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Volume 53, Number 3
May/June 2008

  • INTERVIEW
    Interview with Wayne B. Sorensen, PhD, FACHE, Associate Professor, Texas State University-San Marcos, Kyle L. Grazier

  • COVERING THE UNINSURED
    What's In It for You? Understanding the Plight of the Uninsured, Dean G. Smith
  • CONSUMER-DRIVEN HEALTHCARE
    Happy Together: Consumer Expectation for Public-Private Healthcare System, Sandy Lutz
  • ARTICLES
    Variations in Hospital Administrative Costs, Niccie L. McKay, Christy Harris Lemak, and Annesha Lovett
    Organizational Resiliency: How Top-Performing Hospitals Respond to Setbacks in Improving Quality of Cardiac Care, Tashonna R. Webster, Leslie Curry, David Berg, Martha Radford, Harlan M. Krumholz, and Elizabeth H. Bradley
    Application of Six Sigma/CAP Methodology: Controlling Blood-Product Utilization and Costs, Robert A. Neri, Cindy E. Mason, and Lisa A. Demko
    Strategic Planning Processes and Hospital Financial Performance, Amer A. Kaissi and James W. Begun

Executive Summary

Variations in Hospital Administrative Costs, Niccie L. McKay, Christy Harris Lemak, and Annesha Lovett

Administrative costs in hospitals are substantial and can have a major effect on performance. Despite this fact, not much research has been done to better understand such costs. This study examined variations in hospital administrative costs using a data set of acute care hospitals in Florida over the period 2000 through 2004. Results indicated that inflation-adjusted total administrative costs increased from about $22 million to $28 million on average over this time period. However, the percentage of total operating costs devoted to administrative costs was quite stable over the period, averaging approximately 23 percent in each of the five years.

Compared to those in rural areas, urban hospitals on average had higher administrative costs per adjusted admission but lower administrative costs as a percentage of total operating costs. Hospital administrative costs also differed by ownership: For-profit hospitals on average had higher administrative costs per adjusted admission than not-for-profit and government hospitals, but administrative costs as a percentage of total operating costs were highest for for-profit hospitals and lowest for not-for-profit hospitals, with government hospitals falling in the middle. For bed size, administrative costs as a percentage of total operating costs were highest for the smallest hospitals.

Results of this study will be useful to healthcare managers searching for ways to reduce unnecessary administrative costs while continuing to maintain the level of administrative activities required for the provision of safe, effective, high-quality care.

Executive Summary

Organizational Resiliency: How Top-Performing Hospitals Respond to Setbacks in Improving Quality of Cardiac Care, Tashonna R. Webster, Leslie Curry, David Berg, Martha Radford, Harlan M. Krumholz, and Elizabeth H. Bradley

Despite substantial improvement in recent years in hospital performance in many quality measures for acute myocardial infarction (AMI), national performance lags in a key publicly reported quality indicator for AMI—door-to-balloon time, the period from patient (with ST-segment elevation myocardial infarction or STEMI) arrival to provision of percutaneous coronary intervention or balloon angioplasty. Previous research has elucidated distinguishing features of hospitals that routinely achieved recommended door-to-balloon times for patients with STEMI. However, what has not been fully explored is how top-performing hospitals handle setbacks during the improvement process.

In this study, we used qualitative methods to characterize the range of setbacks in door-to-balloon improvement efforts and the strategies used to address these barriers among hospitals that were ultimately successful in reducing door-to-balloon time to meet clinical guidelines. Setbacks included (1) failure to anticipate and address implications of initial changes in door-to-balloon processes for the system as a whole; (2) tension between and within departments and disciplines, which needed to gain consensus about how to reduce door-to-balloon time; and (3) waning attention to door-to-balloon performance as a top priority after the perceived goal of reducing treatment times had been reached.

Our findings demonstrate key aspects of technical capacity, organizational culture, and environmental conditions that were factors in maintaining improvement efforts despite setbacks and hence may be critical to sustaining top performance. Understanding how top performing hospitals recognize and respond to setbacks can help senior management promote organizational resiliency, leading to an environment in which learning, growth, and quality improvement can be sustained.

Executive Summary

Application of Six Sigma/CAP Methodology: Controlling Blood-Product Utilization and Costs, Robert A. Neri, Cindy E. Mason, and Lisa A. Demko

Blood-product components are a limited commodity whose cost is rising. Many patients benefit from their use, but patients who receive transfusions face an unnecessary increased risk for developing infections; fatal, febrile, or allergic reactions; and circulatory overload. To improve patient care, safety, and resource stewardship, transfusion practices must be evaluated for appropriateness (Wilson et al. 2002).

A multihospital health system undertook a rigorous study of blood-product utilization patterns and management processes to address cost-control problems in the organization. The system leveraged two process improvement tools widely implemented outside of the healthcare industry: (1) Six Sigma methodology to identify blood-utilization drivers and to standardize transfusion practice, and (2) change acceleration process model to drive effective change.

The initiative resulted in a decreased rate of inappropriate transfusions of packed red blood cell from 16 percent to less than 5 percent, improved clinician use of a blood-component order form, establishment of internal benchmarks, enhanced laboratory-to-clinician communication, and better blood-product expense control. The project further demonstrated how out-of-industry tools and methodologies can be adopted, adapted, and systematically applied to generate positive change (Black and Revere 2006).

Executive Summary

Strategic Planning Processes and Hospital Financial Performance, Amer A. Kaissi and James W. Begun

Many common management practices in healthcare organizations, including the practice of strategic planning, have not been subject to widespread assessment through empirical research. If management practice is to be evidence-based, evaluations of such common practices need to be undertaken.

The purpose of this research is to provide evidence on the extent of strategic planning practices and the association between hospital strategic planning processes and financial performance. In 2006, we surveyed a sample of 138 chief executive officers (CEOs) of hospitals in the state of Texas about strategic planning in their organizations and collected financial information on the hospitals for 2003. Among the sample hospitals, 87 percent reported having a strategic plan, and most reported that they followed a variety of common practices recommended for strategic planning—having a comprehensive plan, involving physicians, involving the board, and implementing the plan. About one-half of the hospitals assigned responsibility for the plan to the CEO. We tested the association between these planning characteristics in 2006 and two measures of financial performance for 2003.

Three dimensions of the strategic planning process—having a strategic plan, assigning the CEO responsibility for the plan, and involving the board—are positively associated with earlier financial performance. Further longitudinal studies are needed to evaluate the cause-and-effect relationship between planning and performance.