A Profile of the Health Management Industry

Velma Lee

• Publisher: Business Expert Press
• Year: 2016
• ISBN:
  9781606499832
• Topic: Business
• Subtopic: Business generale
• Index: Business

Whether you are a seasoned manager who is considering a mid-career change or a college-bound graduate looking at future career in the health science profession, this book offers you a comprehensive, quick glimpse of the health care industry. This book will enable you to begin asking further questions, identify untapped opportunities, and unleash the potential nesting in your current network. Written from a business perspective, this book provides managers with a framework for understanding the historical and competitive landscape in health care. It enables readers to evaluate past development, current issues, and projected changes that affect the industry. It is a good springboard for conversations pertinent to the strategic business development of businesses in the health care industry, especially for non-clinically trained professionals.

CHAPTER 1

Elements of Health Care

In this section, we summarize typical organizational structures found in the health care industry, functions of various departments, and market- versus government-based financing.

Human Resources

According to the World Health Organization (WHO), human capital decisions include an appropriate quality, mix, and distribution of health services. To find the right balance, careful choices made by countries in light of their unique needs, and monitoring, are important. At the organizational level, human resources planning is a crucial function that is often neglected.¹ To forecast supply and demand of human resources in hospitals, one must understand typical organizational structures in the industry.

Typical Organizational Charts

In this section, three types of organizational structures are described, though there are many other types and sizes of hospitals that exist in the U.S. system. Veteran Administration (VA) hospitals are 100 percent government funded, and are not covered in this book. This does not mean that they represent a minority, or are less significant. However, management, financing, and accountability of a VA hospital are very different from a private, community, or emerging hybrid form of healthcare institution; so it is fair only if a more thorough, separate discussion is devoted to the subject.

Research Hospital (e.g., Mayo Clinic)

The objective of a research-focused healthcare institution is to provide patients with the latest and best treatments for advanced diseases that general hospitals do not have the resources to treat. Patients are aware that the treatments they receive might be part of larger research that involves undocumented risks.

Figure 1.1 shows the organizational chart of the Mayo Clinic. The Mayo Clinic was founded by Dr. William Worrall Mayo in 1864, with a medical school opened in 1972. It was the world’s first private, integrated, group medical practice, where patient care and teamwork were the center of medical practice.² During the 1980s, the Mayo Clinic opened in Jacksonville, Florida. In the 1990s, the clinic’s first website was created, and the children’s hospital opened. In 2001, scientists at Mayo developed the first rapid anthrax diagnoses following the 9/11 terrorist attack. In 2010, Mayo launched “decade to discovery,” with the purpose of curing both Type I and Type II diabetes by 2020. In 2013, legislation was passed to approve public funding for Destination Medical Center, which is expected to be a $6 billion investment over a 20-year period.³

Figure 1.1 Organizational Chart of Mayo Clinic

Source: Smith, A.N. (2010, November 23). CFI Structure. Yale School of Management. (2010). Retrieved from http://nexus.som.yale.edu/design-mayo/?q=node/114

Chart 1.2 A typical hospital organizational chart

Chart 1.2 shows a typical hospital’s organizational chart, depicting departments that are common concern for staffing and management.

Private Institutions (e.g., Virginia Mason Medical Center and Hospital)

Virginia Mason Medical Center (VMMC) is a private, nonprofit hospital. Its funding comes from private sources, and it is not responsible to the government. It embodies a typical hospital organizational structure, and more. For example, it has a special quality assurance department called the Kaizen Promotion (KP) office which focuses on hospital efficiency while delivering world-class patient service. The Administrative Director of KP, together with the Senior VP for Quality and Compliance, report to the Executive VP of Chief Operating Officer (COO). Both the COO and Chief Medical Officer (CMO) report to the Chairman and CEO. VMMC’s management goal is to equip frontline staff, so they can improve daily work and transform the way things are done.⁴ It also has specialization of treatment for AIDS and plastic surgery.

Current Hybrid (e.g., University of Southern California Healthcare Center)

University of Southern California Healthcare Center (USC HCC) is a representative of the development of many university research-based hospitals, which evolved from a pure research/teaching institute to one that provides premises for teaching physicians to accept patients on a private level while continuing research and teaching. This hybrid form of healthcare organization usually has two organizational charts. 1. A research-based organizational chart that shows the areas of services and expertise. 2. A revenue-generating, private healthcare center that look like a for-profit organization, with slightly different compensation and benefits systems.

