Decision Making in Hospital Administration and Medical Care: A Casebook [1 ed.] 9780816662777, 9780816602094

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DECISION MAKING IN HOSPITAL ADMINISTRATION AND MEDICAL CARE

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Decision Making IN HOSPITAL ADMINISTRATION AND MEDICAL CARE

A Casebook

BY J A M E S A. H A M I L T O N , DIRECTOR AND PROFESSOR PROGRAM IN HOSPITAL ADMINISTRATION, SCHOOL OF PUBLIC HEALTH UNIVERSITY OF MINNESOTA

UNIVERSITY OF MINNESOTA PRESS, Minneapolis

© Copyright 1960 by the University of Minnesota. All Rights Reserved Printed in the United States of America at the Lund Press, Inc., Minneapolis

Library of Congress Catalog Card Number: 60-10658 Third printing 19 67

PUBLISHED IN GREAT BRITAIN, INDIA, AND PAKISTAN BY THE OXFORD UNIVERSITY PRESS, LONDON, BOMBAY, AND KARACHI, AND IN CANADA BY THOMAS ALLEN, LTD., TORONTO

TO

Sabra Martin Hamilton TRULY A LOVELY LADY WHOSE HUSBAND I HAVE HAD THE PRIVILEGE TO BE

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Preface

With startling rapidity the administration of the social institution known as "the hospital" has become a vital factor hi the social welfare of most communities. In response an increasing number of universities have developed graduate programs in hospital administration. Most of some nineteen existing programs were started following World War II. Their major teaching effort is devoted to administration. Yet important stress, as in all professional education, must be placed also upon the environment in which the application of the principles and the processes occurs. As the university programs began to grow, it became apparent that there was a serious lack of available teaching material and that little if any research had been done to develop generally accepted standards of operation. Though the practitioners had been prodigious imitators of each other, the strong traditional independence of the many institutional units had produced little uniformity. Most of the writings until recently have been confined to magazine articles based largely on opinions with little supporting data. Authentic cases, useful for teaching purposes, have been in short supply. This book is presented to help meet that need. The faculty of the graduate program in hospital administration at the University of Minnesota began, in 1946, to assemble these teaching cases. Much of the material came from the files of James A. Hamilton Associates, the consulting service associated with the program. All the decisionmaking problems presented in this volume represent actual experiences and administrative problems encountered within hospital situations. Thanks to the financial assistance of a grant from the W. K. Kellogg Foundation, whose long-time interest in graduate education in hospital administration has been outstanding, individual members of the teaching and research staff have been able to devote considerable time to the preparation of these real-life situations into formal teaching cases. As director of the Program in Hospital Administration at the University of Minnesota, I originally compiled these case problems and prepared vii

Decision Making in Hospital Administration them for use in the classroom. After using the cases in classes over several years, gradually refining them with increased experience, I decided, upon the urging of other teachers, to make this material more readily available to students and teachers in the form of a casebook. However, most of the credit for this volume must be given to many others involved: to our consulting clients who furnished the original situations, to the students for their willingness to experience the immaturity of the problem statements and the teaching methods in the initial stages of development, to the clinical preceptors on our faculty who have reviewed and refined each of the statements, and to several members of the staff of James A. Hamilton Associates for their actual preparation of the case problems. Particular appreciation must take account of the extensive periods of time devoted by Roger B. Samuelson, Telmer O. Peterson, Madelyne Sturdavant, Bright M. Dornblaser, Edith M. Lentz, Ruth H. Inghram, and P. David Youngdahl. I am especially grateful to Walter J. McNerney, of the University of Michigan, for helpfully experimenting in class with many of the case problems and for reviewing the introductory chapters. Finally, all of us who have had a hand in the project are pleased that the University of Minnesota Press has undertaken the publication of this book, which we trust will make a contribution to the teaching of hospital administration in the university graduate programs throughout the country. We hope that this book will also benefit hospitals that provide inservice training programs for the growth and development of their junior executives, department heads, and supervisors, and that it will be found useful as well to university classes in disciplines allied to hospital administration, such as public health, medicine, nursing, and public administration. JAMES A. HAMILTON April, 1960

viii

/Table of Contents

I. APPROACHES TO TEACHING AND LEARNING

1

The Teaching of Administration

2

Problem-Definition Exercises

3 20

II. DETERMINING THE NEED FOR HOSPITAL SERVICE FACILITIES

3

The Needs of Geographical Areas

27

4

The Needs of Selected Population Groups

47

III. ESTABLISHING A NEW GENERAL HOSPITAL

5

Preliminary Promotion and Development

6

Initial Operating Decisions

79 116

IV. EXTERNAL RELATIONS

7

Standards-Determining Agencies

143

8

Organized Medicine

161

9

Other Community Agencies

169

V. OPERATING A HOSPITAL

10

The Governing Body

193

11

The Medical Staff

207

12

Decision Making in Hospital Administration General Executive Management

241

13

Human Relations

276

14

Fiscal Management

295

15

Departmental Operation

340

VI. ADAPTING THE HOSPITAL TO THE CHANGING SCENE

16

Programs

463

17

Ownership

490

18

Integration of Services

502

19

The Physical Plant

524

20

Finance

532 VII. SPECIAL PROBLEM SITUATIONS

21

Comprehensive Cases

539

22

Curbstone Cases

664

Index of Cases

707

Illustrations Race Track Plan, showing typical nursing floor witn 89 beds.

106

Offset Cross Plan, showing typical nursing floor with 89 beds.

107

Present laundry layout at Mary Burton Hospital.

114

Organization chart for Riverbury Hospital.

316

Administrative organization chart for Cumberland Municipal Hospital.

542

Present organization chart for Colfax Hospital.

634

Supplementary organization chart for Colfax Hospital.

635

/. APPROACHES TO TEACHING AND LEARNING

"I think, therefore I am." Descartes "He only is a well-made man who has a good determination." Emerson

1

The Teaching of Administration

DECISION MAKING AND LEARNING

Modern society demands a high level of performance in the management of its social institutions in order that they may fulfill their functions and meet their goals. The management of an organized group requires executive leadership, which we call administration. Good administration assures the beneficiaries that the group's efforts are utilized most effectively in obtaining the desired objectives. The administrator is the person who is responsible for the efforts of the organization, who makes decisions on questions of policy and practice, and who exercises authority in seeing that the decisions are carried out. He is concerned with directing the activities of other persons and undertakes the responsibility for achieving specific objectives through their efforts. PROBLEM SOLVING IN MANAGEMENT

A major part of the job of the administrator is to solve problems, appraise policies, and plan for the future. All these activities require the making of decisions. These problems are matters to be solved and are not to remain areas of agonizing indecision. One quality that marks the successful administrator is the ability to make sound decisions with assurance while working under pressure. This is a habit of making up one's mind promptly and definitely when circumstances demand it. Intelligent decisions can seldom be reached in a random way. The competent executive solves his problems in a more logical and systematic manner. The effective manager must have skill in analyzing administrative situations, defining problems of operation, choosing from among alternative courses of action, communicating his decisions effectively, and obtaining proper implementation of decisions within the framework of the organization. It is his ultimate responsibility, in fact, to make these decisions intelligently so 3

Decision Making in Hospital Administration that the relative values between several courses of action may be resolved in terms of what is best for society and for the goals of the individual institution. The brilliance of the administrator is not measured solely by the amount of knowledge about administration which he brings with him to his administrative experience. Rather, it is measured by his ability to understand fully the relationship of that knowledge to the realities of the administrative situation and to use the knowledge wisely. Essentially, then, the success of the administrator depends upon his ability to think, to consciously relate knowledge to experience, and, in the light of that relation, to arrive at effective solutions to his administrative problems. His skill rests not so much on knowing as in sensing, thinking, and acting—sensing the realities of a situation, determining possible alternatives of action, predicting the outcome and providing for the consequences of such action, and making a decision in the light thereof. CASE PROBLEMS IN THE EDUCATIONAL PROCESS To prepare the individual to make wise decisions is said to be the aim of education. The educational process is designed to develop the desired behavior patterns in a student. These are to be secured through teachers, curriculums, and teaching methods which help the learner gain an understanding of concepts, secure an adequate content knowledge, and develop skills, attitudes, and values necessary for the basis of choices and judgments. While administration has many universals in principles, attitudes, skills, and processes, regardless of the environment of application, the beginning professional student's learning is enhanced if it can be secured within the environment of the social institution which, eventually, the student is to administer. Many fields of professional education have found that study of the experiences of others is most fruitful in developing the qualities of understanding, judgment, and communication relevant to administrative action. The use of case problems has played a significant part in the teaching of several professions. In our closest neighbor, the medical profession, the medical history was utilized as the earliest form of such case teaching. Through such a case method a strong motivation is developed, the student's realization of the need for acquiring new behavior is accelerated, and guidance in the student's behavior can be exercised at points where difficulty is experienced. By knowing soon the results of his efforts, the student himself develops a way of appraising his own performance and gains satisfaction from changing to the proper behavior performance. Yet the actual experiences of others as developed in a case may never present the student, in exact content and specificity, with the situations that will con4

The Teaching of Administration front him in his later professional life. It is important, therefore, if the case method is used, that the student be confronted with sufficient variety and that the teaching process not be directed toward the securing of an unequivocal answer, based on current practice, to a given problem. Rather, a liberating arts approach should be made: that of learning why and how the truth may be best sought, why and how to think, why and how to exercise judgment, and why and how to gain understanding of the factors of a situation and its environment. Not only should the student enlarge his ability to think, but he should stimulate his willingness to follow the logic of his carefully considered thought through to pertinent action. Also, if this learning is to lead to maturity and to abroad point of view, it can be gained best by experiencing a wide range of cases involving highly complex problem situations. Thus a deep and extended sojourn among the experiences of others will foster growth in the student's conceptual skill. ORGANIZATION AND USE OF THIS VOLUME

This volume of decision-making problems in hospital administration and medical care has been designed primarily for the beginning professional student in the academic period of the university graduate program. It contains cases taken from actual situations experienced by hospitals, allied institutions, and agencies in the United States and Canada, compiled by the teaching staff of the graduate program at the University of Minnesota and refined after several years of use both at the University and in other programs elsewhere in the country. These cases are not composed of a narrated series of events as would be found in a case history. They do not contain already determined decisions as would be found in a case report or a law case. Nor are they designed for research purposes, with accompanying repetitive subject details. Rather they are designed for the exercise of practitioners in the making of sound decisions. The selection is weighted toward the problems confronting active hospital administrators, at the same time keeping in mind the over-all objectives. Also, the cases are placed in a carefully planned sequence in accordance with the student's acquisition of content knowledge of the field, so as to develop the beginner's understanding, skill, and confidence. Actual situations confronting administrators rarely concern themselves with a single problem isolated from all other problems. Therefore it is impossible to identify and classify any set of actual case problems with absolute purity; yet each situation has a major emphasis, and most of these cases have been so identified. They are grouped in natural sequence with the normal progress of a student in this field. There are three major types of case problem: (1) problem-definition exercises; (2) problem-solving cases; (3) comprehensive cases. The remaining classification, curbstone cases, is included for specialized use in seminars and examinations. 5

Decision Making in Hospital Administration Problem-Definition Exercises. The problem-definition exercises (Chapter 2) consist of situations presenting one or more problems in the usual manner in which such situations confront the administrator, that is, unlabeled and in disorderly arrangement. The plan followed here is designed to help the student learn how to comprehend the real issues, become aware of problems, and compose statements of definition from the given factors of a situation in a precise manner which will serve as a guide for later investigation and solution. These exercises can be provocative for both teacher and student. Used wisely, it is expected that this chapter will enable the student to start thinking effectively and to communicate his thoughts with precision, as a basis for administrative action. It should be utilized while the student is learning the various steps of problem solving. The successful completion of these exercises will have a great deal to do with realizing fully the benefits of the next division, problem-solving cases. Problem-Solving Cases. The problem-solving cases are arranged in five groups, Parts II through VI, as follows: (II) those connected with determining the need for hospital service facilities; (III) those identified with establishing a new general hospital; (IV) those concerned with the external relations of a hospital; (V) those concerned with the internal operation of a hospital; (VI) those concerned with the making of changes as the hospital adapts itself to the dynamics of the environment. Most of the students will begin their careers in established institutions and it will be some time before they are identified personally with deciding upon problems similar to those contained in Parts II and III. Nevertheless, when the student is employed later in a hospital, he will find that much is to be gained from reviewing the kinds of decisions that must have been made by others before the institution could have arrived at its present mature status. Moreover, exercise in these first sections will help the student to develop his skills of appraisal of the role and the policies of an established institution — skills that will be needed when he is called upon to administer one. The problem-solving cases are labeled and identified, thus giving the student an opportunity of a "head start" which may not be to his educational advantage. This labeling has been done to facilitate selection of specific case problems out of order of the book's sequence should it differ from the teacher's curriculum. Each case is sufficiently complicated, however, to involve more than one aspect of operation management so as to expand the learning experience of the student. As an additional aid to instruction, a set of questions follows each of these cases. Although not immediately identified with the specific content of the case, these questions afford the teacher and the student the opportunity of discussing other aspects of the subject matter involved. Thus, class discussion may be continued without confinement to a specific problem and directed toward related aspects. 6

The Teaching of Administration Comprehensive Cases. Upon reaching Part VII, the student has by now experienced cases moderately complex and pertaining for the most part to the establishment and operation of an institution. In Chapter 21 he is presented with a series of highly complex and comprehensive situations. Problem areas are not defined by title and no questions are provided at the end of cases which might direct his attention to matters of special relevance These cases are designed also to teach the student how to deal with another kind of complexity that actually faces hospital administrators. He must handle multiple problems and consider many factors at the same time. He must determine priority of attack — the necessity for properly timing several decisions and for pacing management activities in a way best suited to the natural life and growth of an on-going institution. Such considerations are highly pertinent to success in the field of hospital administration. Curbstone Cases. The last chapter consists of a series of short descriptions of situations apt to confront an administrator and requiring immediate action. They do not include a great deal of specific environmental content, but are designed primarily to stimulate discussion of the main issue. These cases are suitable for use in examinations and seminars, where the time for analysis and answer is severely limited but where the objective is to broaden the horizon and the perspective of the student. Use for In-Service Training. While this book of case problems for exercise in decision making was designed with the graduate student in hospital administration in mind, it should also prove useful in in-service and apprenticeship training programs as well. Some of these cases have been used with remarkable success in institutes and in hospitals which offer programs of training for supervisors and for junior executives working in the institution. The principles of administration, the attendant processes and skills, and the necessity for decision making are present in all levels of administration. The beginning top executive learns much from the experiences of other high-level executives as presented in these cases and from the discussion of them. The foreman, supervisor, or major department executive is concerned with the direction of the efforts of others. Through case study the supervisor gains an understanding of interdepartmental relations, secures a greater respect for variables, and learns to make decisions by objective reasoning. Selected institutions have found these cases useful in their in-service training programs for head nurses, supervisors, department heads, and the like, where the qualities of understanding, effective thinking, judgment, and communication, leading to the action of others, need to be sharpened and developed. It is important that each institution accept some responsibility for the continuing education of its supervisory staff. This is especially important in the hospital field where apprenticeship vis-a-vis formal education is still fairly prevalent at the administrative level. The case method is especially appealing to practical every7

Decision Making in Hospital Administration day operators, and offers perhaps the most effective means of teaching them. Use in Other University Disciplines. Many of the cases contained in this book touch liberally upon medicine, public health, business, sociology, and public administration. Of equal importance, these cases bring into consideration basic administrative principles. Teachers and students in these areas of professional study may find in this work a useful text to supplement the more functionally specialized case books within their respective fields. TEACHING BY THE CASE METHOD The teaching method is not the major determining factor of the learning process. Yet there is sufficient evidence that the use of the case-problem teaching method offers, for many phases of the curriculum in the professional sciences and arts, some of the best conditions for effective learning. This has been ably demonstrated in medicine, law, public administration, education administration, and business administration. It would be strange if the method were not utilized in the field of hospital administration, which has an increasingly close association with all of the above professions. CAUTIONS CONCERNING USE

Case study offers the student, within a brief time, learning experiences that would take him a lifetime to encounter in reality. He has the opportunity of undergoing such experiences under the direct guidance of the instructor, from whom he can secure immediate assistance in points of difficulty while attempting to develop the desired behavior. Carefully organized cases present to the future practitioner problems and concrete materials from real life. The student, moreover, gains the experience of making responsible decisions without the penalty of incurring severe risks to himself or to his institution. However, this method of teaching must not be assumed to be the ideal method for all phases of the educational process in the academic period. Subject areas for the use of this method should be selected with great care, especially in a field where there is such a limited amount of supporting written material and where few universally accepted operating standards are developed. The case method is admittedly time consuming and the academic period of most graduate professional programs is confined to nine months. (The typical graduate program in hospital administration consists of nine months' class work on the campus followed by eleven or twelve months of residency in an approved hospital, usually off campus.) Many of the students of hospital administration are novices in the field and good textbooks are scarce. Much content material, definition of principles, 8

The Teaching of Administration and explanation of their roots in the basic sciences must still be imparted to the student through the didactic lecture method. The place of case study in the curriculum must therefore be considered carefully, for to get full value from its use the student should have acquired some background in advance. At least he should be given the opportunity, through use of all readily available sources, to secure concurrently the necessary content material if he is to gain much learning from application of case study to definite situation. Gradualness in use is desirable because a period of adjustment is needed before the student realizes the potential of the case study method. Quite often he is confronted for the first time in his academic career with a new type of assignment, and he may experience many frustrations from the use of a method which refuses to admit any one right answer and offers many choices for correct solution. Other methods of instruction should be interspersed so as to keep the student's perspective in balance; because cases contain for the most part only the troublesome problems. It must not be assumed that from cases one can easily derive generalizations of over-all usefulness. In fact, this method tends to recognize and point up the dangers of broad generalizations. In contrast, use of cases in such a relatively new and dynamic field as hospital administration tends to accelerate the student's alertness to differentiate among situations and to identify the varying character of each. Yet, teaching by the case is a very forceful method of causing the student to gain understanding of the relationship between subject matter and actual experience. In summary, the case, if used following the explanation of principles derived from the basic sciences and the acquisition of necessary information, and if timed with the student's growth, enables him to differentiate between principles and opinions, to cultivate a realistic attitude and set of values, and to develop an administrative skill to a state of perfection not easily obtainable by employers within our field. Such skill likewise gives its holder the confidence so necessary to growth and development and yet so difficult to secure quickly and effectively in any other manner. PLACE IN THE CURRICULUM

Naturally the use of the case method of teaching will vary in the individual program in accordance with the following considerations: (1) specific objectives of the curriculum; (2) qualifications and desires of the individual instructor; (3) amount of case data available; (4) frequency with which it is desired to use such material; (5) nature of the subject matter involved; (6) size of the group to be taught; (7) number of class hours available for instruction. The teaching situations for which the case problems have been found most useful in our experience are as follows: 9

Decision Making in Hospital Administration 1. Where the subject matter can be appreciated best through vicarious experiences, as in the development of a specific program for a community's need for hospital facilities, the selection of a form of ownership for a proposed individual institution, the development of a basis of compensation for the ancillary medical staff in a concrete situation, the resolution of a human relations problem of the unpopular head nurse, the final choice of a food distribution system in a given institution, the collective bargaining experience with hospital unions, the selection of alternate purchasing policies, etc. 2. Where repeated application is required to learn specific skills of administration, such as problem-solving skills or the skills of communication involved whenever presenting recommended action in the solution of problem situations. In this circumstance, problems might be used in a scattered manner here and there throughout the academic period. 3. Where integration between several subject courses is desired. After the student has learned in two or more subject courses the fundamental principles, methods of establishing standards, forms of organization, and methods of control, it is useful to present him with a problem which covers more than one of these subject areas. He is then forced to integrate the content knowledge from the various subject courses into a selection of priorities between conflicting interests. 4. The conduct of a seminar. The case problem, as the basis of a seminar, provides the teacher a focus for exploring at one time several or more areas which may not fit easily into the pattern of subject curricula, and creates for the student an opportunity to gain understanding and appreciation within these areas which he might not otherwise have. 5. As a basis for written reports. When the skill of communication through written reports is to be perfected, these problems are most useful as a vehicle for achieving two teaching objectives at the same time, i.e., further development of problem-solving skill and of written communication skill. / 6. As a question in examination. Used as an examination question, a case problem has twin advantages: as a further teaching device of integration and as a means of developing conceptual skill through demanding the application of subject matter to a concrete situation. This seems much more educational and a better basis of evaluation than requesting only a reporting of content information to test the memory. STEPS IN PROBLEM SOLVING

Part of the value of the case method of instruction is for the student to learn the decision-making process itself. This is best started by a lecture explaining the steps of the process, with suggestions for the achievement of each step. Such a lecture should be presented in advance of the use of 10

The Teaching of Administration cases and should be followed immediately by the problem definition exercises as the application of the first step. This is then followed by problem exercises hi one or two other major steps. The problem solving in the cases may be started. The following steps are suggested as an outline for discussion leading to an understanding of the process: 1. Define the problem by apprehending the real issues of the situation and stating the problem precisely. 2. Budget the time as well as the effort available and necessary to arrive at an acceptable solution. 3. List the areas necessary for consideration to determine the best solution. 4. List the elements to be measured and the best means of measurement. 5. Plan, make contact, collect, and classify data. 6. Make comparisons with others, with existing standards, or with past experience. 7. Interpret results of comparisons by seeking the real reasons for variance. 8. Develop temporary conclusions. 9. Consider various solutions; choose the best, not the first acceptable. 10. Take a fresh look at and approach to the problem and the selected solution. 11. Develop a plan of accomplishment for the solution. 12. Determine recommendations which invite action. 13. Prepare and present report to those who make the final decision. 14. Implement action to carry out the selected solution. The student should learn also why several individuals using the same steps and the same data will arrive at different interpretations and at different decisions for action. Likewise, it is well for him to learn the effect upon the process and the decision that is caused by the variances of settings for decisions, i.e., legal, social, political; by the limits of the level of the organization participating in the process of decision making; by the time limits available for decision; by the use of the individual or the group in the organization to develop the decision; and by the factors which dictate a decision for no action. Under all circumstances the steps delineated blend imperceptibly into one another but are stated separately here for didactic purposes. Under the right circumstances selected steps will properly receive more emphasis than others. The steps and the entire process should become a matter of habit comfortably followed by a student attempting to correct an administrative situation. Of course at first the student, preoccupied with the form, will take the process literally, feel awkward, and need guidance. As he becomes more skillful, uses his inventiveness and imagination, and senses his 11

Decision Making in Hospital Administration progress in solution, the student develops a finesse in using the steps in combination, thus gaining an acceleration to the point of decision. TECHNIQUES IN THE CLASSROOM

Case problems can be utilized in several ways in the classroom. The following are illustrative: 1. The most common way is the general class discussion, in which the class, as a group, with the aid of the instructor, proceeds to analyze and solve the problem situations presented in the case. The instructor initiates the discussion by posing a pertinent question to the group and the discussion proceeds from that point. 2. Case problems may be used in role playing. One student assumes the responsibility of the administrator, charged to define the problem and to present a solution. Several other students assume the roles of members of the board of trustees of a given institution or some other relevant group, ask questions and decide what to do. Perhaps one student assumes the role of the board president. Others may play designated roles or not. The students thus develop the skills of presentation and of analysis through questions. 3. Use two or three teams within the student body to present their respective solutions to the problems in the given situation. Then have the class as a whole review the results. 4. When a theme arising from the subject matter of one of the case problems indicates a strong difference of opinion and needs clarification, this difference may be used as the basis of a debate between two members or groups in the class. If desired, a practicing hospital administrator might be invited to class to discuss his reactions to the solutions presented by the students. At the end of all discussion of the case, the instructor should highlight in a brief summary the significant major points of decision making and indicate any errors of approach or analysis that may have emerged during the session. This book includes a list of questions following each problem-solving case. These allow the teacher to promote further discussion of the subject matter initiated by the case itself, but not confined to the specific content or environment of the case. Then the discussion is subject-matter centered rather than student- or case-centered. TEACHING VALUES AND PREREQUISITES We reiterate our belief that the case method of teaching is a highly effective way to have the student learn administrative decision making, but we do not believe it is the only way to secure such learning. Neither do we claim that the potential values to be secured by this method as outlined in

12

The Teaching of Administration this chapter can be best attained by the use of this method solely. In fact, we strongly urge that several teaching methods directed at the same goals be utilized to insure actual achievement. Likewise, we do not believe the case method can be substituted for the actual practice of the residency period of the graduate programs or for the later experiences contributing to growth and development secured on actual employed positions. Rather we believe that learning derived from the case method makes the actual experience more meaningful. It is well for the faculty and for the student body to keep in mind that more important than the method of class presentation of cases is the spirit that governs the interplay during such discussions between students and faculty and among students. The case and its discussion are not ends in themselves, but rather a means to other ends. Such ends as insight, an integrated approach, and a sense of relevance are the reward of a stimulating give-and-take kept active by the students and pertinent by the faculty, always governed by administrative propriety. The over-all objective is to stimulate minds to an active consideration of present-day problems, under the restraint of the past experience of others, but with an impatient vision as to the possibilities of the future. If the greatest benefit is to be gamed from the case method, it is important for both the student and the teacher to realize beforehand the potential values to be secured and to accept responsibility for preparing themselves in the prerequisites. As an aid in the attainment of this advance understanding, we outline below values and prerequisites for student and teacher alike, as well as offer suggested additional readings as helps toward securing greater proficiency in specific elements of the process of decision making. VALUES TO THE STUDENT

1. Stimulates immediate interest with an accompanying desire to learn. The case problem method offers an emotional appeal to the student, as he feels he is dealing with practical affairs rather than formal academic matters of a theoretical nature. It furnishes him with an imaginative reality in contrast to the abstract generalization of the usual class period. It accelerates his sensitivity to the usefulness of his acquired knowledge and it gives him some immediate purpose of study. It changes him from a passive observer, or absorber, to a continual participant in the process of learning. It gives him a sense of stature when thinking out the problems and searching for possible solutions. It places the student in a position of importance, in that he is afforded an eagerly sought opportunity of expressing independent thought. It demands that he think and act as an administrator. 2. Develops a sense of relativity in management affairs. The student learns early that today's problems cannot be solved necessarily by yester]3

Decision Making in Hospital Administration day's solutions, that a decision which may have been wise six months ago may not be so now. He becomes aware of the importance of intangibles in a given situation. He secures a sense of timing, and gauges the time for investigation and for action. He apprehends the value of gradualness versus abrupt change. He acquires an appreciation of the costs involved in any action taken, and benefits from an opportunity of weighing the monetary versus the human results of predictable action. He senses the necessity for priority in the consideration of the partial or the complete solution of a problem. He more fully recognizes the need to consider human reactions to change and develops an awareness of the interrelationship between problems and phases of a given situation. He achieves a perspective of the whole rather than an isolated part. He discerns the advantages and the limitations of tradition in a given institution. He is forced to recognize that there is no one right action, that he must occasionally weigh action versus no action, but that whatever his choice he must formulate a considered decision. He is impressed with the value of considering immediate versus long-term action. He learns how to treat risk-taking and uncertainty, while accepting the responsibility for his predicted outcome. 3. Furnishes an opportunity of acquiring administrative values and attitudes. As he deals with concrete situations, under the teacher's guidance, the student obtains a new concept of the hospital as a social institution and of its responsibilities to society. He gains a new appreciation of external influences and a firm basis for evaluating them in the making of decisions on internal affairs. He speeds up his time for planning and effecting responsible action, and begins to accept managerial responsibility for such decisions. He perceives the dynamic nature of the fields and environment with which he is dealing, both socially and medically, and realizes that he must continually be alert to meet ever-changing conditions. He uncovers a facility to act in the presence of new experiences. He learns how to accept decisions contrary to his own desires. 4. Increases self-awareness and presents occasions to develop ability in management skills. There exists for the student under these situations pressure to think clearly, specifically, analytically, and constructively. He obtains with force an increased self-awareness of his own abilities and shortcomings. He acquires a skill (1) to meet situations directly; (2) to recognize and define problems; (3) to differentiate between facts and opinions; and (4) to discriminate between stable and easily varied statuses. The student increases his ability to solve problems, and he begins to exercise intelligence in judgment. Necessity for precise communication gives him a respect for semantics, and he develops an ability to communicate the significance of his ideas in relationship to the situation confronted. He learns how to formulate recommended action and acquires the power and facility to deal with multiple affairs and variables at the same time. As a 14

The Teaching of Administration novice, the student discovers sources of data and how to discriminate among these sources. He sees the necessity of seeking specific factual information and learns how to treat assumptions. He comprehends that these skills are worth the effort of acquisition. Acting as an administrator, the student gains knowledge of how to plan the implementation of his decisions. He obtains a vision of possibilities beyond the obvious; he becomes sensitive to the pressures of time; and he amplifies an assurance to tackle any problem by repeated approach to new problems, which puts him in the habit of making decisions. 5. Develops an understanding of the individual's role in the group process. The student recognizes and increases his respect for the interdependence of people and achievement. Acting as a subordinate in a given case, he grasps the need for cooperation to implement his superior's decisions. Acting as a superior, he realizes that his accomplishments are dependent greatly upon the efforts of his associates and subordinates. He advances his feeling for the importance of the group in administration and the essential nature of effective communication between the parts of this group. As a student, he begins to cultivate an art of exchanging ideas with equals and superiors, especially with those whose opinions differ from his own. He sees the importance of learning from others and procures a technique of gaining knowledge from those who differ with him. He perceives the importance of achievement to the morale of a group and the value of joint intellectual efforts to group unity. Also, as a student, he accepts the spirit of friendly competition, sensing when it is best to conform with and when to differ from the group. He learns how to achieve objectives while working with other people by subordinating his personal feelings and prejudices in order to make intellectually sound decisions. He is encouraged to recognize that sometimes it is better to accept individual differences while still adhering to the objective standards. The method provides a new access of relationship with his fellow students in a joint endeavor to meet the challenge of the situations confronted, and the student takes his initial steps toward exercising independent thought and responsible judgment in the face of possible group opposition and debate. He becomes accustomed to subjecting his ideas to open criticism. PREREQUISITES OF THE STUDENT

For the student to derive the most value from the case method of teaching, he must learn to develop, as rapidly as possible, the attitudes and concepts listed below: 1. He must accept the teacher as a guide and a counselor, and not as a competitor. 2. He must learn to think and act as a general administrator rather than a functional specialist dedicated to the values of a single field. 15

Decision Making in Hospital Administration 3. He must accept the fact that the major burden of responsibility for learning and solution is his. 4. Learning becomes personalized and, to acquire the benefits of such, he must accept the painstaking personal effort involved. 5. He must avoid unwarranted assumptions and, if it is intelligent to make pertinent assumptions, be sure they are identified. 6. There will be a constant urge to feel that sufficient facts are not available for his solution of the problem. He must learn to accept this as a condition of many real-life administrative problem-solving situations. He must accept a willingness to act and to accept responsibility for his action even though he may wish that there were more data or that there were more time to contemplate his recommended solution. 7. He should recognize that without class discussion this teaching method is sterile, and he should not accept the position of an observer, but rather that of a participant. 8. He must be willing to accept a critical atmosphere and expose his conclusions to rebuttal. 9. He should recognize that the sooner he makes an adjustment to the group process, the more effective will be his participation. This does not imply conformity to the group opinion. 10. He must be strong enough to accept the fact that there cannot be one definitive answer to most problems, but that there should be a considered conclusion for action and that his choice should be the result of good judgment and responsibility. 11. He should learn to develop bridges with the current outside world in relation to the situation with which he is confronted in the classroom. 12. Although he should be firm in his conclusions, he must be flexible to consider and to accept, in some instances, differences, and to learn from such differences that there may be a better idea than his own. 13. He must be willing to accept the risks involved in stating his conclusion by overcoming the fear of offering a wrong answer or suggestion, as well as the fear of making and admitting a mistake. 14. He must learn to face up to and grapple with the situation and avoid spending his time merely spilling out his feelings. 15. He must sense the potential values outlined in the preceding sections. VALUES TO THE TEACHER

The teacher experiences more frequently the deep satisfaction of hearing his students grasp with fuller understanding the principle or the content knowledge presented and of seeing the growth and development of desired skills of application of such knowledge to challenging situations. He has a current and often repeated opportunity to examine the class as 16

The Teaching of Administration a whole and the individuals within the class in their grasp of the subject matter, their attitudes, and their skills. He faces an unusual challenge to his own conference leadership and communication skills, with corresponding opportunities of exercise. He must guide the discussion regardless of its starting point or sudden deviation. Also, he must keep the interest of each student, not only in the development of the case, but in the efforts of the other students. Variance in the speed of the thinking process and in the skill of communication among the students creates real hurdles to the achievement of such goals. The class discussion of a case furnishes the instructor with a current appraisal of his own ideas: in content, firmness, and reliability. In the proper atmosphere, the generalization of the teacher is often challenged for support to its application in a given specific situation. The dynamics of the environment and the differences between changing student bodies present to the instructor, even in the discussion of an old and annually repeated problem, the refreshing stimulus of a fresh imaginative point of view in the approach or in the selected solution. If the instructor, as he should, collects new material for a new case or for the elucidation of a point in an old case, he is compelled to keep hi touch with current developments in the subject matter of his specialty. Otherwise he will find himself unable to answer the questions of a case discussion, which are not often stimulated by a prepared lecture. PREREQUISITES OF THE TEACHER

It is obvious that there is no one best technique to be used by the teacher in the handling of the class discussion of case problems. The techniques will vary primarily with the abilities and characteristics of the individual instructor. However, the following generalizations can be made which, if sensed and accepted by the teacher, will make it possible for him to obtain high value from this teaching method. 1. The teacher must focus his attention on the class and the individuals in the class rather than the subject matter. Above all he is to furnish them an opportunity to gain understanding and to develop their decision-making skills. 2. The teacher should permit the individual student to present and try to support his own views, even though they may differ radically from those of the teacher and even if he thinks these views of the student are immature or irrational. Of course, if some gross error is not revealed by the ensuing discussion, the teacher must not permit the class to depart without having indicated the error. 3. While the teacher endeavors to maintain a permissive atmosphere for learning, he should be willing to participate and accept an informal atmosphere as an associate in learning with the students. This does not mean 17

Decision Making in Hospital Administration undisciplined helter-skelter meaningless argument. As mentioned at the beginning of this chapter, the active discussion should be kept pertinent and should be governed by administrative propriety through the efforts of the teacher, if necessary. 4. The teacher should recognize that the development of the individual by participation is paramount. While he must accept the role of distinct faculty leadership, yet he should lead the student along the path of reasoning selected by the student, regardless of the start or place of beginning of the student's conceptions. He must realize that the cases are designed to stimulate discussion, not to arrive at a predetermined conclusion. However, allowing the student just to talk doesn't necessarily help the student to talk more clearly. Likewise, the student should not be graded specifically during class discussion for fear the procedure would become a barrier to free participation. 5. Teaching with case material demands not only a complete command of facts and issues of the situation, but often a more advanced preparation of key questions than is normally involved in other types of classwork preparation. These questions, however, will be composed so as to be adaptable to the actual introduction by the class of the material and to the progress of actual discussion. Therefore they must be quite often "ad libbed" and phrased on an impromptu basis. They should be keyed to promote argumentative discussion and spontaneity of thinking. 6. The teacher's basis of emphasis now is on the particular rather than the general. He is in the process of decision making, not of theory construction. Frequent expounding of generalizations should be avoided. Emphasis on reference to the specific environment of the case at hand should be constant. 7. The process of education and teaching here requires more emphasis on the acquisition of skill than on knowledge content. He must accept the premise that development of administrative skills on the part of the student is a very slow and painstaking process and one requiring a considerable amount of patience upon the part of the teacher. There is danger in telling the student all he needs to know and thus preventing him from personally achieving the solution. 8. The teacher must truly impart a willingness to experiment and to deviate from his own bias. It is difficult to lead and not be too dominant, to be permissive and not too passive. Fruitful discussion can be stifled by either extreme. If the student feels he can freely and jointly with the teacher follow the path of his own reasoning to see where it leads, then the discussion can be both fruitful and entertaining. If the teacher knows of an actual situation in a hospital, similar to the case at hand, the class will benefit from his report, following the normal presentation and discussion, on what course of action the hospital decided 18

The Teaching of Administration upon and the results. In fact, there is considerable value in trying to compare the class's solution with other actual experience, recent if possible, even though the two situations differ from each other in some respects. In summary, then, the teacher must realize that the main objective of the class discussion is not the solution, but that each student must learn why and how to meet a situation; how the situation arose; and how to acquaint himself with its problems. The student must learn why and how to define the problem involved in such a way that it will permit investigation for solution; how to determine and use good judgment in the choice of the alternatives that appear to be possible; and how to select the best solution. Finally, the student must learn why and how to plan the implementation of the solution; how to think constructively about such matters; and how to present such conclusions and communicate them in a manner conducive to effective total results. If the teacher is sensitive to the preceding ideas, the student is then afforded a better opportunity of learning the beginnings of these skills, values, and attitudes by the case method. Although later in his career the student will meet situations which have different contexts, different data, and different immediate environments, he will have gained insight into the causes of these situations and the ability to meet with confidence the problems they present. SUGGESTED REFLRENCES

Argyris, Chris. Personality and Organization. New York: Harper & Brothers, 1957. 291 pp. Beardsley, Monroe C. Thinking Straight. New York: Prentice-Hall, 1954. 278 pp. Bross, Irwin D. J. Design for Decision. New York: Macmillan, 1953. 276 pp. Flesch, Rudolf. The Art of Plain Talk. New York: Harper & Brothers, 1946. 210 pp. . The Art of Clear Thinking. New York: Harper & Brothers, 1951. 212 pp. Gowers, Sir Ernest. Plain Words: Their ABC. New York: Alfred A. Knopf, 1955. 298 pp. Katz, Robert L. Developing Human Skill. Hanover, N. H.: Amos Tuck School of Business Administration, 1955. 16pp. Lewis, Norman. How to Get More Out of Your Reading. Garden City, N. Y.: Doubleday, 1951.425pp. McNair, Malcolm P., ed. The Case Method at the Harvard Business School. New York: McGraw-Hill, 1954. 292 pp. Payne, Stanley W. The Art of Asking Questions. Princeton, N. J.: Princeton University Press, 1951. 249 pp. Reilly, William J. The Twelve Rules for Straight Thinking. New York: Harper & Brothers, 1947. 131pp. Simon, Herbert A. Administrative Behavior. 2nd ed. New York: Macmillan, 1957. 259pp. Thouless, Robert H. How to Think Straight. New York: Simon and Schuster, 1950. 248 pp. Wallis, W. Allen, and Harry V. Roberts. Statistics: A New Approach. Glencoe, 111.: The Free Press, 1956. 645 pp. Young, James W. A Technique for Producing Ideas. Chicago: Advertising Publications, Inc., 1953. 61 pp.

19

2 Problem-Definition

Exercises

BAY VIEW HOSPITAL

The Bay View City-County Hospital is a public institution for the care of the indigent and medically indigent of the southern city and county in which the hospital is located. The hospital is financially supported by the taxes of city and county residents. The hospital operates 357 beds, with 260 beds located in the original building constructed in 1926 and the remainder located in the connecting building constructed in 1936. Of the 357 beds, 112 are medical, 113 surgical, 32 neuropsychiatric, 39 contagious, 23 pediatric, and 38 obstetric. Not included in the total bed count are eight labor beds and 49 bassinets. The hospital census rarely falls below 90 per cent of the capacity. The present layout of the obstetrical service facilities was developed in 1921 and is not considered to be good in terms of modern standards. The number of deliveries per month varied from 240 to 170 last year and from 245 to 130 during the previous year. Nearly 2 per cent of these deliveries were low forceps deliveries, and 3.7 per cent were caesarian sections. There is an average of eight deliveries per day at present. The average patient stay on the obstetrical service is 24 to 48 hours after delivery. With increasing pressure on the obstetrical service the infant mortality of the hospital per thousand live births has dropped from 34,7 to 19.5 in the last five years. During this same period, the maternal mortality per 10,000 deliveries has varied from 4.4 to a present 12.0. Ninety-five per cent of the obstetrical patients are charity patients and many of them enter the emergency room ready for delivery. The population of the city in which Bay View Hospital is located is 500,000 while an additional 200,000 persons are located in the remainder of the county. Approximately 17,000 residents of the county are nonwhite, and it is this group that furnishes the greater share of patients for the hospital. Annual births in the city have risen from 2000, thirty-five years ago, to 15,000 last year. 20

Problem-Definition Exercises STATESIDE HOSPITAL Stateside Hospital is a 135-bed, German-built hospital used by the United States occupation forces. The officer in charge of the admission of patients has felt for some time that there is unwarranted congestion of traffic when patients are admitted. There is a minimum of two admitting clerks on duty at all times. The admitting area consists of two mediumsized waiting rooms, one large and one small examining room, a large patients' clothing room with showers, a medium-sized treasurer's office, a small mimeographing room, and a large interviewing room. Next week a new 4' x 7' safe, requistioned by the treasurer, is due to arrive and there is not sufficient room in the treasurer's office for it. No other area nor additional space is available in the hospital for the admitting-area functions. No funds are available to alter existing walls. VETERANS ADMINISTRATION HOSPITAL As the new manager of a 400-bed, veterans administration, general hospital you are requested by the chief nurse to authorize the establishment of a central supply room, and to allocate sufficient funds to establish and maintain the facility. The chief nurse stressed the economy which would be secured by such a pattern of operation. The nursing equipment and supplies are now scattered in the fifteen nursing units as assigned at the time of original purchase and receipt. You learn from your assistant (a carry-over from the previous regime) that this same suggestion was made by the chief nurse a year ago. At that tune the chiefs of professional services objected to the establishment of a central supply room. The former manager of the hospital supported these chiefs and turned down the request. The present chiefs of professional services are the same persons who opposed the original request. Recently, you received orders from your superior to reduce current expenses of operation as much as feasible. ARMY HOSPITAL You are the pharmacy officer of the hospital. Of the personnel assigned to the pharmacy, you have one registered pharmacist. The remainder of the personnel are service-trained pharmacy technicians. You have experienced considerable difficulty with the registered pharmacist as he is uncooperative, argumentative, lazy, and is definitely a problem. You have repeatedly talked to this soldier and made every effort to correct his attitude and general conduct. He recently stated that he was eligible for promotion from his present grade of E-6 and would like to know when he could expect this advancement in grade. At this time you again pointed out his deficiencies and told him, among other things, that you did not consider him qualified for promotion.

