Healthcare Management: An Introduction
The COVID-19 pandemic has created unprecedented challenges for those responsible for the management of healthcare activities. These challenges require decision-makers at all levels to possess a broad and comprehensive understanding of healthcare management tools, and especially of the interaction between formal control systems and the informal power dynamics which operate within healthcare organisations. Managing in healthcare is not only difficult because of the sectorâs high-stakes ethical contexts but also because the healthcare workforce is inherently complex and heterogeneous (Eldenburg, Krishnan & Krishnan, 2017).
Occupying a place at the top of the occupational hierarchy, clinicians exert considerable influence on how healthcare work is structured and organised (Malmmose, 2015). This can create tensions with those tasked with allocating resources within organisations as well as efforts to monitor or control outputs. Accounting research has looked into the socio-economic and political frameworks which facilitate or hinder the design and implementation of formal management control systems in the sector. Much of this work has centred on the healthcare sector where cost containment efforts or efforts to increase output have led to pressures to implement management control systems, often with the implicit objective of curtailing the power of medical professionals (Oppi, Campanale, Cinquini & Vagnoni, 2019). Today, management control systems are in place in most medium to large healthcare organisations, and at times an uneasy peace exists between those wanting to maintain clinician dominance and those seeking to manage output and performance in healthcare organisations. Meanwhile, a number of recent contributions from various sub-fields have explicitly thought to structure management interventions in a way that facilitates collaboration among a broad range of clinicians, managers and healthcare workers (Brennan & Flynn, 2013).
It is the purpose of this book to survey the expanding literature on management control in healthcare with the aim of giving readers a better understanding of the options available to managers, decision-makers and also educated observers of this important sector. We present this material in six chapters, which move the reader from a general discussion of management controls to specific applications. The final chapter discusses trends arising from developments in ehealth.
The Nature and Importance of the Healthcare Sector
Healthcare ranks amongst the largest economic sectors in many countries, not just in times of crisis but during periods of relative calm and steady economic expansion. In the 1960s healthcare expenditure accounted on average for less than 4 per cent of GDP across OECD countries. By 2007 this had risen to 9.6 per cent, and 12 OECD countries spent more than 10 per cent on healthcare. Healthcare expenditure as a share of GDP has since stabilised or fallen (OECD, 2018) in response to measures aimed at ensuring fiscal sustainability. Such measures were particularly prominent during the global recession of 2007/2008. The recent COVID-19 crisis is likely to lead to renewed increase in healthcare expenditure both in the short run and in coming years when problems arising from the temporary suspension of âregularâ care will need to be addressed and demands will be made for societies to be better prepared for crises of this kind. Meanwhile, legislative requirements, advances in service provision (technology and pharmaceuticals), altered public expectations, population aging and changing disease patterns will continue to place significant pressures on the management of healthcare systems (Corbett, d'Angelo, Gangitano & Freeman, 2017).
The focus of many developed countries has been on management reform. A central element of this reform movement has been the pursuit of improved performance, and this has particular relevance to management control in healthcare centred on management control and budgeting (Adinolfi, 2014). The label New Public Management (NPM) has been used to encapsulate various types of changes in public management. Hood (1991), a seminal theorist on NPM, suggests that, while NPM has been a significant global trend in international public administration since the mid-1970s, its intellectual origins can be traced back to a much earlier period. Typifying NPM as a âmarriage of opposites,â Hood (1991, p. 45) characterises it as a synthesis between post-World War II ânew institutional economicsâ and âbusiness-like public sector managerialism.â Growing out of this synthesis has been one hard to dispute change which is a common feature of NPM reforms: a growth in the power and influence of managers and management control practices in the healthcare sector, which is often accompanied by an emphasis on accountability. Hood (1995, p. 94) asserts that
accounting is a key element in this new conception of accountability since it reflects high trust in the market and private business methods, and low trust in public servants and professionals whose activities therefore need to be more closely costed and evaluated by accounting techniques.
The increased prominence of management control practices prompted Power and Laughlin (1992, p. 132) to issue a note of caution highlighting the potential for management control to âsubvert existing value systems and to redefine the world or social space which it enters.â In this regard, Pavolini et al. (2018) identify healthcare organisations as being at particular risk. Specific sources of complexity in this context are highlighted in the next section.
Management Control in Healthcare
Healthcare structures and functions are similar in most developed countries, but there are also some important national differences that have implications for management control practices. It is important to note that many of these differences have evolved from a long history of incremental policy decisions, influenced by economic and non-economic factors as well as by specific institutions, such as the Catholic hierarchy or the power of the medical profession in English- and German-speaking countries (Cardinaels & Soderstrom, 2013).