Similarities and Differences

Although all three types of organizational structures have similar missions, functions, and service mottos, their sources of financing and dependence on state budgets versus private patients with independent governance provide different degrees of incentives and flexibility for planning, training, and retention of human resources. For example, USC was originally affiliated with the university, and all staff benefits operated like the rest of other academic departments in the university. Over time, the hospital had different sections that were privatized, and organizations such as Tenet Healthcare Corporation took control and started giving it new name, logo, regulations, and so on. Although the outside of the healthcare facility might not present notable difference to the average patient, the internal policies and difference in staff compensation system (dependent on their joining era as a university staff or a private hospital organization staff) can be distinct. When two types of differently compensated healthcare professionals work in parallel, there are potential conflicts regarding objectives, speed, and quality focus. There might also be duplication of duties and positions for a significant transition period prior to clarification of new roles and responsibilities.

Divisions

Outpatient service/treatment (OS/T) refers to treatment of patients who do not require hospitalization. There is also increased emphasis on care for those who have been released recently from the hospital or were admitted to the hospital for overnight monitoring. OS/T has been gaining importance over the years since hospital performance is now monitored more closely and hospitalization expenses skyrocketed. There have been increased pushes to discharge patients from the hospital earlier so their care can be provided in the least expensive way that still accords with positive medical outcomes. Many hospital affiliated urgent care centers are established in the last two decades. According to research of the United States Department of Labor, consumer prices for outpatient healthcare services increased 200 percent from 1997–2015. Over the same period, there was an overall 50 percent increase of all items. Medicare/insurance companies have strict criteria and definitions for technically admitting patients into the hospital. OS/T plays a role in determining how patients are treated and whether they are considered outpatient/hospitalized patients from a billing perspective. Many healthcare organizations choose to strengthen support offered by OS/T to boost overall patient satisfaction and lower cost. Below are elaborations on a few divisions that complement OS/T.

Medical Records and Patient History

Medical records are increasingly organized in electronic health systems, which offer convenient storage and retrieval. However, medical records also create high risk of fraud and identity theft once information is available to unethical groups. For patient safety and privacy concerns, patients must fill out an “Authorization for Release of Information” form to receive medical records before being discharged/picked up.⁵ The U.S. Government has aggressively pushed medical organizations to adopt electronic medical records systems, offering financial incentives for implementation and imposing penalties for failure to timely achieve these goals. Good record keeping allows for better medical diagnosis and treatment, potentially resulting in fewer readmission of patients to hospitals. The average service budget for this area is about 4 percent of annual total operational cost.⁶ Reliable maintenance of computer servers and storage backups are important challenges for this department. “What are ways to protect patient information while maintaining the application of advanced technology for improved communication and consistent medical care?” is a question worthy of strategic concern and management attention.

Diagnostic Services

Diagnostic services facilitate the provision of timely, cost-effective, high-quality diagnostic care in secure environments.⁷ Pathology, laboratory medicine, radiology, and nuclear medicine are components of diagnostic services. Correct diagnoses are important for the right treatment and patient recovery. Most diagnostic blood tests can be completed with simple chemical procedures and minimal laboratory time. Diagnostic tests such as blood tests are typically less expensive. However, radiology- and cardiology-related diagnostic tests, and cancer genetic diagnostic tests, are more complicated and expensive. Acquisition costs of radiology equipment are high, but tests can be run inexpensively after the equipment is obtained.⁸ Some tests cost minimally while others are expensive, depending on whether a physician’s interpretation is required. The average budget for this department is about 5 percent of annal total operational cost.⁹

Pharmacy

The traditional role of pharmacist has transformed from that of a dispenser of medications to that of a vital healthcare team member who consults closely with patients with chronic diseases, offers medication adherence strategies, and broadens the profession’s overall influence.¹⁰ For example, during management of insulin levels for diabetic patients, pharmacists help with both tests and glucose monitoring, which is expected to reduce death rates from 75 percent to 45 percent in 100,000.¹¹ Over $100 billion was spent in 2011 just on diabetic-related pharmaceuticals and supplies,¹² and these expenses are expected to increase in the years to come. Some medications can be addictive, so there is the ethical dilemma of prescribing medications to patients that are not supposed to make them more drug-dependent. Another area of debate is the use of generic versus new drugs. Medicare has a policy on restricted adoption of new drugs. Generic drugs are usually affordable, whereas new drugs (e.g., a drug that treats Hepatitis C in 90 days but costs thousands of dollars) are much more expensive. Average hospital budget for a pharmacy department is about 7 percent of annal total operational cost.¹³

Anesthesia

Anesthesia is an indispensable part of surgery. The various types of anesthesia include local, regional, spinal, and epidural, and general. The medical definition of ...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Contents
• Foreward
• Purpose
• Acknowledgment
• Overview
• Chapter 1 Elements of health care
• Chapter 2 How the industry operates
• Chapter 3 Industry organization and competition
• Chapter 4 Competitive strategies
• Chapter 5 Regulation
• Bibliography
• Related Books and Articles
• Index