21

Decision Making in Hospital Administration Because of his professional knowledge of pharmacy and his acting as a safeguard for you in compounding prescriptions and in manufacturing Pharmaceuticals, you have hesitated to request that this man be reassigned. Since you have told the pharmacist that you would not recommend him for promotion because of his past deficiencies, he has become surly and even less cooperative, almost to the point of insubordination. JOHNSTON HOSPITAL The nursing director has complained to the administrator that linen is chronically in short supply and that its whiteness is not all that she desires. The housekeeper, who is in charge of the linen room, claims she gives the nursing department all the linen she has available but that she is held up by the amount she receives from the laundry. The laundry manager says that if the housekeeper and nursing director would establish a linen control system in order to eliminate pilferage and hoarding, the linen shortage would not be so acute. He also believes he should be given responsibility for the operation of the linen room. Johnston Hospital is a 160-bed, general-acute, voluntary institution. It was constructed approximately five years ago. It has been purchasing on specification, and has bid $5800 worth of linen per year for the past three years. The laundry washes approximately nine pounds of linen per occupied bed per day at an operating cost of $0.035 per pound, dry weight. The laundry is operated by ten employees and the laundry manager. CORWIND HOSPITAL The administrator of Corwind Hospital, a 250-bed, general-acute, voluntary hospital, has received a phone call from a member of his board of trustees expressing his serious concern over a complaint about the hospital's operation. The board member said the president of the largest industrial plant in the community had related his personnel manager's report concerning a company employee who was taken to the hospital accident room after an automobile accident yesterday afternoon. The employee was complaining of dizziness and a slight headache from a bump on the head. According to the personnel manager's report the hospital refused to admit the patient who returned home and died this morning from a cerebral hemorrhage. The factory personnel are all highly incensed at the poor treatment which they believe their fellow worker received at the hospital. The company's industrial nurse asserts that the patient's death is entirely the fault of the hospital. LONGWOOD HOSPITAL Traditionally, surgical procedures in the 120-bed, general-acute Longwood Hospital have been performed by experienced general practitioners.

22

Problem-Definition Exercises Over the last ten years, however, the number of board-qualified surgeons has increased to eleven. These surgeons believe they can perform all the surgery which comes to Longwood Hospital from the town's 26,000 persons. Four of these surgeons perform surgery at the new 200-bed, generalacute Catholic hospital also serving the community. All the surgeons would like the medical staff's bylaws changed to separate the medical and surgical service into two services, and require board certification for all members of the surgical staff. They believe, in addition, that the hospital privileges of new surgeons in the community should be determined after the hospital's surgical staff has had an opportunity to observe and evaluate the quality of surgery performed by the new men. The proposal of the surgeons is opposed by the general practitioners, particularly those who have been performing surgery for many years. Three of these physicians are among the most popular and respected doctors in the community. They point to the 1.8 per cent surgical death rate of the hospital as proof of their continued competence. These three physicians currently perform 20 per cent of the 1600 surgical procedures annually performed in Longwood Hospital. The hospital does not employ a pathologist nor contract to have an analysis of the per cent of normal tissue removed. The Catholic hospital sends surgical specimens to a medical center 48 miles away for analysis. Longwood Hospital does not perform a medical audit. The administrator of Longwood Hospital would like to secure approval from the Joint Commission on Accreditation. The trustees are in full agreement with this objective as they are, in fact, with most of the administrator's efforts to improve the hospital. The medical staff members have made few comments, to date, either for or against a survey by the Joint Commission on Accreditation. UNIVERSITY HOSPITAL The dietitian of a 450-bed university hospital located in a West Coast city is fifty-two years old and has had fifteen years service with the hospital. In eight years she will be automatically retired in accordance with university policy. She has developed a reputation of being one of the outstanding dietitians in the area. The department's raw food cost per patient day is one of the lowest of all hospitals in the area. Twenty per cent of the diets are special diets. The dietary department employees have had, in the past, an unusually high average length of service. The hospital's administrator has been receiving adverse reports on the dietitian during the past few months. The accountant complains that the dietitian is uncooperative in collecting information on the food service for cost accounting purposes. The patients have been complaining about cold, unappetizing food. The interns are continually griping about their

23

Decision Making in Hospital Administration meals. Occasionally the employees of the dietary department have complained that the dietitian is too severe a taskmaster. One of the assistant administrators who supervises the department reports that a well-qualified dietitian has just moved into the community from the eastern part of the country and is seeking a hospital position.

24

//. DETERMINING THE NEED FOR HOSPITAL SERVICE FACILITIES

"Decision by majorities is as much an expedient as lighting by gas." Gladstone "Decide not rashly. The decision made can never be recalled. The gods implore not, plead not, solicit not; they only offer choice and occasion, which once being passed return no more." Longfellow

3

The Needs of Geographical Areas

1. INTEGRATION FOR HOSPITAL CARE The health committee of the legislature of State A is conducting a study of the state's health needs as a basis for determining the state's health legislation program for the next four years. The committee has heard of the concept of "integrated hospital care," and as part of its study it has asked the state hospital association to define the concept with respect to State A. The committee would like to have at least an estimate of the number of general-acute, chronic, tuberculosis, and mental beds needed in the state in the next ten years. It would like a general statement as to where in the state the needed beds should be located in accordance with the concept of integrated hospital care. The committee would also like to know what steps should be taken to translate the initial general statement into a specific and concrete plan for hospital care. This plan would be intended for the guidance of the committee and other groups concerned with the development of the state's hospital resources. The state committee wishes the state hospital association to prepare its comments without being limited in its thinking by the existing plan for the state's hospital development as prepared by the state health department. As chairman of the state hospital association's legislative committee you have been asked to convene your committee to prepare the association's general statement for the legislature's health committee. The association's executive secretary has made available to you information about State A which he feels will provide a basis for the statement requested by the health committee. State A is located in the western part of the country and comprises an area of approximately 120,000 square miles. It is geographically a land of extremes. Rugged mountain ranges traverse the northwestern part of the state. Separated by deep valleys, they have proved formidable barriers to travel to and contact with the rest of the state. By contrast, the central

27

Decision Making in Hospital Administration and southern portions are characterized by rolling country and flat plains areas. Climate ranges from relatively moderate year-round conditions in the southern areas to considerable variations in temperature in the mountainous northwest. In the latter section, heavy snowfalls in the winter months with subsequent flooding conditions during spring thaws often make travel between this section and the remainder of the state extremely difficult and, at times, practically impossible. Settlement has occurred, for the most part, in the central and southern portions. There are only five cities of any consequence in the state. Three of these, Bedford, the state capital with an estimated population of 200,000, Hammond with 50,000, and Maryville with 45,000, are located in the south central, southeast, and southwest portions respectively. The other two cities, Elm City with 30,000 and Carrolton with 24,000, are respectively located in the central and northeast areas. Two small communities, Micaville and Boardton, with populations of 7500 and 3800 respectively, have developed in the northwest area largely as a result of mining and lumbering activity in this section. Because of topography as well as distance to the centers of population in the state, the residents of these towns have looked upon a large industrial city located about fifty miles to the west in an adjoining state as a logical center for their trading and shopping. As might be expected, the development of transportation facilities has occurred chiefly in the central and southern portions of the state. Two major rail lines traverse these sections with interconnecting branch lines between the various cities. A fairly extensive system of highways also covers these areas. In the northwest, however, development of transportation facilities has necessarily been limited except to the industrial western center. Only one branch-line railroad and two mediocre highways connect this area with the remainder of the state. Population of State A is currently estimated to be 1,750,000. Up to about fifteen years ago population growth had been gradual, but the rate of increase has stepped up considerably due to more rapid industrial development in the south during and since the last war. The industry has become permanent in character; it is expected that the future rate of growth will more nearly approximate that of the last fifteen years. Whereas the average rate of population increase was only about 20 per cent in the last decade it has jumped to approximately 38 per cent in the present decade. Despite the increasing industrial activity in the south, the state is essentially a rural one since better than 75 per cent of its population is engaged in agriculture or cattle and sheep ranching. Density of population ranges from less than one person per square mile in the sparsely settled northwest 28

The Needs of Geographical Areas to approximately 9000 persons per square mile in metropolitan Bedford. Average density for the state as a whole is approximately fourteen persons per square mile. In recent years an influx of elderly persons into the southern areas has been apparent. These people, seeking a suitable location in which to spend their years of retirement, have been attracted to this part of the state by its relatively mild climate and by more favorable living conditions. Thus the proportion of population in the higher age groups is about 12 per cent greater here than the national average. However, the age distribution of population for the state is approximately the same as that of the nation. Average birth and death rates during the past fifteen years have been substantially the same as national averages. Maternal and infant mortality rates, though consistently higher than the national experience, have declined steadily in recent years to 115 per cent of the national average. The decrease has been primarily the result of an improved and expanding statewide public health program. The tuberculosis death rate, although still 18 per cent in excess of that for the country as a whole, has declined gradually during the past twenty years. Development of hospital facilities through the years has been an unorganized, haphazard process. Many of the rural areas have either inadequate facilities or none at all within 50 to 75 miles of them. In the larger communities hospitals have been developed largely as a result of vested interests and bear little real relation to each other. In Bedford, where the state university is located and where a medical school is in the process of being established, there is a marked shortage of beds. The shortage is evidenced by long waiting lists for admission to the hospitals. The average length of stay is five days for those patients who are admitted. The picture is further complicated by the existence of several small specialized hospitals in the Bedford area such as maternity, orthopedic, and the like, none of which is utilized at anywhere near normal capacity. Facilities for the care of mental patients other than in the two state mental institutions are almost nonexistent. One of the larger hospitals in Bedford has a few beds set aside for the short-term care of such patients, but it is poorly equipped and staffed, and operates on anything but a satisfactory basis. In many of the general hospitals throughout the state an increasing number of chronic and convalescent patients are occupying beds which might otherwise be available for general-acute care because the only facilities available for chronic and convalescent care are a relatively few nursing homes (320 beds). Only one general hospital in the state, located in Bedford, has any facilities available for treatment and rehabilitation of the chronically ill, and the space designated for these twenty-two beds is badly overcrowded. 29

Decision Making in Hospital Administration Your committee is planning to meet today to discuss and prepare its presentation to the state legislature's health committee. What plan for integrated hospital care in State A do you think should be presented to the legislature's health committee? Upon what factors did you place most emphasis when arriving at your conclusions? What other factors did you consider, and why did you not place more emphasis on them? COMPLEMENTARY QUESTIONS

1. How do you define "integrated hospital care"? "birth-death ratios"? 2. Do you believe that integrated hospital care will be established by hospitals voluntarily? Why or why not? What motivations would tend to cause voluntary development of integrated hospital care? to prevent voluntary development of integrated hospital care? 3. Do you think integrated hospital care could and would be achieved if hospitals were supervised and controlled by state governmental agencies? by federal governmental agencies? Why or why not? 4. What would you consider to be the advantages and disadvantages of securing integrated hospital care through governmental agencies, as contrasted with attempting to secure such care by voluntary means? 5. What organizational structure, if any, would you recommend to promote and implement a plan for integrated hospital care? 6. What effect might the provision of integrated hospital care have on the relationship of participating hospitals to third-party, prepaid, health insurance agencies? How might the growth in subscribers of prepaid health insurance plans affect the desire of hospitals to participate in programs for integrated hospital care? 7. What effect might participation in a program for integrated hospital care have on a hospital's sources of revenue? 8. What are the needs for intercommunication among hospitals participating in a program for integrated hospital care? What means of communication do you think should be used? 9. What minimum conditions are needed to permit the development and implementation of a program for integrated hospital care? Why? 10. How might participation in a program of integrated hospital care affect a hospital's size? program? type of ownership? qualitative and quantitative standards of service? 11. What effect does lack of physical proximity to other hospitals have on the feasibility of a hospital's participation in a program of integrated hospital care? 12. What effect might a program for integrated hospital care have on undergraduate and graduate medical education? on a hospital's drawing power to fill available internships and residences? Why? 30

The Needs of Geographical Areas 13. How do you expect the number of hospitals participating in programs of integrated hospital care will change during the next ten years? Explain. 14. What are the advantages and disadvantages of "integrated hospital care" to the patient, to the doctor, to the community at large? 2. INTEGRATED HOSPITAL CARE

You have recently been elected chairman of your state hospital association's committee on state relations. This committee has in the past worked closely with state authorities on subjects of mutual interest such as hospital construction, hospital minimum standards, and use of tax funds for hospital operating revenue. You are well acquainted with the existing hospital facilities and have available a copy of your state plan. The state official responsible in your state for planning the expenditure of federal tax funds for medical-care facilities has phoned you to say, "We anticipate, as you know, the availability of federal funds this next fiscal year for additional hospital construction and for the construction of rehabilitation facilities, nursing homes, chronic-care facilities, and health centers. We'd like to plan now for the use of these funds. The governor has asked that we enlist the help of your committee. Specifically, we'd like you to review first our existing plan for hospital and other medical-care facility construction, the progress we've made to date in compliance with the plan, and to express your association's opinion as to how the plan should be modified in the future. Secondly, we wish you would review the factors and principles we've followed in determining where in the state we should add the physical facilities we need and the priority for construction of such facilities. We'd like your committee to prepare a statement of the factors and principles that should be given emphasis in this state at this time when anticipating the planning and fund allocation responsibilities we will meet when the federal funds become available. Your committee has been of real assistance to us in the past, and we feel that working together in this way achieves better mutual understanding and better planning results. Do you think you can help us now in this manner?" You indicated that you would like to be of assistance if you could and that your committee members would feel the same. You also indicated, however, that approval of your committee and the state hospital association's executive committee would be required. You obtain the necessary approvals and phone this information to the state official who expresses his pleasure at the committee's decision. He agrees to make available to the committee all information that would be helpful to completion of the project. It is decided that the committee will begin work immediately. What changes do you think should be made in the plan to support by 31

Decision Making in Hospital Administration tax funds the construction of hospitals and other medical-care facilities in the state of your location? What factors and principles do you think should determine the future location and priority for construction of additional medical-care facilities in the state? COMPLEMENTARY QUESTIONS

1. Do you believe state officials should perform the function of reviewing plans for construction which are financed in part by federal tax funds? Why? If the answer is yes, what do you believe should be the content of the review and the limits to such a review? How should the standards of evaluation be developed? How should the standards be promulgated and enforced? 2. How do you believe the relation of hospital administrator to state officials concerned with hospital construction and finance will be changed five years from now? ten years from now? 3. How should the inspection and service functions of governmental agencies relate to the same functions as performed by the Joint Commission on Accreditation? the American Hospital Association? the American Nurses Association? 4. Do you believe it better to obtain funds for the construction of medical-care facilities through the collection and distribution of tax revenues or through local, voluntary fund-raising campaigns? Why? 5. Do you believe greater or less emphasis should be placed on the construction of small hospitals under fifty beds in your state? Why? What changes do you anticipate in the kind of medical-care facility which will be constructed during the next five years? 6. What is the most important factor in determining the location of a new medical-care facility? What other factors do you consider important when determining such a location? 7. What over-all patterns for the relationship of medical-care facilities to each other do you believe should be followed when planning the location of such facilities? 8. What should be the function of the veterans administration hospitals as compared with voluntary agency hospitals? of state and local tax-supported hospitals and the state and local health centers as compared with voluntary hospitals? 9. Should a state place emphasis on medical education and other educational functions when determining location of state-operated medical-care facilities? on research functions? Why, or why not? 3. REGIONAL HOSPITAL PLANNING Preliminary conclusions on a hospital development plan for State Region IV will be the subject for discussion during a meeting just called of 32

The Needs of Geographical Areas the Valencia Hospital Commission. The commission was formed for the purpose of securing a hospital development plan for the region. Commission membership included board members of the leading hospitals of the area and well-known business and labor leaders. Representatives of the three large lumber companies in the area will be present at the meeting, although not as members of the commission. The preliminary conclusions will be presented by the director of the State University Hospital, who heads the study staff which is developing the regional hospital plan. The study director has learned that questions are being raised about the preliminary conclusions of his staff and believes understanding and, if possible, agreement should be reached on some of the more basic conclusions before the study progresses further. The commission was formed and is financially supported by the lumber companies. The companies have recognized the need to improve the hospital facilities in the area of 4680 square miles containing their timber and mineral holdings. The need is evidenced by the pressure of high occupancy levels in the existing hospital facilities. The need is expected to increase when the population expands to implement new discoveries in the use of wood products and to implement plans for development of the lumber companies' mineral holdings. The study group has found that, with relatively minor exceptions, the service area boundaries of the hospitals in the area of lumber company operation coincide with the boundaries of Region IV of the State Plan for hospital construction. It was found that approximately 88 per cent of the total number of patients admitted to Region IV hospitals reside within twenty-five miles of the hospitals. Eight per cent come from towns located twenty-five to fifty miles from the hospitals while 4 per cent are residents of towns over fifty miles away. Region IV is located in the southwestern portion of a northwestern state. It is mostly hilly or mountainous. The summer climate is excellent but the winters are rigorous. A very good system of highways traverses the area in all directions, although only the main highways may be passable at times during the winter. The university maintains a large medical school 225 miles to the north. The study group defined sub-areas within Region IV and designated them as the Valencia, Aetna, and Hatfield areas, and gathered data on Region IV's population (Table 1). The study group learned that most of the contemplated development of mineral holdings will occur in the Valencia area, near the town of Alben; the remainder near the town of Bergson. The Valencia area therefore was subdivided for the classification of collected data. Census data and information from other sources were used by the study group to further describe the area's population. It was found that 60 per 33

Decision Making in Hospital Administration Table 1. Actual Past, Present, and Estimated Future Population of Region IV and Sub-Areas

Year

1900 1910 1920 1930 1940 1950 1955 I960 1965 1970 1975

ValenciaValencia Valencia- Bergson Area Area Alben Area Region IV 24,782 72,097 93,061 87,960 86 436 80 805 96,000 116,500 125,500 137,000 147,500

15,516 39,735 48,572 41,850 40,739 36,601 47,000 64,000 70,000 77,500 84,500

13,713 33,294 41,048 36,478 35,376 31,929 34,000 37,000 39,000 42,500 45,500

1,803 6,441 7,524 5,372 5,363 4,672 13,000 27,000 31,000 35,000 39,000

Aetna Area

Hatfield Area

5,450 5,828 7,933 8,098 7,945 7,428 10,000 11,500 12,500 13,500 14,500

3,816 26,534 36,556 38,012 37,752 36,776 39,000 41,000 43,000 46,000 48,500

cent of the area's population is rural. Average population density for the entire region is 17 persons per square mile, ranging from 3000 persons per square mile in the urban centers of Hatfield and Valencia to one person to 40 square miles in a portion of the Aetna area. It was also found that 52.7 per cent of the area's population is male, that 27.5 per cent of the population is under fifteen years of age, that the birth rate rose last year to a high of 24.5 per thousand from 16.4 a decade before, that 99 per cent of the births are occurring in hospitals, that 31.8 per cent of the population is over 45 years of age and 10 per cent over 65 years of age, and that the death rate has risen from 8.1 deaths per thousand in 1940 to 10.2 in 1951, with 55 per cent of the area's deaths now occurring in hospitals. Median family income in the area is approximately $3200 per year. Net effective buying income per capita was $1367 and $1354 last year in Hatfield and Valencia respectively. Bank deposits in urban centers have increased by 50 per cent within the last five years while postal receipts have increased over 40 per cent and automobile registrations, electric meter installations, etc., have increased by at least 10 per cent. In addition to the medical-care contracts now being carried through the lumber companies by the great majority of their employees, it is estimated conservatively that better than two thirds of all the population hi the area is covered by Blue Cross or some other form of hospital insurance. A total of 51 physicians now practice hi Region IV. Three reside in the Aetna area while 24 are found in each of the other two areas. The study group accumulated selected data from last year on existing hospital faculties (Table 2). In addition to general hospital beds the study group found the region to contain 155 beds for custodial care. The region also contains tuberculosis sanatoria for the care of long-stay cases, but no beds for the care of 34

The Needs of Geographical Areas nervous or mental patients. Of the region's general-acute beds, it was found that 205 would need to be replaced during the next twenty-two years (195 within two years) because their facilities are not fire-resistant, are set up in spaces neither intended nor adequate to accommodate them, or are unsuitable for the performance of general hospital functions. The study group has developed its conclusions on the bed needs of the area and has developed a proposed hospital construction program to meet these needs (see Table 3). In developing the proposed program, many factors were considered: the size of the population, other population characteristics, and population trends; the existing hospital service areas; the extent to which existing hospitals are performing a regional function, for example, 10 per cent of the patients admitted at Valencia Hospital are "regional" rather than "local"; the distribution of physicians; the quality of existing physical plants and equipment; the rates of invalidism, both present (14 per thousand) and estimated future rate (17 per thousand); the layout of existing physical plants; the transportation possibilities and problems. The hospital commission has been made aware that many detailed analyses of many factors are the bases for the study group's conclusions. The commission has accepted the validity of the bases used to develop the conclusions and the validity of the conclusions themselves, insofar as they indicate the area's theoretical hospital-bed needs and an ideal construction program. The study group's conclusions on bed needs and construction requirements differ hi some respects from the State Plan for hospital construction in Region IV. The State Plan indicates that last year the region contained 409 general-acute beds^ of which 266 were acceptable or 3.2 beds per thousand, based on the states's population estimate for the region of 83,039 persons. The State Plan estimated that 336 general-acute beds should be constructed in the five hospitals allocated to the region: 144 in the Valencia area, 30 in the Aetna area, and 162 in the Hatfield area. The State Plan does not indicate total chronic-bed needs for the area but does propose the construction of a 50-bed unit in Hatfield. Representatives of the lumber companies are expected to question why the State Plan's construction goals should not be established as the community's immediate objectives. A possible basis for their question lies in their objection to the cost of the study group's proposed plan. The estimated costs of construction including equipment for the two-year program, at present prices, are $6,215,000. The cost of the twenty-two-year program is estimated at $5,925,000 for general-acute beds, $2,625,000 for chronic beds, and $1,575,000 for nervous and mental beds. Other commission members support objections to the program's cost. They go further by questioning whether the twenty-two-year plan should even be contemplated at the present time. It is felt that such a plan must be based 35

Table 2. Distribution by Ownership of General Hospitals and Beds in Region IV and Data on Utilization Area and Type of Ownership

Valencia Nonprofit Governmental . . . Proprietary . . . . . . Total Aetna . Nonprofit Proprietary . . Total Hatfield . Nonprofit Region IV . Nonprofit Governmental . . . Proprietary . . . . . . Total

Average No. % of Beds Occupied Normal Bed of Patients Complement Capacity Per Day

Bed Complement

Normal Capacity

Total Admissions

Total Days of Care

Average Stay in Days

1 1 1 3

28 107 10 145

26 104 7 137

755 3,886 215 4,856

7,572 29,945 1,712 39,229

10.0 7.7 8.0 8.1

20.7 81.8 4.7 107.2

73.9 76.3 47.0 73.9

79.6 78.7 67.1 78.2

1 1 2

34 27 61

34 24 58

497 752 1,249

5,485 4,951 10,436

11.0 6.6 8.4

15.0 13.5 28.5

44.1 50.0 46.7

44.1 56.3 49.1

2

182

150

5,237

40,120

7.7

109.6

72.1

91.3*

4 1 2 7

244 107 37 388

210 104 31 345

6,489 3,886 967 11,342

53,177 29,945 6,663 89,785

8.2 7.7 6.9 7.9

145.3 81.8 18.2 245.3

67.9 76.3 49.0 68.5

80.7 78.7 58.4 77.9

No. of Hospitals

* Medical and surgical occupancy percentages could be segregated for these two hospitals and were found to be 85 and 95 per cent. Table 3. Summary of Bed Requirements and Proposed Hospital Construction Program in the Valencia, Aetna, and Hatfield Areas of Region IV

Hospitals

Type of Bed, No. Required, and No. Proposed Type of Bed, No. Required, and No. in Next 2 Years Proposed in Next 22 Years Nervous Nervous Existing Generaland Total Proposed Generaland Proposed Beds * Acute Chronic t Mental t Required New Beds § Acute Chronic t Mental t New Beds

Existing Hospitals 28 Ellen . . . . 10 Soporro * * 25 Valencia Detention 122 Valencia Municipal . . . .

Valencia 10 205

10 70

35

310

101

360

70

70

500

New Hospitals Community Hospital (Alben or new site) Total Existing Hospitals Aetna Detention Windom Sheldon New Hospitals Community Hospital (Aetna) Community Clinic (Berwin) . . Total Existing Hospitals Cullum Detention Cullum Memorial tt Hatfield General Total Grand Total

185

60 275

70

35 Aetna

240

380

161

60

190 550

65 5

75 5

20

70

50 5 55

30 280

80

30 285 375 945

70

35

210

35

420

105

1260

60

50

120

7u

740

16 34 27

77

50 5 55

15 15

80

95 5 700

20

Hatfield

15 30 152 197 459

30 200 230 560

55 55 140

25 25 60

310

760

80

296

70

30

390

* Includes only general-acute beds. t Chronic beds are for both treatment and rehabilitation of the chronically ill only; nervous and mental beds are for short-term custodial care only. t Nervous and mental beds for the Aetna area have been combined with those of the Valencia area. § Includes new construction to replace existing beds where needed and to secure the required number of general-acute beds only. No construction of chronic or nervous and mental beds is proposed for the next two years. ** To be discontinued within 22 years, these ten beds have been assigned to the long-range replacement program of Valencia Municipal Hospital. tt If it should be determined in the long-range program that these facilities would more usefully serve some other type of care than general-acute, the beds now available will be replaced in the future expansion program of Hatfield General Hospital.

Decision Making in Hospital Administration on many assumptions and might restrict thinking on future hospital construction plans when the time comes to actually implement a hospital construction program. As a means of reducing the cost of the initial program, it is being suggested that a smaller number of beds be replaced by new construction. Other objections are being raised by the commission for discussion. It is noted that the State Plan calls for early construction of chronic-bed facilities, while the study group's plans do not. Commission members note that a need for chronic hospital beds has been established in the region and is recognized, nationally, as a rapidly growing problem. Objection is expressed to abandonment of the allied special (detention) hospitals (see Table 3) where acute tuberculosis and other communicable disease patients have received care and where acute mental patients have been held in custody while awaiting transfer to state facilities. In fact, Hatfield officials say they will not abandon the Cullum Detention Hospital. The physician who established the nonprofit Windom Hospital also says that the hospital will not be abandoned, at least so long as a certain physician continues to own and operate the Sheldon Hospital in the town of Aetna. Further objection to the plan for the Aetna area is directed against establishing a community clinic rather than a community hospital in the town of Berwin. Aetna representatives believe it the function of local public health authorities rather than a voluntary hospital organization to operate a local clinic facility. The community clinic is planned to provide space and facilities for physicians' and dentists' offices, limited diagnostic X-ray and laboratory units, a minor emergency operating unit, office space for a public health nurse, and perhaps a few patient beds. Representatives of one lumber company, headquartered in Valencia, object to the planned size of the Valencia Municipal Hospital. From previous private conversations it is known that the company objects to planning for 20 per cent of the beds to be used by patients throughout the region, which means that some of the beds will be utilized by employees of the other lumber companies. Further objection is expressed because the plan does not include expansion of the existing Soporro Hospital but assigns its ten beds to the long-range replacement program of Valencia Municipal Hospital. Community representatives say they do not want to lose a hospital that is providing acute, chronic, convalescent, and emergency care close to home, that the community's hope of attracting physician residents to the hospital must be considered, and that it is a matter of community pride to have their own hospital. Soporro is located five miles from Valencia, with good roads and transportation facilities connecting the two areas. The chairman of the Valencia Hospital Commission is concerned that the objections and questions expressed indicate an inability of various 38

The Needs of Geographical Areas groups in Region IV to agree on a hospital construction plan for the region. He also wonders what the organizational structure and membership should be, of the group of citizens needed to implement whatever plan might be developed and approved. What action do you think should be taken by the director of the study group to secure support from interested individuals and groups in Region IV for the regional plan of hospital development which has been prt pared? Upon what factors would you place most emphasis in arriving at your conclusions? Why? What do you think should be the organizational structure and the membership of the group which will implement whatever regional plan is developed? What factors did you consider in arriving at your conclusions? COMPLEMENTARY QUESTIONS

1. What do you mean by the terms "community clinic," "community hospital," "district hospital," "regional hospital," and "regional hospital plan"? 2. What do you think should be the objective of the study group responsible for preparing a regional plan of hospital development? 3. How would you as director of a study group of three persons with similar knowledge and ability in the field of hospital administration organize their efforts in the preparation of a regional plan of hospital development? 4. What sources of information would you use in the development of a regional plan for hospital construction? 5. How do you think the development and implementation of regional hospital plans might be affected by increased allocation of tax funds for hospital construction? By increased enrollment and benefits under prepaid hospital insurance plans? 6. How might the development of a regional hospital plan be affected by the affiliation or ownership of hospitals in the region with church groups? governmental agencies? medical centers? medical schools? 7. If implementation of a regional plan means consolidation of hospitals, what can and should be done concerning hospital employees of hospitals which may be abandoned? 8. What steps would you take to secure representative community attitudes concerning specific provisions of a regional hospital plan under development? 9. What community conditions can you list as likely to be favorable to the development and acceptance of a regional hospital plan? 10. What effects do you think the implementation of a regional hospital development program might have on hospital teaching and research programs in the region? Why? Do you think there will be an increase in 39

Decision Making in Hospital Administration the future in the rate of development and implementation of regional hospital plans? Why, or why not? 4. PROGRAM FOR COMMUNITY NEEDS Robert Jayson, recently hired administrator of Rockford Hospital, has just been asked by his board of trustees to prepare recommendations as to whether the hospital should establish obstetrical and public-health nursing programs, concerned with both maternal and child health, in Rockf ord Hospital. A committee of community leaders has asked the board to initiate the programs. The committee states that the nearest hospital to Rockford provides unsatisfactory service and that the nearest hospital that provides good obstetrical hospital and home care is too far away to meet the community's needs. Jayson believes there is some validity in the citizens' committee's claim. Little Falls Hospital, a 45-bed, general-acute hospital twenty-five miles to the west, is not accredited by the Joint Commission on Accreditation of Hospitals, its facilities are minimal and in need of some replacement, and its obstetrical care is provided by general practitioners. He realizes, however, that the physicians have had long years of experience in rural obstetrics. A well-qualified public-health nurse uses Little Falls Hospital as headquarters. One half of her salary is paid by the State Department of Health, in accordance with the department's existing maternal and child health program. The 220-bed Milf ord Hospital provides good obstetrical care in a town of 65,000 persons located fifty miles to the southeast. Good roads have made it feasible to use the medical staff of Milf ord Hospital as consultants to Rockford Hospital. A very good program in maternal and child health is also available to patients of Milford Hospital. However, no official agency or public-health programs are provided to citizens of Rockford within their own community. Rockford Hospital is an 84-bed, general-acute, voluntary, nonprofit institution located in a service area of 12,000 persons, primarily in the town of Rockford. The hospital has been accredited by the Joint Commission on Accreditation of Hospitals. The town's economy is built almost exclusively upon one company's operation of extracting mineral resources from this northwestern state. The hospital was built two years ago with company funds. The company has strong representation on the board of trustees. No provision was made for an obstetrical program because it was expected that needs for such service could be provided by the two nearest hospitals. Average occupancy of the hospital over the past two years has been 36 patients, with the company underwriting the annual operating deficits. Average length of stay last year was 7.2 days for adult and pediatric pa40

The Needs of Geographical Areas tients. One 30-bed nursing unit has therefore never been opened. The company hopes that increased occupancy will reduce the annual operating cost per patient day of $28.00 and the annual operating deficit of $131,000. Realistic estimates of population expansion, however, indicate that it will be twenty years before as many as 60 general-acute hospital beds will be needed. Although the area's birth rate is 38.5 per thousand and the death rate is 2.0 per thousand, a constant decrease in populations results from the departure of employees who have reached the compulsory retirement age of 60. Thirty-two per cent of the remaining population is under fifteen years of age while 8.8 per cent is over forty-five years of age. The previous administrator and the director of nurses had been aware of the growing community demand for an obstetrical inpatient program and a public health nursing program in maternal and child health. The director of nurses has developed plans for the establishment of such programs which the board of trustees has asked Robert Jayson to evaluate. Jayson believes the plans to be reasonably sound. The estimated number of annual deliveries is 375, with the expected average maternity census to be about five persons. Examination of the proposed staffing pattern of the maternity service, including time spent by delivery room personnel on the service, indicates that the annual expenditure would total $36,000. The proposed staffing pattern would provide 4.01 hours of nursing care per patient day, 76 per cent of which may be classed as professional service. The evening and night shift supervisors would also be expected to provide assistance when needed in the delivery room. The hospital's recruitment experience justifies an assumption that sufficient nursing staff could be obtained to operate a maternity service. The medical staff does not have a board-certified specialist in gynecology and obstetrics. Present daily room rates are $14.00 for private, $11.00 for semi-private, and $8.00 for ward accommodations. The hospital's room rates and ancillary charges are about 8 per cent above those of Little Falls Hospital and comparable to those of Milford Hospital. The median income of the area's families is $4962. Fifty-five per cent of the families purchase prepaid health insurance which includes maternity benefits. Jayson reviews the factors he believes involved in his decision regarding the proposed hospital programs and begins preparation of his recommendation to the board of trustees. What recommendations would you as administrator of Rockford Hospital present to your board of trustees regarding the establishment of an obstetrical and public health nursing program at the hospital? What factors did you consider most important in arriving at your decision? Why? What other factors did you consider in relation to your recommendations? Why did you not give more emphasis to these factors? 41

Decision Making in Hospital Administration COMPLEMENTARY QUESTIONS

1. What should be the objective of a hospital with respect to its programs of service to its community? How might these objectives vary with a hospital's size? Type of ownership? Location? Affiliation with a medical center or medical school? Community needs? 2. What do you mean by the words "obstetrical program"? "Public health maternal and child health program"? 3. Under what conditions, if any, do you think a physician should be permitted to practice obstetrics if not board-certified in the specialty? 4. What personnel, space, and physical facilities do you think a hospital should have before establishing a maternity program? What other minimum requirements do you think should be met in a hospital before a maternity program is established? 5. Do you believe a hospital is justified in asking the patient to pay higher costs for service rendered because the volume of service does not fully utilize minimum staff and physical facilities? What nongovernmental sources and methods of financing do you think might be utilized to assist the patient to pay for "standby" costs of such services? 6. To what extent do you believe financial support of a governmental agency should be provided to support "standby" services in a hospital? What controls do you believe a governmental agency would be justified in establishing over the expenditure of such funds? 7. What are the relative values of an inpatient obstetrical program and a program for ambulatory maternal and child health? 5. HOSPITAL SERVICE AND COMMUNITY NEED The administrator of Ellender Hospital has completed gathering together information which she believes will permit her to answer the following series of questions raised by her board of trustees: 1. Should we contract our hospital service area rather than expand our facilities? 2. Should we continue to accept patients from the town of Lester, regardless of our ultimate decision on the future scope of our hospital's program? 3. Can we increase our obstetrical occupancy percentage, whether or not we contract our service area, expand our facilities, or maintain a status quo? 4. Should we establish our pediatric work on a better basis, considering the rapid growth in pediatric work load? 5. Should we establish separate facilities for the chronic and aged of a somewhat different character from our regular services? 6. Should we erect additional facilities to house the Cordovia Visiting

42

The Needs of Geographical Areas Nurse Association, the local Red Cross Chapter, the Cordovia Friendly Aid Society, and the Veterans' Health Service on hospital grounds? Ellender Hospital began operation in 1911 as a 14-bed hospital under the auspices of a Protestant denominational church group. The property has since been deeded to a voluntary nonprofit corporation. The hospital was last expanded in 1951, when the bed capacity was increased and the ancillary service facilities were improved and expanded. The bed distribution is now 30 medical and surgical, 4 pediatrics, and 4 chronic beds on the first floor; and 22 obstetrical beds on the second floor. It is the administrator's opinion, supported by the viewpoints of highly respected administrators of large nearby hospitals, that the present physical plant will not permit alternative utilization of any second-floor space so long as obstetrical beds continue to occupy the second floor. It is also the consensus that space is not available in the pediatrics area to provide needed beds, segregation by ages, isolation areas, and recreation areas. The administrator gathered data on bed utilization and patient care to aid her study of the board's questions (Table 4). She also collected data on the existing allocation of space to hospital functions (Table 5). Ellender Hospital serves an area within a 15-mile radius of the hospital, containing twelve towns in the eastern third of Middlebury County and one town in the next county to the east. One of the twelve towns is Lester, from which come approximately 20 per cent of Ellender Hospital's patients. All of these towns, except Lester, contributed funds which made possible the forming of the present hospital corporation and construction of the existing physical plant. The board of trustees estimates the communities would contribute $250,000 to a capital-fund drive at this time. Each year the citizens of the majority of the towns contribute to a Table 4. Data on Bed Utilization and Patient Care at Ellender Hospital Item Number of beds * Average daily census * Percentage of beds occupied * Average stay in days Adults and children Newborn Births Operations X-ray examinations Laboratory examinations Outpatients

Two Years Ago

37.0 34.0 91.9 7.1 7.2 6.5 429 1,248 3,755 10,767 2,714

One Year Ago

60.0 41.1 68.5 6.3 6.2 6.5 623 1,820 4,319 15,471 3,063

First 8 Months Present Year

60.0 44.2 73.7t 64 6.4 6.4 421 1,129 3,102 11 701 2,330

* Adults and children only, as distinguished from newborn. t Medical and surgical, chronic, and pediatric, 88 per cent; obstetrical, 47.2 per cent.

43

Decision Making in Hospital Administration Table 5. Distribution of Floor Space among Departments at Ellender Hospital Department Administration Laboratory Radiology Pharmacy Physical therapy * Nursing units Nursery Surgery t

Area (sq.ft.) 2,780 985 985 300 800 8,345 825 2,035

Department Obstetrical delivery Emergency Dietary Housekeeping Mechanical facilities Employee facilities Storage Total

Area (sq.ft.) . 1,550 220 2,335 730 3,120 1,015 2,810 28,835

* Includes occupational therapy, 300 square feet. t Includes recovery room, 350 square feet.

hospital-fund drive to eliminate the usual 10-15 per cent operating deficit. Lester has never supported the hospital's fund-raising efforts, perhaps because the community considers itself more a part of Allerton Hospital's service area. There are no other hospitals in Ellender Hospital's defined service area, but hospitals are located in the cities encircling the area, namely Allerton, Walters, Milton, and Lawrence. The first three towns contain voluntary general-acute hospitals with 97, 166, and 105 beds respectively. Corresponding bed-occupancy percentages are 73, 66, and 65 per cent. Lawrence contains three voluntary general-acute hospitals containing 210, 164, and 182 beds. Corresponding bed-occupancy percentages for these hospitals are 73, 84, and 85 per cent. Ellender Hospital's service area, known as the Cordovia area, contained 44,800 persons in 1954 and 47,500 in 1957. The population is expected to expand to 50,000 by 1960, and to 63,500 by 1970. The United States Bureau of the Census Reports record the growth of population from 1910 through 1950 as increasing from 22,719 in 1910 to 24,919, 26,850, 30,636, and 38,715 in the succeeding four decades. Population growth has occurred partly because of the movement of industry into the area, which is still primarily agricultural. The population increase is also partly due to the rapid expansion of the residential suburbs surrounding the large midwestern metropolitan area thirty-five miles to the east. With the growth in size of the population has come also a growth in the percentage of young and old segments of the population. The proportion of the area's population under fifteen years of age was 12.8 per cent in 1930. This percentage increased to 22.7 in 1940 and to 24 per cent in 1950. Similarly, the percentage of the population over 65 increased from 6.5 in 1930 to 8.5 per cent in 1940 and 9.6 per cent in 1950. Throughout the period of expansion of population numbers, the standard of living has continued to be high. Middlebury County ranks tenth 44

The Needs of Geographical Areas in size among the ten metropolitan counties in the United States with over one million population and ranks fourth in effective buying income per family. During 1957 this income per family was $6051 in the county as compared to the state average of $5499. The area's level of income is thought to be reflected in the fact that 68 per cent of patients admitted to the hospital carry hospital insurance. The area's level of income is also thought to be at least a partial explanation for the utilization of the hospital for 93.6 per cent of the area's births and for 52.3 per cent of its deaths. The area's resident death rate has been calculated as 8.8 deaths per thousand population. The hospital enjoys good public relations with the many and diverse segments of the surrounding populations. Much of the credit for the hospital's reputation for good service rests with the medical staff. The staff is composed of an honorary staff of four doctors, an active staff of fifteen doctors from the communities served by the hospital, and an associate and courtesy staff of fifteen doctors. Five of the courtesy staff members are from Lester and six from other towns. The consulting staff consists of twenty-three specialists, all from the highly regarded medical school in the nearby metropolitan area. Almost all major surgery performed at Ellender Hospital is done by or under the supervision of these specialists. A pathologist from the medical school regularly visits the hospital one day a month and is on call for autopsies and emergencies. A radiologist visits the hospital four times a week. Credit for the hospital's fine reputation also rests on the board of trustees and the administrator for having developed and maintained the strong spirit of cooperation among the various hospital groups. The board has become concerned at the possible bad public relations that might justifiably follow from the high occupancy levels. Some board members, noting the expanding populations in the area and the construction of new schools in the surrounding towns, have asked whether some of the hospital patients should not be receiving care in hospitals constructed by these towns. Other board members have wondered if more of the existing hospital space should be allocated to chronic care so that some patients now receiving care in the area's nursing and old-age homes could be given better care in the hospital. The housing of voluntary agencies in the hospital was first suggested by the voluntary agencies themselves. The voluntary agencies do not believe, however, that they could finance the construction or hospital renovation needed to provide such space. What answers would you give, as the administrator of Ellender Hospital, to the questions raised by the hospital's board of trustees? What factors did you consider when arriving at your decision? What factors did you 45

Decision Making in Hospital Administration consider to be most important? Why? What objectives did you keep in mind -when preparing your answers to the questions asked by the board? COMPLEMENTARY QUESTIONS

1. Do you think the administrator should seek consultation when attempting to answer questions asked by a board of trustees? Why, or why not? What consultation resources are available to the administrator? Which resource would you prefer? Why? 2. Do you think it is a good practice for a hospital to conduct an annual community drive for hospital operating funds? Why, or why not? 3. Do you think any justification exists for a voluntary community hospital to receive tax-fund support for its operation? Why, or why not? 4. How do you think the growth of prepaid hospital insurance coverage will affect a hospital's responsibilities toward the various segments of the population hi the community? 5. What factors do you think should determine when to construct a new hospital, to add a new program, or to expand the hospital's physical faculties? How might these factors be affected by a hospital's size? type of ownership? program?

