we find evidence for significant effects of control HR systems on two out of three
HR outcomes in this study. A form of control, represented by supervision and quality control
reveals a positive effect on presence of employees (in contrast to absence of employees).
Thirdly, we find evidence for mediating effects of institutionalisation in the Dutch context.
The effects of control HR systems on absence due to illness and average duration of absence
due to illness are weaker in a high institutionalised context (hospitals and local governments)
than in a less institutionalised context (hotels). Organisations in a less institutionalised context
seem to have more leeway with respect to human resource management than organisations in
23
an institutionalised context. These findings provide strong arguments for future control in
research on HRM and performance with respect to the degree of institutionalisation. The
degree of institutionalisation might significantly differ between countries like the USA versus
the Netherlands (see for example Paauwe, 1998) and between branches of industry with a
specific country (for example hotels versus hospitals versus local governments).
A final remark relates to the research design and methods we have used. Following Arthur
(1994) we have used a survey/questionnaire based quantitative research design. Reflecting on
the results and looking back at what we have achieved we can seriously wonder if we should
be happy with this kind of research in a setting in which institutions and stakeholders outside
the company have such an influence. Probably the level of generated insights would have
been far greater if we had stuck ourselves to our tradition of carrying out a number of in-depth
case-studies using principles of theoretical sampling and grounded theory (Glaser and Straus,
1967). In this way we could have achieved a distribution of case studies across different
sectors (high and low on institutionalisation) and we would have involved the various
stakeholders by interviewing them and by making use of document-analysis (for example
minutes of the meetings of works council, trade unions etc). In this way in-depth case-studies
would have enabled us to establish chains of cause and effects and would have provided
ample means for analytical generalisations (Yin, 1989).
Rotterdam, March 2002

Boselie/Paauwe/Richardson4
Notes
1. USA research on HRM and performance: e.g. Arthur, 1994; Osterman, 1994; Huselid, 1995;
MacDuffie, 1995; Koch and McGrath, 1996; Lazear, 1996; Ichniowski and Shaw, 1999.
2. UK research on HRM and performance: e.g. Guest and Peccei, 1994; McNabb and Whitfield,
1997; Guest, 1999; Hiltrop, 1999.
3. Worldwide seminars and conferences on HRM and performance: e.g. the HRM Conference in
Rotterdam (Erasmus University/London School of Economics, September 1995), the ESRC
seminars in the UK (1996), parallel sessions in the Academy of Management meeting ('Failing to
find Fit in SHRM: Problems and Prospects', 1998; 'The Impact of Human Resources on
Organisational Performance', 1999; 'Human Resource Management and Firm Performance', 2000;
'Human Resource Systems and Firm Performance', 2001), the first Dutch HRM Network
Conference ('Confronting Theory and Reality', Erasmus University Rotterdam, November 1999),
and the Global Human Resources Management Conference, track 1 on SHRM, in Barcelona
(2001).
24
4. The authors would like to thank prof.dr. Paul Jansen (VU Amsterdam) for his suggestions with
respect to Karasek's (1979) model.
Literature
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Arthur, J.B. (1994) Effects of human resource systems on manufacturing performance and
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27
Publications in the ERIM Report Series Research* in Management
ERIM Research Program: “Organizing for Performance”
2002
Trust and Formal Control in Interorganizational Relationships

Rosalinde Klein Woolthuis, Bas Hillebrand & Bart Nooteboom
ERS-2002-13-ORG
Entrepreneurship in China: institutions, organisational idendity and survival. Empirical results from two provinces.
Barbara Krug & Hans Hendrischke
ERS-2002-14-ORG
Managing Interactions between Technological and Stylistic Innovation in the Media Industries.
Insights from the Introduction of eBook Technology in the Publishing Industry
Tanja S. Schweizer
ERS-2002-16-ORG
Investment Appraisal Process in the Banking & Finance Industry

Mehari Mekonnen Akalu & Rodney Turner
ERS-2002-17-ORG
A Balanced Theory of Sourcing, Collaboration and Networks

Bart Nooteboom
ERS-2002-24-ORG
Governance and Competence: How can they be combined?

