by Rene T. Domingo (email comments to rtd@aim.edu)

The changing health care landscape

One of the most difficult industries to innovate is the health care industry, in particular, the hospital industry. While the manufacturing industries and most services industries, like airline, hotel, restaurants, and banking have reinvented themselves to provide better quality and services to their customers, hospital processes have not dramatically changed over the years as to impact over-all patient satisfaction. It is common and ironic to see out-of-date management practices mixed with state-of-the-art medical equipment and sophisticated information technologies. Service quality has lagged behind hardware and software quality in many hospitals.

Given the rapid changes in the hospital's operating environment and stakeholders, change and innovation have become strategic in managing hospitals, in fact, key to their survival. New government regulations including the impending malpractice law, the increase in HMO and capitated (fixed fee) patients, the high turnover of medical staff particularly nurses, the current economic hardship that prompts more self-medication, and the increase in new hospitals in the country are going to challenge traditional hospital practices and paradigms. Hospitals stakeholders - patients, their employers, doctors, nurses, and HMO's - have likewise become more demanding and have raised their expectations from hospitals. Meanwhile, operating costs - salaries, supplies, and utilities - have continuously gone up. Addressing the need to provide better service with rising costs and regulations requires strategic thinking and solutions.

Need for long term thinking

Unfortunately, long term strategic planning is seldom done by hospitals. One excuse for lack of long term thinking is the short-term, day-to-day firefighting nature of the business. Hospitals are always engaged in a constant flurry of activities and admissions. It seems you cannot stop the clock in these 24x7 mills and ask strategic questions like: Are we still doing the right thing? Is there a much better way or different way of doing things? Are we still moving in the right direction? Should we change gears and our heading? Paradoxically, there seems to be no change, but only constancy and complacency amidst the flurry of activities and people milling around in many hospitals. Hospitals are essentially repair and restoration facilities - most go there because something is already wrong with them, either to have something removed from and fixed in their bodies. Thus hospitals, by nature and by necessity, have become reactive and diagnostic (after-the-fact) in their medical and clinical processes. The problem arises when this same reactive attitude is applied to the hospital's management and service processes like planning, admission, discharge, housekeeping, billing, hiring, and purchasing, medical records, and ancillary services. The consequence is short term firefighting, constant problem solving, and finger-pointing that eventually affect the medical processes. While a hospital's medical staff may be reactive in their medical processes, its management should be proactive and strategic in outlook and decision-making.

Perhaps the most significant result of the short-term thinking and firefighting stance of hospital managers is the all too familiar indifference to the plight of patients. Hospital processes are often characterized by bureaucratic delays and long agonizing waits for almost anything: waiting for the doctor, waiting for a room, waiting for the results, waiting for the bill and the elusive doctor's professional fees. No wonder hospitals call their customers "patients", since they need a lot of patience during their stay. On top of the delays is the lack of transparency; patients are not informed adequately or not at all of the reasons for these delays. Many policies are anti-customer, like multiple handoffs-- the point of sale or service is separate from the point of payment, resulting in multiple queuing by the same customer.

There is likewise a large room for improvement in quality in health care. While the manufacturing sector can boast of very high quality levels of 200 defects per million (dpm) or even 6 sigma quality (3 dpm), mistakes in hospitals still range from 60,000 to 300,000 per million opportunities. Like medical and medication errors, hospital infection is also high. A Fortune article "The Killer Bug" cited hospital infection as the unofficial No. 5 cause of death in the U.S. in 1999. 90,000 died of it in that year, beating No. 6 killer diabetes which claimed 68,000 lives. A large number of delays and errors in hospitals are truly unnecessary, avoidable, and preventable.

Hospitals do not seem to realize that their customers are the most sensitive in the service industry. Hotel guests are just tired, restaurant customers are just hungry. These people could endure some degree of delays and bad service. But hospital customers are physically, psychologically, and financially distressed upon arrival, and if they are welcomed by slow, uncaring and erroneous service, we have the proverbial case of "adding insult to injury". Some hospitals might rationalize their complacency as: "Patients are dying (figuratively and literally) to get into our hospital, why bother about service?" Like the telephone application backlogs and year-long waits, the days of high hospital occupancy rates are numbered, as new players, technologies, and market behavior change the health care playing field.