46

4

The Needs of Selected Population Groups

6. PEDIATRICS CARE You are chairman of a special committee formed to prepare recommendations to the board of trustees of the Children's Hospital and Medical Center, a corporation, on the size and future location of its new hospital. Committee membership has been drawn from the corporation's board of trustees. The committee has been comparing the possibility of constructing the hospital on a separate site with the possibility of physically attaching the new hospital structure to an existing general hospital. The committee has asked the board to hear the committee's conclusions and recommendations on the subject during next month's board meeting. The conclusions will be based on data collected from previous surveys of the community, special studies, advice of hospital administrators concerned, and from discussions with the board of trustees of the voluntary hospital with which the possibility of affiliation has been discussed. The Children's Hospital and Medical Center is a nonprofit corporation created a year ago by the Children's Hospital and the Crippled Children's Society of the eastern city of Franconia. The corporation's purpose is to provide improved hospital services, both inpatient and outpatient, to sick and crippled children of Franconia and the surrounding area. The present board of directors, twenty-two in number, is made up of representatives from each of the two organizations and from the public at large. The Children's Hospital has been operated continuously since 1918 by a voluntary, nonprofit organization. The organization is governed by a board of trustees with nineteen members. Board membership is on a rotating basis with terms staggered in order to preserve continuity of management. The Crippled Children's Society is a voluntary, nonprofit organization, established in 1947 for the purpose of providing outpatient care to needy 47

Decision Making in Hospital Administration crippled children. Care has been provided primarily to children suffering from cerebral palsy, although a limited number of children suffering speech deficiencies from other causes also receive care. The society's board of trustees has seventeen members. Board membership is on a rotating, staggered-term basis. The physical facilities of each of the two corporations are poor and cannot be satisfactorily expanded. It is for these reasons that the joint corporation was formed to pool the individual resources to construct improved physical facilities. A fund-raising organization has estimated that up to one and a half million dollars might be raised for new construction because of the strong community appeal of the pediatric services. The area of service of the Children's Hospital in Franconia has been found to be essentially the county of its location, as 90 to 95 per cent of the hospital admissions are residents of the county. The county, 877 square miles in area, is primarily urban in character with an average population density of approximately 412 persons per square mile. Franconia, the principal city (77 per cent of the county's population), is located fortyfour miles from a larger city which serves as the center for specialized medical care in the western half of the state. Transportation facilities in the area are excellent. The median family income of the area is $3256 per year. There are 420 medical doctors, 42 osteopathic physicians, and 16 board-certified pediatricians in active practice in the area. The population of the area is expected to increase to 475,000 persons in two years and to 915,000 in the next twenty years. At the present time 50.8 per cent of the population is female, 25.8 per cent is under fifteen years of age, and 6.4 per cent between fifteen and nineteen years of age. The area's birth rate last year was 27.9 per thousand population with 99 per cent of the births occurring in hospitals. The area's average annual death rate last year was 8.3 per thousand population, with an infant death rate of 26.1 per thousand live births. Careful studies performed last year indicated that within two years the area's total requirements for inpatient care of children will be 230 pediatric beds and that within the following twenty years the need for such beds will reach 600. Data on existing pediatric beds was also collected by the committee (Table 6). Pediatric outpatient visits last year were found by the committee to be 6689 at the Crippled Children's Society, 24,850 in county clinics, 4130 in general hospital clinics (470 in Hayward Hospital). In addition, 14,305 home visits were made by the visiting nurse services (public health department). Half of the estimated 200 cerebral palsy cases in the area are now receiving medical care. Outpatient service needs are expected to expand 15 per cent during the next two years. The board of the Children's Hospital and Medical Center believes it 48

The Needs of Selected Population Groups Table 6. Utilization of Existing Pediatric Beds Last Year and the First Three Months of the Present Year

Type of Hospital * Children's hospitals Colwell Memorial Hospital Children's Hospital Total General hospitals City-County Hospital Hayward Hospital St. Vincent's Hospital Total Grand Total

No. of Beds

Average Stay per Patient in Days

Average Daily Census

55 36 91

4.7 15.2 9.9

31.5 15.7 47.2

30

16.5 4.7 5.2 8.8 9.3

27.5 16.0 20.4 63.9 111.1

34 30 94 755

* In four additional general hospitals without formally organized pediatric departments, and in one children's hospital without a formally organized pediatric staff, an estimated 20 children per day are receiving pediatric care.

would be justified in constructing a children's hospital completely independent organizationally and physically from any other hospital. Such a hospital, the board reasons, should bring about a concentration of skilled specialists who, by their utilization of highly developed facilities and equipment, could serve exceedingly well the complicated cases requiring such specialty care; offer greater educational opportunities to student nurses; offer younger physicians opportunities for training which will further equip them to practice their specialty; and ultimately advance medical science through research. However, the board also believes that it would be remiss in its trusteeship if it did not at least explore the possibility of affiliating in some manner with an existing general hospital. Study has shown that Hayward Hospital is the only hospital in Franconia with which the board would consider affiliation. Hayward Hospital is a 370-bed, general-acute hospital currently in the process of expanding to 600 general-acute beds. The hospital is owned and operated by a nonprofit, voluntary corporation and is under the guidance of a fifteen-man board of trustees. The Hayward Hospital board's initial response was favorable to the possibility of some kind of affiliation with the Children's Hospital and Medical Center. Space is available to construct a children's hospital physically attached to the Hayward Hospital. The Hayward Hospital board of trustees would like to discuss further the relationship of the two hospital boards if such a construction program were undertaken. Other subjects for discussion would be the administrative relationships between the two hospitals and whether the Children's Hospital would purchase services from Hayward Hospital. The Children's Hospital board believes Hayward Hospital might wish to con49

Decision Making in Hospital Administration sider purchasing services from the Children's Hospital, such as physical rehabilitation services. What recommendations do you think the special committee of the board of trustees of the Children's Hospital and Medical Center Corporation should make relative to the size and location of the new hospital building? What recommendations should be made concerning the relationships to be established if the Children's Hospital building is attached to Hayward Hospital? What factors should be considered when preparing such recommendations? Upon what factors would you place most emphasis? least emphasis? Explain. COMPLEMENTARY QUESTIONS

1. What do you consider to be the advantages and disadvantages of specialized hospitals such as pediatric or maternity hospitals? Would the same advantages and disadvantages be applicable to hospitals providing specialized care for short-term communicable diseases, mental illness, tuberculosis, or chronic diseases? Why, or why not? 2. What minimum conditions do you think would have to exist in a community to justify the development or operation of a specialized hospital? 3. How would a specialized hospital's size, type of ownership, or affiliations with other hospitals affect your comments on the advantages and disadvantages of specialized hospitals? 4. In what respect do you think a children's hospital would differ in layout or equipment from a general-acute hospital? What differences in layout or equipment might you expect to find between a general-acute hospital and a maternity hospital? a communicable-disease hospital? a chronic-disease hospital? 5. What differences in staffing patterns, if any, would you expect to find between a general-acute hospital and specialized hospitals? Why? 6. What differences hi policies and procedures, if any, would you expect to find between a general-acute hospital and specialized hospitals? Why? 7. Do you think the differences should exist which you have noted in answers to the previous questions? Why, or why not? 8. Do you think financing the construction and operation of specialized hospitals is easier or more difficult than the financing of generalacute hospitals? Explain. 7. MATERNAL AND INFANT CARE The board of trustees of the 43-bed Maternity Hospital has scheduled a meeting next week to hear recommendations on the establishment or continuance of certain hospital programs. The recommendations will be

50

The Needs of Selected Population Groups presented by a special committee of which you are chairman. The programs which the committee has studied include a domiciliary program for unwed mothers, a premature-infant program, and a program of medical social service. There are at the present time two institutions in the community providing domiciliary care to unwed mothers, namely the hospital's Maternity Home and a Home for Girls operated by a church group's welfare society. Their present combined capacity is 42 beds, with 18 beds in the Maternity Home. The two institutions accept all applicants at a per diem rate dependent upon the individual applicant's financial resources. Maternity Home occupants may work in the home and the hospital to help pay for their domiciliary care and for their future hospital care. For the past eighteen months the number of occupants in the two maternity homes averaged thirty-five mothers daily. Maternity Hospital has provided domiciliary and hospital care for unwed mothers since the hospital's inception thirty-one years ago. The service has become well established in the minds of many people as a community responsibility of the hospital. The original need for such a service has largely disappeared, however, in the opinion of Community Chest and council officials. They note that the State University Hospital provides similar maternity care for eligible state residents. These officials believe the city should provide such care for city residents eligible to receive maternity care in the 600-bed city hospital. They believe only out-of-state residents and those patients unable to meet the ability to pay admission requirements of the university or city hospitals are hi need of the domiciliary care available at the Maternity Home. It is estimated that approximately 50 per cent of Maternity Home domiciliary occupants fall within the latter classification. The Community Chest and council officials are concerned with this fact as the requests for voluntary funds to finance voluntary agency services to the city and county residents (totaling 416,000) far exceed the two million dollars raised in the annual Community Chest campaigns. However, all concerned realize it would be difficult to reduce the Chest allocation to the Maternity Hospital. Present accounting does not distinguish between the Maternity Hospital and Maternity Home expenses and income, and strong emotional attitudes of some influential community citizens favor the hospital's domiciliary program. The board's committee has decided that other factors to be considered, when determining whether the hospital should continue its domiciliary program, are the future role of the hospital in providing hospital care and the future location of the hospital. The board would like to expand the hospital's present function to include gynecological care in order to develop a more adequate program for postgraduate medical education. The 51

Decision Making in Hospital Administration board also believes the hospital's bed capacity should be expanded to 150 or 200 beds. A "City and County Hospital Survey" now under discussion by all hospital boards in the county recommends the expansion of Maternity Hospital to 150 beds, but as a general hospital with 50 obstetrical, 25 gynecological, and 75 medical and surgical beds. The survey staff has pointed out that from a community viewpoint Maternity Hospital can expand its obstetrical and gynecological services beyond 75 beds only if other hospitals in the city agree to abandon their performance of these services. Two of the four hospitals which the survey has planned for relocation, near a fifth hospital in the center of the city, might be persuaded to give up these services. In such a program, Maternity Hospital would need to expand to 116 obstetrical and 34 gynecological beds. The survey also discussed the relative advantages of alternative sites for the Maternity Hospital, noting that relocation in the city "medical-center" development provided the best opportunity to persuade other hospitals to relinquish their maternity and gynecological care. Such relocation offered a number of advantages: easy access for patients from all sections of the city; economy of operation because of integration with other hospitals and because of a well laid out physical plant; better training programs for nurses, interns, resident physicians, and medical staff; improved opportunity for combined research with other hospitals; immediate availability of specialized ancillary facilities; and probably high quality ancillary services. The survey considered the advantages of remaining in the present location: a saving of capital expenditure because a new site would not have to be purchased and because the existing plant would be utilized; and avoidance of the problems which would arise in the separation of the Hospital from the Maternity Home. It was noted that any expansion of existing facilities would require demolition of the Maternity Home, and that construction of a new Maternity Home in the projected medical center would require a considerable capital outlay. The survey noted further that affiliation with a suburban general hospital, as contrasted to the medical center, would reduce capital investment required for land cost and beds but would increase the unit building costs and limit the opportunity for operating savings. The survey included estimates of the total capital investment requirements under the alternative hospital programs and site locations. These capital requirements were calculated to be $1,630,000 for a 150-bed general hospital at the present site, $1,730,000 for a 150-bed obstetrical and gynecological hospital at the present site, and $2,285,000 for a 150-bed obstetrical and gynecological hospital at the medical center. The survey recommended a united hospital fund drive to finance all future hospital construction in the county. 52

The Needs of Selected Population Groups The board of trustees of Maternity Hospital has also been considering a program of care for premature infants. The board would like to establish a "central premature facility" at Maternity Hospital. The county now lacks any such facility. County pediatricians have recommended that premature infants receive care in special nursery facilities under supervision of specially trained personnel. The hospital survey recommended establishment of a premature-infant facility in the proposed medical center. However, the survey did not specify whether the facility should be placed in the Maternity Hospital, if the hospital is relocated in the center, or in the center's pediatric hospital now being planned at the insistence of the city's pediatricians with the support of influential women's groups. The possibility of relocating Maternity Hospital at the new medical center raises questions about the future scope of the hospital's medical social service program. The program now focuses primarily on service for Maternity Home occupants and other unwed maternity patients in the community. A medical social service program for the medical center is recommended by the survey — one which will serve several hospitals in the center. At present, only three of the city's eight voluntary hospitals are providing any medical social service, with only Maternity Hospital and a poliomyelitis hospital providing such service in an organized way. The board of trustees committee has recognized, after much discussion, a subjective factor that has affected the thinking of all committee members on the future program and location of the hospital. The committee members have asked themselves "just where do we and the other members of the board fit into the future picture if the changes we've been discussing in the hospital's role and location do materialize?" The committee members believe the same question exists in the minds of the other board members and of the administrator and the medical staff members as well. Full and thoughtful discussion by the committee membership has produced certain conclusions and recommendations which the committee feels ready to submit to the other members of the board of trustees. It is to discuss the committee's recommendations that next week's meeting of the board of trustees has been scheduled. What recommendations do you think should be presented on the future program of Maternity Hospital by the special committee of the board of trustees to the remaining membership of the board? What factors do you believe the committee should consider when arriving at its recommendations? Upon what factors would you place the greatest emphasis? Upon what factors would you place least emphasis? Explain. What objectives do you think the committee members should keep in mind, as board of trustee members, when considering the hospital's future program? 53

Decision Making in Hospital Administration COMPLEMENTARY QUESTIONS

1. What do you believe motivates a community to pay for the conduct of a hospital community survey and the development of a program of hospital construction? What action would you take as an administrator to promote such a survey if you felt one was needed in your community? 2. If a program for future hospital development in your community planned for the relocation of your hospital as part of a new medical center, what do you think your reactions would be as the hospital's administrator? 3. If your community's program for future hospital development placed your hospital in a key position, what do you think the effect would be on your relationship to other hospital administrators in the community and your approach to them? on their approach to you? 4. What precautions do you think should be taken, from the tune the idea is originated of developing a community program for future hospital development to the time when the completed program is implemented, to secure the necessary cooperation and coordination of all groups concerned? 5. What different methods can you list of financing the planning of a community program of hospital development? Which would you prefer to see followed? Why? 6. What different methods can you list for financing the implementation of a community program of hospital development? What are the advantages and disadvantages of each? Which would you prefer to see followed? Why? 7. Upon what professional and personal qualifications would you base your evaluation of individuals or organizations being considered for the conduct of the community hospital survey and for preparing a plan of future hospital development? Upon which qualifications would you place most emphasis? Why? Would you prefer the individual or group selected to be from within or outside of the community? Why? 8. INDIGENCY AND COMMUNICABLE DISEASE The board of trustees of Carlton Hospital and the county board of supervisors of Sparkhill County, in which Carlton Hospital is located, have agreed in principle to a plan for the treatment of communicable disease in the county. Under the agreement, patients with communicable diseases needing hospital care would receive such care at Carlton Hospital rather than in the county hospital. Your board has asked you, as their administrator for the past six years, to prepare a statement of the basic provisions which from the hospital board's viewpoint should be included in the formal agreement to be developed with the county board of supervisors. Carlton Hospital is a 275-bed, general-acute institution providing serv54

The Needs of Selected Population Groups ice to the 125,000 persons of Sparkhill County along with Porter and Gorgas hospitals. Porter Hospital is a 250-bed, general-acute hospital and Gorgas Hospital is the county hospital providing 200 beds for chronic cases and communicable disease, particularly all isolation cases. Hospital occupancies averaged 89 per cent, 83 per cent, and 90 per cent last year for Carlton, Porter, and Gorgas hospitals respectively, with the latter comprised primarily of tuberculosis patients. For some time the concentration of nontubercular cases of communicable disease at Gorgas Hospital has been considered unsatisfactory because of (1) the difficulty in maintaining a reasonable ratio of nursing staff to nontubercular contagious disease patients, (2) the inability to satisfy present standards of isolation technique during periods of peak census due to lack of adequate facilities for segregation of various diseases, (3) the difficulty of providing medical staff coverage for the patients at a reasonable price, and (4) the lack of the type of laboratory service required for nontubercular contagious cases. After a very detailed study of the situation the county board of supervisors decided to provide funds for a new 20-bed isolation unit to suit its present needs for nontubercular communicable-disease care. Carlton Hospital, which has just started planning for construction of a new 75-bed wing, has agreed to incorporate this 20-bed isolation unit into the new wing. It was decided by mutual agreement that Carlton Hospital would have full responsibility for planning and equipping these 20 beds and would be reimbursed on the basis of the final cost of construction and equipment. The hospital guaranteed to the county board of supervisors that at all times 20 beds would be available for care of patients with dangerous, nontubercular communicable diseases who were the responsibility of the county, and in return it was agreed that Carlton could use these beds for other purposes when they were not in demand for patients with communicable diseases. The size of the isolation unit was determined by an examination of the actual experience in Gorgas Hospital last year when the average census of nontubercular contagious disease cases was 8.7 and the peak census 20.5. With a 20-bed unit and the same census there will be an average occupancy of 43.5 per cent. The isolation unit provides a bed ratio of 0.6 beds per thousand of the present population. According to state law the county is responsible for payment of the costs of hospital care for the indigent which the state board of health interprets to mean "medically indigent." The present practice is for the county welfare officer to determine what constitutes medical indigency for those individuals with communicable diseases who are admitted to Gorgas Hospital. In practice this has resulted in virtually free care for persons 55

Decision Making in Hospital Administration with dangerous communicable diseases, except for those patients with prepaid health insurance or those who are eligible for assistance from national voluntary organizations providing funds for the care of particular diseases. However, no comment has been made or interest aroused concerning the practice, as the cost of treating communicable-disease patients has not been segregated from the total operating cost of Gorgas Hospital. This total cost was $15.92 per patient day last year as compared to Carlton's figure of $21.34. Carlton Hospital has 145 beds and 30 bassinets in its present building. Its daily census averaged 129 last year with 6802 inpatients. Outpatient admissions numbered 4972. Carlton and Porter hospitals have been providing hospital care to the medically indigent, acutely ill patients of Sparkhill County. The attending staffs of the hospitals have been providing the necessary medical care. The hospitals have been reimbursed by the county at the rate of $12.00 per patient day. The board of trustees believes that reimbursement from the county should be on the basis of Carlton Hospital's per diem costs and is particularly aware of how important the additional revenue would have been when planning the present expansion of the hospital's bed capacity. The county board, on the other hand, believes that the present rate of reimbursement more than repays Carlton Hospital for its "marginal" costs incurred by care of county patients. The county board also believes that the maximum amount of reimbursement should be based on the per diem costs of Gorgas Hospital and that the responsibility for collecting income from county patients in voluntary hospitals should be transferred to the voluntary hospitals. The Porter Hospital board and administration is essentially in agreement with the philosophies expressed by Carlton Hospital representatives but would prefer reimbursement based upon hospital charges for ward care or a continuance of the negotiated rate. What recommendations would you present to Carlton Hospital's board of trustees regarding provisions of a formal agreement between the hospital board and the county board of supervisors regarding the care of county communicable-disease patients? What provisions would you consider most essential for inclusion in such an agreement? What alternatives to the provisions which you recommended did you consider? Why did you reject the alternatives? COMPLEMENTARY QUESTIONS

1. What is your comment on the agreement to add a new 20-bed, communicable-disease unit to Carlton Hospital in conjunction with the Carlton Hospital 75-bed addition? Would you have made such an agreement prior to an agreement as to how patient care in the unit was to be provided and financially supported? Explain. 56

The Needs of Selected Population Groups 2. Do you agree with the principle that communicable-disease patients should receive care in voluntary general hospitals? Why, or why not? Would you apply your conclusion to the care of tuberculosis patients? to mental patients? to "chronic" patients? Why, or why not? Would your conclusions be applicable if public agency hospital beds were available and staffed? Explain. 3. What basic collection policies would you establish relative to the care in voluntary hospitals of the medically indigent patient eligible for assistance from tax funds? Would you establish the same policies relative to patients who are eligible for financial assistance from voluntary health agencies? 4. If a voluntary general hospital is to provide care for communicabledisease patients eligible for tax-fund support, do you think the hospital should set aside a given number of beds for such care? Explain. Should the beds be used exclusively for the communicable-disease patients? What size rooms would you recommend for a 20-bed, communicable-disease unit in a general hospital? Where would you locate it in relation to other nursing units? 5. Do you think communicable-disease patients should be charged for the medical care they receive? Would the fact that the patients are subject to isolation controls affect your conclusion? Explain. What other factors might affect your decision? 6. What do you mean by the word "indigent"? by the words "medically indigent"? by the words "communicable disease"? 7. What additional medical and management hazards must be accepted by a hospital when it accepts known communicable-disease patients for hospital care? What special precautions should the hospital take in the care of such patients? What staffing problems would a 20-bed, communicable-disease unit create in a general hospital? 8. What program can a hospital establish to help prevent the spread of communicable diseases? How might such a program be integrated with that of an official public health agency? a voluntary public health agency? 9. If a voluntary hospital provides care to communicable-disease patients who receive financial support for hospital care from tax agencies or voluntary agencies, how can the agencies assure themselves that reasonable value is being received for the funds spent? 10. Should the medically indigent patient without a family physician be eligible for admission on a non-emergency basis to available voluntary hospital beds? How is a decision made as to the selection of a physician to provide care for such a patient? as to whether or not the patient is eligible for tax-fund support? 11. How would you assure other patients in your hospital, or the people of the community who would contemplate using your hospital in time of 57

Decision Making in Hospital Administration need, that by providing care to communicable-disease patients you are not endangering them? What channels of communication would you use? 12. What additional qualifications, if any, would you establish for personnel assigned to care for patients on an "isolation ward"? What additional compensation, if any, would you provide such employees for providing care to communicable-disease patients? 13. Do you think it wise to accept any funds for bed construction with a condition imposed that requires use of the beds for certain purposes? 14. What safeguards would you establish, in a municipal hospital's relation with the county board of assistance, to insure admission of patients on bases of medical and economic need only? 15. Would you develop an all-inclusive rate for county patients? Why, or why not? If so, would you include expenses for special duty nurses? for special equipment? 16. What adverse effect might admission of contagious-disease patients to your hospital during epidemics have on other patients wanting to come to your hospital? What would you do to counteract any adverse effects? 17. What would you do if a private patient with a contagious disease applies for admission to your hospital and the patient's family doctor is not on your staff? 9. CHRONIC DISEASE CARE Hillsdale Hospital is a 275-bed, general-acute, nonprofit institution located in Bel Air County in the southern part of the United States. The hospital has a well-qualified medical staff organized to provide inpatient care to acutely ill, medically indigent patients, for whose care the hospital is reimbursed by the county. The basis for the reimbursement is a negotiated rate. The rate is lower than the hospital's average costs, but is estimated as a dollar per day higher than the hospital's marginal costs for providing care for acute illnesses. The county board of health has recently approached you, as the administrator of Hillsdale Hospital for the past seven years, with a proposal that the hospital provide care to chronic patients at a rate of two dollars per day less than that for acute patients. You agreed to present the subject for your board's consideration. Preliminary discussions with the board have provided support for serious thought concerning the proposal. The board recognizes the community's need for additional hospital beds of all kinds, particularly for chronic patients. The board believes that sufficient funds can be raised in the community to expand the Hillsdale Hospital bed capacity to 375 beds. Planning is under way for the expansion program to begin next year. The board believes it is advisable at this time to determine what the hospital's program for chronic illness should be during the foreseeable future. Such program definition would guide the planning for 58

The Needs of Selected Population Groups the bed-expansion program. If it is decided that a program of chronic care should be established, it might justify the use of federal funds available for the construction of chronic and rehabilitation facilities. The hospital has a low priority for federal funds to construct acute hospital-bed facilities. The board would like you to present your recommendations at its next monthly meeting as to whether Hillsdale Hospital has a responsibility to develop a chronic-disease program and, if so, your recommendations as to the content of the program and its relationship to other programs for chronic illness in the community. Bel Air County is facing a serious problem as a result of the rapidly increasing number of people disabled by long-term illness. The area has experienced a tremendous growth since the turn of the century. A considerable portion of this growth is attributable to the influx of elderly people who have selected this area of year-round moderate climate as a place in which to spend their years of retirement. The population at the present time is 406,175. In two years it is estimated that the total population of the area will increase another 6.8 per cent. During the following eight years an increase of 33 per cent is expected. The anticipated increase in the succeeding ten years is approximately 30 per cent, resulting in total population of 750,000. Eight other voluntary hospitals and one 300-bed county hospital have a combined capacity of 1600 beds for general-acute patients and 150 beds for long-term patients (100 in the county hospital) of Bel Air County. Average occupancies range from 78 to 91 per cent, the latter in the county hospital. Hillsdale Hospital's average occupancy last year was 87 per cent. You estimate that at least 10 per cent of your occupancy actually represents chronic rather than acute patients because of the lack of chronic-disease facilities to which the chronic patients without need for acute hospital care may be transferred. The hospital does not operate an outpatient department program. There have been rapid increases in the incidence of chronic diseases in the Bel Air area and in the number of people requiring long-term medical and nursing care as a result of them. There has been a marked decrease in the ability of families to care for invalids in their own homes as the average size of families has decreased and the number of single persons and aging couples has increased. No corresponding increase has occurred in the number of hospitals, infirmaries, and nursing- or rest-home facilities for care of chronic patients. Bel Air is, and probably will continue to be, a Mecca for persons who are ready to retire from active life because of advanced age and failing health. Bel Air County's population over 45 years of age is already 43.4 per cent of the county's total population. The average invalid rate per thousand persons in Bel Air County is 16.9, ranging from 3.2 per thousand under 15 years, and 10.6 per thousand under 55 years, to 107.3 per thousand population over 85 years of age. 59

Decision Making in Hospital Administration It is estimated that 1255 beds are currently available in the area for the care of chronic patients, and since 1105 of these beds are located in nursing homes, rest homes, and homes for the aged, they are considered primarily custodial in character. The number of invalids receiving care in the individual homes is considerably above the capacity of the homes as established by state licensing requirements. The state standards have not been applied rigorously, however, because of the shortage of nursing-home beds. The homes have been approved provisionally. Most of the nursing homes and rest homes in the area are not hospital affiliated and most do not have sufficient nursing service or physician consultation. Patients needing acute medical attention must be transferred to hospitals to receive adequate care. Chronic-disease patients are loath to go into a home from the hospital for fear of being unable to re-enter the hospital in case of future need. The county public health program for the chronically ill operates the county hospital. The county health department is aware of the need for an expansion of its preventive and curative program for the chronically ill, and the board of health and county officials have been considering whether to construct new county facilities for the curative care of chronic patients or to purchase such care from voluntary hospitals. They decided to initiate this discussion of the subject with voluntary hospitals by making a proposal for contractual arrangements with Hillsdale Hospital. The board of health feels that such an arrangement would be preferred by patients, as most of the hospital's patients object to admission to an institution known as a place for the care of the sick poor. The board also favors providing care to the chronically ill as quickly as possible in order to relieve the burden upon welfare expenditures without the delay which would be incurred by new construction. There is no rehabilitation or treatment program provided in Bel Air County for the convalescent or chronic patient other than acute hospital care, which includes some physical therapy, and an occupational workshop program administered and financially supported by a voluntary health agency. Hillsdale Hospital has no program for either occupational or physical therapy. It is estimated that approximately one half to two thirds of the invalids of the county can receive custodial care from their families. Experience has demonstrated that chronic patients prefer to stay in their homes if possible. However, continuous attention by the families is not considered feasible in many cases because of the necessity for active family members to earn their livelihood outside of the home. The families are not considered able to hire specialized care in most instances. The community has no equipment set aside for rental or loan, and the only personnel organized to provide curative care in the home are a few private-duty nurses 60

The Needs of Selected Population Groups and those personnel provided by the county hospital for its home-care programs. The medical staff of Hillsdale Hospital are of the opinion that they should individually and as a group provide care for the chronically ill. They emphasize the fact that 70 per cent of the county's deaths last year were due to diseases of the heart and circulatory system, cancer, and kidney disorders. The staff believe that the chronic patient is in need of and can benefit from medical-care programs. The value of such patients as teaching cases for interns, residents, and student nurses is recognized by the staff to a limited degree. More importance, however, is attached to the possibility of conducting a research program which will provide data for professional and general public programs of education. Although cognizant of the need for providing care for chronically ill patients, the staff are divided as to where such a program should be conducted. Many of the staff believe that the county hospital should conduct such a program for all chronic patients, including the physicians' private patients, and that the voluntary hospital should be reserved for the care of acutely ill patients. Other physicians, however, state that it is unfair to the taxpayer that patients able to pay for medical care should receive such care in a tax-supported institution. These physicians feel that if the health department wishes to provide assistance to the chronic patient, it can conduct a detection program for chronic diseases but leave diagnosis and treatment to the private physician. Members of your board are also divided on the question of where chronic-disease facilities should be located. Some believe they should be located in voluntary hospitals, to the extent that voluntary hospitals have unoccupied beds and the staff to provide care. Other board members believe that if tax funds are to be allocated for chronic cases, these patients should receive care in a public institution as "most of them are indigents anyway." These members believe that the chronic patients should be accepted as a public responsibility, much as mental or tuberculosis patients are, and as such should be provided free care in public institutions. The county officials are inclined toward the same point of view. They question whether they can justify to the public the expenditure of tax funds for the purchase of care from voluntary institutions wherein they would have very little control. County officials also question whether emphasis should not be placed on preventive as well as curative measures when planning the allocation of tax funds. For example, a program for improved housing has been strongly urged by several citizens' groups. The county officials wonder if by improving the housing, particularly of the indigent or the medically indigent, much chronic disease would be prevented. They also question the value of providing medical care to persons who "can't be cured anyway." The state department of welfare has 61

Decision Making in Hospital Administration been considering a program for the construction and operation of nursing and convalescent homes throughout the state, jointly financed by state and county tax funds. The county officials are inclined to favor such a program. The county officials also support the health department's proposed plans to act as a coordinating agency for the optimum use of available chronic facilities in the community. There has been little medical research in the chronic illness field. Many of the cases are termed "hopeless" and turned over to custodial institutions for palliative care. The present method has been to treat the disability and not the disease. Your board of trustees is generally optimistic about the ability of the hospital and official agencies to finance the medical-care programs which the board wishes to establish. The area has recently been shown to be rich in natural resources, expected to provide income to state, county, and voluntary agencies needed to expand existing programs. It is with this background of information that you begin preparing your recommendations concerning the hospital's future participation in the community's program for the care of chronic diseases. What recommendations would you present to your board of trustees as to whether or not Hillsdale Hospital has a responsibility to develop a chronic-disease program? If you think Hillsdale Hospital should develop a chronic-disease program, what do you think the content of the program should be? What factors did you consider to be most important when arriving at your decision? COMPLEMENTARY QUESTIONS

1. What do you think a general-acute hospital should establish as an objective of its chronic-disease program? How might the objective vary with a hospital's size? location? other hospital program? type of ownership? affiliations? 2. How do you define "chronic disease"? "nursing home"? "convalescent home"? "home for the aged"? "acute disease"? "custodial care"? "rehabilitation"? 3. Five years from now what proportion of the cost of medical care for chronic patients do you think will be covered by third-party insurance? by tax funds? How does that differ from the proportion now covered by each? 4. Do you believe the cost of providing care to chronic-disease patients is lower, the same as, or higher than the cost of providing care to patients with acute diseases? Why? How do you think the two costs will compare five years from now? 5. What is the comparison between costs of constructing and equipping chronic facilities and acute hospital facilities? 62

The Needs of Selected Population Groups 6. What kind of functions do you believe should be performed as part of the chronic-disease programs of voluntary health agencies other than hospitals? of official health agencies other than hospitals? What relationships do you think should exist between the chronic-disease programs of hospitals and of other voluntary health agencies? of official health agencies? 7. How might an outpatient department program be related to a hospital's chronic-disease program? 8. Do you believe that a state should establish a hospital registration or licensing program for nursing and convalescent homes when there is a shortage of beds provided by such homes? Explain. If a state licensing law is established for nursing and convalescent homes and there is a shortage of such beds, do you think the homes which do not meet the standards of the licensing statute should be refused a license? Why, or why not? 9. Do you believe a county health department should operate both a preventive and curative program for the chronically ill? Why, or why not? 10. If acutely ill patients were in need of your hospital beds which were occupied by chronic-disease patients medically eligible to leave the hospital but who had not left because they preferred not to do so, what action would you take? Would your decision depend in part on whether the chronic-disease patient were paying his complete bill? Explain. 11. Of what value do you believe chronic-disease patients can be to a teaching program? Do you think they will ever be as valuable to a teaching program as patients with acute diseases? 12. Do you believe the indigent chronically ill patient should receive care in a tax-supported hospital while the non-indigent chronic patient receives care in a voluntary institution? Explain. How would you attempt to determine which patients are indigent and which non-indigent? 13. If indigent patients were eligible for admission to any hospital, how would you prevent one hospital from being placed in the position of providing care mostly to chronic patients? Would it be undesirable for one or two hospitals of a community to provide care almost exclusively to chronic patients? Would your answer vary with a hospital's size? program? type of ownership? affiliations? If indigent patients were eligible for patient care in any hospital, what advantages, if any, would be gained by a governmental agency's owning and operating a hospital for such patients? 14. If a hospital had a continuing and stable census of chronic patients, what economies, if any, could be made in providing care to such patients as compared with providing care to patients with acute diseases? How might your conclusions vary with a hospital's size? with the number of chronic-disease patients? with the kind of chronic disease involved? What other factors might affect the economy with which care can be provided for chronic-disease patients? 63

Decision Making in Hospital Administration 15. Do you think the construction and operation of nursing- or convalescent-home facilities should receive higher or lower priority than construction and operation of facilities for the hospital care of chronic-disease patients? What factors did you consider in arriving at your conclusion? What medical-care services do you think should be provided patients in nursing or convalescent homes? What resources do you think could be used to provide such services? 16. What should be the objective of a hospital rehabilitation program, in your opinion? How might the objective vary with a hospital's size? with program? with type of ownership? with hospital affiliations? What alternative objectives did you consider? Why did you reject the other alternatives? 17. What rehabilitation programs do you think should be established in a community in addition to the hospital's rehabilitation program? Who should sponsor and operate such programs? 10. CARE OF THE MENTALLY ILL

Scoville City is located in the center of a midwestern agricultural state. It has 60,000 inhabitants and 20,000 additional persons living within a radius of twenty-five miles. A group of private citizens in Scoville City, interested in promoting a better mental health program, have organized the Mental Health Society. They have been aware of and are concerned with the lack of facilities for detection, prevention, and treatment of mental disease and have given freely of their time and money to establish and promote a good program. They have established voluntary, district clinics for dissemination of information on mental health but have been seriously hampered in their program because of the lack of beds for the treatment of acute mentally ill patients. The three hospitals in the city have been cooperative in providing space for clinics and assisting in any manner possible. The city hospital has made available 10 beds for the care of the acute mentally ill patients. However, the delay in transfer of the chronically ill mental patients to the state asylum has reduced the 10-bed capacity to five because the state asylum has a long waiting list. The city hospital has a total of 250 beds. Outside the ward so assigned, no other area in the hospital is suitable for psychiatric care. Pressures on other services are so great that even releasing these 10 beds was a major concession. The lack of beds has caused ten courtcommitted mental patients to be housed in the city jail, without benefit of psychiatric care. St. Alexis, a 150-bed general-acute hospital, has provided space for psychiatric day clinics. Doctors Hospital, a 20-bed unit, has also provided clinic space for 64

The Needs of Selected Population Groups psychiatric purposes and would like to expand its clinic activity if additional personnel and financial support could be found. The Mental Health Society is faced with the problem of stimulating interest in construction of facilities for the prevention of mental illness or care of the mentally ill, or in providing accommodations in the present hospitals through reassignment of services or building additions. The society has discussed the situation with the two psychiatrists currently practicing in the city. These doctors know of two more psychiatrists who are willing to come to Scoville City as soon as facilities for psychiatric treatment are made available. These two Scoville City doctors have been tentatively considering the purchase of a 30-room home, on an estate three •miles from the city, for use as a psychiatric center. Insufficient funds have prevented them from making the purchase. The doctors have stated their desire to work with acutely ill mental patients and to study new methods of reducing the numbers of mentally ill. They candidly indicate their desire for a substantial income. The Mental Health Society has approached the city and requested that it construct a 100-bed unit for the care of the acute mentally ill. The board of health is of the opinion that the state should assume complete responsibility for the care of mental patients, pointing out that the state now has exclusive legal responsibility for the care of such patients after they have been hospitalized for one month. Inasmuch as the state hospital is only fifty miles away, the board believes such cases should be hospitalized there. They prefer this to providing any facilities in the city because in their opinion the state hospital is specialized for the care of such cases, and has claimed tax resources which are necessary for the support of mental cases. The city board of health did, however, indicate its desire to begin experimenting with development of a mental health program. The board of trustees of St. Alexis Hospital is willing to add a psychiatric unit to the hospital if it can get support for their building program from the community. They also want assurance that the city would reimburse them at cost for the care of the city indigent cases as it does for other indigent cases. The board also offered to sell general-acute hospital services to the Mental Health Society if the society should construct and operate a psychiatric unit on the St. Alexis Hospital property. The Doctors Hospital board of trustees has shown no desire to add beds for psychiatric care. The board is in favor of the city's supplying facilities for the acute mentally ill, saying it is a city responsibility to protect its citizens from dangerous psychiatric cases. The board thinks the city hospital should accept paying as well as indigent mental patients — as it now does for all other type of cases. The Mental Health Society is in a position to provide program-operating funds from the proceeds of their annual campaign for funds and to influ65

Decision Making in Hospital Administration ence public opinion to support a campaign for capital funds which bring in an estimated $300,000. The society has asked you, as the society's executive secretary, to define what you believe the relative responsibilities of the state, city, and voluntary agencies should be for the care of the mentally ill person; to recommend what the role of each agency should be in working toward the solution of Scoville City's problems, and to recommend what action the Mental Health Society should take to perform its function in the care of the mentally ill. What comments and recommendations do you think the Mental Health Society's executive secretary should present to the society's board on the situation described in this case? COMPLEMENTARY QUESTIONS

1. What programs should be given emphasis in endeavoring to reduce the incidence and prevalence of mental illness in our population? What are the alternative programs which public hospitals can perform? Are the programs mutually exclusive? Does the performance of one program preclude the performance of another? Does it require it? Does any program lend itself to performance by a voluntary hospital more than to performance by a municipal hospital? 2. Do you think there are any circumstances when a patient who can afford to pay for acute mental care should be admitted to a city hospital? a state hospital? What are these circumstances, if any? 3. How "large" should a hospital be to provide psychiatric services to patients? What special physical facilities and personnel resources should be provided? 4. What do you anticipate the functions of the voluntary hospital will be in a mental health program five years from now? ten years from now? 5. Upon which do you believe greater emphasis should be placed when developing and operating a mental health program — quantity or quality? Explain. 6. What mental health programs lend themselves to performance in a voluntary hospital? Are the programs made more or less feasible by the size of the hospital? How would you install and operate such programs in your own hospital? 7. How do you anticipate that hospital and other mental health programs will be financed five years from now? ten years from now? Would you ^advocate the same method for financing programs for the prevention or care of other kinds of illness? Why, or why not? Should third-party payers be expected to provide benefits covering the care of mental illness? 8. What general changes might be anticipated in the emphasis of training programs for psychiatric personnel five years from now? ten years from now? 66

The Needs of Selected Population Groups 11. CARE OF THE MEDICALLY INDIGENT Carmel City, located in the central midwest, is a municipality of 88,000 inhabitants. The maintenance shops and roundhouses for two leading railroads are located here. Several small canning factories offer seasonal employment. The city is located in the center of a beet and potato section of the state. An unusual number of Negroes and Mexicans have migrated into the area for employment in the fields, factories, and with the railroads. There are two hospitals in the city. St. Jude's Hospital is owned and operated by the Daughters of Charity of St. Vincent de Paul, and Koster Hospital is operated by a nonprofit corporation. The board of directors of Koster Hospital is composed of one member from each of the eleven leading Protestant churches in the city. The majority of the population, about 60 per cent, are Protestant. A committee of interested and influential citizens has been formed to bring to the attention of the mayor and city council the lack of hospital facilities and the lack of adequate reimbursement by the city for voluntary hospital care provided city patients. The citizens note that state law requires the city to assume as its responsibility the medical care of medically indigent persons. As director of Koster Hospital, you have accepted the invitation to serve on this committee, along with the superintendent of St. Jude's. The citizens' committee wants more hospital facilities and is not particularly concerned about where they will be located. The hospital boards are willing to expand their hospitals' capacities with the aid of public subscriptions and Hill-Burton funds if the city will assure them cost of indigent care. The mayor, a Protestant, believes the hospital costs are too high and comments on his personal experiences with hospital bills to support his contention. He thinks the city should build its own hospital and operate it for the care of city patients only. Eight years ago, an ordinance was passed authorizing the city to issue bonds to the amount of $500,000 to build a new hospital when the need arose. There was no acute shortage to warrant building at that time. The city council's committee on public health and welfare announces that it will hold an informal public hearing on the city's future role in providing medical care to the medically indigent and asks the citizens' committee to establish a point of view and submit definite recommendations at that time. The citizens' committee asks you to be chairman of a subcommittee which will prepare recommendations for review by the citizens' committee before presentation to council's committee. Your committee is now gathering the information necessary to prepare its report. St. Jude's Hospital is a general-acute hospital with a capacity of 100 beds. Originally 25 of these beds were used as infirmary beds for aged and ill nuns. In the last two years there has been such a demand for acute hos67

Decision Making in Hospital Administration pital beds that the aged sisters have been sent to a rest home at the Mother House. St. Jude's Hospital has been operating at a 95 per cent capacity for the last year. The physical plant is about twenty-five years old and no additions have been made in that time. The Order has considered building a 50-bed addition and improving the physical facilities for auxiliary services. The sisters are hesitant to begin construction because of the unfavorable financial picture. To date the diocese has covered the yearly deficit for care of the medically indigent, but it does not feel it can both aid in new hospital construction and continue this policy. Five per cent of St. Jude's Hospital's patient days last year were indigent and part-pay. Fifty per cent of these days were city cases for whose care the city paid ten dollars per day. The cost per patient per day was $24.30, including depreciation. Ten per cent of the indigent load was complete charity. This group included transient workers such as Mexicans in the beet fields and Negro migrants for whose hospitalization their responsible governments would not pay. The remaining 40 per cent were part-pay cases. The average amount collected per part-pay case was seven dollars per day. The operating expenses of St. Jude's totaled $624,150 last year while the operating income during the year was $606,477. Koster Hospital shares the pressure brought on St. Jude's administration by the medical staff and the public for increased and improved bed care and ancillary facilities. The board of Koster Hospital has become gravely concerned. The medical staff have complained that they cannot give adequate medical care in such crowded conditions and that the ancillary services are insufficient in quantity. The board is willing to expand the hospital, realizing that it must expand if the patient is to receive good care. The board does not feel the hospital can support financially an expanded program of care unless the city pays for care of the indigent. The yearly deficit has been met each year by a Community Chest campaign. This fund drive has had diffiiculty in meeting the deficit in the last two years. Koster Hospital is a general hospital with a bed capacity of 185; it has had an occupancy of 105 per cent. Patient days, excluding newborn, totaled 57,488 for the last year. Ten per cent of these days were for the care of indigent or part-pay cases. Of this 10 per cent, 50 per cent of the patient days were for city cases, 15 per cent for "free care" cases, and 35 per cent for part-pay cases. The city paid ten dollars a day per patient and the part-pay cases averaged seven dollars per patient per day. Collection on accounts receivable, other than indigent cases, has been very good. The cost of care at the hospital was $26.10 per patient day, including depreciation. It has been the policy of the hospital to keep private and semiprivate rates as close to cost as circumstances permit. 68

The Needs of Selected Population Groups The operating expenses at Koster Hospital totaled $1,149,760 last year. The operating income was $1,077,614 for the year. The hospital authorities do not wish to raise rates any higher to aid in making up the deficit as rates have been increased 25 per cent in the last two years. Nearly 50 per cent of each hospital's medical staff holds a staff appointment in the other hospital. Each hospital conducts intern and resident teaching programs, which are approved only provisionally due to inadequate ancillary facilities. The medical staffs are interested in the teaching programs and are anxious for them to continue. They would prefer to continue the programs in the existing voluntary hospitals because of the assistance which they receive from the interns and residents in care of the private patients. The medical staffs express reservations concerning the construction and operation of a city hospital, saying, "It just takes us one step closer to complete government control of the practice of medicine." Some members of the hospital boards are concerned that if a city institution is constructed and operated, the wage levels of scarce administrative and technical hospital personnel will rise. Other board members, however, are untroubled by such competition, saying, "People don't care to work in city hospitals anyway." These board members do object, however, to patients "having to go to a city hospital." The Carmel City paper has discussed the question and noted that servicing the city's bonded debt amounts to approximately 15 per cent of its yearly revenue. It was also noted that the policy of the council appeared to be no increase in taxes during the remaining two years of its administration and that little increase was anticipated in the general-fund budget (eight and a half million dollars) for the city unless general economic conditions showed improvement. An annual surplus of $100,000 is accumulating at present tax rates, but the council is keeping careful watch over the mayor's expenditures, perhaps in anticipation of a tax cut before the next election. What do you believe the viewpoint of the citizens' committee should be concerning the responsibility of the city for medical care of its medically indigent? concerning the manner in which the city should carry out its defined responsibilities? COMPLEMENTARY QUESTIONS

1. As administrator of a municipal general-acute and chronic-disease hospital, what would you recommend as the admission policy of that hospital? If the city contracted with voluntary hospitals for the care of patients how might the admission policy be modified? 2. What procedures would you establish for the admission of citysupported patients in contract voluntary hospitals to prevent unjustified 69

Decision Making in Hospital Administration billing of the city for care rendered? How would you assure yourself, and the city council, that the money paid to voluntary hospitals was for value received? 3. At what point would you consider it preferable for a voluntary hospital to be paid local tax dollars for the care of indigent patients rather than to provide such care in a city-owned and operated hospital? 4. If you are an administrator of a voluntary hospital in a city which has a city hospital, are you justified in accepting indigent inpatients or outpatients at your hospital? If so, under what circumstances? 5. What effect does the operation of a city hospital have on the research and teaching programs of the voluntary hospitals? 6. As administrator of general-acute city hospital, what action would you take to prevent your hospital from becoming full of chronic patients? 7. Should patients with third-party insurance be accepted in a city hospital? Why, or why not? If you believe such patients should be admitted, should the hospital endeavor to collect the insurance benefits? 8. If city patronage has hindered good administration of the city hospital, lowered personnel morale, and threatened good patient care, what action would you take as administrator of the city hospital? 9. What motivations of councilmen would you consider when planning an approach to secure tax funds for care of the medically indigent in a voluntary hospital? 10. Should a contractual arrangement between voluntary hospitals and the city for the payment of care rendered to the medically indigent be made on a per diem basis, per patient basis, or a per bed basis? What are the relative advantages of each? Should the amount of payment be based on a negotiated rate for each hospital? a negotiated rate for all contract hospitals? the "cost" of each hospital, the average "cost" for all contract hospitals? the "cost" of providing care in a city hospital of like size in another community? 11. Should depreciation be included in "cost"? Should teaching or research expenses be so included? Why, or why not? 12. How might the organization of a voluntary hospital's medical staff be affected by the organization and operation of a city hospital in your city? 13. Under what conditions would you not admit a Negro to your city hospital when such a person is in need of medical care? 14. What comment do you make on the medical staff's statement that construction and operation of a city hospital "just takes us one step closer to complete government control of the practice of medicine"? 15. Why do some people believe that hospital personnel prefer not to work in a city hospital? How might objections to working in a city hospital be overcome?

