Introduction

The world-wide trend today is for the Health Sector to be under siege with increasing patient loads, more complex procedures and ever rising medical costs. The cost of hospitalisation is the most dominant cost factor absorbing most of the resources.

 

Managing the process between the conflicting vested interests of Funders, Providers and Patients is a mammoth task. This is one of the greatest challenges now facing the newly formed Health Management Organisations (HMOs). The key role players are the Funders, being predominantly Medical Aid Societies whose resources are paid for by members’ i.e. patients’ contributions, and Providers who consist of hospitals, doctors, nursing staff, pharmacists and other health care workers. All of this leaves the poor patient side lined and bemused while at the same time expecting enhanced services.

 

Current State

Traditionally hospital systems, especially in the government sector, have been unable to provide management with the necessary timely and meaningful information with which to manage.

 

In the government sector the hospitals are almost totally devoid of useful on going information.  Managers are not in a position to make appropriate decisions as they do not know how much procedures or departments are costing.  At best macro figures are provided for the hospital, (months after they have been incurred) for personnel costs, capital expenditure, pharmaceuticals, consumables and utility costs.  Statistical data is gathered for input into official records which is used to help motivate for more resources, and clinicians utilise the information for further analysis within the medical fraternity, often for predominantly research purposes.

 

In the private sector many hospitals have very sophisticated systems to ensure all items directly used may be appropriately costed and charged for. This cost focussed approach is a recipe for over servicing and the long suffering patient has little or no influence, and eventually is simply forced to pay higher medical premiums.

 

Therefore, there is either no ability nor motivation from hospital management to manage more efficiently.  In terms of optimising the use of the resources under their responsibility too many managers are not in a position to account for the various aspects from a financial perspective.  The divide between clinicians and hospital administrators is a cause of great frustration which hampers any possible close working relationships for the benefit of the hospital and its patients.

 

Future State

Hospital management needs to become more business orientated with a system which provides both cost effective, and efficient meaningful, information. The outputs need to be prepared in a timely manner so as to be more useful and practical for day to day management.

 

Management should be optimising the utilisation of their resources without adversely impacting on the health delivery capabilities of the hospital and it’s staff. Improved management information and systems allows for better decision making which enhances health care delivery.

 

To succeed the cost of various activities, procedures, departments and services must be known by the individuals who are responsible for making the decisions at the “coal face”.  Being effective means “Doing the right things” while being efficient is “Doing things right”, and when both are done in conjunction with each other at the right time the decision making process is enormously enhanced.

 

Solution

The solution to better performance is to have a well thought out structured approach to creating a comprehensive set of management information to add value. The creation and construction of the reporting outputs should be determined in a consultative and participative manner to maximise the benefits. It is absolutely critical for the clinicians and management to work closely together from the outset with a shared responsibility.

 

The entire process is built around an agreed structure for the hospital and all resources used or consumed must be accounted for in a matrix format and matched against revenues generated. This would consist of a Profit Centred (PC) approach with related activities, services or procedures matched to the resources needed to perform them.  A Profit Centre is essentially:

 

• any area or unit that is clearly identifiable in practice

• is of sufficient significance to be accounted for separately

• for which an individual is responsible and may be held accountable

• where activities, procedures and/or services are performed 

 

The diagram below is an example of a high level Profit / Cost Centre structure.