New Paradigms, New Leaders

For our local hospitals to survive and be at par with the best in the world, new leaders with new paradigms are needed. Our hospitals and their systems should be reconfigured to become patient-centered, patient-focused, and patient-driven, rather than doctor-driven. Special attention should be given to the "hotel like" processes of the hospitals, which constitute the bulk of its processes and source of most patient complaints: billing, housekeeping, records, admission (check-in), discharge (check-out), security, pharmacy, and food service. Hospitals are in reality specialized hospitals. In short, total customer care - clinical and non-clinical quality - should be the aim of customer service. The best way to run a hospital is not to run it like a hospital, but as a customer service center. If airlines were run like airlines, passengers would be treated like cattle and cargo.

The new hospital leaders should be masters of change. They should be able to transform and turnaround the institution and be able to incite and excite the entire organization about new possibilities. They should serve as inspiration and models to emulate. With so many stakeholders hospitals should deal with, the leaders should be master communicators and negotiators who always seek win-win solutions. They are hands-on managers, who can macro as well as micro manage as the need rises. They can see the trees and forest at the same time. Since most hospitals have funding problems which will worsen, the new hospital leaders should be resourceful. As leverage players, they can create synergies and bring out the best in everybody. The new hospital leader is a visionary, a strategist who knows when to change direction. He thinks out-of-the-box, and challenges everyone with stretched goals and targets.

Two-headed hospital

There is one important aspect that make leadership and change management particularly challenging in the hospital industry. Most hospitals are run by two top executives: the hospital administrator, in charge of the employees and the business functions, and the medical doctor who is in charge of the doctors and the clinical processes. Most businesses and institutions have only one chief executive. There are few other two-headed organizations. The closest analogies would be the publishing industry co-run by publishers and the editor-in-chiefs, and the film business co-operated by producers and directors. There would be inherent dichotomies, tensions, and complexities in organizations with two bosses. The typical question is who is more important: the hospital administrator or the medical director. Who is the tail? the dog? Who should wag who? Who should lead the change? Who decides the long-term strategy for the hospital? The answer is both: the two heads should think with one head in deciding fate and future of hospital and its stakeholders. This is easier said than done, but it has to be done. One reason for the slow pace of change in a hospital may be the lack of shared vision and commitment from the hospital administrator and the medical director.

In addition to acting in unison, each head should have strong personalities and leadership. Both have unique groups of people to manage to ensure quality service. Administrators have nurses under them, the biggest group which also has a high turnover. Typical hospitals suffer from scarcity of nurses, and those who remain are overworked and overloaded, and are constantly being wooed away by U.S. and U.K. hospitals. Hospital administrators will have to formulate long term strategies given this scarce and transient resource.

Doctors with three hats

On the other hand, the biggest challenge of medical directors is managing, coordinating, and disciplining doctors. Doctors, or more precisely consultants, wear three hats: employee, customer, and owner. They act like employees. Though receiving no salaries from hospitals, they perform employee-like functions and processes from the patients' viewpoint. They also act like customers. Though they do not pay the hospital, doctors bring in patients, and actually decide in most cases which hospitals their patients would be admitted in. Most of them have affiliation with many other hospitals. Doctors have a substantial influence in revenue generation. In a way, they are like tenants and entrepreneurs renting space in hospitals - without paying rent. Finally, many doctors, particularly the important ones, are owners or part owners of their hospitals. As a group, they have a strong say in what happens and what does not happen in "their" hospitals. No other organization, business or otherwise, has this kind of principal stakeholders who wear three hats. Doctors make any change and managing it particularly difficult, compared to other organizations where you just manage employees. Medical directors and administrators would need leadership and acumen in managing and serving this particular resource and stakeholder and in making doctors think strategically. In a way, management should know which hat a doctor is wearing when he does something, when he says something, or when he complains about something.

TQM in hospitals

Leadership and change management in hospitals are not an easy task - given the unique nature of its operating environment and stakeholders. But the hospital of the future and its fate will be decided by the long term strategy formulated today by its leaders and management. It is worth noting however that there are already major hospitals in the country that have finally aimed at customer service and satisfaction as their long term strategic goals. Implementing total quality management or TQM, they have achieved very positive results. They likewise discovered in the process that improving patient satisfaction is both image-building and financially rewarding since it cuts length of stay (LOS) and unnecessary costs. We expect more hospitals to follow suit and emulate these pioneers of the new patient-first paradigm in health care.