70

The Needs of Selected Population Groups 16. What attention do you believe the citizens' committee should give to the mayor's personal experience with hospital bills? 12. VETERANS HOSPITAL CARE

"The state and local medical societies of this state regard the construction of a 500-bed Veterans Administration hospital in the City of Corlington as justified only if it is needed in accordance with the standards approved by the House of Delegates of the American Medical Association." The president of the Corlington County Medical Society, Dr. Cocheran, continued by noting the House of Delegate's official statement that "the provision of medical care and hospital benefits for veterans in Veterans Administration and other federal hospitals . . . should be limited (a) to veterans with peace-time or war-time service whose disabilities or diseases are service incurred or aggravated, and (b) within the limits of existing facilities, to veterans with war-time service suffering from tuberculosis or psychiatric or neurological disorders of non-service-connected origin, who are unable to defray the expenses of necessary hospitalization." Dr. Cocheran's comments concerning a veterans hospital in the City of Corlington were directed toward Mr. Frasier, administrator of the Longwood Hospital in Corlington and a member of the Corlington Hospital Area Planning Committee. Mr. Frasier was gathering information to help the planning committee determine its position on a proposal to construct a veterans hospital in Corlington. A discussion of the subject is scheduled between the congressman from the district in which Corlington is located and the chairman of the planning committee, Mr. Wortman. Other participants in the meeting are to be Mr. Frasier, Dr. Cocheran, and the state chairman of the American Legion. The scheduled meeting was proposed by the planning committee after newspaper announcements told of efforts made by the American Legion to have a veterans hospital constructed in Corlington. The planning committee is also aware of the American Legion's attempts to influence the area's congressmen to ask for approval of the project, in Washington, D.C. The planning committee believes it is directly concerned with the proposed project. The committee has recently sponsored a survey of the area's hospital needs and the subsequent development of a program for the area's future expansion of hospital facilities. The program for expansion, planned just four months ago, had not contemplated construction of a veterans hospital. However, the planning committee now feels it should consider whether the program should be modified to include such construction, and to transmit its views to the congressman. The planning committee believes the present program for future hospital expansion to be based upon a thorough survey of the Corlington area's needs and resources. The trading area of the City of Corlington, 71

Decision Making in Hospital Administration studied during the survey, includes twenty counties covering 750 square miles of three southwestern states. The area's population totals 756,000, having increased 75 per cent in the last fifty years. Sixty-five per cent of the area's population is located within the seventy-five square miles of the City of Corlington. The area's population is expected to increase 8 per cent during the next two years, and up to a total of 988,000 persons during the next twenty years. The moderate climate accounts in part for the anticipated population increase and also for the high proportion of persons over forty-five years of age—10 per cent higher than the national average. The need for chronic hospital beds reflects the age distribution of the population. Between 3800 and 4000 invalids are expected to require some degree of medical care annually, within the next two years, with an estimated 50 per cent requiring hospital care or nursing care. A favorable economic climate also favors population growth. Stable and diversified industry, commerce, and agriculture establish a firm basis for an expanding economy, which has provided the area an additional annual payroll of 125 million dollars in the last five years. Corlington is rapidly becoming an important distribution and transportation center. The present annual net effective per capita buying power is $300 over the national average, which accounts in part for strong recreational and school programs, and the 65 per cent coverage of the population by Blue Cross contracts. Over 1100 physicians provide medical care for the area's population, including the 12.1 per cent non-white population. A high proportion of the physicians are qualified specialists, providing care in the area's twentytwo hospitals. Of the 5333 beds in the area, 2935 are located in eleven general-acute hospitals, 280 in two allied special hospitals, and 1012 are chronic beds located primarily in two chronic hospitals. Beds for mental patients total 506 in three specialized hospitals and general-acute hospitals. The area's 600 tuberculosis beds are located in a separate hospital. Non-hospital convalescent beds in nursing homes number 1250. Voluntary, nonprofit hospital beds number 82 per cent of the total, with 89.3 per cent of the normal bed capacity occupied on the average. The average length of stay is 8.6 days. The governmentally operated beds are occupied to 63.2 per cent of normal capacity with an average length of stay of 12.5 days. A medical school located in the area provides professional care to teaching cases in a 300-bed voluntary hospital, now scheduled for expansion and in the 850-bed municipal hospital of Corlington, for which no expansion is planned. The planning committee's capital expansion program recommends the purchase of bed space in voluntary hospitals with local tax funds if changing economic conditions should make more persons eligible for care in 72

The Needs of Selected Population Groups the municipal hospital than its present bed capacity can accommodate. Corlington hospitals admit 85 per cent of their patients from the two counties in which Corlington is located. Fourteen per cent of the remaining admissions come from Corlington's trading area. The capital expansion program of the area's hospital facilities, based upon an evaluation of the area's present and future bed needs, proposes the addition of 1580 beds within the next two years and an increase of 4396 beds during the following twenty years. Of these totals, 803 acute beds, 613 chronic beds, 40 tuberculosis beds, and 124 acute nervous and mental beds are recommended for construction during the two-year period, while 2342 acute beds, 1415 chronic beds, 100 tuberculosis beds, and 539 acute nervous and mental beds are planned for construction during the Mowing twenty years. In addition, it is proposed that 260 custodial mental beds be constructed in the next two years and 1965 additional during the following twenty years. The twenty-two-year expansion program would cost twenty million dollars if financed at current prices. It has been contemplated that the equivalent of three million dollars would be provided from tax resources primarily through state construction of beds for the care of chronic or mental patients. The city could contribute by purchasing land for additional construction. Little assistance is foreseen from Hill-Burton funds, as the area ranks thirtieth in the state's list of areas to receive such assistance. It has been planned, therefore, to raise seventeen million dollars by private fund drives during the next twenty-two years to finance the area's hospital expansion program. The American Legion notes that the construction of a 500-bed general hospital for veterans in Corlington would help solve the problem of financing the area's hospital expansion program. The 200 beds which would be reserved for patients from the Corlington trading area would be allocated for medical, surgical, acute mental, tuberculosis, or chronic patients, in accordance with changing needs. The American Legion has pointed out to the congressman that some veterans are unable to meet the financial or geographic admission requirements of the municipal hospital and yet cannot afford care in nongovernmental hospitals. The veterans hospital would provide care to such persons. The Legion also noted that the number of veterans and their average age are increasing, with both factors indicating a need for the construction of veterans hospital beds. The American Legion states that a survey has shown that few veterans have signed false statements indicating inability to purchase hospital care elsewhere in order to qualify for admission to veterans hospitals. The American Legion has pointed to the high quality of care provided in veterans hospitals where faculty members from the medical school are on the staff. The ability to recruit nurses and other essential hospital per73

Decision Making in Hospital Administration sonnel for veterans hospitals has also been noted and attributed to the. new physical facilities and the higher wage levels provided by veterans hospitals as compared with most other hospitals. The actual number of veterans who would endeavor to utilize the veterans hospital is unknown. Dr. Cocheran of the county medical society stated to Mr. Frasier that if the American Medical Association House of Delegates admission criteria to veterans hospitals were adopted, sufficient bed space would be made available in an existing veterans hospital located near a medical center a hundred miles from Corlington to answer the bed needs of the area's eligible veterans. He believes such an approach should be followed before building new Veterans Administration hospital beds. Most hospital administrators contacted by Mr. Frasier express little concern over Veterans Administration hospital care of mental, tuberculosis, or chronic-disease patients if the patients are unable to purchase such care in voluntary hospitals. However, they believe the Veterans Administration should send veterans needing general-acute care to voluntary hospitals to the extenfsuch facilities are available. The administrators, of course, believe the Veterans Administration should pay for such care. They note that the community's program for capital expansion provides for the care of the veterans as part of the total population. A business man also has observed that if veterans hospitals were not constructed additional federal tax dollars would be available for allocation to the HillBurton program. With this background in mind, Mr. Frasier begins preparation of his recommendations as to the point of view which should be expressed by the Corlington Hospital Area Planning Committee regarding a new Veterans Administration hospital in Corlington. What point of view do you think should be adopted by the Corlington Hospital Planning Committee regarding the proposed construction of a Veterans Administration hospital in Corlington? Upon what factors did you place most emphasis in arriving at your decision? What other factors did you consider, and why did you not place greater emphasis on them? COMPLEMENTARY QUESTIONS

1. What concepts do you believe to be basic to consideration of the situation described in this case? 2. What do you believe is meant by the phrase "need for hospital care"? by the phrase "need for additional hospital facilities"? How are such "needs" determined? 3. If a veterans hospital is constructed in Corlington, what coordination do you think should be developed between its program and that of the other hospitals in the area? 4. What are your comments on requiring veterans requesting admis74

The Needs of Selected Population Groups sion to veterans hospitals, for treatment of non-service-connected illness, to list their assets, income, and liabilities for the purpose of determining their priority for admission? 5. How do you believe the area's congressman is likely to weigh the viewpoint of the Corlington Hospital Area Planning Committee as compared to that of the American Legion? What channels of communication do you think the planning committee might use to publicize its point of view? 6. If the prognosis for economic growth or stability in the area were poor, would your conclusions vary as to whether the veterans hospital should be approved for construction? How might your conclusions vary if the population forecast indicated a status quo or a decrease? How might your conclusions vary if the community survey showed an average occupancy of ward beds of 60 per cent? 7. What justification can you cite for and against the proposal to allot 300 of the 500 beds planned for the veterans hospital to patients from outside of the Corlington trading area? 8. What requirements do you believe the Veterans Administration would be justified in asking voluntary hospitals to meet, if the voluntary hospitals wish to provide care to veterans which will be paid for by the Veterans Administration? 9. Would your conclusions regarding the expansion of the Veterans Administration hospital and medical-care programs accurately express your views on the expansion of other federal hospital and medical-care programs? Why, or why not? 10. On what basis would you justify federal tax support of hospital and medical-care programs rather than state tax support of such programs, and vice versa? 11. What reasons would you give in support of purchase of health insurance by the federal government to cover care in voluntary hospitals for individuals now eligible for care in government hospitals? 12. Do you think the quality of hospital care in federal hospitals would tend to be higher or lower than in voluntary hospitals, and why? Do you think that more or less hospital care is apt to be obtained for a given expenditure of funds in voluntary hospitals as compared to federal hospitals, and why? What factors did you consider when developing your conclusions?

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///. ESTABLISHING A NEW GENERAL HOSPITAL

"Who shall decide when doctors disagree?" Pope "We ought to weigh well what we can only once decide." Syrus

5

Preliminary Promotion and Development

13. PROMOTION

Among its other distinctions, the Ohio town of Linden (population 2500) was the birthplace of Charlotte Austin who became the wife of Wallace Callan, president of Callan and Myers, one of the largest publishing houses in the United States. Although she left Linden to attend school and returned only for occasional visits during her life, Mrs. Callan retained an affection for the town and after her death it was learned that in her will she had left $250,000 to help build a hospital for the people of Linden. One of the provisions in the will required, however, the matching of this fund by a like amount raised in a community-wide drive in Linden. Until the provisions of Mrs. Callan's will became known in Linden, no particular thought had been given to a hospital. Linden is fifteen miles from the town of Oakton which has a 70-bed hospital and a district office of the state health department. Linden is thirty miles from any other hospital facilities. Known to the doctors of Linden, but not generally, is the fact that the nearest hospital is not approved by the Joint Commission on Accreditation and is considered a second-rate institution. Two other hospitals which are located thirty miles — a 45-minute drive — from Linden are approved by the Joint Commission on Accreditation. These hospitals are highly regarded and have always been willing to accept Linden patients on referral from Linden's physicians. Linden itself is a trade center for a prosperous agricultural area of approximately 3500 population, the area being somewhat irregular in shape but extending roughly fifteen to twenty miles from Linden in all directions. In addition to the business places, agencies, etc., directly related to supplying this agricultural area, Linden has some light industry, notably a novelty manufacturing company, and a canning company, all three local family-owned concerns. Linden's industry as well as its surrounding farm 79

Decision Making in Hospital Administration area has enjoyed marked prosperity and financial security since the depression, due in part to a very high level of employment. Socially, Linden is divided into rather distinct groups, that keep to themselves in practically all matters except business relations. By far the largest of these is the farm group. The farmers around Linden are predominantly Methodist, staunch supporters of their local Grange chapter, and generally a close-knit group. The employees or laboring class of Linden, on the other hand, are predominantly Catholic, being largely secondgeneration Italian stock. The third distinct group is composed of the more well-to-do professional people and the families that own the town's industries. Of course, there is some overlapping, and the groups are neither entirely exclusive nor entirely noncooperative. Linden is simply too small. But the lines are definitely drawn and civic activity to the extent that it exists has been invariably carried on by one of the groups alone. Tom Darrell, president of the Darrell Canning Company, was perhaps the best known and most popular of Linden's citizens. He had initiated personnel practices in his plant, such as a profit-sharing plan, which made him well liked by not only his own employees but by the townspeople in general. His buying policies were such that the farmers around Linden considered it a pleasure, as well as profitable, to grow for and sell to his company. Darrell, because of a family friendship with the Austin family, was the person notified of Mrs. Callan's will, or that portion of it relating to a hospital for Linden. His first step after receiving the notification was to approach each of the seven doctors in Linden about the need for a hospital in Linden. To his surprise, all of them agreed that Linden and its surrounding area could well use a small hospital, as the only hospital to which they presently had staff privileges was in Oakton. The younger doctors were especially enthusiastic about the possibility of having a hospital closer to home and which, with their assistance, they thought might be less expensive to their patients than the hospitals they currently used. The older practitioners had carried on for most of their careers without a hospital and so were not too enthusiastic, but said they would cooperate in any way possible. At this point Darrell decided to take the initiative in the matter of promoting a hospital, and called on several of the active people in the various groups in the area, with the purpose in mind of forming a committee to sponsor a hospital in Linden. The persons approached were receptive to the idea, partly because of the prestige value of such a committee, partly because of a sincere interest in Linden civic affairs, but probably mostly because Tom Darrell was promoting it. As the Grange master put it, "If Tom Darrell is back of this project, it's bound to be good, no matter who else is on the committee." 80

Preliminary Promotion and Development The first meeting of the committee found the Methodist minister, the Catholic priest, the part-time mayor of Linden who ran a garage in town, the Grange master, the two other factory owners, the business agent of the sash and door workers' union, the physician who acted as part-time health officer, and Tom Darrell in attendance. It was the first time such a representative group had ever been assembled in Linden. Darrell had been careful to include people from all of the major groups in town, but knew that the committee by its very nature would take a lot of diplomatic handling to keep it functioning and to achieve action. He brought out at this first meeting that Linden needed a hospital (he had been sold on the idea by his talks with the doctors), that through the generous legacy of Mrs. Charlotte Callan such a hospital was a distinct possibility, that a lot of work by each member of the committee was necessary to bring a hospital into existence, and that each member was to be congratulated for the interest shown thus far. By unanimous approval, Darrell was elected chairman of the committee. Nothing else was done at this meeting. In the week following, Darrell read a couple of books on hospital planning; and on the basis of information therein and from further conversations with Linden's doctors, he decided to recommend to the committee at its next meeting a size of fifty beds for the new hospital. Each doctor had estimated the average number of his patients expected to be hospitalized, and also had given Darrell an estimate as to the proper size of the new hospital; from these Darrell had made his estimate. A building contractor wrote in answer to a request from Darrell that cost of construction would approximate fifteen or sixteen thousand dollars a bed. Darrell at the next committee meeting made his recommendations outlining his proposal for action on the new hospital. They were (1) select a site, (2) employ an architect, and (3) get a fund-raising campaign under way. The committee accepted his estimate of size of the proposed hospital and his proposal for action. Accordingly committees were appointed, Darrell serving on each, to select a site and an architect. The part-time health officer said he remembered reading something about a state plan to distribute federal funds for hospital construction but had paid little attention to it because Linden didn't appear to fit into the plan very well. Darrell said he would look into it. Progress on the hospital was quite satisfactory. A site was selected and an architect consulted. The architect submitted a few preliminary sketches, and although he had never designed a hospital before, the sketches looked all right to Darrell. Arrangements were made for Darrell to bring a contract along for the architect's signature the next time he visited the architect's city, which would be in a few days. The fund raising was carried on by the committee as a whole, rather than by a smaller committee for that specific purpose. Each member was 81

Decision Making in Hospital Administration in charge of his own part of the public, and quotas for each were agreed to by the committee members after a few heated conferences and considerable persuasion by Darrell. As it happened, the drive got off to a good start, with each member using campaign methods best suited to his own group. Darrell realized, however, that there was some feeling among the townspeople and the farm groups that each was carrying more than its share of the burden. He did much of the campaigning himself, and largely through his own efforts, $75,000 came in during the first three days of the campaign. He set up a separate account in his name at the bank where he placed the funds for safe keeping. A feeling of shock and deep personal loss was felt throughout Linden and the surrounding area when the news came by telephone from a town nearby that Tom Darrell had been killed in an automobile accident. Darrell was driving to the architect's city to sign the contract with him, on the morning of the fourth day of the fund campaign, when the accident happened. Ten days later the committee met to select a new chairman to replace Darrell. No one in the group enjoyed the respect or friendship of the others to the degree that Darrell had, nor possessed his leadership and organizing ability. Nor had any of the group kept in close touch with all aspects of the project. "Tom had taken care of everything." The suggestion was made that one of the clergymen take over the job but this fell through because all knew that neither of the two clergymen would support the other, nor support a fund campaign for a hospital even remotely suspected of being controlled by the other's church. The committee members were unanimous in their opinion that the fund drive had "fallen through" with the notice of Tom DarreU's death. Darrell had been the only one to meet the architect; no one else knew the man. Nor did anyone know whether fifty beds was the right size, nor whether the cost estimates were accurate. Two months ago you had begun work in the Darrell Canning Company, in charge of its canning division. You had expressed interest in the talk of a new hospital, having had some experience in a fund drive for a new hospital in the town of your previous employment. Tom Darrell had said, "Sit in on the committee meetings, if you care to, and we'll put you to work." You had attended two committee meetings and had been invited to attend this last meeting. You have made no comments on the committee's previous actions, but now that the committee members appear unable to agree upon a future course, you decide to present your views as to the steps the committee should take. How would you advise the hospital sponsoring committee to proceed in the promotion of hospital facilities for the people of Linden? 82

Preliminary Promotion and Development // Darrell had not died, would you have expressed yourself as you did to the committee after his death? If not, what advice might you have given to the committee? If you had not been Darrell's employee, would you have felt free to express yourself more forceably? Why? COMPLEMENTARY QUESTIONS

1. What program would you endeavor to establish as administrator of a small hospital located in Linden? How might you modify your program if the hospital were located twenty miles from a large medical center? if located near a state district health office? 2. From what groups is support needed for the development of a new hospital? What kind of support is desired from each group? How would you attempt to secure such support? 3. What conditions would cause you to select a hospital consultant? What functions would you ask him to perform in advising on the promotion of a new hospital? How would you proceed to select the consultant? What standards would you apply when evaluating his ability to help you? What fee would you expect to pay him for his services? Would you prefer to obtain your consultation services from an architect who has extensive experience in hospital construction? Why, or why not? What effect, if any, does hospital size or program have on your use of a hospital consultant? 4. What functions would you ask an architect to perform for you? How would you proceed to select an architect? What standards would you apply when evaluating his ability to help you? What fee would you expect to pay him for his services? What effect, if any, would hospital size or program have on your answers to the above questions? How would you answer the above questions when considering the services of a general contractor? 5. Which step in the promotion of a new hospital do you consider the most important? Why? 6. At which stage in the development of a new hospital do you believe the hospital's director should be hired? Why? Would your answer be affected by the size of the hospital? by the contemplated hospital program? 7. In planning a new hospital would you provide space for local health department personnel and clinics? for doctors' office space? for voluntary health agencies, e.g., tuberculosis and health associations? Why, or why not? 8. Would you hire a professional fund-raising organization to obtain contributions from your community for a hospital or would you set up your own organization to perform the job? What do you consider to be the advantages and disadvantages of each method? 9. What policies would you establish concerning the conduct of a 83

Decision Making in Hospital Administration fund-raising campaign? Would these policies vary depending upon whether your own organization were conducting the campaign? How and why? What would you attempt to "sell" during the campaign? How might your "sales pitch" be affected by the presence of another hospital in your area which is not participating in the campaign? What source of funds would you expect to be the most lucrative? the least lucrative? 10. How do you expect the amount of tax funds allocated to hospital construction to vary five years from now? ten years from now? Do you expect increased governmental controls on the use of tax funds for construction and operation of hospitals? If so, what do you expect the nature of the controls to be? 11. What changes in emphasis on the purpose of new hospital construction do you foresee five years from now? ten years from now? 12. Do you consider it preferable to have a man like Darrell initiate and carry through action to promote a hospital in a community or take the chance that citizens in a community like Linden might otherwise get together and promote a community hospital in a more deliberate manner? 14. BUILDING CONSULTATION You have been administrator of the Kirkwood Hospital for five years. Kirkwood Hospital is a 110-bed, general-acute institution located in a metropolitan area of 50,000. Jordon Hospital, a 75-bed railroad hospital, is also located here. In addition to these two facilities the Pieper Hospital is under construction and will begin operation in a year and a half. It will have 100 general-acute beds. The community is rapidly growing. Construction of atomic energy plants and hydroelectric dams along the river has begun, and the population in the area is expected to double in the next ten years. The board of Kirkwood Hospital wishes to modernize and expand, primarily to meet the competition of the new Pieper Hospital. It is anticipated that additional hospital facilities will be needed to care for the influx of transient construction workers. The construction companies building the new projects in the area do not plan to construct hospital facilities for their employees. Mr. Carl Daly, president of the board, felt it wise to procure "outside" assistance in examining Kirkwood Hospital's present and future place in the community. The board members agreed, and collected sufficient funds from their own resources and from their friends to finance a study by a hospital consultant. A survey was made of the community's existing health resources, its plans for additional health facilities, and the existing and anticipated needs of the area. The survey recommendations stated that Kirkwood Hospital should modernize certain of its existing facilities, add 100 84

Preliminary Promotion and Development new beds for specified categories, and expand or replace existing ancillary facilities. The survey further recommended that construction be planned and begun as soon as funds became available. The survey recommendations were accepted by the board. In the ensuing year the board and the administrator developed public understanding of the program. A fund-raising organization was engaged. Sufficient funds were solicited which, when added to the Hill-Burton funds allocated by the state, totaled 5 per cent more than the amount the consultant's report had estimated as needed. The board has been looking ahead for the past two months as to how to proceed, once the necessary funds became available, with further planning and carrying out of the actual construction of the new hospital facilities. Mr. Daly has asked that the agenda of the next board meeting schedule sufficient time for discussion of the subject so that a board decision on future action can be reached. He asked you, as Kirkwood Hospital's administrator, to assist the board by digesting the accumulated information on available consultative resources and to prepare recommendations as to which of the resources the board should use. He suggested that you investigate the possible use of other architects or other consultants if you feel it desirable to do so. You know that Mr. Daly and other members of the board consider the work of your previous consultant very satisfactory and worth the fee paid him. You also know that the fee of 1 per cent of the total contract price, quoted by the consultant for further consultation, is considered to be high by the board. The board views the existing 5 per cent margin of available funds over estimated expenditures as too narrow a safety factor, and they therefore tend to look favorably toward the 6 to 7 per cent fee for combined architect-consultant services quoted by a nationally known hospital architect-consultant. As one board member said, "We've heard that the architect is good, and while we might expect our previous consultant's firm to provide satisfactory service, would it be any better? After all, we'd be paying twice, in effect, for the same consultation assistance." Another board member expressed a different viewpoint, however, when he spoke favorably of the fee quoted by a second hospital consultant. He added, "This fellow quoted us the lowest fee we have received and may very well have the best experience. Don't forget the thirty-two years' experience he had in his large teaching hospital before entering the consultant field, including many years of supervising his hospital's extensive building program." Two other architects are also being considered by the board. One is a well-known firm of hospital architects, which provides no hospital consulting service, and the other is a local architect. The latter is a young man who has never designed a hospital, but who has built several schools and 85

Decision Making in Hospital Administration industrial plants with results that are considered highly favorable by those who have hired his services. Some thought has been given by the board, and by you, to your carrying on the work of the consultant because of your experience as an assistant administrator at the 250-bed hospital where you were located a year ago, before moving to Kirkwood Hospital. You had spent a major portion of your last year at that hospital working with an architect and consultant in planning and implementing the construction of a 150-bed addition and the expansion of ancillary facilities. As part of this possibility was the thought that you might at least purchase the Group II and III equipment for the hospital. You do not have a good stores keeper at the moment but have your eye on the stores keeper hired by Pieper Hospital and hope to obtain him in the near future. You feel the need of a man of his caliber as Kirkwood Hospital has never had a good purchasing system or stores control. The most recent consultation resource to be considered is the Hospital Section of the State Health Department, the administering agency of the state's federal aid programs for hospitals. The state authorities offered their assistance, saying that as they had to approve the project eventually it would be preferable for them to do the original planning. They noted that their knowledge of state and local legislation affecting hospital construction and operation, as well as their experience with the public officials administering the legislative provisions, would be most helpful to the board of trustees. The Hospital Section authorities pointed out their experience in extensive hospital construction, gained from having reviewed the plans of all hospitals constructed or expanded throughout the state during the past several years. The authorities added that their consultation was provided free of charge as another service of the State Health Department to the health agencies and people of the state. Kirkwood Hospital is located on a level plot of land quadrangular in shape, measuring approximately 366 feet by 161 feet by 376 feet by 265 feet. A city park borders the hospital property on the north and is separated from it by a flood wall. The Thames River, approximately 800 feet north and east of the hospital, had been a continuous menace during the flood season before construction of the flood wall. The main hospital building was constructed ten years ago. Built of poured concrete with steel reinforcement and finished with a brick facing, it is fire resistant. The building was not constructed to take additional floors beyond the present three, and has no basement. Other buildings on the hospital property are the nurses' home, the polio unit, the boiler house, and the maintenance shop. The nurses' home is connected to the hospital building, but is separated from it by a fire wall. A three-story building, not fire resistant, and beyond 86

Preliminary Promotion and Development repair, it has just been condemned and will be torn down within the next year. There are twenty-four hospital personnel housed in the building at the present time. The polio unit, a two-story building, is used for clinic reception, physical therapy, cancer clinic, and blood bank and, in addition, houses eight polio patients on the second floor. This building, not fire resistant, is connected to the main hospital by an enclosed ramp. Fire doors separate the two buildings. Though built in 1917, the building is in good condition, has been well maintained, and was remodeled three years ago at a cost of $30,000. The boiler house is a one-story detached building constructed of brick, built at the same time as the polio unit. The building is in good condition and has been well maintained. The maintenance shop, constructed of cement blocks with a wooden roof, is attached to the boiler house and was built in 1950. The shop is in very good condition and has been well maintained. What consultant and /or architectural services would you recommend that the board of directors of Kirkwood Hospital hire to assist in the completion of the expansion program planned by the hospital? Why? What resources would you recommend that the board use to help arrive at a decision? What factors did you consider when arriving at your decision? Upon what factors did you place most emphasis? COMPLEMENTARY QUESTIONS

1. How can a board of trustees become aware of the consultative and architectural services available to them? What resources are available to guide an evaluation of consultants and architects? 2. In what order are the major steps taken that are needed to transform a statement of hospital needs into a completed physical facility ready for occupancy and use? 3. Would you include participation by the medical staff in the selection of architectural or consultative services? Why, or why not? If the medical staff is to participate, what should be the scope of their participation? 4. Do you think the administrator of Kirkwood Hospital should or should not endeavor to hire the Pieper Hospital stores keeper? Explain. 5. What effect does a hospital's size have on your evaluation of the need for a hospital consultant or an architect? Is the need affected by the contemplated hospital program? by its ownership? 6. What would be the objective of your hiring a hospital consultant? a hospital architect? What is a "hospital consultant"? a "hospital architect"? 7. What are the relationships of the hospital consultant to the architect? Are the relationships altered if the architect is a hospital architect? What 87

Decision Making in Hospital Administration is the relationship of each to the hospital board? to the general contractor? to the administrator? 8. What bases are used for financing the services of the consultant? the architect? What are the advantages and disadvantages of each? What is the general relationship of the amount of the fee for the consultant or architect to the amount of the contract regarding which they are providing their services? In what manner might the amount of fee be negotiated? 9. What are the general building layouts used in hospital construction? What factors should be considered in the development of a building layout? How might building layout be affected by the size of the hospital? the hospital program? by hospital climate? the physical surroundings? 10. When planning the physical layout and facilities of a given department in the hospital, what main considerations should be kept in mind? Is one consideration given priority over the others in planning or are they interrelated? If interrelated, how does this affect the planning process? 15. OWNERSHIP From a speech delivered to the Rotary Club of Franklin, Minnesota, by one of the city's doctors sprang the idea that the club should investigate the hospital needs of Franklin. The object was to ascertain whether serious thought should be given to construction of a hospital to serve Franklin and its trade area, as suggested by the speaker. A committee was appointed, an investigation was made, and the report of the committee indicated that the club could well consider the possibility of such a hospital. Twelve physicians practice medicine in Spring County, of which Franklin is the county seat and trade center. Five of these work together as a group and operate the 36-bed Hoffman Hospital on the second floor of a downtown building in Franklin. Of the remainder, most have privileges in Carey Hospital, Carey being eighteen miles east of Franklin, and two have major surgical privileges in one of the Carey hospitals. According to the survey made by the Minnesota Health Department, Hoffman Hospital cannot be expanded, and in fact is classified as non-acceptable because of non-fireproof construction, lack of adequate fire escapes, and its secondfloor location. In the town of Lakeville, twenty miles to the south of Franklin on the southern line of Spring County, a voluntary 10-bed maternity hospital is operated by a nurse and used by two of Spring County's doctors who have no other hospital connections. Ten miles northwest of Franklin, a general-acute hospital is maintained by the Division of Indian Health of the United States Public Health Service. This hospital of 47 beds provides care only to Indians from four northern Minnesota reservations, the southernmost of which lies partly in 88

Preliminary Promotion and Development Spring County. Medical and surgical service is provided these patients by doctors from the Hoffman Hospital, under contract with the Division of Indian Health. The superintendent of the reservation hospital told the committee, however, that inasmuch as the existing structure is hi need of replacement within the next few years, strong consideration would be given to contracting for care of reservation Indians in a new Franklin hospital, should such be constructed. Analysis of hospital records showed that approximately 30 per cent of admissions were from the reservation in which the hospital is located, and of these it was not known how many came from Spring County. All of the Spring County doctors interviewed by the committee members, with the exception of the Hoffman Hospital staff, expressed enthusiasm for a new and open staff hospital in Spring County. They say their patients have thought a hospital of "their own" would be preferable to going to Carey for medical care. The Hoffman Hospital group reserved their approval of the idea, expressing some uncertainty about then: status on the staff of such a hospital, especially if they closed the Hoffman Hospital. The committee corresponded with the Minnesota Health Department about the hospital bed needs of Franklin, as determined by the state survey made under Public Law 725. Here they found that 60 general-acute hospital beds were listed as needed by Franklin and its trading area. Since the existing 36 beds in Hoffman Hospital were classified as non-acceptable, their plan showed no existing acceptable hospital facilities. The committee reported these facts to the Rotary Club, as well as its observation that a very considerable interest had been shown in its survey by not only the medical profession but by civic groups, businessmen, and almost everyone that heard of the survey. As a result of this preliminary work and of the county-wide interest shown, the Rotary Club appointed you and two other of its members to form with other interested people in the county a Spring County Hospital Committee. The hospital committee was to explore further the question of the need of a hospital for Spring County and methods of meeting this need. This committee was to be temporary and to disband as soon as a more formal organization could be formed. In the course of time, this committee of eleven people sponsored a professional community survey, with funds which were raised in two days in a door-to-door residential campaign of Franklin. The community survey largely supported the statement in the state hospital plan that 50-60 beds were needed by the Franklin trading area. The survey also indicated that the community should be able to support such a hospital at least during the current period of prosperity. The survey reported that the hospital probably could be staffed, although with difficulty in some professional categories, particularly regular nurses. Plans were begun by the committee 89

Decision Making in Hospital Administration on the basis of the survey to organize and construct a 50-bed hospital to serve Spring County. The question of a controlling body for the new hospital was one to which the hospital committee first gave considerable thought. The committee asked you to be chairman of a five-man subcommittee which would prepare recommendations on the make-up of the controlling body for presentation to the entire committee at its next meeting, now two weeks away. Control by a group which is representative of all elements of the population to be served is the primary objective of the committee. One of the first possibilities considered by your subcommittee was control by the Spring County board of commissioners either directly or through a hospital board. This board of commissioners, elected biennially, has never been of the "political machine" type. The board has been a conscientious group, over the years, doing its best to give Spring County citizens all the services expected and authorized, at the lowest possible cost to taxpayers. As a matter of fact, one of the commissioners has suggested to the committee that probably the easiest way to raise money for construction of a new hospital would be a bond issue which would, he thought, be approved by an overwhelming majority if submitted to the voters. Of course, he said, the hospital must be county-owned and operated if it were built with county bond issue proceeds. If such were the case the commissioners would appoint an advisory council to supervise the hospital and make recommendations to the board of commissioners. Since one third, or seven thousand, of the people of Spring County live in Franklin, the group considered a joint city-county control with each unit of government sharing in control and financing. Features of this type of control would be very familiar to the people of the county. Taxes are available to Franklin which are not available to the county, and could provide additional financial stability to the operation of the hospital. One of the most diligent and interested members of the Spring County Hospital Committee is the pastor of the Franklin Lutheran Church. He has expressed the opinion that his congregation is also vitally interested in the possibility of a new hospital and that the national Lutheran body, of which his church is a part, owns and operates general-acute hospitals throughout the United States. He has not committed himself or his church but gives the impression that his church would be willing to at least consider with interest the prospect of financing, owning, and operating the new hospital. Spring County and Franklin are almost completely Protestant (93 per cent). No single denominational group, however, can claim more than one third of the community's church members. Three companies employ 80 per cent of all employed persons in Franklin. All three are processors of wood, one being a match company, one an insulation manufacturing company, and the largest a locally owned paper 90

Preliminary Promotion and Development mill. The combined annual payroll of these three concerns amounted to over eight million dollars last year, and the insulation company has an expansion program under way with expectations of increasing its output by one third. The remainder of Spring County, excluding Franklin, is agricultural and consists in large part of small dairy farms supplying the Carey area. During the winter months considerable cutting of second grade, low quality wood for the Franklin factories is done. Officials of the three companies in Franklin, as well as other businessmen throughout Spring County, are aware of the part they will be expected to play in financing the construction and perhaps to some extent the operation of a new hospital. One of these businessmen expressed the opinion that the manufacturing and commercial interests in town would contribute much more willingly to a hospital building fund if the hospital were controlled by a nonsectarian, nonprofit corporation rather than a church or governmental organization. However, he said, the hospital came first and he personally would contribute no matter who controlled it, as long as it served any patient needing care. What recommendations would you make to the Spring County Hospital Committee as chairman of the subcommittee to investigate forms of hospital ownership and to prepare a recommendation of different patterns of hospital ownership for the Spring County Hospital? What are the factors upon which you would place greatest importance when arriving at your decision and preparing your recommendations? What do you consider to be the advantages and disadvantages of the alternative forms of ownership proposed for the hospital? Under what conditions would you consider each of the alternative forms of ownership preferable to all others which you considered? COMPLEMENTARY QUESTIONS

1. To what degree might you expect the individuals or groups who finance hospital construction or operation to control hospital policy? hospital administration? How might the degree of control vary with the identity of the financing group? By what means might individuals or groups financing hospital construction or operation exercise control of hospital policy or operation? 2. How do you define "hospital ownership"? 3. Which form of hospital ownership do you expect will be most prevalent five years from now? ten years from now? Why? What form of hospital ownership would you like to find most prevalent five years or ten years from now? Why? 4. What effect do you anticipate a growth of voluntary prepayment in91

Decision Making in Hospital Administration surance plans will have on hospital ownership? and control? What effect would an increased allocation of tax-fund dollars to provide medical care have on hospital ownership? on control? Which of the two effects do you think will have the most influence in the future? 5. Do you think it appropriate for a Rotary Club to take initiative in the promotion of a new hospital? Explain. 6. What do you think should be the relationship of the Spring County Hospital Committee to the Rotary Club? 7. If the physicians of Hoffman Hospital actually opposed the construction of a new hospital, how would it affect your actions and recommendations as chairman of the subcommittee? 8. Do you think it a good policy for a governmental agency to contract for medical care from a voluntary agency rather than provide its own care? Why? 9. Does any one form of ownership and control lend more support to a hospital's teaching or research program than another? Why, or why not? 10. What are you attempting to secure for the hospital when developing its form of ownership and control? What function should the owners of a hospital perform? 16. CAPITAL FINANCING Officials of the public and voluntary organizations of Townsend and the surrounding area have formed a committee, of which you are chairman, to review and comment upon a "Plan of Hospital Care for the Townsend Area." The committee was formed in response to a request from the Townsend Mining Company's officers who wanted to learn of the community's opinion concerning the construction of a hospital in the area. The "Plan of Hospital Care for the Townsend Area," upon which the committee is to comment, was prepared by a professional hospital survey organization hired by the mining company to prepare the report. The report summarizes the survey team's analyses of many factors which affect the hospital-bed requirements of the Townsend area. The survey team's conclusions concerning the bed requirements are found in Table?. The survey team has also concluded that a population of the size and Table 7. Number and Type of Hospital Beds Required in the Townsend Area

Year

GeneralAcute

Chronic

1957 1960 1965 1975

40 55 75 90

12 16 21 25

92

Nervous and Mental 7

9

12 15

Total 59 80 108 30

Preliminary Promotion and Development character found in the Townsend area would need hospital outpatient service only to supplement their primary ambulatory care resource, the doctor's office. Other supplemental outpatient care is provided by the industrial health unit at the Townsend Mining Company's plant site. The survey team anticipated that a hospital outpatient service in the area would provide emergency surgical treatments, especially for accident cases, diagnostic X-ray and laboratory services, and perhaps some treatment services such as physical therapy. At the present time there are no hospitals operating within the Townsend area (2100 square miles), controlled by the Townsend Mining Company. The closest hospital is approximately twenty-nine miles from the village of Townsend. This unit is supplying some care to residents of Townsend (450 persons) and vicinity but its facilities are inadequate and present an extreme fire hazard. A local controversy prevents improvement of these facilities. Most Townsend-area residents receive needed hospital care in the hospitals serving a city of 156,000 population, located sixtyseven miles from Townsend. The road to this city is well surfaced and is the only good road that winds its way through the ruggedly beautiful terrain of this northwestern state. The Townsend area itself is sparsely populated, approximately 1.7 persons per square mile. Most of the settlement is in small communities scattered throughout the area. Rigorous winters at times make travel difficult and occasionally, in some places, almost impossible. On the other hand, the area enjoys a fine summer climate which, together with its natural assets of mountain lakes and streams, has made it a popular summer vacation area for eighteen to twenty thousand tourists each year. Lumbering, fishing, and hunting provide most of the area's income at the present time, although the mining company expects to begin extensive expansion of its mining operations in the area during the next few years. The area's net effective buying income per capita last year was $1418. The median family income in the area was approximately $3000 per year, at the time of the last census. Table 8. Actual and Estimated Population of the Townsend Area

Year

Actual Population

Year

Estimated Population

1900 1910 1920 1930 1940 1950 1955

1,209 2,050 2,422 3,045 3,687 3,811 7,000

1960 1965 1970 1975 1980 1985 1990

12,300 16,500 18,000 19,500 21,00 22,500 24,000

93

Decision Making in Hospital Administration The survey group included in its report a tabulation of actual and estimated population in the area (Table 8). The survey group concluded that analyses of certain population characteristics would be fruitless as the current population will be a minor percentage of the total population within a few years. These characteristics include age and racial distribution of the population and birth and death rates. At present there are two physicians in practice hi the area. One is employed by the company constructing the Townsend Mining Company's new plant. He provides care to company employees and also does some private practice. The other physician does very little work now because of chronic illness. The survey team's report outlined three main courses of action that could be followed to provide for Townsend area's hospital needs. They are (1) construct no hospital facilities within the area and rely entirely on hospitals in nearby or adjoining areas to provide all hospital care; (2) construct only limited hospital facilities (to handle emergencies) within the area and rely on hospitals in other areas to supply most of the hospital care needed; and (3) construct within the area all hospital facilities needed for uncomplicated general care. The third alternative is the course of action which the study team recommended. The possibility of constructing space for doctors' offices in the hospital also was suggested. The survey team's estimated costs of construction considered the possibility of a need to expand the hospital soon after its initial construction. Accordingly, estimated costs include an allowance for providing extra service facilities at the time of initial construction. The estimated cost to construct 50 hospital beds was $935,000, including allowances for fees, and including $245,000 for the additions to the service departments necessary to accommodate an ultimate 115-bed capacity. Cost of equipment was estimated at $105,000. Cost to construct a doctor's office unit was estimated at $25,000. Estimated costs of an alternative program were prepared, including fees and equipment. The alternative estimate was $102,000 for a local 10-bed emergency unit and $488,000 for a 40-bed addition to some hospital outside the area, to provide hospital service to area residents. The survey team has estimated that the occupancy of a newly constructed 50-bed hospital would vary from 36 to 62 per cent of capacity during the first year with a total cost of operation of $ 170,000. It has been calculated that to meet this total expense, average income per patient day would have to be approximately $18.65, a figure well in line with income rates of other comparable hospitals in the state. A loss of $16,000 during the first six months would be expected. The survey team anticipates that during the second year of operation the average occupancy would be 70 94