Bart Nooteboom
ERS-2002-25-ORG
ISO 9000 series certification over time: What have we learnt?

Ton van der Wiele & Alan Brown
ERS-2002-30-ORG
Measures of Pleasures: Cross-Cultural Studies and the European Integration

Slawomir Magala
ERS-2002-32-ORG
Adding Shareholders Value through Project Performance Measurement, Monitoring & Control: A critical review
Mehari Mekonnen Akalu & Rodney Turner
ERS-2002-38-ORG
Web based organizing and the management of human resources

Jaap Paauwe, Rolf Visser & Roger Williams
ERS-2002-39-ORG
* A complete overview of the ERIM Report Series Research in Management:

http://www.ers.erim.eur.nl
ERIM Research Programs:

LIS Business Processes, Logistics and Information Systems
ORG Organizing for Performance
MKT Marketing
F&A Finance and Accounting
STR Strategy and Entrepreneurship
Challenging (Strategic) Human Resource Management Theory: Integration of Resource-based Approaches and
New Institutionalism
Jaap Paauwe & Paul Boselie
ERS-2002-40-ORG
Human Resource Management, Institutionalisation and Organisational Performance: a Comparison of Hospitals,

Hotels and Local Government
Paul Boselie, Jaap Paauwe & Ray Richardson
ERS-2002-41-ORG
The added value of corporate brands: when do organizational associations affect product evaluations?
Guido Berens, Cees B.M. van Riel & Gerrit H. van Bruggen
ERS-2002-43-ORG
High Performance Work Systems: “Research onResearch” and the Stability of Factors over Time
Paul Boselie & Ton van der Wiele
ERS-2002-44-ORG
ii
Human resource management in hospital networks
Submited: 31 March 2009
Guest editors
Professor Adrian Wilkinson, Griffith University (adrian.wilkinson@griffith.edu.au)
Dr Keith Townsend, Griffith University (k.townsend@griffith.edu.au)
Professor Mick Marchington, Manchester University (michael.marchington@manchester.ac.uk ).
Hospitals are an essential service. Throughout the world hospitals are facing many challenges including increased
costs, per capita decreases in government funding, technology that delivers both less invasive surgery (consequently
capacity to perform more inpatient procedures) and the capacity to deal with more complex medical interventions.
As such, one important area of improving and maintaining service delivery is to better manage the HR function and
human resources more generally. In many cases this is complicated yet further because people working at a hospital
site are likely to be employed by a range of different organisations both from the public and private sectors. This
makes management of what is meant to be a joined-up healthcare experience potentially confusing and subject to
multiple influences.
Government reports have warned that a chronic shortage of health professionals is constraining the capacity of
hospitals to deliver adequate services. Shortages of nurses, doctors and some allied health professionals are national
and international problems. There have been many media reports of hospitals closing emergency departments and
wards due to workforce shortages. Such labour shortages are putting pressure on politicians, policy-makers, health
practitioners and administrators to find solutions to what is increasingly seen as a health-care crisis. One of the main
causes of labour shortages is the inability of hospitals to retain existing staff. An alarming proportion of the trained
and experienced health workforce become dissatisfied and exit from hospital settings.
Performance measurement has been a major theme. But it has been noted that many of the performance measures
in hospitals are unique, for example, staff per bed workloads, number of patients treated, patient mortality (Buchan,
2004). The high proportion of skilled professional working within the highly labour intensive environment provides
the ideal context to promote highly successful HR systems. But, if these are to work across organisational
boundaries within the network, they need to be integrated wherever possible. However this is not always easy as
the workers employed by other organisations that operate on hospital sites might also be part of other large
organisations, so any attempt to integrate teams across employer boundaries might lead to disintegration of terms
and conditions within their own employing organisations.
Various studies have attempted to link the management of human resources to patient mortality in acute hospitals.
Through attracting and retaining good nurses through the HR practices ‘Magnet’ hospitals have lower patient
mortality rates (Aiken et al, 2002). Jarmen et al (1999) have shown a strong association between the number of
doctors per bed and patient mortality rates. However, this research is not uniform in reported results. West et al
(2006) cite studies with conflicting results when investigating the relationship between nursing workload and patient
mortality and the Aston research argue that bundles of HR practices are linked with lower patient mortality.
Evidence from the USA, UK and Australia suggests that there are common values held between front-line hospital
staff and administrative staff within organisations (cf. Hyde et al, 2006). However, there appears to be no uniform
approach to HRM within the sector due to differences in organisation between different countries (eg private v
public), to the ways in which hospitals might be grouped together (eg acute v mental health), and to the roles that
governments and labour organisations might play within different institutional contexts.
Research in this sector is limited by a range of factors. Firstly, a lack of methodological pluralism inhibits our ability to
understand the complex social and institutional dynamics involved in managing HR in hospitals. Secondly, there is a
failure to adequately examine structural and organisational aspects of hospitals that are important in measuring
performance. Aikin et al (2002) note that their data suggest that ‘what ails hospitals’ is not country specific but
rather based on management styles and strategies that do not match the funding arrangements and service
provision models under which they are operating. Hence, research on HR in hospitals provides a timely examination
of what might lead to better outcomes for employees, patients and, as a consequence, the organisation.
We seek contributions that critically explore aspects of HR within hospitals. This can include but is not limited to:
Managing diversity
High Performance HR
Line managers
Organisational Change
Global market for nursing
Fragmented workforces and managing across organisational boundaries
Professional groups