In its widest sense, management control comprises measures and systems through which an organisation ensures that its activities conform to plan and its objectives are achieved. Management control has three core components: a performance plan with objectives, a means for measuring outcomes and measures which can be taken to address deviations from those objectives. In broad terms, management control practices are designed to help an organisation adapt to its environment and to deliver the results desired by its stakeholders (Otley, 2016). An organisation that is âin controlâ is likely to perform well in meeting its objectives, regardless of whether these objectives are to maximise shareholder returns, heal the sick or educate the young.
Merchant and Van der Stede (2011) categorise management controls into: (i) action controls, (ii) personnel controls and (iii) result controls. This typology is adopted to discuss the operation of management control practices in the context of healthcare organisations. Action controls relate to the observation of acts by individuals as they carry out their work. In healthcare, action controls include structural constraints, such as passwords that restrict access and editing rights to information sources to authorised personnel only. Additionally, pre-action reviews involve the scrutiny and approval of the action plans of individuals before they are permitted to undertake certain courses of action. Examples include the approval by management of a clinicianâs plans for the purchase of a new piece of medical equipment. Action accountability, then, involves defining which actions are acceptable and which unacceptable in order to reward acceptable actions and punish unacceptable ones. Examples of action accountability measures in healthcare include instruction manuals, quality standards and action plans for different activities.
Action controls have been found to be most appropriate where cause and effect relationships are well understood. They are sometimes appropriate where it is possible to reliably predict that certain specified procedures will produce certain desired outcomes. An examination of the operation of action controls in the context of healthcare, however, also suggests that this type of service provision can involve the operation of many complex processes of different types, ranging from administrative tasks and protocols to services provided to patients by clinicians such as assessment and treatment. Healthcare operating processes are often highly complex and dynamic, involving many interconnected elements that exert a mutual influence on each other. Uncertainty in cause and effect relationships occurs relatively frequently because it can be very difficult to predict with certainty what outcomes will result from particular actions. This may be due to incomplete knowledge concerning the input/output relations or the highly interdependent nature of work processes with multiple inputs, which makes it difficult to programme workflows. In this way, the role of action controls can also differ across different sub-units in the context of a healthcare organisation, with some areas being characterised by greater and others by lesser levels of certainty and control.
Merchant and Van der Stede (2011) define personnel controls as those that enable employees to perform well by building on their natural tendencies to control themselves. A fundamental issue in implementing personnel controls in healthcare is the conflict of interest between the different stakeholders involved in the management of a healthcare organisation. Glouberman and Mintzberg (2001) characterise the internal organisation of healthcare as comprising four different professional groups: clinicians, nurses, management and trustees. Building on this, Cardinaels and Soderstrom (2013) correctly suggest that each professional group evaluates a healthcare organisationâs decisions from its own standpoint, and that the differing perspectives can result in conflict between groups. In considering the operation of management control practices, conflicts of interest between management and clinicians are particularly important. Eldenburg, Hermalin and Weisbach (2004) and Mintzberg (1997) indicate that fundamental divergence between the viewpoints of clinicians and management primarily occurs in relation to how resources should be deployed. Furthermore, clinicians who are classified as âdominant professionalsâ are primarily orientated towards providing effective clinical care for individual patients, while the management groups are orientated towards the efficient and effective use of resources for all patient groups, as well as the overall needs of the healthcare system (Mintzberg, 1997). These conflicts of interests have implications for the operation of management control practices, which aim to control resource usage for the healthcare organisation as a whole (Chua & Preston, 1994). The conflict is also compounded by the fact that core healthcare operating processes depend on the expertise of clinicians, thus granting them a significant degree of autonomy. Furthermore, the training and education of clinicians have long emphasised their role in advocating for their patients, to ensure that they receive effective care. In order to be patient advocates, however, clinicians often believe that they must also maintain clinician autonomy to determine the care needed. The literature has given considerable attention to examining this issue, and we return to this topic again.
Result controls relate to the gathering and reporting of information concerning the outcomes of work efforts. Establishing such controls requires the selection of performance measures. However, the selection of performance measures can be a difficult and onerous task in healthcare contexts. While most private organisations have finance-related goals focused on maximising profits and satisfying stakeholders, healthcare organisations tend to adopt more broadly defined mission statements. For example, âequity and fairnessâ are frequently stated principles of healthcare policy. However, such abstract objectives lack a clear focus and are difficult to measure. This creates a political environment where preferences in healthcare are continuously challenged and debated, which ultimately can translate into goal ambiguity at the micro-level of healthcare organisations themselves, as they attempt to respond to the political agenda through resource allocation decisions.
The operation of result controls also requires performance to be measured, but in healthcare reliable and precise measurement of performance is not always attainable. For example, âquality of careâ is an important healthcare outcome but it can...