Preliminary Promotion and Development per cent. Total operating expenses for that year have been estimated as increasing to $225,000. The survey team's cost estimates make no provision for the cost of depreciation since such a practice is not followed by other hospitals in the vicinity at the present time. The local governments in the vicinity will not permit the inclusion of depreciation costs when establishing rates which they will pay hospitals for the care of indigent patients. Inclusion of a proper depreciation allowance in the budget of the new hospital would increase total expense by approximately $25,000 per year. The Townsend Mining Company officials have asked your community advisory committee on hospital planning whether a professional fundraising organization should be hired to procure needed capital and operating funds for the proposed hospital. The company officials explained that the fund-raising organization receives a fee of 5 to 10 per cent of the amount collected for organizing and directing the fund-raising campaign. Actual solicitation, they explained, would remain the responsibility and under the control of the citizens of the area. Two or three members of the advisory committee expressed their immediate reaction that certainly the local citizens could raise the needed funds from their neighbors, whom they know so well, with less expense than would be incurred by hiring a professional fund-raising organization. The committee's discussion of the subject raised a number of questions, however, as to just what steps would have to be taken to establish a fund-raising organization and to develop and execute a successful campaign. The committee members realized that answers to these questions would have to be found after agreement is reached on a "Plan of Hospital Care for the Townsend area." What recommendations do you think your committee should make concerning the report entitled "A Plan of Hospital Care for the Townsend Area"? Why? What recommendations do you think the committee should make concerning the amount of funds which should be raised to support a program for hospital development in the Townsend area? What steps should be taken by the citizens of the area to organize a fund-raising campaign? to develop a successful campaign? Upon which of the factors considered by you when answering the above questions did you place most emphasis? Why? COMPLEMENTARY QUESTIONS

1. What possible courses of action can be taken if estimates of the amount of capital funds which can be raised for the construction of hospital facilities are less than the estimated cost of the construction program which the community believes it needs? What course of action would you prefer to see taken under the circumstances? Why? 2. What possible courses of action can be taken if the amount of capital 95

Decision Making in Hospital Administration funds actually raised for construction of hospital facilities is less than the estimated cost to construct the facilities as planned? What course of action would you prefer to see taken under such circumstances? Why? 3. What individuals or groups should participate in determining the amount of capital funds to be raised for hospital construction within a community? 4. What means of communication do you think should be established to accumulate and disseminate the information needed to develop and successfully implement a capital fund-raising program for hospitals within the community? 5. In what ways does the element of control need to be considered when a community attempts to determine the amount of capital funds it will raise for hospital construction? when determining how the funds collected are to be expended? What individuals or groups within a community are likely to exercise such control? What sanctions are they able to apply to secure compliance with the control measures they wish to have established? In what ways do the elements of cooperation and coordination need to be considered when developing a community fund-raising campaign for hospitals, and when expending collected funds? How can needed cooperation and coordination be developed? Which would be more important to a successful fund-raising campaign, in your opinion, cooperation or coordination? Why? 7. If you were attempting to select a professional fund-raising company to conduct a campaign in your community, what factors would you consider when attempting to evaluate possible companies? 8. What conditions within a community would be favorable to the conduct of a fund-raising campaign for hospital construction? What conditions would be unfavorable in your opinion? 9. What are the advantages and disadvantages of a joint fund-raising campaign by several hospitals within a community from the viewpoint of the participating hospitals? the non-participating hospitals, if any? the contributors to the campaign? What effect might a joint fund-raising campaign have on future patient care? 10. What would be the advantages and disadvantages of publicly announcing before a hospital fund-raising campaign that the collected funds will be used to develop a medical center where none had existed before? 11. Do you think teaching and research programs would have an appeal to potential contributors to a hospital fund-raising campaign? Why, or why not? 12. Under what conditions do you think a hospital board of trustees might be justified in refusing to receive restricted financial contributions to the hospital? 96

Preliminary Promotion arid Development 13. What do you think will be the importance of public voluntary financial contributions to hospital construction and operation in the future as .compared to the present? Why? 14. What are the advantages and disadvantages of asking individuals or special groups to provide sufficient funds to pay for a room or piece of equipment? Would you approve of donor plaques on rooms, equipment, and special areas of the hospital? Why or why not? 17. LOCATION

The Damon Hospital Association, organized some three years ago, was incorporated in November of that year. It was founded for the purpose of establishing and building a short-term general hospital of about 200 beds in the City of Bakerton, which is a metropolitan city of 600,000 population in an East Coast state. Twelve general hospitals serve the area, including a 500-bed institution owned and operated by a university in connection with its medical school. The organizers of the Damon Hospital Association proposed to build a hospital (1) to provide hospital facilities to that part of the Bakerton medical profession which had difficulty, or found it impossible to obtain appointments on the staffs of existing Bakerton hospitals, not for reasons of medical incompetence, but partly because of religious differences and partly because of closed-staff policies of existing hospitals, (2) to provide a place for training interns and residents who had difficulty obtaining appointments in existing hospitals for reasons of religion, and (3) to provide additional hospital facilities needed by the people of Bakerton, particularly that part of the population of the same religious denomination as the doctors concerned. The association expected the group of doctors mentioned to form the nucleus of the medical staff of the Damon Hospital, and it was informally understood that they would. The association itself can be described briefly. Memberships were offered for sale to raise funds and the members elected a board of directors of fifteen members. This board, consisting of businessmen, attorneys, etc., but no physicians, was the major planning and policy-making group of the organization. Immediately upon incorporation a site committee was appointed to select a plot of ground for construction of the Damon Hospital. After careful study, the committee recommended and the association purchased a square city block from the Bakerton board of education for a sum of $60,000. On the grounds was the Simpson School, an old school building erected in 1889, closed two years ago, and not intended for use again since the area was provided with adequate school facilities of newer vintage. This site fulfilled the site committee's requirements in the following re97

Decision Making in Hospital Administration spects: (1) Location was two miles (10 minutes) from the downtown area of Bakerton, on a busy avenue served by the city bus company. Parallel to this avenue and three blocks from the prospective hospital were two major one-way automobile traffic arteries connecting the downtown area with the neighborhood of the site. A cross-town traffic artery, also served by the bus company, lay two blocks from the prospective hospital and at right angles to the above avenues. Thus, a hospital on this site would be accessible to doctors, patients, employees, and visitors. (2) The site was in the "hospital belt" of Bakerton. Between the site and the downtown area were a leading 300-bed hospital, a 100-bed hospital, and a 400-bed hospital. This was felt to be an advantage to such physicians as would be on the staffs of these other hospitals as well as Damon because of saving of travel time between hospitals. (3) Adequate parking space would be available. The city block in this case measured 630 feet by 300 feet from curb to curb. (4) The neighborhood was predominantly residential, the only business places being grocery stores, drug stores, and the like. No tall buildings surrounded the site and there were no factories nearby. The Bakerton Park Board planned, within the next three or four years, to establish a public park on an adjoining block. (5) The area was zoned for commercial construction, permitting erection of a multi-storied building. (6) Adequate water, sewage, and electricity were available. (7) Soil tests had produced satisfactory results. (8) The site was purchased in one transaction and thus it was unnecessary to make a number of separate purchases to acquire it. (9) It was thought the site would provide ample room for future hospital expansion — a particularly important advantage, in the committee's opinion. During the year following the purchase of the site the association made progress in its planning and organization and plans were tentatively set for delivery of blueprints late in 1947, and for construction to begin early in 1948. As will happen, several delays were encountered by the association and the blueprints were not delivered until April of 1948. And it was during this same month that a development occurred which caused the association to reconsider its site selection. A faculty member of the medical school located in Bakerton approached a member of the board of governors with the proposal that Damon Hospital be built near the medical school and that there be a close affiliation of the two for the purpose of teaching medical students. This proposal came as something of a surprise to the board, but it was agreed to meet with the officials of the medical school to discuss the matter. The meeting was held and the principal argument for building on a site near the school was that such a location would obviate the need for automobile or public transportation for students and faculty, and would facilitate communications between the two institutions. The board members left the meeting 98

Preliminary Promotion and Development with the feeling that a location near the medical school and staff affiliation with the university would be advantageous to all concerned. The medical school of Bakerton was part of the university and was located four miles away, on the opposite side of downtown Bakerton from the site selected. For this reason, the board felt that it was faced with two alternatives: (1) careful consideration, first, of all aspects of affiliation with the medical school and then selecting and obtaining a site nearby, if such affiliation appeared to be warranted; and (2) taking an option on a site near the medical school as soon as possible and then investigating and considering the implications of affiliation. The second alternative was the one chosen by the board of directors. Only one site was immediately available — this one also a school building and adjacent playground which had been closed in 1942 by the school board. This site was seven blocks on the other side of the medical school from the downtown area, in a residential area, and two blocks from a traffic artery on which the city bus company provided services. It was two and a half miles (15 minutes) from the downtown area in a neighborhood in which there were no hospitals other than the medical-school hospital. Soil tests proved satisfactory, utilities were adequate, and terrain was desirable. The population from which the prospective hospital's clientele was to be drawn was equally close to both building sites. The school on this site (the Alder School) had been built in 1924 and closed in 1942 as a fire hazard to the life of the students. The building had been remodeled into an apartment building housing seventeen families. The size of the plot measured 300 feet each way, curb to curb. The neighborhood was zoned for residential construction, thus rezoning would be necessary if Damon Hospital were to be built here. Two methods of bringing about a rezoning were open to the association and its board of directors. The first method would be to obtain the consent of two thirds of those owning property within a 100-foot radius of the proposed structure. Evidence of this consent would then be given to the Bakerton City Planning Commission, which in turn would almost invariably approve the rezoning and recommend it to the Bakerton City Council which had the final authority to control zoning. The city council would almost always follow recommendations of the planning commission if no serious objections arose. The second way to effect a rezoning was to go directly to the city council and obtain a special permit to construct the building desired. This second method was more difficult than the first, however, as a special permit required a two-thirds vote of approval in the council, whereas rezoning on recommendation of the planning commission required only a simple majority. The board of directors bought an option on the Alder School site from the board of education, this purchase for $25,000 being contingent on 99

Decision Making in Hospital Administration rezoning to permit construction of the hospital. This news was announced by the Bakerton press and radio on July 15, 1948. Opposition to building on the Alder School site developed almost immediately. Neighborhood protest meetings were held and several arguments were put forth in opposition to the Damon Hospital: First, families would be forced to find new living quarters if the Alder School were torn down. Second, residential parking would be obstructed by automobiles of those visiting and working in the hospital. Third, a large structure such as a hospital would depreciate property values in the area. Fourth, demolition of the Alder School would remove any and all possibilities that the site might some day be used again for a new school. In the neighborhood was a small but vocal group of parents that had violently opposed closing the school in 1942, since it meant additional travel for their children to nearby schools, one of which was on the other side of a busy railroad grade crossing. One child, in fact, had fallen under a train on the way to this school in 1945, and had her legs amputated. In any case, the neighbors of the site convinced the two city council members from their ward that the neighborhood opposed a hospital on the site selected. This was significant since, by custom, the council in matters relating to one ward almost always follow the wishes of the members from the ward concerned. Opposition from another source developed quickly too. The physicians' group, which the association expected would form the nucleus of the medical staff of Damon Hospital, first heard of the option on the Alder School site at the same time that it was announced to the public. In fact, the group read the news in the public announcement of the option purchase in the Bakerton newspapers. Leaders of this group of physicians immediately called a meeting at which strong objections were raised on the grounds that, first, the Alder School site was an inconvenient location in relation to their offices, and second, affiliation with the medical school would mean domination by the medical school's faculty in matters of staff government, appointments, discipline, and all other matters relating to medical staff affairs. It was agreed to record these objections and present them to the Damon Hospital board of directors. This was done, and the communication reached the board in August of 1948. The board examined the opposition from the neighborhood and from the medical staff. It obtained legal advice as to rezoning and found that rezoning of the Alder School site could without a doubt be obtained throught court action. The litigation would take about a year, however. As to affiliation with the medical school, the board observed that (1) the board, and no one else, would control the staff of Damon Hospital, and (2) the medical school was already affiliated with a voluntary hospital located 100

Preliminary Promotion and Development on the outskirts of Bakerton farthest from the medical school, a distance of some seven miles through the city, and (3) even on a 300-foot-square plot adequate parking space could be provided. The board stated, however, that it would decide on which site the hospital would be located during its next regular meeting one month away. The building committee, of which you are chairman, has been asked to review the available data and recommend at the next board meeting which site should be selected as Damon Hospital's location. Which site do you think should be recommended for the location of Damon Hospital? What factors would you consider when deciding upon your recommendation? Upon what factors would you place the greatest emphasis when arriving at your decision? COMPLEMENTARY QUESTIONS

1. In your opinion, what are the most important factors to consider in the selection of a site? What factors do you consider essential? desirable? How would these and other factors be affected by the hospital size? the hospital program? the method of ownership? 2. What groups or individuals do you think should be represented in the selection of a hospital site? Why? How can you weigh the opinions of each group? 3. List in order the steps which should be taken in the promotion of a new hospital before a site is selected. Did the Damon Hospital board follow the procedure you have outlined? What reasons do you think motivated the board to purchase a site at the stage of the hospital promotion that they did? Is the board's action in securing an option on the Alder School site consistent with the motivations which you have noted above, or are some other motivations applicable to the latter situation? Are the motivations valid? Would you be motivated in the same way? 4. Do you agree or disagree with a community practice that stimulates a group in the community to build its own hospital to be staffed by members of its own group? Why? 5. Do you believe physicians should have been on the board of directors of the Damon Hospital during its planning and policy-making period before hospital operations? Why, or why not? What alternative channels of communication are available to secure the ideas of the medical staff? If you think alternative channels of communication are needed between the Damon Hospital board and prospective medical staff members, what channels would you suggest? 6. What factors other than physical affect the location of a hospital? How are these factors affected by the size of a hospital? the hospital program? the type of ownership? the physical proximity of a hospital to a medical school? 101

Decision Making in Hospital Administration 7. Do you think the attitude of the Damon Hospital board should have been one of surprise when learning of the medical school's proposal for closer geographical proximity and close teaching affiliation? Why, or why not? Do you believe the board's listing of two alternatives, after hearing of the medical school's alternatives, to be complete? Which of the steps would you take, and in what order, in giving "careful consideration to all aspects of affiliation with the medical school"? 8. What is your opinion of the relationship of the Damon Hospital board of trustees to the prospective medical staff of the hospital? 9. Do you believe the objections of the physicians to the Alder School to be valid? 10. What expenses are involved in site selection? How would you finance them? 11. Do you believe it more important to locate a new hospital near other medical-care facilities to permit more effective use of available human and physical resources or to scatter your human and physical resources to provide greater accessibility to the population served? What factors affect this decision? 12. What different methods of securing land for hospital construction are used? What are the advantages of each? Are the advantages affected by the size or type of hospital? by its form of ownership? 13. What should be the relationship of the size of the site to the size of the hospital? How is this relationship affected by an allowance for hospital expansion? 18. ARCHITECTUEAL PROGRAM The administrator of Palmerton Hospital has been asked to present at the regular monthly meeting of the board of trustees next week a progress report on the development of an architectural program for a new Palmerton Hospital building. The administrator expects to be able to present the board a preliminary allocation of available square feet of new construction among major classifications of space, such as nursing units, administration, dietary, storage, etc. He plans to inform the board that he will later refine the preliminary allocations by studying the square-foot needs of each room which he believes should be included in the new structure. The board of trustees based its decision to construct a new Palmerton Hospital building on an intensive and thorough study of the existing hospital facilities in the community and of the community's future hospitalbed needs. The study found that hospital service is being provided in the area by five general-acute, voluntary hospitals (including Palmerton Hospital) , one allied special maternity hospital, one state and two private mental hospitals, and one municipal tuberculosis sanatorium. These hospitals 102

Preliminary Promotion and Development provide 985 general-acute beds, 155 chronic beds (hospital care phase Dnly), and 170 nervous and mental beds (short term, non-custodial only). All hospitals are located in the city of Pemberton, except two generalacute hospitals which supply 15 per cent of the area's general-acute beds. The Pemberton hospitals are not only supplying the needs of the 112,000 residents of Pemberton proper, but a major portion of the needs of the three-county Pemberton area. The Pemberton hospitals are also caring for additional patients from a nine-county region surrounding the immediate hospital area. The two larger general hospitals in' Pemberton are accepting 12 per cent of their patients from the outlying region and about 5 per cent of Palmerton Hospital's patients come from the nine-county area. Last year Pemberton's three general hospitals operated at a total average occupancy of 86 per cent, with average occupancies of 90 per cent for medical and surgical facilities, 76 per cent for obstetrical facilities, and 74 per cent for pediatric facilities. Palmerton Hospital began operation in 1882, is the second oldest hospital in Pemberton, and was regarded at one time as the leading hospital in the community. However, governing authorities over the years, and before the tenure of the present board of trustees, failed to recognize the necessity of keeping the hospital abreast of modern trends. While the other two general hospitals in Pemberton have carried out rather extensive modernization and expansion programs, Palmerton Hospital facilities have been allowed to deteriorate appreciably. A gradual decline in the quality of service rendered patients has been the result, except perhaps in the area of nursing care. Despite the deterioration considerable evidence exists that Palmerton Hospital is still held in warm regard by a number of people in the community. The present administrator, who was hired three years ago, is eager to improve the services and physical facilities of the hospital. The present governing body has spent much time and effort studying ways and means of upgrading the hospital's program and physical facilities. The board realized from its study that assistance in determining the hospital's future role would be helpful. Accordingly, tne board hired an independent study group to report on the community's present and future hospital-bed needs to aid the development of a future hospital program. It was found after careful study and evaluation that the community presently has unmet hospital-bed needs for 195 general-acute beds, 295 chronic beds (hospital care phase only), and 55 nervous and mental beds (short term, non-custodial only). The ratios of these beds per thousand population are 0.7,1.0, and 0.2 respectively. The shortage of 195 generalacute beds presumes that the building programs now under way in three of the area's general-acute hospitals have been completed. The figure also recognizes the necessity for replacing all of the 111 beds now operated by Palmerton Hospital. It is expected that the area's unmet bed needs 103

Decision Making in Hospital Administration will increase to 881 general-acute beds, 545 chronic beds, and 210 nervous and mental beds within the following twenty years, unless new construction occurs within that period. The ratios of these unmet bed needs per thousand of the estimated population at that time are 2.2, 1.3, and 0.5 respectively. The board of trustees of Palmerton Hospital considered several possibilities for the hospital's future role in relation to the area's unmet hospital-bed needs. Thought was given to rebuilding and expanding at the present site; to rebuilding and expanding at a new site either in an independent location or adjoining another hospital or as a wing of another hospital; or to discontinuing the hospital operation with the understanding that needed facilities would be constructed by another hospital. After careful study, it was decided to construct a new hospital of 150 beds at a new site in a rapidly growing area of the city. An architect was hired and preliminary plans of the new hospital were drawn for use in the fund raising campaign. The plans showed space for 30 chronic beds and 40 mental and nervous beds in deference to the community need for such beds and the popular community appeal of such bed construction. The plans to construct chronic and mental beds also recognized the greater likelihood of securing federal matching funds for such construction than for construction of general-acute hospital beds. Eighty medical and surgical beds, 20 obstetrical beds, and 10 pediatric beds were proposed for construction. The architect estimated the squarefoot needs of such a program to be 95,000 square feet and the cost of the building including fees and contingencies to be $2,380,000. Equipment cost was estimated at $320,000 and cost of land and improvements at $75,000. The plans showed space for an oral surgical suite — an innovation for the hospitals in the area. The surgical staff would rather have had space allocated for a cystoscopy room. Space was provided for private outpatient care, but not outpatient clinic care, which is already being provided by another general hospital in Pemberton. The plans contemplated the care of communicable-disease patients other than those tuberculosis patients who could receive adequate care in the sanatorium. The plans also showed additional space for a 60-bed student nurses' residence, although it was doubtful that the additional $400,000 to $500,000 could be raised for such construction. A community fund drive was conducted and federal grants authorized (on half of the general-acute beds and all of the chronic and mental and nervous beds). The amount collected for the new hospital's construction from all sources totals $1,750,000. The board of trustees has asked the hospital's administrator to prepare an architectural program for Palmerton Hospital based upon the amount of funds collected. What recommendations do you think the administrator of Palmerton 104

Preliminary Promotion and Development Hospital should make to his board of trustees regarding an architectural program for the hospital? What factors should the administrator consider when developing his architectural program? Upon what factors would you place most emphasis? least emphasis? Why? COMPLEMENTARY QUESTIONS

1. How do you define "architectural program"? "preliminary drawings"? "final drawings"? 2. What are the interrelationships of the board of trustees, the administrator, the architect, and the hospital consultant during the development and acceptance of an architectural program? 3. What are the relative responsibilities and authority of the board of trustees, the administrator, the architect, the contractor, and the hospital consultant from the completion of an architectural program until the building is completed and ready for occupancy? 4. What is the need for coordination among the groups noted in the previous question and how might such coordination be achieved? What is the need for cooperation among these groups and how might such cooperation be achieved? 5. What are the advantages and disadvantages of hiring the services of a hospital consultant during the planning and construction of a hospital? of hiring the services of a consulting architect? How might your conclusions vary with a hospital's size? type of ownership? program? affiliations? 6. What is the amount of the fee you would expect to pay an architect for services rendered in the construction of a hospital? to a hospital consultant? What factors might .affect the amount of the fee actually paid? 7. What responsibility and authority do you think should be exercised by the state governmental agency which dispenses federal grants in aid for hospital construction over the planning and construction of hospitals for which federal aid has been authorized? Why? 8. If you were planning to hire the services of a hospital consultant as well as an architect, which would you hire earlier in the planning process? Why? 9. Are there any conditions under which you think an architectural program should not be developed during the construction of a hospital? Explain. Would your conclusions vary with the hospital's size? type of ownership? program? affiliation? 19. BUILDING SHAPE

"We would like you to compare these two plans and tell us which plan you think should be followed in the construction of Mt. Airy Hospital." Mr. James Landon, Mt. Airy Hospital's administrator, replied to the 105

Race Track Plan, showing typical nursing floor with 89 beds.

Offset Cross Plan, showing typical nursing floor with 89 beds. See abbreviations and comparative data on Race Track Plan above.

Decision Making in Hospital Administration president of his hospital's board of trustees by saying he would present his recommendation at the next scheduled meeting of the board. The two preliminary plans which Mr. Landon has been asked to compare are known as the "race track" and the "offset cross" plans (see the accompanying illustrations). They are alternate plans for a 400-bed, generalacute hospital, which is the contemplated size of Mt. Airy Hospital. Mr. Landon has just been hired as the administrator of the voluntary, nonprofit institution after six years' experience as a hospital administrator in an adjoining southwestern state. Landon has had experience with a construction program but not with either of the two designs he has been asked to compare. Mt. Airy Hospital's architect favors the race track plan. He says the race track plan requires 49,000 fewer square feet than the offset cross to provide the space required by the proposed hospital program. This factor plus the shape of the building itself will save $300,000 in new construction, the architect argues. He points out that the building fund campaign has secured just $50,000 more than the estimated cost of his plan, including the allocation to the project of available federal funds for hospital construction and that it would be difficult to obtain additional funds. He also believes the race track design to be aesthetically more desirable. Preliminary drawings of the offset cross plan were prepared at the insistence of a prominent member of the community and a member of the Mt. Airy board of trustees. He had been a member of the building committee of a hospital board of trustees in another community which had approved the use of the offset cross plan, and was of the opinion that the plan provided economy of operation. The board believes it desirable to compare the two alternatives. The board has previously studied and eliminated from further consideration other alternative building shapes. The preliminary plans confirm the architect's statement that the offset cross plan will require 49,000 more square feet than the race track. Both preliminary plans provide a basement and six floors, and for vertical expansion. Either plan provides good exposure on the site. Landon decides that he will base his recommendation upon an evaluation of the plan's relative effect upon the quality and comfort of patient care and upon economy and effectiveness of operation. He finds that a comparison of travel distances between service departments shows shorter distances and less horizontal transportation with the offset cross plan. Landon decides also to include in his evaluation a comparison of selected travel distances which he considers significant to the operation of a nursing unit and other hospital departments (see Table 9). What recommendations would you make to the board of trustees regarding the building plan which should be followed in the construction 108

Table 9. Comparative Evaluation of Nursing Floor Layouts, Showing Approximate Distances (in feet) between Facilities, for Mt. Airy Hospital. Item Nurses' station to: Patients' rooms Medicine closet Treatment room Nurses' toilet Utility room Pneumatic tubes Pharmacy conveyor Dictaphone room Patients' rooms to: Treatment room Medicine closet Bath Wheelchair and stretcher storage Passenger elevators Utility room Linen chute Treatment room to: Medicine closet Service elevators Utility room Pharmacy conveyor Medicine closet to : Waiting room Pharmacy conveyor Supervisor's office to: Waiting room

Race Track Plan

Offset Cross

Difference

55 6 112 60 41 4 Ill 27

70 4 29 12 29 2 51 19

15 —2 —83 —48 —12 2 -60 —8

98 52 52

98 69 54

0 17 2

42 96 41 92

106 101 58 103

64 5 17 11

117 34 63 7

39 22 47 22

—78 -12 —16 15

96 17

48 55

—48 -62

21

30

9

Item Supervisor's office to: Teaching room Dictaphone room Bath to: Waiting room Linen chute Passenger elevators to: Waiting room Serving pantry to: Waiting room Utility room Service elevators to: Waiting room Waiting room to : Utility room Food conveyor Women's toilet to: Conference room Men's toilet to: Conference room Janitor's closet to: Utility room Flower room to * Utility room Teaching room to: Conference room Utility room

Race Track Plan

Offset Cross

Difference

18 94

9 9

-85

66 48

54 51

-12 3

14

12

-2

69 65

55 69

—14 4

33

26

-7

63 56

57 60

-6 4

70

50

-20

103

62

-41

22

23

1

67

44

—23

120 24

17 82

-103 58

Q

Decision Making in Hospital Administration of Mt. Airy Hospital? What factors did you consider when arriving at your decision? Upon what factors did you place most emphasis? least emphasis? Why? COMPLEMENTARY QUESTIONS

1. What objectives should an architectural plan try to achieve? How would you rank the objectives hi order of importance? Why? 2. What basic concepts do you think should be expressed in any architectural plans for hospital construction? 3. What steps hi the development of a hospital should be taken before determining the shape of the hospital building? In what order should they occur, and why? What steps should be taken hi the development of a hospital after selection of the hospital's shape? In what order should they occur and why? 4. Do you think a hospital administrator should be hired before or after a building shape for a new hospital is approved? Explain. 5. How might the selection of a hospital building's shape be affected by a hospital's size? whether or not it is an addition to an existing building? the hospital's location in the United States? What other factors affect the shape of a hospital building? 6. What factors should be considered in the development of a hospital building shape in addition to the cost of construction and the effect of the shape upon efficiency of operation? Why? 7. What alternative hospital building shapes can you describe? What are their advantages and disadvantages in relation to each other? Which shape do you prefer? Explain. 8. Do you think that a hospital administrator without previous experience with a hospital construction program should attempt to evaluate architectural plans without consultation? Why, or why not? How might your answer be affected if the administrator concerned has had previous experience with hospital construction? Explain. 9. What consultation resources for hospital construction are available to a hospital administrator and the board of trustees? Which resources do you think should be used and why? If more than one resource provides the same service which resource would you select? Why? 10. How much net usable space per bed do you think should be provided by a plan for a 200-bed, general-acute hospital? How would the space requirements per bed be affected by a hospital's size? type of ownership? program? medical center or medical school affiliation? location? 11. What factors do you think will affect the space needs per hospital bed in the future? How will future space needs be affected by each factor? 12. Do you believe a better basis for recommendation could have been 110

Preliminary Promotion and Development selected by Landon? or that additional bases should have been used? Explain. 13. Do you think that travel distances other than those used by Landon should have been considered significant in the comparison of the two plans' effect upon operation? 20. DEPARTMENTAL LAYOUT

John Stone has just been appointed assistant director of Mary Burton Hospital. His responsibilities include supervision of the hospital's laundry and housekeeping operations. The administrator has expressed his opinion that some improvement might be made in the laundry's operation in its present location and that thought should be given to laundry equipment, layout, and staffing after the laundry's relocation two years in the future. He asks Stone to bear in mind the fact that the administration is hard pressed to find sufficient funds to operate the hospital and to equip the new wing presently under construction. When John Stone begins to review the laundry operation, he learns that no records are available to aid his study. As he accumulates information, he finds that the laundry washes approximately 8700 pounds per week, or about 8 pounds per patient day. The work is performed by one combination laundry manager and washman, one assistant washman, four flatwork operators, one tumbler operator, and one machine-press operator. A maintenance-department truck driver transports the linen to and from the separate laundry building. The laundry manager has responsibility and authority over the hospital linen during the time it is in the laundry building. Linen is received daily at 7:30 A.M., 9:30 A.M., 11:30 A.M., and 3:30 P.M. The linen is washed in either of two washers, a metal 84'' x 48" washer or a wood 48"x40" washer. The latter is in need of constant repair. The metal washer is three years old. After washing, the linen is pulled by hand from the washers into wooden carts, moved to the 185-pound capacity extractor, loaded, and extracted. The time required to perform these operations is varied in accordance with the size of the wash loads. The flatwork and tumbler operators and press operator sort the extracted linen from the wooden carts, according to large flatwork pieces, small flatwork pieces, and pieces to be tumbled dry in a 40-pound, dry weight capacity tumbler. Flatwork is ironed on a 120inch, six-roll flatwork ironer. The extractor and the tumbler were purchased five and six years ago respectively and are in good mechanical condition. The flatwork ironer is sixteen years old and is in constant need of repair or adjustment. The items to be machine pressed are sorted in the washroom, after extraction by kind of item. Kitchen linen and diapers are washed each 111

Decision Making in Hospital Administration day except Saturday and are pressed and returned to the hospital on the same day. Nurses' uniforms and bibs and house-staff laundry are pressed a day or two after washing and returned on the subsequent day. The machine pressing is performed on two mushroom presses and two 48-inch flat presses. Stone gathers information on the current utilization of laundry equipment. His review of basic data notes that washing time in the metal washer varies from 1.15 hours for 440 pounds to 1.30 hours for 135 pounds and in the wooden washer from 0.55 hours for 129 pounds to 1.47 hours for 150 pounds. Loading and unloading time per 100 pounds is 12 minutes. Extracting pounds per load varies from 70 pounds to 218 pounds and running time per load from 12 minutes to 40 minutes. Stone also finds that flatwork ironed per working hour varied from 169 to 208 pounds and from 33 to 60 pounds per employee hour. The laundry manager says he allows sufficient soap flakes and running time per load to wash adequately any contaminated or extremely soiled linen which might be in the load. Lack of time, space, and linen supply precludes pre-wash sorting of the linen. Insufficient water pressure prevents filling both washing machines simultaneously. Each press or tumbler operator is responsible for detecting and segregating linen in need of mending, and for folding linen and placing it in delivery baskets. Stone finds that relationships between the laundry manager and the employees are friendly but workmanlike. Some friction exists between the laundry manager and the housekeeper. The housekeeper blames the laundry manager for short linen supplies. The laundry manager claims the housekeeper attempts to "interfere" with the operation of his laundry. The formal division of authority between the laundry manager and the housekeeper specifies that the manager is to control the linen during the time it is in the laundry building. With present staffing, the washing and extracting work day averages about eight hours, the flatwork and tumbling about seven hours, and the machine press work day averages 10 to 12 hours. The flatwork and tumbler operators actually work about five hours per day. The number of pieces machine pressed per hour averages 18 for nurses' bibs, 6 for nurses' white uniforms, 20 for nurses' blue uniforms, 17 for house staff linen, 14 for kitchen linen, 18 for miscellaneous pieces, for a total average rate of 18 pieces per hour. The number of blue uniforms per week is expected to increase by 294 and the number of collars and cuffs by 98 as the number of student nurses increases within the next six months. The laundry manager feels that his presses do not receive sufficient steam to operate at the necessary temperature. He can't be certain, how112

Preliminary Promotion and Development ever, as he has no gauges to measure existing pressure or temperature. The manager feels that one of the machine presses should be replaced as the size of the buck is small, and the machine requires considerable mechanical attention. The Mary Burton Hospital is in the process of constructing a new physical plant which will be completed within about ten months. The bed capacity will be increased from 187 beds to 256 beds. About 20 of the beds will be classified as chronic beds, and an additional 20 beds will be allocated to care of selected psychiatric cases. Renovation of existing hospital areas is expected to add another 20 beds to the capacity within the following year. The construction of an additional floor within the next ten years on the new wing now being completed would increase the total bed capacity to 326 beds. The laundry is scheduled to be moved to a single-storied, high-roofed wing of the existing two-story hospital building when the new construction is completed. The new wing dimensions are 45' x 90'. The laundry is now located in a single-story building, fifty-three years old, originally used as the hospital's stable. Stone prepares for study a drawing of the existing layout (see accompanying illustration). He then makes recommendations for improvement of the present operation and plans the layout for the laundry in its future location. What changes do you think should be made in the existing operation of the Mary Burton Hospital laundry? What do you think the layout of the hospital's laundry should be when located in the wing of the hospital which will be vacated after completion of the new construction? What new laundry equipment do you think should be purchased at the present time? in the future? What changes in the staffing pattern of the laundry do you think should be made now and in the future? What changes, if any, do you think should be made in the division of responsibility for the hospital's linen between the laundry manager and the housekeeper? Upon what factors did you place most emphasis when answering the above questions? COMPLEMENTARY QUESTIONS

1. What resources are available to a hospital administrator when attempting to improve the operation of his hospital's laundry? What services are offered by suppliers of laundry equipment? 2. What factors would you consider when attempting to determine whether or not laundry "labor-saving devices" should be purchased? 3. What points of contact does a laundry manager have with other hospital departments that are apt to be sources of friction? What can be done to eliminate these sources of friction? 4. To whom in a hospital organization do you think a laundry man113

Present laundry layout at Mary Burton Hospital.

Preliminary Promotion and Development ager should report? How might this vary with a hospital's size? affiliations? type of ownership? 5. What control should be exercised by a hospital administrator over the laundry operation? How should this control be exercised? 6. What physical characteristics do you think should be possessed by a building area in which a laundry is located? 7. How many square feet do you think should be assigned to a hospital laundry? How might your answer be affected by a hospital's size? program? type of ownership? affiliations? 8. What should be the physical relationship of a hospital laundry to other areas of a hospital? Why? 9. What percentage of the total hospital budget do you think should be allotted for laundering the linen of a 200-bed, general-acute, voluntary hospital? What should be the laundry cost per pound? per piece? How might your answers vary with a hospital's size? program? type of ownership? affiliations? What other factors would affect your answer? 10. How many personnel should be assigned to a laundry in a 200-bed, general-acute, voluntary hospital? What bases did you use for determining your answer? How might your answer be affected by a hospital's size? program? type of ownership? affiliations? What other factors would affect your decision? 11. What information on laundry operation do you think should be reported to the administrator? Why? What channels of communication should be used to make the report? What should be the frequency of the report?

115

f\

Initial Operating Decisions

21. POLICY FORMATION

The governing board of Anton Hospital assured you when you became administrator of the 250-bed, general-acute institution one month ago that you would have full administrative responsibility and authority for the daily operation of the hospital. The board said also that it would expect and rely upon your advice as to what policies it should approve to assist you in the effective operation of the hospital. The hospital began operation three months ago, but the board has not felt it had the time until now to formally promulgate operating policies. The board has described its committee structure as one which will provide you prompt liaison with those board members most able to understand and assist in the area of their special knowledge. The committee structure assures each of the twenty-one self-perpetuating board members of being on at least two committees. Besides an executive committee, there are separate committees on public relations, finance, nursing, building and grounds, nominating, inspection, admission policy, and housekeeping. The board committees nominally voiced enough confidence in the previous administrator for him to set up his own operating policies. The previous administrator had been hired during the late stages of the hospital's construction to establish organizational structure, recruit personnel, and place the hospital into operation. Differences of opinion between the administrator and the board of trustees regarding their relative responsibility and authority caused the decision, one month after the hospital opened, to sever their relationship. The previous administrator established a management committee to aid him in running the day-to-day operations of the hospital and to point out certain areas in which operating policies should be developed. The director of nurses, however, decided to set up her own advisory committee. This committee suggested that the administrator should take to the nursing committee of the board of trustees certain policy recommendations 116

Initial Operating Decisions concerning the school of nursing and nursing service which the nurses' advisory committee had recommended. Your predecessor agreed to take this under advisement, but he felt that the board of trustees, through its nursing executive committee, had given him authority to determine policy for the school of nursing and nursing service. Department heads and employees generally feel they have been made a part of the over-all management team. Morale appears to be high, and all employees seem well satisfied. Your predecessor stressed to the employees (that they were actually running the hospital for him, that if it were not for the cooperation of the entire staff, the hospital could not function well and provide the high quality of patient care for which it wishes to become known. He was not too disturbed, therefore, when he learned that the nursing administrative staff had exercised its initiative by contacting individual members of the board's nursing committee to persuade them that the recommendations of the advisory committee regarding nursing policy should be accepted. The board's nursing committee asked the administrator what he thought of the recommendations, and when he voiced no objection, the board promulgated the recommendations as policy. The administrator then took the policy before the management committee. This committee was told it had the opportunity to discuss thoroughly the policy and make any suggestions which might improve its over-all implementation. If the suggestions were major in nature, the administrator would take them back to the nursing committee of the board of trustees if he thought such a procedure necessary. He said the board had given him the authority to make changes in the policy without consulting them. However, the management committee did not think that the nursing policies needed further revision. The administrator next expressed to his department heads his belief that they were strong enough to carry out agreed-upon policies without detailed follow-up from him. Furthermore, the administrator said, if they were not carried out, this would certainly be brought to his attention during the committee meetings. As the current administrator of Anton Hospital, you are now facing a situation similar to that in which the previous administration was involved with respect to new nursing policy. The development of admission and collection policies is now being considered. One of the most pressing problems awaiting you when you assumed your position was the need to keep the hospital's first-year expenses to a minimum consistent with good patient care. You have learned, upon investigation, that the admission and collection policies of the other hospitals in your area are considerably more stringent than the initial practices of Anton Hospital. The other hospital administrators feel that the city hospital is able to provide the needed care for many of the patients who are credit risks. You have found that a number of your board members are of a similar opinion. 117

Decision Making in Hospital Administration The subject was discussed by you during the hospital's managementcommittee meeting and in a preliminary fashion with the chief of the medical staff. You find that strong feelings are developing fast on the subject, even before any concrete proposals of an admissions policy are developed for discussion. The medical staff wants the indigent patients to be admitted to the hospital because of their teaching and research value. The nursing department wants the admission of indigent patients for much the same reasons, with reference to the hospital's nursing school program. The manager of the business office is strongly in favor of tight admission and collection policies. You soon learn by the calls received from board members that each group is busily contacting the board members with whom they have established rapport and are vigorously expressing their various points of view. The president of the board of trustees is disturbed over the furor and asks that a special meeting of the board be called in two days to review the situation. You arrange for notice of the special meeting to be sent to all members of the board and commence preparing your comments for presentation to the board during the meeting. What comments would you make to the board of trustees of Anton Hospital at its special meeting? What alternative comments did you consider making? Why did you select the comments which you decided to present? COMPLEMENTARY QUESTIONS

1. How do you define "policy"? Why are policies developed? How do you think they should be used? How do you define "rule" as distinguished from "policy"? How do rules and policies relate to each other? 2. In your opinion, what are the most important factors for consideration in the development of a hospital policy? 3. What effect do you anticipate changing patterns of financing hospital care will have on the future development and determination of hospital policy? 4. How do you think the "human factor" should be considered when establishing and implementing a hospital policy? 5. How would you decide what individuals or groups should participate in the development of a policy? In what order do you think such individuals or groups should be asked to comment upon it? Do you think all people affected by a policy should be asked to participate in its development? How would you apply your conclusions to the administrative situation of Anton Hospital described above? 6. Are policies developed regarding quantity of service, quality of service, or both? 7. As an administrator, would you want your board to establish general or specific policies? Why? 118

Initial Operating Decisions 8. Is the content of a policy apt to change with the size of the hospital? with its program? with its pattern of ownership? Explain. Js the need for policy decisions apt to change under such conditions? Why? 9. Is the method of developing or using policies apt to change with the size of the hospital? with its program? with its pattern of ownership? Explain. 22. HOSPITAL BYLAWS

The administrator of a large general-acute hospital located two hundred miles from Allentown has been asked by the Allentown Hospital board of trustees to review and evaluate the hospital's articles of incorporation and bylaws of the governing body. The president of the board wants to make certain that the documents establish as favorable a climate as possible for the hospital fund-raising drive due to begin in three or four months. Allentown Hospital is to be a 100-bed, general-acute, nonprofit institution located hi the western town of Allentown and serving an area within an eight-mile radius. The population of the entire area is approximately 100,000 persons with 35 per cent of the total living hi Allentown itself. A 185-bed, general-acute hospital located in an adjoining town five miles to the south, and a 50-bed, general-acute hospital just completed three miles to the northeast, serve the hospital needs of the area. Also serving the area is a 240-bed, general-acute, denominational hospital located in Allentown. Forty per cent of the area's population are members of the denominational group that owns and operates the hospital. The average occupancy level of all three hospitals falls between 70 and 75 per cent. The president of the Allentown Hospital board of trustees has been the driving force behind the hospital's development and the plans for a building-fund campaign. He has had the financial support of a $500,000 bequest for a nondenominational hospital in Allentown. He has had the verbal support of a number of the medical staff members of Allentown's existing hospital. One fund campaign failed two years ago, and it is for this reason that the president of the board wishes to take all precautions to secure a favorable reaction to the fund campaign now being planned. The administrator studies first the hospital articles of incorporation. He finds that the corporation, as named, is a nonprofit and nonsectarian corporation organized for stated purposes that will permit the corporation to perform and provide the services of a modern general-acute hospital. The membership of the corporation consists of four classes. Class A members are corporate religious congregations who hold life membership as charter signatories to the articles of incorporation and who are represented by two voting members whom they select from their own groups. The selected representatives are in several instances less capable as hos119