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University of Central Punjab

Faculty of Management Studies

University of Central Punjab Lahore, Pakistan

 Management by Objectives (MBO)

 Behaviorally Anchored Rating System (BARS)

Statutory regulations, such as the Payment of Wages Act, Minimum Wages Act, Equal Remuneration Act, and

History and Introduction to Hospital:

What is the importance of Hospital Management?

Prepared by: Mahboob ali khan (M.sc,M.H.M) quality specialist PSBJH 1

What to be managed in Hospital?

Concept of Productivity in the context of hospital:

As we are discussing regarding the concept of Productivity in the context of a hospital, so we

The effective and valuable usage/utilization/consumption of the resources or assets is important

Prepared by: Mahboob ali khan(M.sc,M.H.M) quality specialist PSBJH 3

E.g. Input + Output=Productivity.

Prepared by: Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 4

The following factors have a big role in the effectiveness of materials.

• The items which are needed urgently should be provided.

In general the pathology services are the cornerstone of the

Prepared by: Dr Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 6

Some Key Issues to be addressed:

Prepared by: Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 7

5- Maximum utilization of Lab Service

• Making links with small hospitals and nursing.

Key Managerial points:

Prepared by: Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 8

4-Lack of Skilled Technicians:

Prepared by: Mahboob ali khan(M.sc,M.H.M) quality specialist PSBJH 9

Management of Blood Banks:

The main tasks of blood banks are as follows:-

How we can collect a Blood:-

1- Voluntary/intentional donors: - This kind of blood collection is done by

Some Critical issues in blood banks:

o Staffing and workload:-

Internal blood banks v.s external blood banks:

The advantage of the external blood banks are:-

- Blood is not quickly available when it is needed.

In-house blood banks depend on:-

- Having financial resources.

Health Management Information System (HMIS)

Prepared by: Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 11

o Analyze the informatics processes as it relates to the healthcare enterprise

o It provides less staff to operate and manage.

Possibility of computer usage in hospitals:-

o Requirement for computerization.

The Profit/Advantage of Computerization:

o The investment is easily can be phased.

Some of the Problems in Computerization:-

The below are the problems which is facing during computerization.

o The staff may fright from economizing due to computerization.

Some Recommendations to overcome these problems:-

Financial Management of a Hospital:-

Steps in Financial Management:

Some of the best techniques in Financing

Cost accounting and Cost Control:

Prepared by: Mahboob ali khan(M.sc,M.H.M) quality specialist PSBJH 14

The fees should be based on:-

- Cost and Competitors fees.

Prepared by: Mahboob ali khan (M.sc,M.H.M)quality specialist PSBJH 15

Prepared by: Mahboob ali khan(M.sc,M.H.M) quality specialist PSBJH 16