1CoE Hospitals More Likely Than Not to Lead the Restructuring of Health Care Strengths for Leadership Role Budget and capital resources available Administrative structures and staffing in place Weakness for Leadership Role Must change business model away from in-patient volume Strengths for Leadership Role Budget and capital resources available Administrative structures and staffing in place Weakness for Leadership Role Must change business model away from in-patient volume

2CoE Arguably Important for All Physicians to Have A Basic Understanding of Hospitals For most physicians some importance to their daily lives. For all physicians a force to be reckoned with in the future. For most physicians some importance to their daily lives. For all physicians a force to be reckoned with in the future.

3CoE Primer on Hospital Administration Over-arching issues Complexity of hospital structure Basic hospital organization Focus on Nursing Focus on Financing Focus on Medical staff Focus on Governance Over-arching issues Complexity of hospital structure Basic hospital organization Focus on Nursing Focus on Financing Focus on Medical staff Focus on Governance

4CoE Overview of Hospital Management Philosophic shift last 50 years –Hospital as “physician – workshop” to hospitals as accountable institutions Issue of “who is the primary customer”? –Physicians or patients? Philosophic shift last 50 years –Hospital as “physician – workshop” to hospitals as accountable institutions Issue of “who is the primary customer”? –Physicians or patients? Two Over-Arching Hospital Management Issues

5CoE Overview of Hospital Management Structural Layers of a Hospital Large Hotel24/7 Hotel Facilities Dietary Housekeeping Etc. Nursing and Support Services24/7 care for sick and unstable “customers” or patients Physician Ordered ServicesPhysician ordered admissions and services drive revenue and large portion of expense Governance: Boards, Medical Staff and Community Governance complexity – dealing with Boards, medical staff and community

6CoE Overview of Hospital Management Basic Hospital Management Domains Hospital Nursing and Patient Care Services Operations Medical Director Finance and Budget Legal, Governance And Ext. Relations

7CoE Overview of Hospital Management Critical and defining component of hospital workforce. Paradox: At one and the same time the clearest role, yet the most complex role. –Discussions on the “role of the nurse” Tension between roles of “air-traffic controller” and “primary care giver”. Critical and defining component of hospital workforce. Paradox: At one and the same time the clearest role, yet the most complex role. –Discussions on the “role of the nurse” Tension between roles of “air-traffic controller” and “primary care giver”. Focus on Nursing

8CoE Overview of Hospital Management Need to deal with variety of public and private payors. Each with different incentives for volume, admissions, and intensity. Need to deal with variety of public and private payors. Each with different incentives for volume, admissions, and intensity. Focus on Finance and Budget - Revenue Side Payment MethodAdmissionsLength of Stay Intensity Pay charges Per Diem DRG or Episode based Capitation

9CoE Overview of Hospital Management Incentive for expense management weak in the past. –Doctor driven expenses often uncontrollable or even unavoidable. Future imperative for expense management presents huge challenges Incentive for expense management weak in the past. –Doctor driven expenses often uncontrollable or even unavoidable. Future imperative for expense management presents huge challenges Focus on Finance and Budget Expense Side -Hospital budget 60% personnel, 40% “all other” -“All other” often “uncontrollable” - Personnel cost reduction has two major levers -Wage and salary hard to use - FTE reductions (or layoffs) become final common pathway. 40% 60%

10CoE Overview of Hospital Management Different models of physician relationship to hospital imply differences in balance of power. –Private practioners –Mixed model –All salaried physicians But – in all cases physicians are more like share-holders than employees Hospital CEO has two groups of bosses –Board of Directors –Medical Staff Different models of physician relationship to hospital imply differences in balance of power. –Private practioners –Mixed model –All salaried physicians But – in all cases physicians are more like share-holders than employees Hospital CEO has two groups of bosses –Board of Directors –Medical Staff Focus on Medical Staff

11CoE Overview of Hospital Management Governance – Board role has been sub-optimal in the past, but this is changing. External Relations – Hospitals have more complex constituencies than other business. –Patients –Physicians –Payors – private and public –Government as regulator –Community Governance – Board role has been sub-optimal in the past, but this is changing. External Relations – Hospitals have more complex constituencies than other business. –Patients –Physicians –Payors – private and public –Government as regulator –Community Focus on Governance, and External Relations