Decision Making in Hospital Administration pital corporation members than as members of their religious groups. Class B members are voting, honorary life members and are those persons who originally provided financial support to the Allentown Memorial Hospital Association. Class C members are properly qualified corporate religious congregations, accepted upon proper application by a two-thirds vote of the corporation's voting membership. Annual membership dues for Class C members is fifty dollars; life memberships cost one thousand dollars. Class C members are represented in all corporate actions of the membership by two duly elected representatives of their own choosing, with each representative entitled to one vote. Class D members are any association, organization, group, club, society, or corporation, elected upon proper application to advisory membership in the corporation by a two-thirds vote of the voting membership. Memberships are issued on a one, five, ten, or twenty-five year basis depending upon the amount of the fee paid. The two representatives of each Class D member may participate in any discussions during annual or special meetings of the membership but may not vote. The corporation's board of trustees consists of twenty-one members elected from and by the voting membership. No more than one third of the members of the board may be of any one religious denomination. Each year, one third of the board members are elected for three-year terms. Persons who have served as board members for one term may not be elected to succeed themselves until they have spent one year out of office. The board of trustees annually elects from its membership a president, vice president, secretary, and treasurer who are general officers of the board and of the corporation; they hold office for one year and perform specified duties typical of these positions. The board of trustees may provide for the appointment of additional officers, may order the offices of secretary and treasurer combined, and may impose duties upon the officers or members of the corporation. The board may also require the furnishing of a surety bond for certain officers or employees and may order an annual audit of the books of account of the corporation by certified public accountants selected by the board of trustees. The articles of incorporation specify the annual meeting date and provide for the call of special meetings upon request of the board of trustees or a written request of ten voting members of the corporation. More than 50 per cent of the total voting membership of the corporation shall constitute a quorum at any regular or special meeting. The articles of incorporation may be amended only by a quorum at an annual or special meeting. The corporation may be dissolved by a two-thirds vote of the qualified voters of the corporation, with any remaining assets disbursed to the members on a pro rata basis in proportion to the amounts paid in by them. 120

Initial Operating Decisions The articles of incorporation provide for an advisory medical panel to the board of trustees consisting of five doctors elected by the members of the active medical staff of the hospital. No more than two members of this panel shall be of any one religious denomination. The panel may meet with the board of trustees during any regular or special meeting or attend any annual or special meeting of the corporation at the request of the board or of a majority of the advisory medical panel. The articles specifically permit a person to be a member of the corporation, the board of trustees, and of the advisory medical panel at the same time; in fact, one honorary life member is a member of all three groups. The administrator looks next at the bylaws of the governing board. He finds that the first article of the bylaws repeats the qualifications for membership in the corporation and board of trustees as found in the articles of incorporation. The bylaws state that an affirmative vote of the majority of the trustees present at a regular monthly meeting shall be sufficient to adopt any measure except an amendment of the bylaws. Tardiness of more than ten minutes at regular meetings shall be subject to a fine of twentyfive cents. Absence from three successive regular meetings of the board or more than four regular meetings during the year without leave of absence or adequate excuse shall be deemed a resignation from the board. Absences totaling over six in one year, whether excused or not, shall constitute a resignation unless leave of absence is granted by the executive committee. Trustee responsibilities are listed and include payment of annual dues, active participation in the government of the corporation, service on one or more committees, and attendance at the required number of monthly meetings. Standing committees of the board which are specified by the bylaws are the nominating and membership, executive, finance, nursing school, public relations, house, hospitality shop, endowment, and ways and means committees. Members and chairmen of such committees are nominated by the nominating and membership committee and elected by the board at its annual meeting. Members may be re-elected indefinitely. Other standing committees, and special committees, may be appointed by the board when deemed necessary. A majority of committee membership constitutes a quorum unless otherwise provided in the bylaws. An affirmative vote of a majority of the members present shall be sufficient to adopt any authorized measure. The executive committee consists of the officers of the board and the chairmen of the standing committees. The board's president shall act as chairman of the committee. Meetings of the committee shall be held at regular intervals as determined by the committee and may be called by the president at his discretion. A quorum of the committee shall consist of 121

Decision Making in Hospital Administration one third of the total membership of the committee. The committee has full power to act for the board between meetings of the board, but actions taken or decisions made shall be reported to the board at its next regular or special meeting. The nursing school's executive committee consists first of the board of trustee members on the nursing school committee. These committee members may then elect non-board members to the committee. The house committee consists of five board members. The function of the committee is to keep in touch with the needs or problems of the dietary, laundry, housekeeping, plant and equipment, and grounds departments — and with the problems of decorating and furnishing — for the purpose of cooperating with the administrator in maintaining the highest possible standards. When deemed advisable by the committee, it shall inspect the departments or otherwise review the performance of hospital operation. The finance committee is responsible for all financial activities of the hospital except for the investment of funds, which is accomplished by the endowment committee, and for the raising of funds for special purposes, which is the responsibility of the ways and means committee. The representatives of the other board committees perform duties which are in accordance with the committee titles. The bylaws provide for the payment of annual dues of ten dollars per board member at the annual meeting of the corporation. The bylaws require that annual dues and penalty fines collected by the treasurer shall be kept in a separate account to be used for special purposes at the discretion of the board. The bylaws finally provide that "The Board of Trustees shall determine what physicians and surgeons shall be permitted to use the hospital." The administrator completes his review of the articles of incorporation and bylaws of the governing body of Allentown Hospital and begins his evaluation of the documents as a basis for his report to the board of trustees. What recommendations do you think should be made to the board of trustees of Allentown Hospital regarding additions, deletions, or modification of the hospital's articles of incorporation and bylaws of the governing body? What factors did you consider when determining your recommendations? Upon what factors did you place most emphasis? least emphasis? Why? COMPLEMENTARY QUESTIONS

1. How would you define the terms articles of incorporation? hospital bylaws? bylaws of the governing board? bylaws of the medical staff? hospital charter? 2. Do you think the various documents which are prepared to provide 122

Initial Operating Decisions written authority and guidance to hospital operation should be interpreted strictly or liberally to meet changing conditions? Why or why not? 3. Who should initiate the development of the documents denned above? Who should be asked to participate in their development? By what steps and in what order would you attempt to develop such documents? 4. What major differences, if any, might you expect to find in the content of the documents defined above because of a hospital's size? type of program? type of ownership? affiliations? Why? 5. What effect, if any, do you think the growth of enrollment or covererage of prepaid hospital and medical care insurance plans might have on the provisions found in the hospital documents which you have defined above? 6. What steps should be taken, and in what order, to revise hospital documents such as those defined above if it should appear necessary? 7. What comment would you make concerning a group of citizens who promote the establishment of a hospital and who make certain that continuing authority for the operation of the hospital remains with the group? 8. What changes do you expect might have to be made in the charter provisions of nonprofit hospital corporations in order to insure their nonprofit status in the future? Why? 23. THE HOSPITAL ADMINISTRATOR The City of Parkwood has a population of 25,000. There has never been a well-established hospital in the city except small ten-bed proprietary units which have periodically sprung up and gone out of existence. The city fathers decided to float a bond issue for 40 per cent of the needed funds and with the assistance of federal aid, private contributions, and fund drives have been able to acquire enough money to let contracts for the construction of a 100-bed hospital to be called Stahr Hospital. Funds were also raised to equip the hospital. Final plans have been approved, and construction is expected to begin in a month. There has been no hospital consultant on the job. Advice to the architect, who has constructed one hospital before, has come from the State Department of Health, local medical practitioners and specialists, arid from the hospital building committee. Mr. Harold Hayes, a member of the board, has been farsighted in much of the hospital planning. He has recently suggested that attention be given to the selection of an administrator. He thinks the administrator should be hired before construction begins, feeling it is important that the administrator approves of the proposed building layout as long as he is the one who will be responsible for its operation. This suggestion has stimulated considerable discussion among board members. Dr. Rodney Hill, chairman of the medical staff and a member 123

Decision Making in Hospital Administration of the board, thinks the idea out of line because the doctors who are to practice in the hospital already have approved the plans. Another member, Ralph Lahey, representing the city government, has not given his approval to the idea. He reasons that the expense is unwarranted inasmuch as the city coffers would be strained to pay an administrator an adequate salary. He added that he didn't see any need for an administrator for a while as the architect would prepare specifications on much of the equipment. Gordon Barnes, board treasurer, suggested that it may be wise to hire an administrator now, from a public-relations viewpoint and for purposes of continuing a gift and fund campaign. Mr. Barnes believes that it will take a director a year to establish policies, bylaws, rules and regulations, to acquire personnel, and to set up programs. He thinks an administrator could be of great assistance in purchasing equipment, particularly items of a technical nature. Mr. Johnston, another board member, said he believes an administrator's duties other than purchasing would keep him more than busy, once hired. Mr. Johnston also feels that a consultant should be hired, at least to prepare specifications for the new equipment. He adds that he knows from a friend on the board of trustees of a hospital in the neighboring state that a consultant has saved that hospital from a number of poor decisions. All members of the board are cognizant of the fact that an administrator will have to be selected eventually, but they have not arrived at a decision as to the proper time. Instead they have decided to discuss first the qualifications they wish the hospital director to possess. They have asked you, as a member of the board, to head up a subcommittee consisting of Mr. Hayes, Dr. Hill, Mr. Barnes, and Mr. Johnston to determine the qualifications of the new administrator, how and when he should be selected, and whether any local candidates for the position should be selected. There has been considerable interest in the administrative position in the hospital on the part of various persons and groups in Parkwood. The hospital will be governed by a nonpolitical, impartial board of trustees consisting of nine persons, three of whom will be appointed by the city government until the bonded indebtedness is repaid. The city government officials are interested in having a well-run institution without creating ill feelings in any of the community groups. Mr. Robert Nathans, chief cashier in the city bank, has been encouraged to apply for the position. He has excellent ability in business, is local Legion commander, and is well thought of in the community. The Reverend Mr. Ness, a minister in his forties, whose church is closing because of lack of membership, is personally interested in the position. He has had five years' experience as a chaplain in army hospitals during the last war, is an active participant in community health and welfare planning, and has general community approval. 124

Initial Operating Decisions Miss Ann Nering, a registered nurse with ten years' supervisory experience in a middle-sized hospital, has expressed a desire for the position. Her father is an influential member of the local medical association. Harlan Holden, a resident of Parkwood, is attending a course in hospital administration and will complete his work for a master's degree within the coming year. He is interested in the position but has had no previous experience in the hospital field. A graduate of the same course with two years' experience, Carl Carlson, also is interested in the position but does not subscribe to the dominant religious faith in the community. The medical staff prefers to have a member of its group become the director, with a nurse to assist him in administration. Its members want to be assured of a good administrative-medical staff relationship and are wary of a lay director. The trustees, in turn, wish to have an administrator with whom their relationship can be most harmonious. What would be the content of your report to the Stahr Hospital board of trustees, as chairman of its subcommittee investigating the procurement of a hospital administrator? COMPLEMENTARY QUESTIONS

1. What would you consider as important qualifications to be found in a hospital administrator? Would your decision vary with the size of the hospital? with the program to be performed in the hospital? with its type of ownership? 2. How might your other qualifications for the administrator vary for a 100-bed hospital? 250-bed hospital? 750-bed hospital? with the hospital program? with the ownership of the hospital? 3. What is the basic function of a hospital administrator? What is the justification for his existence? 4. What should be the relationship of the administrator to the board of trustees? Should he be a member of the board of trustees? If so, what position should he occupy? Would membership on the board of trustees modify his functions? 5. Describe what you believe the nature of the administrator's relationship should be to the medical staff. What are the channels of communication that may develop between him and the medical staff? Is there anything unique in administrator-medical staff relationships as compared with the relationships which non-hospital, corporation executives must consider? 6. How might the administrator-medical staff relationships and channels of communication in a 100-bed hospital differ from those in a 50bed hospital? in a 250-bed hospital? in a 1000-bed hospital? How do you believe the relationships and channels of communication might be modi-

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Decision Making in Hospital Administration fied by the conducting of a teaching program in the hospital by a medical school? 7. How would you describe your job requirements as the new administrator hired eight months before the opening of Stahr Hospital? What priority would you give to the objectives you have established for yourself? How might these objectives and the priority you assign them be modified by the willingness of the hospital board to hire a hospital consultant to assist you and them to prepare the hospital for operation? 8. What first-year objectives would you establish for yourself, and what priority would you place upon them if you were the newly hired administrator of an established hospital? of a new hospital? How might your objectives and priority be modified by the size of the hospital? by its type of ownership? by its program? by its affiliations? 9. What factors govern the amount of salary paid to the hospital administrator? What do you consider as the most important factor? What factors do you think should receive less emphasis? more emphasis? How would you rank the importance to your job satisfaction of the salary you receive in relation to other rewards from work as a hospital administrator? 24. MEDICAL STAFF BYLAWS AND STAFF ORGANIZATION

The administrator of a 300-bed, general-acute hospital, John Regent, has been asked by the president of his board of trustees to provide some assistance to the board of trustees of Riverview Hospital, a 250-bed, general-acute hospital being planned for construction in a town sixty miles away. The president of Riverview Hospital's board of trustees, a close friend of the president of your board, is anxious to prepare for Riverview Hospital a proposed set of medical staff bylaws. He intends to use the proposed bylaws to gain the support of the physicians of his community for a capital-fund drive soon to be conducted for Riverview Hospital. A 240-bed, general-acute, Protestant hospital is now being operated in the town of Riverview Hospital's location and is known as Johnsbury Hospital. The president of Riverview Hospital's board of trustees suggests that the medical staff bylaws of Johnsbury Hospital be used as the basis for those of Riverview Hospital. The administrator discusses the Johnsbury Hospital bylaws with the physicians of the community and finds that the general practitioners strongly desire to increase their medical staff status to approximate that now enjoyed by the specialists. The twentyfive general practitioners have been allocated thirty beds in Johnsbury Hospital and believe the number to be insufficient. The administrator discovers considerable resistance from the 105 specialists on Johnsbury Hospital's medical staff to the changes asked by the general practitioners. The specialists would like, instead, to have additional clinical services included in the organizational structure of the medical staff of Johnsbury Hospital. 126

Initial Operating Decisions The president of Riverview Hospital is also chairman of its executive committee. It is this committee that, in effect, makes the board of trustees' (decisions. The executive committee is composed of fifteen men who hold responsible positions in their respective vocations and who want information presented to them in a manner suitable for prompt decisions. These members want the future medical staff of Riverview Hospital to understand clearly that they, as the board's executive committee, hold the final responsibility and authority for the operation of the hospital. The committee would prefer to deal with the medical staff indirectly, perhaps through the hospital administrator. If direct and official contact with the medical staff is required, the committee has informed John Regent that it favors the present arrangement at Johnsbury Hospital, where the chief of staff is the spokesman for the medical staff and liaison between them and the board of trustees. The administrator is aware of this arrangement from comments received during his interviews at Johnsbury Hospital. He is also aware that the chiefs of the hospital's clinical services are becoming increasingly resentful of being left out of discussions on administrative matters that have effect upon the work of the medical staff. It is with this background in mind that John Regent studies the medical staff bylaws of the town's existing hospital and the preparation of his recommendations to Riverview Hospital's board of trustees. What recommendations would you, as John Regent, present to Riverview Hospital's board of trustees regarding the medical staff bylaws of the hospital? If you would revise the medical staff bylaws of Johnsbury Hospital, what objectives would you attempt to achieve through such revision? What would be the content of your revision? What approach would you make to the board of trustees and the physicians of the community when presenting your recommendations? What procedures do you think the board of trustees of Riverview Hospital should follow when studying your recommendations and arriving at their conclusions? COMPLEMENTARY QUESTIONS

1. What are the purposes of bylaws? What is their relationship to charters? to rules? to regulations? How would you define bylaw, charter, rule, and regulation? 2. Should every medical staff have bylaws? Why, or why not? 3. If a hospital medical staff does have a set of bylaws, what kinds of basic provisions should they include? 4. What expenses of the medical staff as an organization would you consider the hospital justified in supporting, if any? 5. What purpose is achieved by establishing positions for officers of a medical staff? Could the same purpose be achieved by the hospital's providing medical staff leadership? Explain. 127

Decision Making in Hospital Administration 6. What control do you think the medical staff officers need to exercise over medical-staff membership? What sanctions might the officers of a medical staff have available to them to control the actions of staff members? What assistance can the hospital administrator give the officers of the medical staff hi controlling the staff members? 7. What influence might an administrator have over the election of officers of a medical staff? over the actions of officers once elected by the medical staff? What factors will affect the extent of such influence? Should the administrator attempt to use such influence as he may have? Why, or why not? 8. What influence might an administrator exercise over the selection of full-time, paid physicians on the hospital staff? 9. Should there be direct contact between the board of trustees and the medical staff? Why, or why not? If so, in what ways may it be achieved? If not, how could communication between board and staff be carried on? 25. OBTAINING A MEDICAL STAFF The new board of directors of Founders Hospital about two months ago hired Mr. Thome as the administrator of the newly reorganized institution. Mr. Thorne is well trained in hospital administration, is limited in experience, but welcomed the challenge presented by the problems besetting the institution. Mr. Thorne was told by the board that within ninety days he should have formed a medical staff, started plant improvement, and begun to acquire necessary equipment. At the end of the three months, the board expected 65 to 70 per cent occupancy of general-acute patient beds. Founders Hospital is located in a city which has a population of 20,000 and a trading area which encompasses another 50,000 people. The hospital occupies a city block and is located on one of the busiest highways in this part of the midwestern state. The city has a lake frontage of approximately fifteen miles. Shipping on the lake has increased 30 per cent in the last year, and the general population is expected to increase by 25 per cent in the next five years. At the southern end of the city, in the main business and dock section, is Saint Elizabeth's Hospital, operated by a religious order, the Sisters of Gena. The hospital now has 180 general-acute beds, and an addition of twenty beds is currently being constructed. Forty of the forty-one doctors in the city, including the general practitioners, are on the staff. Although the doctors are all satisfied with the management of the sisters' hospital, they object to the difficulty of hospitalizing their patients there. The difficulty arises from the hospital's location and its high average occupancy of 88 per cent. Founders Hospital, the only other hospital located within a thirty-mile

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Initial Operating Decisions radius of the city, is about ten miles north of Saint Elizabeth's and in the more densely populated residential area. The history of the hospital is rather unique. It was built ten years ago by Dr. Soren and was operated by him until eight months ago. Previously Dr. Soren had been on the staff of Saint Elizabeth's Hospital. When his surgical privileges were rescinded, he built Founders Hospital. The strong and dominant personality of Dr. Soren has exerted considerable influence on the hospital's picture. The hospital has helped him build an excellent, financially successful practice. Faced with increasing demands on his time and energy, Dr. Soren decided last year, at the age of fifty-five, to withdraw from active management of the hospital. A group of businessmen thereupon purchased the hospital for $300,000. A mortgage in that amount is held by Dr. Soren. He continues to practice medicine in the hospital and was a member of the board of directors until he resigned two months ago. He still wishes to dominate the hospital's operation, and when he meets with resistance, he threatens to take the hospital back. The hospital's mortgage imposes a serious handicap, the present low occupancy making it difficult for the hospital to carry this financial burden. Dr. Soren is a member of the county medical society, but he is not well regarded or liked by the other physicians in the community. The stigma is so great that the local physicians refuse to have their names associated with Dr. Soren or connected with Founders Hospital. There have been two doctors who have brought their patients to Founders Hospital when there was an emergency and they could not obtain a bed at Saint Elizabeth's. The highway police frequently bring accident victims to Founders Hospital, but the attending doctors have transferred the patients as soon as it has been medically safe to do so. There are two small clinics with three doctors each in the northern section of the city. These men would enjoy the convenience of utilizing Founders Hospital since they object to taking their patients across town to Saint Elizabeth's. Other physicians who live in this section would be interested in using it for night and emergency care, particularly for obstetrical care. The pathologist at Saint Elizabeth's Hospital says he could become interested in providing part-time service to the hospital if the county medical society would approve. The pathologist is hesitant to express much interest because there is no medical staff as yet, because there is no check on the quality of medical care being given, and because no formal rules and regulations have been established. He does not want to be affiliated with practice that might be considered a bit "shady." The hospital buildings include the main hospital which houses sixty patients and an annex which was built to accommodate forty nurses. An average of 30 per cent of the main hospital's bed capacity was occupied by general-acute patients last year. In order to meet operating expenses, the 129

Decision Making in Hospital Administration rest of the beds in the main hospital and in the nurses' annex were converted to chronic care. The hospital has been reimbursed by the state at the rate of six dollars per diem for care provided to geriatric patients. The state is reimbursing other hospitals in the state for care provided to geriatric patients on the basis of billed charges. The physical plant of Founders Hospital is basically very good. However, maintenance and upkeep have been badly neglected, both inside and out. The equipment throughout the hospital is uniformly poor. The community has a generally unfavorable impression, for example, of the patients' rooms and of the emergency suite. The hospital has no physical or occupational therapy equipment. The hospital has no qualified personnel to operate the various departments such as pharmacy, X-ray, laboratory, and the dietary department. Most drugs are purchased at the local drug store and dispensed in the hospital by a graduate nurse. The local pharmacist has suggested that the hospital hire his part-time services. The food is unappetizing in appearance and is usually served cold. Morale in the nursing department is low, and the services of an additional qualified X-ray technician are needed. X-ray films are prescribed and read by Dr. Soren. What specific steps do you think Mr. Thome should take to acquire a medical staff for Founders Hospital? What other steps should be taken to improve the operation of the hospital? In what order should each of the steps be taken and what time limit would you establish for the accomplishment of each step? What factors did you consider when arriving at your conclusions? Upon what factors did you place most emphasis? Why? COMPLEMENTARY QUESTIONS

1. How do you define an "open staff"? a "closed staff"? What are the advantages and disadvantages of each? What factors would affect the advantages and disadvantages of each? 2. What factors would you consider when recommending to your board of trustees the proportion of general practitioners to specialists on the hospital staff? What are the advantages and disadvantages of having general practitioners as a major portion of the medical staff ? How would the advantages and disadvantages vary with a hospital's size? program? location? type of ownership? affiliations? 3. How might the objectives you would like to achieve when developing a hospital medical staff vary with a hospital's size? location? type of ownership? affiliations? program? What other factors might affect the objectives? 4. At what stage in the development of a hospital being newly constructed should efforts be made to obtain a medical staff? Explain. 5. What bases do you think should be used, and what procedures should 130

Initial Operating Decisions be followed, when determining the privileges to be granted to applicants for positions on the medical staff of a new hospital? What factors would affect such a decision? Should the doctor's race, creed, or color be considered when selecting a medical staff and determining individual staff member's privileges? Why, or why not? 6. What arguments can you list for and against the conduct of a medical research program by a voluntary, nonprofit hospital? How might such arguments be affected by variation in the hospital's size? affiliations? other programs? 7. By what means can an administrator aid in the improvement of medical practice in his hospital? 26. HOSPITAL OPERATING EXPENSES

The administrator of Thomas Hospital has been asked by his board of trustees how many employees, by job title, the hospital should employ. The board also wishes to know what he thinks the expenses of the 135bed hospital will be during its first year of operation. The new generalacute, voluntary institution is nearing completion, and the administrator has just been hired to put the hospital in operation and act as its first administrator. The board of trustees has expressed the arm to develop the hospital's reputation as one which provides high quality care. Since trained hospital personnel are in short supply in this southern state, the board expects to pay good salaries in order to attract the needed employees. However, the board also wants the hospital to be in a good competitive position with nearby hospitals with respect to rate structure. Thomas Hospital will be the only general-acute hospital in this rural county. The population of 40,000 in the area surrounding Thomas Hospital has been receiving hospital care in the adjoining county or in hospitals of the nearest metropolitan area, forty-seven miles away. The physicians in the county welcome the new hospital because it will be closer to their offices than the adjoining county's hospital. They hope it will prevent their losing some patients to the city hospital. The county hospital in the ajoining county is a 125-bed, general-acute institution. Its average census last year was 79, and its patients received care from 185 paid personnel. The hospital's personnel expense was $319,000 for the past year, and total expenses for the period were $615,500. The administrator reviews the general organizational structure being proposed by the board of trustees as he begins to plan the hospital staffing pattern. The proposed organizational structure for the hospital does not include an assistant administrator. An office manager will have responsibility for the business office, admission office, the telephone service, and the in131

Decision Making in Hospital Administration formation desk. Anesthesia will be given by nurse anesthetists responsible to the administrator. The administrator is to exercise direct supervision over the chief dietitian, who will in turn direct her department with the aid of an assistant. The dietitian will be responsible for the purchase, preparation, and service of all meals to patients and employees, the sanitary storage of food, maintenance of adequate records, the use and care of equipment, and in general the efficient operation of the dietary department. The hospital will distribute food by a "meals on wheels" system. The housekeeper will also be directly responsible to the administrator and will have the assistance of an assistant housekeeper. The housekeeper is to be responsible for directing the housekeeping program in the hospital and nurses' residence and for the maintenance of an adequate supply of linen. Linen will be laundered in a commercial laundry. The administrator will have direct administrative supervision over the pathologist. He expects that much of his administrative contact, however, will be with the chief medical technologist. The chief engineer is to be responsible for the administration of the maintenance department. The responsibility includes inspection and maintenance of building equipment, advice on purchases, direction of installation or replacement or alteration of equipment or supplies, and supervision of the grounds, boiler room, and painting. The chief engineer reports directly to the administrator and has as his principal assistant an assistant engineer. The administrator plans to hire and supervise directly a registered medical records librarian to perform the medical records functions. The director of nursing will have responsibilty for the administrative supervision of the nursing department including nursing service and nursing employee education. Her principal assistant will have general supervisory responsibilty over the nursing employees on the nursing floors. The assistant will also have charge of the drug room and the filling of drug orders not procured from the local commercial pharmacist. She will supervise the emergency room in the absence of the director of nursing. The nursing department will be responsible on afternoon and night shifts for the admission of patients and the bookkeeping in the business office. The department will also be responsible for staffing and administering the hospital's outpatient clinic and forming its program. The administrator will have the assistance of a purchasing agent who will also perform the duties of a hospital personnel director. This person will make the actual purchases of all supplies and equipment. He will formulate and supervise programs for the selection, training, and welfare of employees and will handle the employer-employee relationships involved in a personnel management program. 132

Initial Operating Decisions The hospital radiologist will be directly responsible to the administrator and will have the assistance of a chief X-ray technician. The hospital will provide clinical training for X-ray technician students. The administrator begins the preparation of his recommendations concerning the staffing and first year's operational expenditures of Thomas Hospital after having considered the hospital's proposed general organizational structure and other factors which he considers important to his decisions. What recommendations do you think the administrator of Thomas Hospital should present to his board of trustees regarding the staffing of the hospital? What estimates would you, as the administrator, present to the board regarding hospital expenditures during its first year of operation? What factors did you consider when arriving at your conclusions? Upon what factors did you place most emphasis? least emphasis? Why? COMPLEMENTARY QUESTIONS

1. What procedures would you establish, as administrator of a new hospital nearing completion, to recruit and select the hospital's employees and to see that they are actually performing their jobs on the first day of the hospital's operation? 2. What steps would you take as administrator of a hospital in the finishing stages of construction to secure sufficient operating funds for the hospital to begin operation? for the hospital to continue operation throughout the first year? 3. What do you mean by the terms "operating funds"? "fiscal requirements"? "capital funds"? 4. What action would you take as administrator of a hospital soon to begin operation to determine the kind, quantity, and quality of supplies to be on hand? to arrange for the supplies to be in the hospital in the places they are needed when the hospital begins giving patient care? 5. What steps would you take as administrator of a hospital under construction to obtain the maximum amount of patient income for the hospital as it is set in operation? 6. Would you plan to put all of the proposed hospital program for a new hospital in operation as soon as the hospital begins admitting patients, or would you postpone the establishment of parts of the proposed program until a later date? If part of the program is to be given priority, what part would you establish first? Why? 7. How might your answers to the questions above vary with the hospital's size? type of ownership? program? affiliations? 8. How would you arrive at your estimate of operating costs for the first month? the first three months? the first year? 133

Decision Making in Hospital Administration 27. THE DEVELOPMENT OF RATE STRUCTURE Phillips Hospital, under construction at the present time, is expected to be ready for occupancy within the next ninety days. John Reed, the administrator, is faced with the immediate problem of developing a rate structure for approval by the board of governors. The board of governors is primarily interested in seeing that the patients of Phillips Hospital receive high quality care at minimum cost. At the last meeting of the executive committee, Mr. Reed was asked to develop two types of rate structures, the conventional room-and-board plus itemized-charge system and the more modern inclusive-rate system, and to present both types of rate systems to the board of governors within the next thirty days with his recommendations for the adoption of either system. The new hospital is located in a midwestern city with a population of approximately 500,000. The city is recognized as a medical center and has some 15 hospitals, of which 11 are voluntary nonprofit in character; Phillips Hospital also will be voluntary nonprofit in character. When ready for occupancy, Phillips Hospital will have a bed complement of 200 adult and pediatric beds, 30 bassinets, and 4 incubators. The 170 adult beds will consist of 58 private or single bed rooms, 40 semiprivate or two-bed rooms, 8 four-bed or ward accommodations, and 30 pediatric beds, of which 7 are two-bed, 1 is four-bed and 2 are six-bed rooms. Three of the adult four-bed accommodations will be utilized primarily for totally indigent cases. Mr. Reed's first approach to the development of a room-and-board plus itemized-charge system was to obtain complete rate structures for all services from the five leading voluntary nonprofit hospitals in the city. The comparison of bed complements with average patient-day costs in these five hospitals is shown in Table 10. Since Phillips Hospital does not have an operating budget for the first year of occupancy, Mr. Reed concluded that he should pattern the roomand-board plus itemized-charge after the hospitals in the group whose services were similar to those which are to be provided at Phillips Hospital. These hospitals were hospitals 1, 2, and 3 in Table 10. Mr. Reed believed that Phillips Hospital costs per patient day would probably not reach $23.02, which prevailed at hospital 3. Both hospitals 3 and 4 are housed in a number of brick buildings, most of which are thirty to fifty years old and require an unusual amount of upkeep and repair. He believed that patient-day costs at Phillips would nearly approximate hospital 2's costs since hospital 2 was constructed five years ago, and Phillips Hospital will offer almost identical patient services. After comparing rates for services of the five hospitals, Mr. Reed found that the rate variance for ancillary services among the five hospitals was negligible. The wide discrepancies in rate structure were found in room 134

Initial Operating Decisions and board charges. Mr. Reed decided therefore to pattern the rates for ancillary services after the rates for hospitals 1, 2, and 3. If a difference existed among the three hospitals on X-ray charges, laboratory charges, etc., Mr. Reed selected the highest of the three charges. He believed this rate structure for ancillary services should yield at least hospital 3's income of $9.14 per patient day. When determining Phillips Hospital's room and board rates, the rates in effect in the existing hospitals were reviewed (Table 11). The variance in room rates was primarily due to the differences among hospitals in types of rooms, furnishings and location, and the degree of privacy, desirability, convenience, and luxury provided. Mr. Reed believed that Phillips Hospital could charge and obtain at least one dollar a day more for each type of accommodation than hospital 3. He calculated that such a schedule of room rates would produce an average per patient-day income of $13.00 based on an average occupancy of 80 per cent for the hospital's first year of operation. Mr. Reed believed this 80 per cent occupancy figure was conservative since all the hospitals whose rate structure he studied were experiencing average annual occupancies of 85 per cent, the range being from 83 to 90 per cent. The physicians who were maintaining the high occupancy rates at the other hospitals would also, in many cases, be sending patients to Phillips Hospital. Table 10. Comparison of Bed Complements with Costs among Five Hospitals Hospital 1 2 3 4 5 Average

Bed Complement

Cost per Patient Day

150 150 200 262 450

$21.17 22.04 23.02 25.02 18.75

242

$22.00

Table 11. Comparison of Room and Board Rates among Five Hospitals Type of Accommodation

Hospital 1

Hospital 2

Hospital 3

Hospital 4

Hospital 5

Private with bath (1-bed) $18.00 $19.00 $20.00 $22.00 $18.00 Private (1-bed). 14.00-18.00 15.00-18.00 17.00-19.00 18.00-20.00 14.00-16.00 Semi-private (2-bed) 12.00-13.00 12.00-13.00 12.00-13.00 13.00-14.00 11.25-13.50 Ward (4-bed) .. 10.50 10.50 11.00 12.00 10.50 Pediatric 10.75 11.00 10.75 11.75 9.75 Incubator 5.50 5.50 6.00 8.00 6.00 Bassinet 4.50 4.50 4.50 6.50 5.50 135

Decision Making in Hospital Administration The inclusive-rate sysiem posed several problems for Mr. Reed. First of all, he had no operating budget from which he could develop a rate structure, and second, no hospital in this area had ever used an inclusive rate. Therefore Mr. Reed contacted hospitals in other cities that were on the inclusive rate. From these hospitals he learned that for rate-making purposes, the inclusive rate is made up of two factors, the day-rate factor and the special-services factor, and this is done for rate-making purposes only as the entire rate is based on cost for all hospital service. The dayrate factor corresponds to what is commonly called the room rate under the itemized-charge system. The special-services factor covers all other services in the inclusive rate. The services which Mr. Reed decided to include in the inclusive rate were room, board, and nursing care, operating room, delivery room, anesthesia, routine drugs, X-ray diagnosis, laboratory, physical therapy, emergency room (if patient is admitted to the hospital following treatment), oxygen therapy, ordinary and usual medical supplies and dressings, and blood and blood plasma administration (excluding cost of blood and blood plasma). These were the most common services included in inclusive rates at other hospitals. Such services as telephone, telegraph, radium therapy, X-ray therapy, and electroencephalograph were excluded. In developing the two factors of the inclusive rates, Mr. Reed decided that the day-rate factor could be the same as the rate for room and board in the itemized-charge system. Mr. Reed then determined the specialservices factor. He obtained permission to utilize the information hospitals 1, 2, and 3 report to Blue Cross on charges for ancillary services. In studying this Blue Cross information, Mr. Reed found that a number of charges by type of care existed at these three hospitals for special services included in the inclusive rate (see Table 12). The Blue Cross data also revealed that 80 per cent of all charges for ancillary services occurred in the first four days of the average patient's stay. Since the most popular form of inclusive rate has the special-services factor set up on a declining basis over 7 to 10 days, Mr. Reed believed that Table 12. Data on Charges per Patient for Special Services under the Inclusive Rate at Three Hospitals Type of Patient Medical Surgical Pediatric Psychiatric Obstetric All patients

Average Charge

Range of Charges

Average Stay in Days

$60 79 43 36 52

$54-65 70-85 38-47 32-40 50-55

7.4 5.5 3.4 10.0 5.0

62

50-75

6.9

136

Table 13. Schedule of Total Inclusive Rates for Each Type of Accommodation, Arranged According to the Length of Hospital Stay to Enable the Prospective Patient to Estimate Charges

Days of Service *

1-bed room with bath

1 2 3 4 5 6 7 8 9 10

$ 41.00 77.00 108.00 134.00 159.00 184.00 209.00 232.00 255.00 278.00

General, Medical, Surgical, Obstetric,! and Gynecologic Services 1-bed 1-bed 1-bed 2-bed 2-bed room room room room room $ 40.00 75.00 105.00 130.00 154.00 178.00 202.00 224.00 246.00 268.00

$ 39.00 73.00 102.00 126.00 149.00 172.00 195.00 216.00 237.00 258.00

$ 38.00 71.00 99.00 122.00 144.00 166.00 187.00 208.00 228.00 248.00

$ 34.00 63.00 87.00 106.00 124.00 142.00 159.00 176.00 192.00 208.00

$ 33.00 61.00 84.00 102.00 119.00 136.00 152.00 168.00 183.00 198.00

4-bed room $ 32.00 59.00 81.00 98.00 114.00 130.00 147.00 160.00 174.00 188.00

Pediatric Service t 2-, 4-, and 6-bed rooms

Psychiatric Service 1-bed room

$ 31.00 57.00 78.00 94.00 109.00 124.00 140.00 152.00 165.00 178.00

$ 38.00 71.00 99.00 122.00 144.00 166.00 187.00 208.00 228.00 248.00

* Day rate after tenth day continues same as for tenth day. Charge is made for the day of admission but not for the day of discharge unless the patient leaves after 1:00 P.M. t Obstetrical charge for mother only. t Bassinet rate, $5.50 per day; incubator rate, $7.00 per day.

Decision Making in Hospital Administration this would be the best type of special-service rate to develop for Phillips Hospital. After calculating the special-service factor, Mr. Reed prepared a schedule of inclusive rates (Table 13) which he believes the board of governors should promulgate if the board wishes to adopt an inclusiverate system. The special-services factor as developed by Mr. Reed would, he believed, yield approximately $9.04 per patient day based on an average of hospital 1, 2, and 3's utilization of ancillary services per patient day. In making final preparations for presenting to the board his recommendations on a rate structure for Phillips Hospital, Mr. Reed realized two kinds of questions would be asked of him. First, he would be required to justify the amounts of the rates recommended. He decided to meet this approach by summarizing his basic assumptions and presenting them to the board with the reasons for having made them. Next, he knew he would need to justify his recommendations as to the form of the charges, i.e., room and board plus itemized charges or inclusive rates. In preparation for this line of questioning, Mr. Reed decided to present to the board of governors the advantages and disadvantages of each system along with his reasons why certain factors should be given greater emphasis than others. What justification would you, a* administrator of Phillips Hospital, present to your board of trustees to support your recommendations as to the form of the charges, i.e., room and board plus itemized charges, or inclusive rates? as to the actual amount of the rates recommended? COMPLEMENTARY QUESTIONS

1. What objectives are you attempting to achieve when establishing the amount of the hospital rate? the rate system? How might the objectives vary, if at all, with the size of the hospital? its program? its type of ownership? 2. What do you believe are the most important factors to consider when establishing the amount of hospital charges? when selecting a rate system? Explain. 3. What individuals or groups should participate in the establishment or revision of hospital rates and the establishment or revision of a rate system? Explain. 4. What effect does payment from insurance companies or from governmental agencies have on the amount of hospital rates and their relationship to costs of service? 5. What means of communication would you use to gather the comments of those who will be assisting in the establishment of a hospital rate? Would your means of communication vary with the size of the hospital? its ownership? the personalities involved? Explain. 138

Initial Operating Decisions 6. What factors would you consider upon deciding when revisions in hospital rates should become effective? 7. What comment would you make as to the relative effects of hospital charges — as compared to the reputation of the medical staff— on the development of a high hospital occupancy rate? 8. What would you consider to be the advantages and disadvantages of equating your hospital's rates with those of other hospitals in your area? 9. Do you believe that the expenses of your hospital's teaching and research programs should be included in the "costs" which you try to recover in your charges to the private patient? to the insurance companies? to governmental agencies? to nongovernmental agencies? Explain. 10. Do you anticipate that hospital rates will increase or decrease over the next five years? Why? What effect will the change you anticipate have on the methods of financing hospital care? on the relative importance of sources of funds for the financing of hospital care? 11. Do you anticipate that inclusive-rate systems will become more or less prevalent in the future than they are at present? Why, or why not? 12. What are the advantages and disadvantages of inclusive rates to the patient? to the hospital?

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IV. EXTERNAL

RELATIONS

"Multitudes in the valley of decision." Joel 111. 14 'Decision destroys suspense and suspense is the charm of existence." Disraeli

7

Standards-Determining Agencies

28. HOSPITAL LICENSURE

You are administrator of Bellam Hospital, a 100-bed, general-acute hospital located in Bellam, a city of 30,000 population in a southern state. You have been the hospital's administrator for about one year, having come with two years' experience as an assistant administrator hi a 200-bed, general-acute hospital in a neighboring state. The city's principal industry is a small cotton-textile factory. There is no other hospital in the city. Your hospital is owned by a nonprofit association from whose members the board of trustees is selected. The hospital building was erected some fifty-five years ago as an orphan asylum and was converted to hospital use in 1915. In the main, the construction is not fire resistant, apart from some later additions. In this connection, the state fire marshal has repeatedly expressed to you the opinion that "something would have to be done." One of your board members, a prominent local politician, has in the past discussed any shortcomings in relation to fire prevention with the fire marshal. Medical, surgical, obstetric, and pediatric services are maintained, but owing to lack of space, there is no segregation of operating and delivery rooms. In fact, space is so inadequate that a substantial part of the hospital stores are maintained in a nearby residence, rented as a warehouse. X-ray diagnostic service is provided, and a small laboratory is maintained for routine tests. The two technicians who operate these services do so without any particular guidance, and readings and interpretations are made by the physicians who request the examinations. The medical staff is not formally organized, but frequent meetings are held. These meetings are usually dominated by the chief of staff, who is a general practitioner of very considerable standing in the community. The chief of staff has resisted any effort to receive approval from the Joint Commission on Accreditation of Hospitals, stating that it is not necessary, and that he is responsible for the quality of medicine practiced in the hospital. The hospital has an excellent reputation in the community. 143

Decision Making in Hospital Administration The director of nurses has been with the hospital for twenty years and is considered satisfactory by the medical staff. She does not have a bachelor's degree and is thought to be old-fashioned by many of the nursing staff, who look upon some of the nursing procedures which she has established as needlessly detailed and tune-wasting. The medical records section is handled by a former stenographer under the supervision of the head bookkeeper. The records are reasonably complete, but the filing system is antiquated. The quality of the medical records is not reviewed by the medical staff. The average daily census is 85, and occupancy fairly frequently reaches 100 per cent. It is definitely felt by the community and by everyone connected with the hospital that additional space or an entirely new hospital is needed, but resources of the community are not great, and a proposal two years ago for a survey of hospital needs in the area was dropped because available funds to finance the survey were insufficient. The hospital operates with an annual deficit in the neighborhood of $10,000 to $20,000, which is met by contributions from members of the hospital association and the owners of the local cotton-textile factory, although the latter are located in the North. The only legislation covering hospitals at all in the state is a law which reads, in part, "any institution, place, or agency in which within a period of six months more than one woman during pregnancy, or during or after delivery is left for treatment." A proposal has recently been made in the state legislature by the state department of health to adopt the Model Hospital Licensing Law as recommended by the Council of State Governments. There is considerable opposition to such a law from a number of influential businessmen who serve on hospital boards of trustees and from the state medical association. The governor is appointing an advisory committee to review the benefits and disadvantages to be derived from a state hospital licensure program. He wants the committee to prepare a report advising him what action he should take. He has asked you to serve as a member of that committee, and you wish to solicit your board's support of your belief that a state hospital licensure law should be established and to approve your taking the necessary time away from your duties as administrator to work on the committee. You happen to believe in a state licensure law because of your experience with it in your previous job. You know from informal conversations, however, that several board members do not feel that hospital licensure is the business of the state government and that such matters had best be left to the medical profession. In fact, the members object to the ideas of any licensure by the state, seeing no purpose in it and feeling that there must be some other and more preferable way to achieve whatever ob144

Standards-Determining Agencies jective state licensure is designed to secure. Several board members have objected to the idea of paying license fees, saying "as a nonprofit institution we should not be required to pay license fees that could otherwise be used for patient care." The board is also afraid of the effect that any regulations would have upon the hospital's operation and asks if you aren't similarly concerned. The chief of staff has already expressed the opinion that if any licensing is to be done, it should be done by the American Medical Association or the Joint Commission on Accreditation, and this opinion is known to the board members. You decide, nevertheless, to attempt at the next board meeting to secure your board's approval of the idea of state hospital licensure and of your participation as a member of the governor's advisory committee. What action would you take to persuade the Bellam Hospital board of trustees to support the idea of state hospital licensure? to support your participation as a member of the governor's advisory committee? COMPLEMENTARY QUESTIONS

1. As administrator of Bellam Hospital, would you take the position regarding state hospital licensure which the administrator is reported to have supported? Explain. 2. On what basis would you expect the governor of the state rather than the state legislature to appoint a committee to study the licensure questions? 3. What is the purpose of a governmental licensing requirement? What other means are there of accomplishing the same purpose? Can the other means actually be used to accomplish completely the same purpose? On what basis can the state justify its entering the field of licensure? 4. What are the units of government which can enact legislation or quasi-legislative requirements which affect hospital operation? What should be the scope of the legislation of each enacting body with respect to requirements they make on the public? What are the relationships of the legislative requirements of the different branches of government to each other? 5. What would you expect the attitude of hospital equipment and supply companies to be toward state licensing requirements for hospitals? Explain. 6. What effect do you believe state licensure laws will have on the field of hospital administration five years from now? ten years from now? How might this effect be modified by the trend you expect to occur in the use of tax dollars for financial support of this country's health services? 7. If standards are to be promulgated by the state, who do you think should develop them? Who do you think will develop them? 8. If standards are promulgated by the state, which level of govern145

Decision Making in Hospital Administration ment should enforce them? What action can you, as a hospital administrator, take to help put qualified persons in the governmental positions where application of the standards is accomplished? 9. What are differences in hospitals that affect the applicability of hospital standards? How can hospital legislative standards account for such individual differences and still have any meaning or value? 10. What recourse do you as a hospital administrator have if you object to the governmental standards? to the application of standards? 11. Does licensure necessarily require establishment of standards? Explain. 12. What would be your reaction as a hospital administrator upon discovery that the only way to prevent rigid enforcement of somewhat unreasonable local hospital ordinances would be to present "appropriate gifts" to the enforcement agency? 29. ADMINISTRATOR LICENSURE LAW OF MINNESOTA

The advisory board of hospital administrators to the Minnesota State Board of Health has been asked to review and comment upon a proposed revision in the State Act Relating to the Registration of Administrative Heads of Hospitals. The proposed revision was prepared by the staff of the State Health Department's Section of Hospital Services. According to the proposed revision: "Section 1. No person shall act as an administrative head of a hospital licensed under Minnesota Statutes . . . without first registering with the State Board of Health . . . as a hospital administrator. The State Board of Health and the Advisory Board shall pass upon the qualifications of applicants for registration, provide for and conduct examinations for registration, and duly register the applicants who successfully pass such examinations. "Section 2. The applicant for registration shall make a verified application therefore on a form furnished by the State Board of Health. Such application shall be accompanied by affidavits . . . certifying that the applicant is of good moral character. Such application shall be accompanied by a fee of $25.00 for the examination and original registration. No portion of this fee shall be refunded. No person shall be granted any such registration unless such person be at least 21 years of age, of good moral character and has sufficient knowledge, training, education, and experience as the State Board of Health may by regulation determine necessary.* * Under the existing legislation which would be replaced by this proposed revision, the applicant is required to have had at least two years' experience in an administrative position in such an institution in this state, or one of equal standing in another state, or has successfully completed one year of formal training in an approved course in hospital administration, together with a one-year internship therein.

