The Master Plan: We Want a Hospital

Too many hospitals view themselves in a different world when it comes to the business of services. A recent Record article, ‘New Jersey hospitals continue to suffer financially,’ underscored such in quoting NJ Hospital Association’s president Betsy Ryan, who stated; “Just like other businesses, hospitals continue to feel the economic pressures of the recession, but unlike other businesses, hospitals can’t simply adjust by reducing their output or cutting back on hours.”

It’s remarkable the number of excuses a struggling business can fabricate for their failure to adjust their operation to their market. In the aerospace industry, new sophisticated materials and engineering demands require manufacturing service businesses to evolve continually, bringing new challenges and opportunities. It requires new high tech machines, greater planning and processing integration and incorporating broad lean manufacturing approaches, all aspects that influence manufacturing efficiency. Throughout the 1990s productivity in high-tech manufacturing experienced rapid growth in output, accelerating from 9 to 13 percent per year. The businesses where management fail to adapt—fall to the wayside—allowing others to step in to seize the opportunities. A naturally recurring reality affecting all service businesses.

Hospitals, like every industry, have their own diversity of challenges, each requiring incisive management. Government policy, changing public funding mechanisms, medical technology, demographics, outpatient competition, evolving insurance reforms, all are business aspects that influence demand for hospital services. Hospitals that observe those aspects, and their trends with timely responses, reflect organizations that should be granted opportunity to expand their successes.

The hospitals that struggle financially have problems that go beyond quick fixes. A January 18th article in Business Week quoted Dr. Robert A Berenson, a health care economist and member of the Medicare Payment Advisory Commission. He stated,

“Hospitals simply don’t need to be efficient. They are able to get payment differentials from the private sector of 30% to 50% over what Medicare pays.”

The article highlighted a hospital in Everett, Washington, Providence Regional Medical Center, pointing out that opportunity and efficiency is a hands on requirement of management.

Obviously the hospitals opposing a small-reopened facility in Westwood agree with Dr. Berenson. Consider Englewood Hospital and Medical Center spokeswoman Maria Margiotta’s recent comment; “The economic outlook will continue to stress New Jersey hospitals for some time. This only strengthens arguments opposing the reopening of an acute-care hospital in Westwood.” Translated: We want to expand our private sector market reducing the stress associated with trying to be innovative.

Now compare it to another management mindset that recognizes the industry is evolving. “Hackensack University Medical Center has experienced an increase in charity care, elective admissions and emergency room visits,” President Robert C. Garrett said. “We have taken the necessary steps to secure our future, which included workforce restructuring in 2009,” he said in a prepared statement. “It is important for any institution to continuously evaluate how efficient it operates.”

The diametrical comments raise the question as to how the NJ Department of Health should respond to the State’s Report on hospital rationalization. Should it attempt to coddle and nurture existing systemic weaknesses caused by the gangrene of poor managements? Or should it view the hospital system as a business that needs performance parameters, which involves ongoing internal and external analysis of management strategies? Public health care needs can’t be served by catering to the ranting of a struggling hospital in a vacuum of documented accountability.