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Volume 49, Number 2
March/April 2004

I. INTERVIEW
Stephen M. Shortell, Ph.D., FACHE, University of California-Berkeley, Kyle Grazier

II. PHYSICIAN-EXECUTIVE RELATIONS
Co-opetition: An Alternative to Competition, Barbara LeTourneau

III. REPLACEMENT FACILITIES
Replace or Renovate, James E. Hosking

IV. ARTICLES

  • Health Promotion and Disease Prevention by Small Rural Hospitals: Reasons, Obstacles, and Enablers, Peter C. Olden and Steven J. Szydlowski
  • Who Should Lead a Healthcare Organization: MDs or MBAs?
    Frank Schultz and Shoma Pal
  • Effects of Medicare BBA Spending Reduction on the Profitability of General Acute Care Hospitals, Alan M. Sear

V. FELLOW PROJECT
Developing Employee Participation in the Patient-Satisfaction Process,
Cheryl L. Stavins

 

Executive Summary
Health Promotion and Disease Prevention by Small Rural Hospitals: Reasons, Obstacles, and Enablers, Peter C. Olden and Steven J. Szydlowski

Rural health stakeholders expect small rural hospitals to help improve health status in their communities. Those hospitals may try to offer health promotion and disease prevention (HPDP) services, but they confront big obstacles when doing this. Research interviews with chief executive officers (CEOs) at small rural hospitals found that low reimbursement, community attitudes, inpatient priorities, personnel shortages, low educational levels, weak local economies, and large older populations are often barriers to HPDP. Research also found practical methods that enabled CEOs to overcome obstacles and to offer HPDP in their rural communities. Collaboration with many organizations within and beyond their communities is essential to expand and leverage facilities, equipment, legitimacy, funds, interpersonal connections, knowledge, and resources. Philanthropy, grant writers, and grants are important, as is the involvement of employee champions and volunteers. Political advocacy can help. Implementing these enablers requires effective leadership, communication, interpersonal relations, and trust building.


Executive Summary
Who Should Lead a Healthcare Organization: MDs or MBAs?
Frank Schultz and Shoma Pal

Debates often arise about who is best suited to manage a healthcare organization. Therefore, we argue that an examination of the ability of healthcare organizations' chief executive officers (CEOs) to make strategic decisions is warranted. Is the most appropriate leader the medically educated CEO, whose training in patient care allows him or her to be most cognizant of the quality-of-care needs of the organization? Or is it the managerially educated CEO, whose training makes him or her most aware of the organization's financial needs?
This article presents a study involving senior managers from two integrated healthcare organizations. The study revealed that no significant differences exist between medically educated and managerially educated senior managers in their ability to make strategic decisions that maximize the net income or the quality of care of the healthcare organization. The debate that pits the "MDs" against the "MBAs" is misdirected. Characteristics other than educational degree appear to have a stronger influence on a CEO's ability to make successful strategic decisions. Therefore, candidates' educational background should not play such an important role in the processes for selecting CEOs.


Executive Summary
Effects of Medicare BBA Spending Reduction on the Profitability of General Acute Care Hospitals, Alan M. Sear

The Balanced Budget Act of 1997 was intended to reduce spending by about $115 billion from the Medicare Hospital Insurance trust fund over a five-year period. Several studies were funded by the hospital industry that indicated that the actual reductions would be far greater than $115 billion and that these reductions would have a devastating effect on U.S. hospital finances. In 1999, Congress passed the Balanced Budget Refinement Act, which added back about $11 billion in spending for fiscal years 2000 through 2002. In 2000, Congress passed the Benefits Improvement and Protection Act, which restored another $37 billion in spending over a five-year period. These cutbacks were going into effect at the same time as a cyclical decline in hospital operating margins occurred. The present study was designed to determine if any separate effect of the Balanced Budget Act could be detected in the operating margins of general acute care hospitals in Tampa Bay, Florida.
Operating margins were analyzed for 25 hospitals for a 12-year period (1990 through 2001), and a regression model was tested in which the dependent variable was the difference in mean operating margins for each hospital between the 1990 through 1997 period and the 1998 through 2001 period. The mean percentage of hospital revenue derived from Medicare, five other revenue source variables, and three hospital structural variables were used as the predictor variables.
A statistically significant decline in operating margins was seen between these two periods, but Medicare revenue did not account for a significant amount of the variance. Thus, it was concluded that the Balanced Budget Act of 1997 did not significantly affect the operating margins of the study hospitals. Implications for Medicare policy are addressed.