146

Standards-Determining Agencies "Every person who, on the date (this law) takes effect, is actually engaged as superintendent or administrative head of a hospital or sanatorium in this state, shall be granted registration by the State Board of Health. . . . "Examinations shall be held twice each year at a time and place to be announced. At the discretion of the State Board of Health, examinations may be written, oral, or both and shall cover such theoretical and practical aspects of hospital administration as deemed necessary to demonstrate competence to administer a hospital. An applicant failing an examination may be re-examined upon payment of re-examination fee of $25. No applicant may take more than two examinations. "Having made application for registration as provided herein, a person eligible to take the examination may be granted a provisional registration for a period not to exceed six months. During this six-month period of provisional registration, such person shall take the examination. A person granted such provisional registration may serve as the administrator of a hospital for not more than one six-month period for which provisional registration is in force. "Section 3. Every such person so registered with the State Board of Health shall s register with the board annually during the month of July and pay a renewal registration fee of $15. All fees received . . . shall be paid by the State Board of Health to the state treasurer and the amount so paid to the state treasurer is hereby appropriated out of any money in the state treasury not otherwise appropriated, to the State Board of Health for the purpose of carrying out the provisions of (this act). The State Board of Health, in its discretion, may reinstate a lapsed registration on payment of the required fees. "The State Board of Health may refuse to grant registration, to renew registration, or may suspend or revoke registration of any registrant for the following: (1) The obtaining of or attempting to obtain registration by fraud or deceit. (2) Conviction of a crime involving moral turpitude. (3) Habitual indulgence in the use of narcotic drugs. (4) Conduct unbecoming a person registered under this act or detrimental to the best interests of the public. Before any such registration is suspended or revoked, 30 days' written notice shall be given the registrant of the date set for hearing of the charges. The registrant shall be furnished with a copy of the charges and shall be entitled to be represented by legal counsel at such hearing. Such notice may be given by registered mail. Any action of the board in refusing to grant or renew registration or in suspending or revoking registration may be reviewed by a writ of certiorari issued by the District Court. "Section 4. The State Board of Health shall have the power to fix such reasonable educational and training standards as it deems advisable for the purpose of providing competent and able persons to administer hos147

Decision Making in Hospital Administration pitals in this state, and to adopt such other reasonable rules and regulations as it finds to be necessary to carry into effect the provisions of (this act). The State Board of Health may rescind, modify, or revise such rules and regulations, from time to time, insofar as such action is not in conflict with the provisions of (this act). "An Advisory Board of five members shall be appointed in the following manner to make recommendations to the State Board of Health in such matters and to assist in the establishment of such rules and regulations and any amendments thereto. This Board shall consist of three members to be appointed annually from the membership of the Minnesota Hospital Association by the Board of Trustees thereof;. . . one member of said Board shall be the director of the course in hospital administration at the University of Minnesota; . . . one member of said Board shall be a duly licensed and registered doctor of medicine to be appointed annually from the Minnesota State Medical Association by the Council thereof. "Section 5. Nothing in this act shall be construed as requiring the registration of a duly licensed and registered doctor of medicine who operates a licensed hospital or sanatorium, owned by him, in this state. The governing authority of hospitals having a capacity of 14 beds or less as rated by the State Board of Health may request waiver of full compliance with the provisions of the regulations. The State Board of Health may waive the usual requirements for application and examination and accept an application for registration from the principal physician or nurse in charge of such institution whichever shall be designated by the governing authority as the administrator. Such physician or nurse shall be duly licensed and registered in this state as a doctor of medicine or as a professional nurse respectively. Registration under such waiver may be renewed annually by the State Board of Health at its discretion. Persons registered under such waiver shall not be eligible to serve as an administrator of another hospital without fulfilling the usual requirements for application and examination. "Any person violating any of the provisions of this act shall be guilty of a misdemeanor." What comments do you think the advisory committee should make concerning the proposed revision of the State Act Relating to the Registration of Administrative Heads of Hospitals? What factors did you consider when determining the comments you think the advisory committee should make? Upon what factors did you place most emphasis? least emphasis? Why? COMPLEMENTARY QUESTIONS

1. How do you define the terms "licensure"? "bill"? "state act"? "regulation"? "rule"? How would you decide whether a proposed piece of leg148

Standards-Determining Agencies islation should be placed in the form of a state act, a regulation, or a rule? 2. From where do you think the impetus should come to revise a piece of legislation concerning hospital construction or operation? 3. What organizations or groups do you think should participate hi the development of a piece of hospital legislation? in the evaluation of a proposed piece of hospital legislation? What procedures would you establish to secure the group or individual participation you would like in the development or evaluation of hospital legislation? 4. What questions would you expect to be asked by the legislators who hold the authority to approve proposed hospital legislation? Why? 5. What factors do you think motivate legislators when considering legislative bills? How would you recognize these factors when planning your approach to the legislators designed to secure their approval of hospital legislation you support? 6. To what extent do you think "the end justifies the means" when developing and attempting to secure approval of proposed hospital legislation? How might such a concept be applicable to the development of a legislative bill? to efforts to secure passage of a legislative bill? 30. HOSPITAL ACCREDITATION

You are administrator of Bellam Hospital, a 100-bed, general-acute hospital located in Bellam, a city of 30,000 population in a southern state. You have been the hospital administrator for about one year, having come with two years' experience as an assistant administrator in a 200-bed, general-acute hospital in a neighboring state. The city's principal industry is a small cotton-textile factory. There is no other hospital in the city. Your hospital is owned by a nonprofit association from whose members the board of trustees is selected and which acts, in effect, as a self-perpetuating board. The hospital has an excellent reputation in the community. The building was erected some fifty-five years ago as an orphan asylum and was converted to hospital use in 1915. In the main, the construction is not fire resistant apart from some additions made since conversion to a hospital. In this connection, the state fire marshal has repeatedly expressed to you the opinion that "something would have to be done." One of your board members, a prominent local politician, has in the past discussed any shortcomings in relation to fire prevention with the fire marshal. Medical, surgical, obstetric, and pediatric services are maintained, but owing to lack of space, there is no segregation of operating and delivery rooms. Frequently the segregation of patients breaks down because of the high average census. In fact, space is so inadequate that a substantial part of the hospital stores are maintained in a nearby residence rented as a warehouse. 149

Decision Making in Hospital Administration X-ray diagnostic service is provided, and a small laboratory is maintained for routine tests. The two technicians who operate these services do so without any particular guidance, and readings and interpretations are made by the physicians who request the examinations. The hospital laboratory is operated by technicians trained by members of the medical staff and supervised once a week by a consulting pathologist. No examination is made of tissue removed in surgery. The medical staff is not formally organized, but frequent meetings of the entire staff are held. These meetings are usually dominated by the chief of staff, who is a general practitioner of considerable standing hi the community. Minutes of staff meetings are kept to record discussions of selected cases which were discharged from the hospital since the last staff meeting. Medical staff appointment and tenure in effect is controlled by the chief of staff. The chief of staff has resisted any effort to secure Joint Commission on Accreditation of Hospitals approval, maintaining that it is not necessary and that he is responsible for the quality of medicine practiced in the hospital. He has not felt the need to formalize medical staff procedure into medical staff bylaws. The director of nurses has been with the hospital for twenty years and is considered satisfactory by the medical staff. She does not have a bachelor's degree and is thought to be old-fashioned by many of the nursing staff, who look upon some of the nursing procedures which she has established as needlessly detailed and time-wasting. The medical records section is handled by a former stenographer under the supervision of the head bookkeeper. The records are reasonably complete although not reviewed or used by the medical staff. The filing system is antiquated. The average daily census is 85, and occupancy fairly frequently reaches 100 per cent. It is definitely felt by the community and by everyone connected with the hospital that additional space or an entirely new hospital is needed. But resources of the community are limited, and a proposal two years ago for a survey of hospital needs in the area was dropped because of insufficient funds to finance the survey. The hospital operates with an annual deficit in the neighborhood of $10,000 to $20,000, which is met by contributions from the members of the hospital association and the owners of the cotton-textile factory, who actually live in the North. Maintenance of the physical plant has suffered because of the chronic shortage of funds, which also limits expenditures for other activities such as travel expenses for the hospital administrative staff. The only legislation covering hospitals at all in the state is a law which pertains to "any institution, place, or agency in which, within a period of 150

Standards-Determining Agencies six months more than one woman during pregnancy, or during or after delivery is left for treatment." A proposal was made in the state legislature five months ago to adopt the Model Hospital Licensing Law, as recommended by the Council of State Governments. There was considerable opposition to such a law from some influential businessmen on hospital boards of trustees and from the state medical association. The governor appointed an advisory committee to review arguments for and against a state licensure program and to recommend what action he should take. The governor asked you to serve as a member of that committee, which you did, with the approval of your board. The board did not endorse your view that a state licensure program for hospitals should be developed nor did they oppose it, although the board is inclined to resist the "imposition of outside control." Instead they decided to reserve judgment until you could report to them the results of the preliminary investigations of the governor's committee. The board still has not determined its point of view because the governor's committee is still preparing its report and the state legislature has completed its session. The board feels no need to make a decision until the legislature reconvenes two years from now. You are disappointed with the outcome of events because you wish the assistance of an "outside" review of hospital operation to assist you in improving Bellam Hospital's operation. You would have preferred to effect such improvement before requesting an inspection by the Joint Commission on Accreditation. You believe, however, it would be well to consider the possibility of requesting such an inspection and have reserved time for a discussion of the subject at the next monthly meeting of the board of trustees. Do you think the administrator of Bellam Hospital should attempt to secure approval from the board of trustees for a Joint Commission on Accreditation survey of Bellam Hospital? Why, or why not? If you were to attempt to have such a survey made, what action would you take as administrator of Bellam Hospital to secure board approval of the survey? to secure the medical staff's approval? What priority would you place on the actions you have listed? What effect would lack of medical staff approval have on your actions? What action would you take, or what would your attitudes be, if the board of trustees should not authorize you, as administrator, to request a survey by the Joint Commission on Accreditation? COMPLEMENTARY QUESTIONS

1. Do you believe Bellam Hospital would receive full approval, provisional approval, or would not be approved by the Joint Commission on Accreditation? 151

Decision Making in Hospital Administration 2. What specific improvements of Bellam Hospital's operation do you believe a survey by the Joint Commission on Accreditation would note as needed? 3. Under what circumstances would you seek "outside" assistance such as that solicited by the administrator of Bellam Hospital? 4. What channels of communication would you use when attempting to convince the board of trustees that a Joint Commission on Accreditation survey should be made? when attempting to convince the medical staff that the survey should be made? What other channels of communication would be available to you? 5. If a Joint Commission on Accreditation survey were made in the hospital, what channels of communication would you use to inform the medical staff of the results? What would be your approach to the medical staff to stimulate their corrective action on conditions which the survey found to be needing improvement by medical staff action? 6. What do you consider the objective of the Joint Commission on Accreditation survey to be? What do you consider its relationship to be to a state program of hospital licensure? to local regulations concerning hospital care? 7. What effect, if any, would you anticipate that increased hospital dependency on third-party payers and governments as sources of payment of hospital bills would have on the status and function of the Joint Commission on Accreditation program? 8. Do you believe the $10,000 to $20,000 annual deficit of Bellam Hospital is justified? Explain. 31. POSTGRADUATE MEDICAL EDUCATION Foster Hospital is located in a small town in an eastern state and is approximately twenty miles from the state capital. It provides services in medicine, surgery, obstetrics, and pediatrics and has 104 beds and 30 bassinets. The hospital is fully accredited by the Joint Commission on Accreditation. Ownership is vested in a nonprofit association. The hospital building, which replaced an older structure, is absolutely modern in every respect. It was completed four years ago, ten months before you became the hospital's administrator. Foster Hospital is affiliated with one of the teaching hospitals in the state capital, where one of the larger medical schools in the country is located. Through this affiliation, Foster receives interns in medicine and surgery for a three-month period. The members of the medical staff for some time have been interested in securing accreditation for intern training by the American Medical Association, and they feel that some action should be taken now. The chief of staff has discussed the matter with the president of the board, saying 152

Standards-Determining Agencies that the medical staff would prefer to operate an intern-training program by themselves. He says the staff members wish to show that they do not need the assistance and support received from the affiliation program with their colleagues in the medical school. The president of the board has asked you, as the hospital's administrator, "to look into the matter" and to recommend to the board what action should be taken. You agree to do so and add, as an offhand observation, that you suspect the basis for the medical staff's attitude is resentment against the faculty of the medical school. You have learned that the dean of the medical school has expressed doubt as to the medical staff's interest in giving time and energy to the intern- and resident-training programs of the hospital. The staff of Foster Hospital is closed and is formally organized with an executive committee consisting of the four chiefs of service. Clinicalpathological conferences are regularly scheduled but frequently are held at the convenience of the pathologist, who serves two other hospitals in the county as well as Foster Hospital. There are no departmental meetings, but there are monthly staff conferences at which recent developments in the various medical fields which may affect the practice of medicine at the hospital are reviewed. Medical records are kept in good order and are in charge of a librarian who has had only a high school education but who has worked at the hospital for some fifteen years in this capacity. There is considerable delay in completing medical records, however, and this problem has been before the medical staff for over a year. The clinical laboratory is under the supervision of the part-time pathologist. It is staffed by three technicians who have had adequate training and experience for their jobs. The autopsy rate currently stands at about 15 per cent. Copies of pathology laboratory examinations are filed in the laboratory and in the medical records. X-ray service is confined to diagnostic work, and the equipment and space available are adequate for this purpose. A registered X-ray technician is in charge of the service. Any patient requiring therapy is sent to one of the hospitals in the nearby state capital. There is no radiologist on the staff, and the physicians make their own arrangements for the reading and interpretations of films. For some time the medical staff has been talking about the desirability of establishing a medical library, and a subcommittee has been appointed to look into the matter. Space was provided in the new building, but it is presently being used as a storage area for some of the older medical records. The hospital subscribes to all the recognized medical journals, and several of the staff members have expressed their intention to donate professional literature as soon as the library is organized. During the last year, the average daily census has been increasing con153

Decision Making in Hospital Administration stantly and has now reached a figure of 115. For last year, admissions were 3961, births 898, and outpatient visits 2842. The town in which Foster Hospital is located has as its principal industry a small textile factory. During the past two years this factory, which operated on a three-shift basis during World War II, has been open only intermittently, and its payroll has been very much reduced. As a result, the number of indigent and medically indigent patients in the hospital has increased from a daily average of five during the war to approximately twenty-five. The Community Chest and tax-fund subsidies have been able so far to finance hospital care of the medically indigent patients. However the operating financial problems of the hospital continue to be ever present and difficult. What recommendation would you, as administrator of Foster Hospital, make to the board of trustees relative to establishing an approved intern-training program in the hospital? Why did you decide on your recommendation? What alternative recommendations did you consider? COMPLEMENTARY QUESTIONS

1. What do you consider the essential factors in determining the time at which a hospital should seek approved status for an internship program which it wishes to conduct? 2. What is the objective of an approved residency program? 3. What differences exist in the kind of standards to be met for approval of a residency program as compared with an internship program? 4. Do the requirements for approved hospital internship and residency programs conflict with each other? complement each other? Explain. 5. How might an approved internship or residency program affect the organizational structure of your hospital's medical staff? Would your organizational structure vary with your hospital's size? with the development of a professional staffing relationship with a medical school? with your hospital's affiliation with a medical center? Explain. 6. What administrative problems would you as an administrator expect to find associated with the establishment and administration of an approved internship and residency program? What administrative problems do you think might be solved in part by the establishment and conduct of such training programs? 7. Which advantages and disadvantages of a hospital training program for interns and residents do you consider applicable to other hospital training programs? Do the other hospital training programs have advantages or disadvantages not found in intern- and resident-training programs? Explain. 8. Do you believe that the "costs" which are considered when establishing the basis and amount of payment from third-party payers and from 154

Standards-Determining Agencies governmental agencies should include the expenses of hospital training programs? What are the arguments for and against such a practice? Would they vary with the individual training programs? What "extra" expenses would you expect a hospital to incur because of its training programs? Would you approve or disapprove of a tax-fund subsidy for medical education? Explain, noting the advantages and disadvantages of such financial arrangements to the administration of hospitals. 9. What comment would you make on the apparent motivation of Foster Hospital's medical staff to establish an internship program? 10. If you, as a hospital administrator, and the hospital's medical staff felt differently as to whether an approved internship and residency program should be developed, would your recommendations to the board of trustees be modified in consideration of the medical staff's viewpoint? What would be your approach to the medical staff when communicating your viewpoint on the subject? What would be your channel and means of communication? Would you discuss with the medical staff your recommendations to the board before or after presenting them to the board? Explain. 11. How do you think the patterns of medical education programs in hospitals might be affected by increased financing of medical care by thirdparty insurance companies or by increased financial assistance from tax funds? 12. What comment would you make on informal, direct conversation as the channel of communication used by a chief of medical staff to bring to the board of trustees' attention the staff's desire for its own teaching program? 13. What are the advantages and disadvantages of placing responsibility and authority for an intern- and resident-training program on a director of medical education as compared with chiefs of the hospital services? Which pattern of organization would you prefer as a hospital administrator, and why? What factors would affect your conclusion? 32. SCHOOLS OF NURSING

Dell Falls Hospital, a 200-bed, general-acute^ voluntary institution, is the only hospital located in an industrial city of 50,000 people. The nearest city has about 100,000 population and is thirty miles distant. There are a commercial college, ^teachers' college, and a theological seminary in Dell Falls. The hospital is about fifty years old. The physical plant has been kept in good repair, and 50 beds were added to the hospital in the last two years. The service facilities were barely adequate before the addition. A new nurses' home to accommodate 75 student nurses was constructed four years ago. This construction accounted for the lack of funds to finance 155

Decision Making in Hospital Administration the badly needed expansion and improvement of the ancillary services at the time the 50-bed addition was built. The service to the public has been very satisfactory, considering that the number of personnel averages about one-plus employees per patient. The hospital has not paid the salaries offered by the industries of the area. The hospital's charges are approximately 10 per cent lower than those of the nearest hospital thirty miles away. Operating deficits have been made up by funds from the Community Chest. The hospital has been approved by the Joint Commission on Accreditation and the state health department, and it participates in the state Blue Cross program. The school of nursing was founded forty years ago by the first woman serving as a member of the board of trustees. There is considerable public sentiment attached to the school. However, because of the building program, building needs, increased hospital costs, and nursing-education salary expenses, the school has been the first department to receive a reduction in budget. The reduction has meant a curtailing of several activities of the school. Classroom theory was cut to a minimum, library contributions declined, loss of qualified instructors resulted, and affiliations were reduced. As a result of these changes, the standing of the school was lowered from a rating in the highest 25 per cent of the schools of nursing, in the nation to Group II (middle 50 per cent of all schools of nursing in the United States). If standards continue to be lowered, there is danger of the school's losing its accreditation. The State Board of Nursing Examiners has recently become critical of the school because the examin-, ation grades of the school's graduates have dropped below the state and national averages. During this month's board meeting, you mentioned to the board that you need its decision on the future status of the school of nursing to guide you in final preparation of next year's budget for the board's review at its next monthly meeting. The board agreed that the subject should be included in next month's agenda and asked you to prepare all background material necessary for its decision. The attitudes of various groups interested in the hospital vary greatly as to whether the school should be improved or discontinued. The general public wholeheartedly supports the idea of a hospital school of nursing. It is a matter of local pride to have a school of nursing in the community. Moreover, there is an economic reason for the public's interest, as many of the girls cannot afford to leave Dell Falls for training elsewhere. Dell Falls Hospital conducts the only school of nursing in the immediate area except for a grade-one school of nursing in a city thirty miles distant. The latter school is limited in size of enrollment by its available clinical facilities. Applications for enrollment in the Dell Falls Hos156

Standards-Determining Agencies pital School of Nursing have always exceeded available space, perhaps to a large extent as a result of the student enrollment tours frequently taken by the director of nurses. The public feels a need for educating nurses who would be interested in remaining in the community. True, many of them leave the hospital to enter industrial nursing, but they do remain in the area. The hospital trustees are rather lukewarm about the status of the school. They seem to be more interested in the amount of expense the school has incurred than anything else. They note that the school cost the hospital $45,000 during the last fiscal year, which was 6 per cent of the hospital's total operating expense. The school had an income last year of $20,000, including tuition of $200 per student, which was 2.77 per cent of the total income of the hospital. Another possible course of action which has been discussed is the advisability of retaining and improving the school in the light of present trends in the nursing profession. One board member has brought out that the commission on hospital care recommended "that the curriculum for nursing education should be studied with a view toward reducing the time required for completion of the general course." Another member, having read Dr. Esther Brown's report, "Nursing for the Future," believes that the three-year schools for basic nursing should be discontinued. Mrs. White, a member of the board, does not agree with the above opinions. To her knowledge, no national or state nursing association has adopted the "Brown Report" as a program for action. She adds that nursing educators have been advised that the abolition of diploma programs for nurses is not contemplated. Mrs. White suggests that bills in Congress which will give federal aid to schools of nursing approved by state licensing agencies should be investigated and supported by hospital organizations. She said the board of trustees of the American Hospital Association has endorsed such bills in the past. Another member of the board thinks the "Goldmark Report" of 1923 is sounder to follow. A majority of the medical staff is definitely against continuing the school. These members feel that the school takes funds from medical necessities (including internship and residency programs) and that if the nursing school's standards are to be raised, the school budget will need to be increased. Some of the doctors say that the present nursing curriculum is not adequate, that the number of student nurses should be reduced, that a three-year basic program is too long, and that graduates are not content to do "common bedside nursing." This group would rather have Dell Falls Hospital offer a course in practical nursing and hire graduate nurses from other hospitals. 157

Decision Making in Hospital Administration The medical staff maintains that the hospital is functioning for the care of the sick, not as a college for nurses, and since the school is not specially endowed, it would be logical to expect a reasonable amount of bedside care from the student nurse. The medical staff also feels that the present curriculum does not allow sufficient time for practical training, and that the hours of class instruction are given at the expense of hours of bedside experience, resulting in "over-educated but under-trained" nurses. The nursing department, as could be expected, is loyal to the school. Miss Smith, the director, and one of the instructors are the only members of the nursing administrative staff who are not graduates of the hospital school. Almost all the general-duty nursing personnel are graduates of the hospital's own school. Miss Smith is firm in her conviction that the school of seventy-five students should be maintained. She feels the community needs the graduates and that it is a duty of the hospital to sacrifice for community needs. She also feels that the hospital should continue the program inasmuch as it is being staffed with its own graduates and efforts to attract nurses from other schools have been unsuccessful. The hospital's 2.5 average bedside nursing hours per patient day would decrease, Miss Smith believes, if the school program were to be discontinued. She also maintains that the quality of nursing care would decline considerably if the school should be discontinued. She feels that the expenses of the school of nursing are not out of proportion when considering the contribution of student nurse services. You believe the hospital's student nurse program is "costing" the hospital approximately $400 per graduated student. Miss Smith does admit that there is a "bottleneck" in clinical training in obstetrics. However, it has been agreed by all concerned that an additional 15 maternity beds, to bring the total maternity beds to 30, will be provided as soon as a building program is feasible. The students now affiliate for experience in communicable diseases for three months, and in psychiatry for three months, and some students must affiliate for two months in obstetrics. Miss Smith mentions that student health practices are up to National League for Nursing Standards except that students are assigned twenty weeks of night duty instead of ten because of the shortage of graduate nurses. The director of nursing service also serves as director of the school of nursing. The teaching staff includes the director, two full-time instructors, and one part-time instructor. Each full-time instructor teaches about six subjects. Miss Smith is proud to state that no student has failed state board examinations in the last ten years. What recommendations would you make to the board of trustees of 158

Standards-Determining Agencies Dell Falls Hospital relative tc the future status of the nurses' training program? What alternatives did you consider? Why do you prefer the course you have recommended? COMPLEMENTARY

QUESTIONS

1. What do you believe to be the essential factors in determining whether or not a hospital should conduct an approved school of nursing? 2. What are the objectives of a hospital school of nursing program? Do you consider the objectives any different from those of a collegiate school of nursing program? Why, or why not? 3. Do you believe there should be any difference in student eligibility standards for a hospital school of nursing as compared with a collegiate school of nursing? Should the two programs require different standards of hospital clinical experience for their students? Explain. 4. Does the idea of collegiate schools of nursing conflict with the idea of hospital schools of nursing? Explain. How do you believe the collegiate, hospital, and practical nursing schools and their graduates relate to each other at present? How do you think they should relate to each other ten years from now? Why? 5. How might the operation of an approved school of nursing program affect your hospital's administrative organizational structure? Would the number of beds in your hospital affect your organizational structure for nursing education? What other factors would affect the organizational structure of a hospital school of nursing, and how? 6. How might the organizational structure of your hospital's school of nursing be affected by the school's affiliation or coordination with a collegiate school of nursing? with a practical school of nursing? by your hospital's affiliation with a medical center? Explain. 7. What administrative problems would you anticipate with the development and operation of a hospital school of nursing in your hospital? What administrative problems do you think might be solved, at least in part, by the operation of a hospital school of nursing? 8. Do you believe your hospital's school of nursing expenses should be included in the "costs" used to calculate the amount of reimbursement due from Blue Cross and health insurance companies or the government? Justify your viewpoint. Do you believe that legislation should be supported for federal support of schools of nursing? Why, or why not? 9. If you as a hospital administrator wished to establish a hospital school of nursing, what steps would you take to accomplish your objective, and in what order? 10. As administrator of Dell Falls Hospital, what channels of communication would you use to discuss with the medical staff the future status of the school of nursing? What would be your "pitch" to the staff?

159

Decision Making in Hospital Administration If you felt the medical staff would differ strongly with your contemplated report to the board on the nursing school's future status, how might that affect your recommendation to the board? Would you discuss with the medical staff your recommendations to the board before or after presenting them to the Board? Explain. 11. What is your comment on the timing of the Dell Falls Hospital administrator's request for a board decision?

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8 Organized

Medicine

33. CORPORATE PRACTICE OF MEDICINE Dr. Andrews, the pathologist and director of laboratories at Billings Hospital, has approached you, the hospital's administrator, with a request that the basis of payment for his services performed in the hospital be discussed. Later that same day, Dr. Clark, the hospital radiologist, presented you with the same request. You had been expecting visits from these physicians since the state attorney general's opinion was announced three days ago. The opinion declared that a nonprofit charitable corporation operating a hospital cannot pay a physician a fixed salary and bill patients for services rendered by the physician at rates unrelated to his salary without being guilty of the illegal practice of medicine as a corporation. You have already discussed the opinion's implications with the president of your board of trustees, and it was decided to discuss the subject fully at next month's meeting of the full board. The attorney general's interpretation of a state statute was requested by the State Board of Medical Examiners with particular reference to the employment of a pathologist by a nonprofit hospital. However, the principle was equally applicable to other licensed physicians and surgeons employed by a hospital. Your state is one of the few states which by statute, in this case in effect for eleven years, specifically deny corporations the right to practice medicine and which make no distinction between profit and nonprofit corporations. This lack of distinction in the statutes is of great importance since it is the point of law which legally supported the opinion rendered. The generally accepted rule of law in most states, you find, is that a nonprofit charitable corporation may employ physicians at a fixed salary so long as the physicians are not selling their services for profit. Therefore the ethical aspects of such a fixed salary arrangement are such that nonprofit hospitals are not subject to laws interpreted as prohibiting corporate practice of medicine. A rule of law in your state, however, provides that "what may 161

Decision Making in Hospital Administration not be done directly may not be done indirectly," and the attorney general's opinion holds that hiring physicians at a fixed salary and offering their services to the public is indirectly practicing medicine. Four major exceptions to this statute prohibiting corporate practice of medicine are in effect in your state as follows: First, the statute does not apply to government hospitals, since according to rules of law a statute does not apply to the government unless it is specifically so provided and the statute in question has no such provision. Second, your state supreme court has ruled that the State Physicians Service, a nonprofit, medical-care insurance corporation, is exempt from the provisions of the statute. Third, county boards of supervisors are authorized in the Welfare and Institutions Code to contract with voluntary hospitals for the furnishing of medical care to indigents. Medical care is defined as including medical, surgical, and all such other care and service necessary to treat the sick. Fourth, the Workmen's Compensation law allows employers to furnish medical care to employees injured in industrial accidents even to the extent of employing physicians and building and maintaining hospitals. An-other provision of the law authorizes the Industrial Accident Commission to fix medical, surgical, and hospital fees unless there otherwise exists an express agreement fixing these fees. Any other exceptions to the statute exist only because the letter of the law has not been enforced. Dr. Andrews has been the hospital's full-time pathologist for the past fourteen years. He has been paid on a salary basis for the entire period and at the rate of $15,000 annually for the past four years. Dr. Clark has served as the hospital's full-time radiologist for the past nine years, has likewise been paid on a salary basis, and at a yearly rate of $15,000 for the past two years. Both men have been satisfied with the salary basis for payment. Dr. Andrews has been satisfied with the amount of his salary. Dr. Clark, however, has indicated that he would ask for an increase of $3000 next year, to be on a par with the salary earned by the radiologists providing service in other hospitals in your hospital council or who are conducting private practices in their offices. Both men have expressed their personal willingness to continue the salary arrangement regardless of the attorney general's opinion. They add, however, that in order to maintain friendly relations with their professional colleagues, a more acceptable basis for compensation should be developed. The Billings Hospital medical staff would not apply pressure for such a change, the two physicians assert, but other physicians of their own specialties and the county medical society might expel them from membership in their organizations if the salary basis for payment were to be continued. 162

Organized Medicine Discussion was undertaken with Dr. Andrews and Dr. Clark concerning the alternative financial arrangements which they would prefer. Dr. Andrews thought a percentage of the gross earnings of the laboratory would be a satisfactory arrangement from his viewpoint, while Dr. Clark favored his purchase of the X-ray equipment from the hospital and subsequent rental of X-ray department space from the hospital. Dr. Andrews would like the hospital to place his name on the bill rendered the patient. Separate billing of X-ray patients for his professional services would be preferred by Dr. Clark. Billings Hospital is fortunate to receive sufficient income from its endowment funds to finance the free care of approximately 10 per cent of the inpatients admitted and below cost care to another 20 per cent of its patients. That is, approximately 30 per cent of Billings Hospital's patients are considered medically indigent, with one third of these patients receiving care at no cost to the county. The remaining two thirds, or 20 per cent of all patients, receive some financial support from the county in the form of a per diem payment to the hospital, at a rate sixteen dollars under cost. Both the pathologist and the radiologist spend part of their time in supervising the work of their respective departments and in conducting teaching programs. Certain of the board members have previously expressed the opinion that such work is not the practice of medicine and therefore questioned the propriety of paying the pathologist and radiologist on any basis other than a salary. On examining Billings Hospital's operating statements, you find that gross income for laboratory work amounted to $42,000 for the past eight months of this year. You estimate that the year's gross income will total $63,000, and similarly that total gross income from the X-ray department will be $ 175,000 this year. With these factors in mind, you begin preparing your recommendations for the board of trustees. You wish to determine what action should be taken by the hospital's administration and the board of trustees as a result of the state attorney general's opinion on the corporate practice of medicine. What recommendations would you present to the board of trustees of Billings Hospital regarding action which should be taken in consideration of the attorney general's opinion on the corporate practice of medicine? Upon what factor did you place greatest emphasis when arriving at your decision? What alternatives did you consider? Why did you select the alternative which you have recommended? COMPLEMENTARY QUESTIONS

1. Do you agree or disagree that a hospital may practice medicine? Explain. 163

Decision Making in Hospital Administration 2. What do you think the purpose is of a state statute which specifies that hospitals cannot legally practice medicine? What are the advantages and disadvantages of such a law with respect to its effect on the patient? 3. What are the advantages and disadvantages of full-time service by radiologists, pathologists, and anesthesiologists in a hospital from the viewpoint of the patient? the physician? the hospital? 4. What would be the advantages and disadvantages of full-time service in hospitals by surgeons, obstetricians, and other physicians from the viewpoint of the patient? the physician? the hospital? 5. Do you think that full-time service in hospitals by physicians other than radiologists, pathologists, and anesthesiologists will become prevalent in general-acute hospitals in the next ten years? Explain. How might your conclusions vary with a hospital's size? program? type of ownership? affiliations? location? How might your conclusions be affected by increased purchase of prepaid health insurance by private individuals or by increased allocations of tax funds for health purposes? 6. What do you believe are the advantages and disadvantages of the salary basis of reimbursement by hospitals to physicians from the viewpoint of the patient? the physician? the hospital? 7. What is meant by the words "doctor-patient relationship"? What is the importance of such a relationship? What actions do you think are necessary if such a relationship is to be "safeguarded"? 34. GROUP PRACTICE AND CLINIC MANAGEMENT A member of the board of trustees of Mary Vernon Hospital, a voluntary, nonprofit corporation, presented to the board what he believes to be a subject for serious consideration. A friend of his, who is president of the largest bank serving Landom's 50,000 persons, had asked him about the justification of a loan request he expects to receive from some of Landom's physicians. These specialists and general practitioners are planning to form a corporation to construct a doctors' office building. The physicians are also discussing the possibility of establishing a group-practice organization. They have inquired as to whether money might be made available to construct clinic-ancillary facilities as well as the office building itself. The board of trustees has for some time approved of the idea of a doctors' office building. The other ideas of the physicians are new, however, and disturb the board of trustees, which has envisioned the 250-bed Mary Vernon Hospital and the 200-bed St. Vincent's Hospital as being the focal points for the diagnosis and treatment of patients by the general practitioners and specialists of the community. The board has considered ambulatory and preventive care as hospital functions, which would make further use of the complicated and expensive hospital equipment. The 164

Organized Medicine board has so far authorized the establishment of six hospital clinics for the ambulatory care of physicians' private patients for whom laboratory and X-ray examinations are performed upon request. The board has asked Joseph Linton, the hospital's administrator for the past six years, to investigate the recent developments and to discuss their implications at the next monthly board meeting. Linton talks first with the physicians who are promoting the construction of the doctors' office building and the organization of a group medical practice. They reiterate their belief that fulfillment of the plans will mean more and better quality care for the patient at more convenience to him and at a cost perhaps less than that under existing arrangements. They note that physicians also would benefit from better interchange of information and from the opportunity to obtain consultation without loss of income; and that they would have stability of income, regular hours, time for study, and freedom from business details. The physicians add in response to Linton's questions that they have been thinking also of providing laboratory and X-ray equipment and personnel in order to make available a more complete package of care. They feel that there would be sufficient demand for service to justify any resulting duplication of facilities. Linton describes the possibility of building the doctors' office building as an addition to or adjoining the hospital, and of using the hospital's existing clinic and ancillary facilities which could be enlarged as needed. The physicians show little enthusiasm, for the suggestions. They believe that the hospital places ambulatory and preventive care second in importance to inpatient care, including care of chronic and mental disease patients. A better arrangement, they feel, would be to have the ambulatory care performed by the group-practice physicians in their own facilities. The physicians say this would reduce the need for hospital beds and permit earlier discharge. They note the difficulty of locating ancillary facilities so that they can answer the demands of both the inpatient and outpatient programs. The group clinic, they add, can act as the community's primary health resource, permitting a better doctor-patient relationship than could be provided in the hospitals. The physicians envision the development of a prepayment insurance plan that will aid the patients to pay for preventive, ambulatory care. They believe that the third-party health insurance plans now available to the area's population do not provide broad enough benefits to the insurance purchasers and do not sufficiently emphasize preventive care. Linton knows that 34 of Landom's 78 specialists and general practitioners have not reserved space in the proposed office building. Some of these physicians object to the centralization of doctors' offices per se. Others believe the proposed building should not be financed by a corporation developed and controlled by physicians. As Linton talks with the 165

Decision Making in Hospital Administration physicians who have reserved space, he finds that they are not all agreed on the idea of developing a group practice. Varying viewpoints are expressed on the number and composition of the group, the location of ancillary facilities for its use, and whether the group should be established at all. At least eight of the physicians who support the proposed building do not wish to participate in a group medical practice organization. Of those physicians who do wish to develop such an organization, fifteen general practitioners and specialists believe the size of a group medical practice should be limited to about that number of physicians. Four other specialists believe the group membership should be limited to specialists. These physicians say that a larger group destroys the individual initiative of the doctor, interferes with the doctor-patient relationship, and makes it difficult to provide integrated patient care. These physicians also appear to favor the utilization of the existing ancillary facilities in the hospitals. They believe such an approach would be more economical and, if combined with hospital clinic programs, would provide indigent patients with a place to receive ambulatory care other than in the doctors' offices. Linton knows from discussions with the superintendent of St. Vincent's Hospital that she would prefer to have group-practice organizations utilize existing ancillary facilities rather than purchase new facilities. She would naturally prefer having St. Vincent's ancillary facilities used rather than those at Mary Vernon Hospital. The physicians attempting to promote both a doctors' office building and a group-practice organization with its own ancillary facilities intend to raise the funds necessary to carry through their ideas regardless of the attitudes of the other physicians of the community. They believe they have sufficient stature with the public and within the county medical society to overcome any criticism they might meet. They tell Linton they are planning to operate the clinic with the assistance of a person trained in hospital administration. The Mary Vernon and St. Vincent's hospitals are primarily generalacute institutions serving the southwestern area of a southwestern state. They draw patients from Landom and a surrounding area with a total population of 150,000. The only other hospital within a hundred miles is a 35-bed general hospital at Richland. The hospitals have allocated approximately 15 per cent of their bed complement to the 'care of chronic patients and acutely ill mental patients. The hospitals also provide inpatient and outpatient care to the indigent patient and are reimbursed for such care from tax dollars at a rate per visit which is $2.10 less than cost. Medical care to the medically indigent is provided without charge by selected members of each hospital's medical staff. These physicians continue to assert that indigent care should be performed in the hospital regardless of their viewpoints concerning the desirability of a doctors' office 166

Organized Medicine building or group clinic organization. Both hospitals operate clinics for the diagnosis and treatment of particular diseases and are careful to return the patients to their referring physicians. Approximately 60 per cent of the medical staff of each hospital also hold staff privileges in the other hospital. Each hospital operates an internship and residency training program, but neither hospital participates in a training program for medical students. Linton reviews the information he has obtained on the background fof the physicians' inquiry concerning bank loans. He then begins preparing his presentation on the subject for the board of trustees. What comments would you make to the board of trustees of Mary Vernon Hospital regarding the development in Landom of a doctors' building with its own ancillary facilities? regarding the promotion of a prepaid medical insurance plan? Upon what factors did you place most emphasis when arriving at your decision? Why? What objectives were you •attempting to reach by your decision? Why do you consider the objectives to be important? COMPLEMENTARY QUESTIONS

1. How do you define "group practice"? "outpatient clinic program"? "private outpatient program"? 2. Would you think it desirable or feasible for all community health programs to be located in or adjacent to a hospital? Why, or why not? What factors would affect your decision? 3. Would you think it desirable, or feasible, for community-sponsored health, recreational, and social programs to be located near or adjacent to community hospitals? Explain. What factors would affect your decision? 4. How do you think the method of payment for physicians' services might affect whether the ambulatory care programs are centered around voluntary hospitals or group medical practice offices? What effect do you think an expansion of benefits and number of enrollees of third-party health insurance programs will have on the organization of ambulatory care programs? How might the organization of such programs be affected by increased acceptance by governmental agencies of financial responsibility for ambulatory care programs? Explain the basis for your comments. 5. What communication is needed between those primarily concerned with the operation of ambulatory care programs and those primarily concerned with inpatient hospital programs? Why? What channels of communication do you think should be used? How might the needs for intercommunication between ambulatory and inpatient care programs be answered at least in part by the organizational structures developed to provide such programs? 6. How can a lay administrator assure himself, and the public, of the high quality of an ambulatory care program over which he exercises ad167

Decision Making in Hospital Administration ministrative responsibility? To what extent should a lay administrator be concerned with the quality of such a program? Explain. 7. In a hospital, what should be the physical relationship of the area for ambulatory care to the area for inpatient care? Explain. 8. What are the basic space and layout requirements of an ambulatory care program? What facilities or departments should be located near the area for ambulatory care? 9. How might the scope, content, and organizational structure of a hospital's ambulatory care program vary with a hospital's size? inpatient program? affiliations? type of ownership? 10. If it were agreed upon by parties concerned that a hospital should construct a doctors' office building, how might the construction be financed?

168

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Other Community Agencies

35. INDIGENCY AND THE COMMUNITY CHEST The manufacturing town of Amherst, on the eastern seaboard, receives hospital service for its 190,000 inhabitants from three voluntary, generalacute hospitals. These hospitals are the Wright and Hawkins Memorial nondenominational hospitals and the St. Theresa Catholic Hospital. The hospitals operate 300,165, and 225 beds respectively. Each hospital incurs annual operating losses for part-pay and free care provided to medically indigent patients. Various means of raising funds have been used by the hospitals to offset part-pay and free care losses, the two most important in recent years being the fund-raising efforts of the Hospitals Joint Committee and the Community Chest. The hospitals' boards of trustees concluded two years ago, basing their judgment in part upon public opinion, that the hospitals should participate in the Community Chest. At that time the boards negotiated an agreement regarding such participation between the three hospitals as a group and the Community Chest. Now the boards are concerned about the basis for distributing the available Chest funds equitably among the three hospitals and wish to review the agreement. Each board is asking its administrator to prepare recommendations as to provisions which should or should not be included in the agreement. The advisory board of St. Theresa Hospital has just asked you, as their administrator of some three years' tenure, to prepare such recommendations. Until six years ago the three hospitals of Amherst were members of the Community Chest. They became dissatisfied, however, with their allocation of the money collected and in that year withdrew. For the purpose of raising funds in the community, they established a nonprofit, nonstock organization under the state laws, called the Hospitals Joint Committee. Campaigns were held for the next four years, and an average of $65,000 a year was raised. The Hospitals Joint Committee became a member of the Community Chest the following year with the understanding that the Chest would assume the fund-raising activities of the Committee and 169

Decision Making in Hospital Administration would provide the hospitals with a minimum annual budget of $65,000. The Committee was to continue its function of preparing budgets for the needs of the three hospitals covering their provision of care to the medically indigent. The Committee, as a Chest agency, was to present the budgets to the Chest for its review, possible modifications, and approval. Funds allocated by the Chest were to be distributed to the three hospitals as determined by the Committee. Two years ago the Chest decided to calculate the amount of the Chest payment to the Hospitals Joint Committee on the basis of the actual deficits incurred by the three hospitals during the previous fiscal year. These amounted to a total of $75,683, and it became apparent early last year that the deficits would run substantially higher. The Chest directors, feeling a responsibility to the public for the constructive use of the funds distributed, felt that the whole basis for participation should be reviewed since future payments to the hospitals would probably take a much larger proportion of the total funds distributed (17 per cent last year). The Community Chest's budget committee says that it will continue to need from the Hospitals Joint Committee, in sufficient time to aid the establishment of the next year's Community Chest goal, a declaration of the amount of funds which should be budgeted for hospitals. The Chest budget committee believes that last year's deficit incurred by hospitals for the care of the medically indigent would be a good basis for determining what portion of the next year's Chest budget should be allocated to hospitals. The budget committee believes, however, that depreciation should not be included in the deficit amount because building funds are secured through public fund drives. The committee also believes that the difference between the hospital's reimbursement from county patients and the hospital's per diem cost, excluding depreciation expense, should also be deducted from the hospital's "deficit" when determining the amount of Chest funds to be allocated to the hospitals. The Community Chest budget committee does not feel it necessary to be concerned with how the hospitals distribute available Chest funds among themselves. The committee does feel, however, that it should receive statistical and expense statements from the hospitals to help the committee evaluate the amount of Chest funds which should be allocated to hospital care. The committee wants the hospitals to agree on how specific expenses should be classified in accordance with the American Hospital Association's uniform system of accounts and to report their finances on standard forms for the budget committee's review. The hospitals' boards agree that a review of the agreements under which they would participate as Community Chest agencies is necessary. The boards feel, however, that they are directly responsible to the public for the content, quality, and scope of their respective hospital programs and that 170

Other Community Agencies the hospital governing bodies are best able to judge the community needs and the wise use of hospital resources. The boards place a high value on their independence and want no organized community effort other than their own to weigh the merits of hospital policies or operations. The boards are agreed that the amount of hospital funds to be budgeted annually by the Chest should preferably be based upon each hospital's estimates of deficits to be incurred during the coming year. The boards realize they will need a strong and unified approach to persuade the Community Chest to accept their point of view. The boards differ on the basis to be used to calculate the estimates, however. Wright Hospital's board believes the budget amount should be based upon an estimate of the medically indigent days of care for the next year times a rate negotiated between hospitals and the Community Chest. Hawkins Hospital's board prefers basing the calculations on an estimate of the number of medically indigent patient days for the next year times the average actual per diem costs of the three hospitals for the past year minus the amount of income which the hospitals expect to collect from medically indigent patients during the next year. St. Theresa Hospital's board has not yet decided whether an alternative method of calculating future losses on care provided the medically indigent might be preferable to the methods supported by the other two hospitals. The Chest budget committee regards such considerations as academic because the amount of direct funds to be budgeted to hospitals will depend upon estimates of the amount of income to be raised during its campaign for funds and the needs for its resources as expressed by other voluntary agencies. The hospital boards have not agreed as yet on a basis for distributing available Chest funds among the three hospitals. Hawkins Hospital's board prefers a proportionate distribution based upon the number of patient days each hospital provides the medically indigent patients. Wright Hospital's board favors a proportionate distribution based upon the number of medically indigent patient days times each hospital's average per diem cost. Again St. Theresa Hospital's board is considering possible alternatives to the proposals of the other two hospitals. The financial operations of the three hospitals last year are shown in Table 14. The expense of providing hospital care to the medically indigent patient last year, other than county patients, amounted to $ 15,721 in Wright Hospital, $24,742 in Hawkins Hospital, and $15,641 in St. Theresa Hospital. It is estimated that for the next few years, approximately $80,000 per year will be required to reimburse the hospitals for the cost of the free work which they will provide. The difference between the hospitals' per diem costs and the amount of reimbursement received from the county, for patients for whose care 171

Decision Making in Hospital Administration Table 14. Summary of Financial Operations for the Last Fiscal Year of St. Theresa, Hawkins Memorial, and Wright Hospitals' Item

St. Theresa

Operating income $1,064,484* Operating expense (except depreciation) 1,004,567* Operating gain (or loss)t 59,917 Supplementary income (except that derived from H.J.C. t) 8,124 Gain (or loss) before capital needs t 68,041 Current capital needs, depreciation, interest, and amortization 79,542 Gain (or loss) after capital needs t (11,501) H.J.C. grant 8,487 Final gain (or loss)t (3,014)

Hawkins Memorial $698,154 729,139 (30,985)

Wright $1,365,423 1,368,413 (2,990)

23,449 (7,536)

7,218 4,278

24,000 (31,536) 29,425 (2,111)

51,253 (46,975) 37,771 (9,204)

* Includes valuation of nuns' services. t Figures in parentheses represent loss. t Hospital Joint Commission.

the county has assumed financial responsibility, totaled $55,575 for the three hospitals last year. The county reimburses the hospitals on the basis of one negotiated rate for the three hospitals. Total patient days for the three hospitals last year numbered 88,530, 52,895, and 74,430 for Wright, Hawkins, and St. Theresa hospitals respectively. What recommendations would you present to St. Theresa Hospital's board of trustees regarding the provisions which should be included in an agreement between the hospitals and the Community Chest? What recommendations would you present concerning the basis for distributing available Community Chest funds between the participating hospitals? What alternatives did you consider when determining your recommendations? What factors did you consider most important to consider when arriving at your decision? COMPLEMENTARY QUESTIONS

l.What is the objective of a Community Chest? What functions should it perform to secure its objectives? 2. How do the objectives of a Community Chest compare with the objectives of a Health and Welfare Council or with a Council of Social Agencies? How might the programs of a Community Chest and of a Health and Welfare Council be interrelated? 3. What principles do you think should be observed when determining the amount and basis for reimbursement of hospitals by a Community Chest? Are the same principles applicable when determining allocation 172

Other Community Agencies of available Chest funds among hospitals who are member agencies of the Community Chest? 4. Do you believe that a patient whose hospital care is supported in part by prepaid health insurance or tax funds should be eligible to receive financial support from Community Chest funds? 5. How would you define the responsibility of a Community Chest for the financial support of care provided to hospital patients? What is the hospital's responsibility for the expenditure of Community Chest funds? 6. What are the advantages and disadvantages to hospitals of participation in Community Chest campaigns as compared to independent solicitation of operating funds? 7. Should teaching and research expenses be included in the "cost" of providing hospital care which is used as a basis for determining the amount of funds to be received from a Community Chest? 36. PREPAID HEALTH INSURANCE "Will you please discuss at our next meeting what effects voluntary hospital insurance plans are having on our hospital's operation?" said the president of Malvern Hospital's board of trustees to John Martin, the hospital's administrator for the past six months. Martin said he would, and also agreed to recommend what action, if any, should be taken by the hospital in dealing with the problems posed by existing hospital insurance plans. The situation to which the board president referred was based upon the sale of a hospital insurance plan by a large commercial life insurance company to a national meat packing company with a home office in the midwestern city of Malvern. A letter announcing the plan and signed by the presidents of the meat packing and life insurance companies had stated that presentation of the policy card to a hospital would eliminate the need for deposit at the time of admission. This statement was objected to by the president of the hospital's board of trustees as interference with the operation of the hospital. Malvern Hospital provides 350 beds for the care of general-acute patients, 60 beds for the care of chronic patients, and 40 beds for the care of acutely ill mental patients. The hospital's average occupancy is 88 per cent, with 14 per cent of the total patients receiving care financed by tax funds. Approximately 55 per cent of Malvern Hospital's patients carry some form of hospital insurance, of which 27 per cent is Blue Cross insurance. The commercial insurance companies supply 73 per cent of all prepaid insurance payments to the hospital. Blue Cross insurance was started in the area after commercial insurance but is gaining in the percentage of patients which it covers. John Martin's study of the situation finds that the hospital's accounts

173

Decision Making in Hospital Administration receivable have decreased by nearly 40 per cent since prepaid health insurance began to be purchased by or for the hospital's patients. Particularly important has been insurance for those patients in the lower income brackets. A major portion of the premiums, and hi some cases the total premiums, are being paid by the companies employing these patients. Martin finds the medical staff is pleased that some patients with prepaid hospital insurance are not postponing admission to the hospital as had been the case previously. Martin also learns that some problems have followed the growth of prepaid hospital insurance plans. The hospital's business manager has asked for an additional person to handle the added paper work and expects he may need even more assistance soon. He states that additional help would not be required if a standard form for reporting claims could be developed. He has described the necessity of developing a file of insurance policies which patients have purchased to facilitate estimating the benefits to which patients are entitled. A complete file, he indicates, would probably contain 2500 policies. The city officials also require detailed information on the care provided those patients for whom the city has accepted responsibility. The question arises as to whether the patient should be asked to make an advance payment at time of admission. Investigation is necessary to determine the extent of each patient's hospital insurance benefits. The length of time the patient has held his contract, the time at which he purchased the contract, whether he is temporarily employed, are some of the factors affecting the amount of his benefits. Information on Blue Cross patients and a few large commercial insurance companies is easily obtainable. However, from many small insurance companies it is difficult or practically impossible to obtain information on benefits or to learn whether they are assignable to the hospital. Questions about assignment to room accommodations also arise. Some patients with insurance, including Blue Cross patients, expect private room accommodations although it is doubtful that they can afford to pay the difference between the insurance room allowance and the private room charges. It is even doubtful whether some patients with hospital insurance can afford to pay semi-private room rates. At the time of discharge, the hospital often receives complaints concerning the necessity for patients with hospital insurance to pay part of the bill. Some patients feel that they should not be required to pay any amount to the hospital because they "have already paid for the insurance premiums." Other patients object to not knowing at the time of discharge the exact amount they will be required to pay. The hospital in many cases, particularly with smaller commercial insurance companies, incurs several weeks' delay in learning what portion of the patient's bill will be paid by the company. A number of the insurance companies require information from the patient's medical record, and the medical record is often not com174

Other Community Agencies pleted for several days or weeks after the patient's discharge. Martin learns that the medical staff blames this delay on the lack of dictating machines near the surgical and delivery suites and on the lack of space in the medical records room. Martin has heard that many members of the county medical society believe the society should take action to provide the patients with a comprehensive, service benefit, prepaid hospital and medical insurance plan. The physicians believe that neither the patients' nor their own self-interest is best served by the indemnity type of health insurance plan, the only type now available to the community. The physicians find further support for their proposed insurance plan in the high percentage of the premium under most insurance plans that goes for "administrative overhead." This is particularly true, they claim, in commercial insurance companies where "administrative overhead" absorbs from 50 to 60 per cent of the premiums. The city's administrative overhead in payments to hospitals for care of the medically indigent is estimated at 16 per cent of the benefits paid, as contrasted with the 8.6 per cent required to administer the Blue Cross program. Further investigation discloses to Martin that Blue Cross and various commercial insurance companies reject from 2 to 35 per cent of the claims submitted by the hospital, certain of the small companies having the highest percentages of rejections. These companies further disrupt hospitalpatient relations by stating that the claims are rejected because the information provided by the hospital is inadequate. To counteract this, Blue Cross and certain of the larger commercial insurance companies, have been thinking of conducting campaigns to develop public understanding of the reasons for increasing hospital costs and of the value received for the hospital payments made. From discussion with administrators of the eight other hospitals in the hospital council, Martin learns that the other hospitals are faced with similar problems. The administrators have been active hi the promotion of the Blue Cross plan in the area. They are aware that the plan is considered to have shortcomings: many persons are unable to enroll because they are not part of a larger group while others pay higher premiums because they are enrolled in a high-risk group. The administrators believe, however, that the hospital insurance program is beneficial to the public and can be improved in the future. What comments would you make to the president of Malvern Hospital's board of trustees regarding action which should be taken to improve the hospital's relationships with prepaid health insurance companies? Upon what factors did you place most emphasis when arriving at your decision? Why? What other factors did you consider? Why did you not place greater emphasis upon them? 175

Decision Making in Hospital Administration COMPLEMENTARY QUESTIONS

1. Do you believe any conflict exists between the objectives of hospitals and voluntary health insurance companies? between the objectives of hospitals and governmental units which have accepted responsibility for the financial support of medical or hospital care? Explain. 2. What do you mean by the terms "voluntary health insurance"? "thirdparty agencies"? "governmental health insurance"? 3. What do you mean by "full cost"? 4. What effect do you think an expansion of the benefits provided by voluntary health insurance and the number of persons covered by such benefits will have on the quality of care provided patients in hospitals? on the control of hospital care by third-party agencies? on the basis used to establish hospital rates? 5. What problems need to be overcome before voluntary health insurance companies can provide coverage for ambulatory or chronic care at prices which subscribers can afford to pay? What do you think can be done to eliminate the obstacles? 6. How are a hospital's relationships with voluntary health insurance companies affected by a hospital's size? program? type of ownership? affiliations? 7. Should a hospital apply uniform principles when determining rates of reimbursement for similar hospital services? in its relationships with all third-party agencies? Why, or why not? 8. What responsibilities should a hospital assume when reimbursed by third-party agencies at full cost? 37. GOVERNMENTAL HEALTH INSURANCE

The state in which you reside has just completed one year's experience under the "Hospital Insurance Act." It was by this act that the state legislature created the State Hospital Insurance Service. The primary objective of the service is to operate a hospital insurance plan which will make it possible for residents of the state to secure adequate general-acute hospital care regardless of their ability to pay. Other objectives of the insurance plan are to provide necessary hospitalization for everyone, to give more extensive hospital benefits at lower rates, and to place hospitals on a sound financial basis, thus assisting in the building of new hospitals and additions. A year's operation of the service has brought both praise and criticism from subscribers and hospitals. The service has become a politicalfootball, a target for sharp criticism in the press. The State Hospital Insurance Service administrators are endeavoring to evaluate the year's experience as a basis for improving service operations in future years. They and the state legislature's committee on health and welfare have requested the advice and counsel of the State Hospital Association. The Hospital Asso176

Other Community Agencies ciation was opposed to the establishment of the service but feels that if the service is to continue, the hospitals should help make it as effective as possible. Accordingly the State Hospital Association's Committee on Governmental Relations, of which you are chairman, has been asked to study the State Hospital Insurance Service and report on improvements which might be made in its operation. There are no restrictions as to the number of times a patient may be admitted or the length of his stay in the hospital as long as hospitalization is necessary. There are no limits attached to maternity benefits or to coverage for illness which began before the date benefits became available. The money to pay for these services comes partly from premiums of insured persons and partly from contributions by the state government. The plan is compulsory in that all residents must register and, unless exempt, must pay the prescribed premiums. All persons are required to register for the insurance whether they are exempted or not. Old-age and blind pensioners, recipients of mothers' allowances and their dependents, and persons receiving social assistance must hold a registration card but will have their fees paid by the state government. Members of the armed services, students in training under the Department of Veterans' Affairs, Indians living on reservations, and wards of the state are exempt. Also exempted, if approved by the hospital insurance director, are members of those private hospital insurance plans which provide benefits to the hospital or the individual at least equal to the benefits provided by the State Hospital Insurance Service. Premiums, payable annually, are highest for single persons and increase at a decreasing rate as an individual supports additional numbers of dependents. The rates have been about 60 per cent of existing Blue Cross rates. The benefits to which the subscriber is entitled, under the state plan, include public-ward accommodation; meals and special diets; ward nursing care; operating room facilities; surgical dressings and casts; available X-ray service; available laboratory service; available physiotherapy service; hospital maternity care; drugs, except expensive new drugs listed by the director of the state service. The benefits do not include service payments for treatment of conditions compensatory under the "Workmen's Compensation Act"; cures for alcoholism and drug addictions; treatment for diseases or providing other medical care to persons already considered to be a legal responsibility of federal or municipal institutions; outpatient care; and nonessential hospital care, as determined by the state director or his authorized representative. Such determination may be made at any time by inspecting the medical records or examining the patient if he is still in the hospital. The system of financing seemed at the outset to place the plan on a finan177

Decision Making in Hospital Administration cially sound basis. The anticipated premium payments were expected to total approximately ten million dollars annually. The state government and municipalities planned to continue to make contributions from their general funds. In addition, a considerable portion of the amusements tax was to be paid into the Hospital Insurance Fund, a part of which was to be used to set up a Hospital Building Fund. An additional fund known as the Hospital Insurance Stabilization Fund, amounting to two million dollars, was authorized by the state government to meet any unforeseen emergencies. The first year's experience found premium collection procedures to be slow and the returns incomplete. The Hospital Insurance Stabilization Fund was depleted, and an additional expenditure of one million dollars was required. The director of the State Hospital Insurance Service believes the costs of the program are excessive and should be controlled by a rigorous scrutiny of the hospital budgets. He recommends strict insistence on detailed rather than "lump-sum" budgets, that actual expenditures not exceed the amounts established, and that the itemized bills submitted by hospitals for care rendered should be carefully examined to make certain that all payments by the state are justified. Representatives of the state director's office feel that while review of hospital bills should be continued as a control on the service plan's costs, the basis for reimbursement to hospitals should not be patient charges but rather the average cost per patient day of all hospitals in the state. These representatives believe that economies could be effected by such a method provided the state controlled the expenses which hospitals would be permitted to include when calculating their costs. Mixed reactions have come from the hospitals after one year's experience with the state insurance program. The hospitals were happy to receive the additional revenue from tax dollars. Some of the hospitals, particularly smaller hospitals, would have been forced to reduce the quantity or quality of their service or add to their deficits without the aid provided by the insurance plan. The hospitals have meanwhile experienced a decided increase hi occupancy, partly, it is thought, because many of the citizens waited until the insurance plan went into effect before seeking medical attention. More people have been coming to the hospital with minor conditions previously treated only in physicians' offices. Furthermore, patients are entering the hospital as inpatients in order to be eligible for benefits under the state insurance plan. It is recognized that the state plan has tended to improve the level of the community's health by inducing people to enter the hospital sooner than they would have without health insurance. In fact, it is felt that some patients receiving needed medical care would not have applied for care without such insurance. 178

Other Community Agencies In addition to higher occupancy, the hospitals have noted increases in the average length of stay. The hospital patrons apparently wish to get their money's worth and demand more service because it seemingly is free to them. Again, it is recognized by the hospital administrators that the increase may mean that some patients are receiving better care which they need and might not otherwise receive. The medical staff has tended to use the X-ray, laboratory, and diagnostic facilities more extensively. An increase in the number of prescriptions of all drugs, particularly expensive drugs, has been observed. These changes in medical practice have been attributed partly to a desire to improve inpatient care and partly to a lessened concern for strict economy in the use of available health service resources. The hospital administrators generally believe that the state insurance plan regulates their work too closely. They are concerned over discussions by personnel in the state director's office regarding prospective changes in the plan for future control of hospital expenses. The administrators believe that a requirement to adhere to budgets as approved by the director's office in order to maintain eligibility for reimbursement from insurance funds would give undue control to the director's office. The administrators do not believe the director's office personnel are sufficiently competent in the field of hospital administration to evaluate the fiscal needs of hospital operation. The hospital administrators believe there is danger in the state's contemplated plan for reimbursement of hospitals on the basis of cost. They fear that the state will equate the hospital "costs" with the state-approved hospital budget. They anticipate that a hospital's operating deficit will have to be offset by other resources than state reimbursement, while operating surpluses will result in a reduced budget for the succeeding year. They anticipate that representatives of the State Hospital Insurance Service will not permit the inclusion of depreciation expense in hospital costs, and will say that the Hospital Building Fund provides the answer to future construction. The hospital administrators view the state's building fund as completely inadequate in amount and believe that its primary effect is the drying up of previous sources of contributions for building campaigns. The administrators also anticipate difficulty with securing state approval to include teaching and research expenses in the hospital costs used as a basis for the state's reimbursement to hospitals. The hospital administrators are not agreed on the basis for determining per diem costs if the state should decide actually to reimburse hospitals on the basis of cost. The majority of hospital administrators believe an average of all hospital costs in the state should be used, saying that such a basis establishes an incentive to economical hospital operation. Administrators of most of the larger hospitals, however, believe that such a basis 179

Decision Making in Hospital Administration unjustly penalizes their hospitals. They would prefer using individual hospital costs as a basis for reimbursement. Other administrators feel that a negotiated rate based upon total bed days and available state funds would be the most practical and would save the expense of calculating and reporting costs. They feel that reported costs would not be comparable anyway and would therefore be inequitable. Still another group feels that if the state has decided to subsidize hospital care, it might just as well accept full responsibility and collect sufficient revenue to reimburse hospitals to the extent of the annual hospital deficit. The state's newspapers have criticized the operation of the State Hospital Insurance Service and have charged the director with poor initial planning. The papers claim that insufficient preliminary study was given to the operation of other compulsory insurance programs or to Blue Cross operating practices. Decentralization of the administration of the state insurance service to city and county governments would be helpful, the papers believe. They also have been campaigning for a review of the qualifications of the insurance service's administrators. It is significant that the complaints stressed by the newspapers are directed at how the insurance service is being operated rather than the idea of the service per se. The papers believe that the plan increases the expenditures for health by adding to the amount of tax dollars allocated for such a purpose and by forcing the public to budget for health expenditures. These papers point out also that the sick patient in private accommodations is required to support a smaller percentage of the community's indigent care than heretofore. The idea of making hospital care available to larger numbers of the public at a price it can afford is applauded by the papers throughout the state. They also believe the competition which the government plan offers to private health insurance is advantageous to the residents of the state. Subscriber attitudes about the plan range from highest praise to deepest dissatisfaction. Many subscribers object to the compulsory aspect of the plan. They are indignant about the fact that they are subject to fine if the premiums are not paid. The dissenters receive public support from the newspapers. A considerable number of the public believe that the state insurance service offers fewer benefits than commercial insurance companies and that the rates are much higher in relation to value received. In view of recent publicity concerning possible increases in the state rates, the public is fearful of how high the rates will eventually go. The public also apparently feels that the premiums are inequitably distributed when all persons, regardless of ability to pay, are required to pay according to their single or married status. People living on limited retirement funds and persons in low income brackets do not feel financially able to pay the premiums. Many persons believe the state should not at180

Other Community Agencies tempt to collect revenue for its health program on a prepaid self-insurance basis but should instead finance the program on a "pay as you go basis." Some favorable public opinion has been detected regarding a proposed requirement that the public make some financial contribution at the time medical care is provided. Proposals have also been made to reduce drug and X-ray service benefits. The opinion has been voiced, however, by the groups that secured the adoption of the Hospital Insurance Act, that more benefits rather than fewer should be included. The public, these groups state, needs and should receive complete and comprehensive benefits at a price which individual members of the public can afford to pay. These groups believe the state should establish a public policy that persons needing care for mental illness or tuberculosis, or any of the services offered by official public health agencies, should receive such care free of charge. The state's municipal, county, and township governments support this point if the state would relieve them of the additional financial responsibilities of such a program. Another objection to the State Hospital Insurance Service was directed toward the requirement that the subscriber must make special application either in person or by mail to the main office or the two district offices operated by the service. The subscribers believe the insurance service, being a governmental agency, should devise some easier method for enrollment in the plan. (And for making premium payments.) Groups in business and industry have expressed their adverse reactions to the idea of the state plan and its method of operation. They feel that the plan contributes to a social psychology which they deplore, namely that of the public's relieving itself of exercising active personal responsibility for the welfare of its neighbors by "letting the government do it." These groups say they would support the government service if the state would first demonstrate that no method under voluntary control could perform the needed service. Business and industry feel that if the state is planning to continue to operate the service, its financing should be completely separated from the general-fund accounting structure of the state. The State Medical Association, in a poll of its members, has found that the doctors' workload has increased at a faster rate than their incomes. The association notes that its members are happy to provide additional professional services wherever they are needed. The association feels, however, that the physicians are being subjected to unnecessary demands that encroach upon the time and attention they would like to give those patients whose needs are greater. The physicians also wonder if state financial support of physicians' services and concomitant controls will not closely follow the State Hospital Insurance Service program. Your Committee on Governmental Relations of the State Hospital Association has been reviewing these factors and is in the process of develop181

Decision Making in Hospital Administration ing its recommendations on possible changes in the operation of the state's hospital service program. As chairman of the committee, you will present the committee's recommendations to the director of the state program and to representatives of the state legislature's committee on health and welfare. What recommendations for change in the operation of the State Hospital Insurance Service would you present to the program's director and to representatives of the state legislature's committee on health and welfare? What recommendations do you consider most important? Explain. What factors do you consider to be most important when evaluating your recommendations? COMPLEMENTARY QUESTIONS

1. Does a compulsory health insurance program actually add to the amount of income expended for health care? Why, or why not? 2. Which level of government — municipal, state, or federal — do you think should exercise primary responsibility in providing tax funds for support of health care? Explain. 3. Which level of government do you think should exercise primary responsibility in the administration of tax funds for support of health care? Explain. 4. In what ways can governmental agencies make funds available for the financial support of health care without collecting and distributing tax funds? Do you consider such more or less preferable than the collection and distribution of tax funds? Why? 5. Do you approve or disapprove of governmental support of physicians' group practice clinics? Why, or why not? 6. What relative priority do you believe government support of health care should place on capital construction, such as hospitals, diagnostic clinics, nursing or convalescent homes; on care of specific diseases, e.g., mental diseases or tuberculosis; on disability insurance and loss of income insurance; on health insurance? 7. Do you believe governmental financial support for health care should be on a lump-sum basis or itemized for specific expenditures? Explain. What factors might alter your conclusions? 8. Do you think direct governmental provision of health care through operation of medical-care facilities results in greater or less unit cost for health services than indirect assistance through operation of an insurance program? Explain. 9. What effect do you think governmental compulsory health insurance plans would have on the functions performed by a hospital administrator? a board of trustees? a hospital council or hospital association? 10. Do you agree with the statement that one problem of providing 182

Other Community Agencies good medical care to all of the public is the uneven distribution of professional personnel? What factors influence a continuation of the present distribution of professional personnel? If you believe the distribution of professional personnel should be altered, what steps would you propose to secure the changes you think are necessary? 11. What do you think the average ratio should be of physicians to the population? dentists to the population? public health nurses to the population? What factors affect the validity of the average ratios in their application to any particular locality? 12. Do you think medical, dental, or nursing education should be subsidized by tax funds? Why, or why not? Do you believe that the same reasoning applies to tax-fund subsidy of medical research? 13. If all professional health personnel were paid salaries by a governmental agency for the services they now perform within a voluntary setting, what motivations do you think would cause them to continue to provide high quality service to their patients? What influences would cause the motivations to become less important? 38. HOSPITAL COUNCILS

Oxford Falls, a midwestern city of 115,000 persons, is situated in a trading area containing a total population of about 265,000. It is a county seat and has several medium-sized industries, the chief of which is a shoemaking company. The area surrounding the city is predominantly rural, with corn-growing and dairying the principal agricultural pursuits. The hospitals of Oxford Falls are Lincoln Hospital, owned and operated by a nonprofit association, with 270 beds and 32 bassinets; Otis Memorial Hospital, also run by a nonprofit association, with 140 beds and 15 bassinets; and St. Mark's Hospital, which belongs to a denominational group and has 60 beds and 21 bassinets. The first two are general hospitals and conduct outpatient clinics; the third specializes in obstetrics and gynecology. The fourth, a proprietary hospital, owned and operated by Dr. Alexander Simpson and named after him, has 100 beds and takes no obstetrical or gynecological patients. Most of its cases are neurological, Dr. Simpson being a leading neurologist whose practice extends throughout several states. The three nonprofit hospitals of Oxford Falls have established an organization which they designate as a hospital council. It is an informal association to which the administrators, their principal assistants, and the chairmen of the hospital boards of trustees belong. The association has not invited representation from Simpson Hospital nor from two voluntary general-acute hospitals with 90 and 60 beds located forty and thirty miles, respectively, from Oxford Falls. The association meets once a month at luncheon, and common problems of internal administration are discussed. 183

Decision Making in Hospital Administration Usually there is no agenda and there are no formal speeches. There is no staff, and the secretary of the administrator who is current chairman of the group acts as secretary for the council. Lincoln Hospital's administrator is currently chairman of the group. As his assistant administrator for the past six months, you have been attending the group's meetings and have shown an active interest in the affairs of the hospital council. Your administrator, noting your interest, has asked you to prepare comments on the changes which might be made in the present operations of the council. He expects your comments will be based in part upon your recent experience as an administrative resident in another hospital which maintains membership in an active hospital council. There is practically no cooperation on an administrative level among the member institutions of the hospital council. However, there is considerable inter-hospital contact among members of the medical staffs, some of whom are affiliated with more than one hospital. The proprietary institution, which has a very good reputation in Oxford Falls, is staffed by several partners of Dr. Simpson and four salaried physicians. None of these physicians has any other hospital affiliation. Dr. Simpson has on occasion expressed an interest in the council, and a request to participate in the monthly discussions of the council has been received recently from the two outlying hospitals in the area. The health program at Oxford Falls is planned and carried out by a number of agencies in addition to the hospitals. The County Department of Health has its headquarters in the city and is directed by a full-time public health officer who is a physician. It has a staff of one sanitary inspector and two public health nurses who work in the rural areas. The City Board of Health is under the direction of a doctor who is employed as a part-time health officer. Its professional staff consists of a sanitary engineer, one sanitary inspector, and one public health nurse. It operates independently of the county organization and is responsible to the town's elected officials. The school system handles its section of the health program and has a small staff of school nurses, to which group the city health officer is an adviser. There is a Council of Social Agencies with which the majority of the philanthropic and charitable organizations are affiliated, such as the YMCA, YWCA, Boy Scouts and Girl Scouts, Salvation Army, etc. The Community Chest serves most of these agencies. The hospitals, however, are not affiliated with the Chest or the Council of Social Agencies. The Chest has been most anxious to embrace them in its program, but the hospitals feel their fund-raising effort is likely to be more successful when done independently. 184

Other Community Agencies Lincoln Hospital and Otis Memorial Hospital generally operate without a deficit, and the fifteen to thirty thousand dollar surplus they each collect a year is used for the purchase of new equipment and the repair and rehabilitation of their buildings. A small portion of the annual surplus is used for care of the medically indigent, but most of the funds for such purposes are raised by the annual hospital fund drive. St. Mark's has been carrying a small deficit for years. This has been financed by the denominational group operating the hospital. The denominational group has also financed the hospital care of the medically indigent of its denomination. The number of days of care provided such persons is excluded from the total of part-pay and free-care days used as the basis for determining the hospital's proportionate share of the funds obtained through the annual hospital fund drive. Distribution of funds on any other basis was not favored by the hospitals as there were no income or expense or other statistical data available to all hospitals on which to base a decision. The three hospitals belonging to the council and the two outlying hospitals use the American Hospital Association's classification of accounts, but the hospital boards are loath to divulge the information to the public. The same attitude prevents Lincoln, St. Mark's, and one outlying hospital from comparing budgets. The other hospitals do not prepare budgets. The physical plants of Lincoln and Otis hospitals are reasonably modern, having been built thirty and twenty years ago respectively. St. Mark's, however, was built nearly fifty years ago and is not of fire-resistant construction. Simpson Hospital is ten years old and has been maintained as a modern plant. All of these institutions are located within a mile of each other. All maintain high occupancy rates — 88 per cent, 81 per cent, 78 per cent, and 89 per cent for Lincoln, Otis, St. Mark's, and Simpson hospitals respectively. Average length of stay is 9.7, 8.5, 7.1, and 12.1 days respectively. Some information is exchanged during the monthly meetings of the Hospital Council in spite of the reluctance of council members to freely discuss their hospital operations. Such reluctance has been gradually lessening with time, however. The hospital representatives also discuss the operation of Simpson Hospital and of the two outlying hospitals as they have individually become aware of different phases of their operations. You have learned from such discussions, for example, that the accounts receivable of the area's hospitals vary from 2 per cent to 5 per cent of their gross income and that losses in bad debts vary from 0.5 per cent to 3.5 per cent. All city hospitals but Lincoln refer accounts to a collection agency when they appear uncollectible. You find that in the area's hospitals the only professionally trained accountant is employed by Otis Hospital; that the only personnel officer is employed by Lincoln Hospital; that all hospitals but Simpson operate 185

Decision Making in Hospital Administration their own laundry; that all hospitals but St. Mark's employ a dietitian and operate centralized food distribution systems; that purchasing is performed by a nursing supervisor, a business manager, a pharmacist, and a person designated as a purchasing agent; that all hospitals but St. Mark's Hospital maintain perpetual inventories; that the inventory values are estimated at 20 per cent of the combined annual operating incomes with available storage space used to capacity. Inquiry and study reveals that all hospitals have salary schedules; that two hospitals have performed job analyses; and that statistics on comparative wages, fringe benefits, etc., are nonexistent. It appears that the hospitals have traditionally revealed such information only to the extent necessary when conducting their individual negotiations with the State Nurses Association, labor unions, governmental agencies, and health insurance companies. The possibility of joint hospital programs has been considered in the past in a general way by Oxford hospital administrators. Discussions of the subject with the hospital boards have resulted in uniform rejection of the idea, particularly because of the need for financial support. Individual hospital programs always have appeared to present more pressing demands upon available financial resources. Your administrator would like you to present to the hospital council during its next monthly meeting your views on modifications which might be effected in the present operation of the hospital council. What comments would you make to the hospital council of Oxford Falls regarding modifications they might make in their existing operations? What alternative suggestions did you consider? Why did you reject the alternative suggestions? COMPLEMENTARY QUESTIONS

1. What is the objective of a hospital council? What similarities and differences do you note between the objectives of hospital councils and hospital associations? 2. What similarities and differences exist in the functions which are performed by hospital councils and hospital associations? What functions do you think hospital councils should perform? What functions do you think hospital associations should perform? How might your conclusions vary with the size of councils or associations in terms of numbers of hospitals? size of geographical area covered? What other factors might affect your conclusions? 3. What do you believe to be the most important function which any hospital council should perform? any hospital association? 4. What basic minimum qualifications do you believe an executive director of a hospital council or hospital association should possess? 186

Other Community Agencies 5. What do you consider as the responsibility of the hospital administrator for the successful operation of a hospital council or hospital association in which he holds a membership? 6. Where should the basic responsibility and authority of a hospital council or hospital association be placed? What authority and responsibility should be held by the council's or association's executive director? 7. How would you justify to your hospital's board of trustees the expenditure of hospital funds to support a hospital council or hospital association? 8. What should be the relationship of a hospital council to a council of social agencies? to a Community Chest? to a board of health? to a legislative body? 9. Would you advocate the practice of conducting annual fund drives in the community to defray annual operating costs of hospitals? to pay for hospital care of the medically indigent? 39. THE BLOOD BANK

For the past year you have been administrator of Wilks Hospital, located in an eastern industrial city of 500,000 population. There are ten other hospitals in the city ranging in size from 50 to 500 beds. All the hospitals with the exception of a university hospital, a city hospital and Wilks hospital are members of the Red Cross Blood Bank. A member of your board of trustees, who is also a member of the board of directors of the Red Cross Blood Bank, has asked you why Wilks Hospital continues to maintain a separate blood bank. You agree to discuss the subject at the next meeting of the board's executive committee. Wilks Hospital is a 250-bed, voluntary, general-acute hospital. It is located on an arterial highway from which it receives numerous emergency cases. The greatest number of its patients, however, come from the immediate suburban areas. A group of attending surgeons have a clinic three blocks from Wilks Hospital and send most of their patients there. Of the 250 beds, 150 are assigned to surgery, 50 to medicine, 25 to obstetrics, and 25 to pediatrics. During the past year, Wilks Hospital admitted 1270 medical patients, 5500 surgical patients, 900 obstetrical patients, 1300 pediatric patients, and 15,000 outpatients. During this same period, 6000 operations were performed at the hospital. The hospital has always obtained sufficient quantities of blood to supply its own needs except during infrequent acute emergencies. The hospital borrows blood on such occasions from University Hospital or from the Red Cross Blood Bank. The blood bank at Wilks Hospital is administered as a regular branch of the laboratory under the supervision of the laboratory director, a board187

Decision Making in Hospital Administration certified pathologist. There is an advisory committee consisting of two surgeons, one specialist in internal medicine, the hospital director, and one obstetrician. A full-time technologist is employed at a salary of $3600 a year. She is relieved on days off and during vacations by the resident in surgery. The blood bank is located on the third floor of the hospital, just outside the operating rooms. There is ample space for receiving the donors, for laboratory work, and for storage areas. The present refrigerator is inadequate in size and is to be replaced. The laboratory section of the bank has adequate blood-typing and sterilizing facilities. The blood service to the patients has been unusually satisfactory. The staff members have been successful in getting a large percentage of replacements for quantities used. They feel that the best time, psychologically, to obtain blood from patients' families is in a hospital situation when blood replacement for the patient is necessary. Blood is sometimes not given until a donor has contributed. The hospital maintains a roster of blood donors, including many of the hospital employees from janitors to residents. Some of the rare bloods have been drawn from these donors at intervals of three weeks. Other regular donors reside in the suburbs and are less available for call than the hospital personnel. The number of procedures performed last year has been recorded as shown in Table 15. The surgical staff is of the opinion that the hospital should retain its blood bank and not become a member of the Red Cross Blood Bank. The surgical staff believes the hospital can provide blood services of known high quality to the patients. In the staff's estimation, the central bank should complement the individual hospital blood needs and no hospital should have to rely upon a source of blood over which it has no control. In a centralized system, the surgical staff feels it is difficult to fix responsibility if something goes wrong because there are too many persons involved in handling the blood. The surgeons join with the laboratory director and laboratory committee in stating that the quality of the personnel handling the hospital blood program and their careful recognition of safety requirements in established procedures, provide a service of quality second to none. Table 15. Number of Procedures Performed in One Year's Operation of the Blood Bank at Wilks Hospital Procedure Grouping Cross matching Plasma processing Rh factor Cold agglutination

No.

Procedure

3,000 3,100 11 3,200 8

Hemoglobin Red count White count Mazzini Basal metabolism rate

188

No. 9,500 6,400 8,000 5,200 1,500

Other Community Agencies The chief of the surgical staff objects to centralization because in the event of a catastrophe to a central bank the complete supply could be eliminated. He is also of the opinion that research in therapeutic values of blood derivatives has just begun, that the hospital and the medical staff have an obligation to the community to contribute their part, and that the hospital's blood bank will play an important part in such research. One surgeon cited the incident of the bookkeeping confusion that he saw in another hospital using the Red Cross Blood Bank. The Blood Bank billed the hospital before the family had time to make the replacement. When the replacement was actually made, time consuming adjustments had to be carried out. The surgical staff is firmly convinced that the hospital should maintain a blood bank and, if necessary, improve its drive for blood donations of #11 types. As administrator you are under pressure to utilize the space now occupied by the blood bank to enlarge a very crowded central nursing-supply room. You also wish to keep expenses down by avoiding the purchase of new equipment for the bank and by reducing its staffing requirements. Until two years ago blood was replaced two to three units for each unit given the patient and the hospital blood bank netted a fair profit. For public relations reasons, the hospital has since been forced to replace blood on a one-to-one basis, but now has added a service charge. Patients who do not replace blood for that received are billed before leaving the hospital at the same rates as those charged by the Red Cross Blood Bank. The blood can be replaced by the patient during the year following discharge for credit on the account or for a refund of any payments for blood which may have already been made. The director of the Red Cross Blood Bank is anxious to secure the participation of all the area's hospitals and physicians within the central blood bank, feeling that such cooperation is essential to the bank's success. He believes complete centralization of local blood services will eventually result in savings to the hospitals and the community. What comments would you make to your board of trustees regarding the use of central blood bank resources to the exclusion of those presently operated by Wilks Hospital? What was the most important factor you considered in arriving at your decision? What other factors did you consider when developing your decisions? COMPLEMENTARY QUESTIONS

1. What do you consider to be the strongest motivating force you could awaken in people in order to persuade them to contribute blood to blood banks? How would you develop and communicate an appeal to the public for blood donations based upon such motivation? To what other motiva189

Decision Making in Hospital Administration tion would you direct your appeals, and what channels of communication would you use? 2. Do you think payment for blood used in transfusions should be included in the benefits provided by prepaid hospital insurance? Why, or why not? 3. Upon what factors does the safety of a blood bank program depend? What action should be taken to prevent accidents from occurring through the collection, storage, distribution, and transfusing of blood? 4. How might the advantages and disadvantages, to the hospital, of op-» crating its own blood bank rather than using a central bank be affected by the hospital's size? program? type of ownership? affiliations? location? 5. Should a blood bank be permitted to perform functions other than its main service, e.g., manufacture of intravenous solutions? Why, or why not? 6. What information should be included in reports submitted by a blood bank to the administrator? to the medical staff?

190

V. OPERATING A HOSPITAL

"Caesar embraces decision. It is as though he felt his mind to be operating only when it is interlocking itself with significant consequences." Wilder

10

The Governing Body

40. BOARD OF TRUSTEE REORGANIZATION

You have expressed interest in the position of administrator of Dawson County Hospital, located in an eastern state. The hospital is a 125-bed, general-acute institution, organized and operated on a voluntary nonprofit basis, and accredited by the Joint Commission on Accreditation of Hospitals. It is the only hospital in Dawson, the principal town (15,000 population) in the county of Dawson which has 28,000 persons. You submitted your application after learning that the board of trustees decided at its previous monthly meeting to replace the hospital's present administrator. The position would pay 25 per cent more than your present salary, and the community is considered by your wife to be a desirable place in which to live. So far you have not met the board of directors as a whole, but one short interview with the mayor of Dawson had provided you with the following facts. The motion to replace the existing administrator was made by a man serving his first year as a board member, a job which went with his position as mayor of Dawson. He had known for some time before becoming mayor that all was not well in the administration of this community hospital but did not find out just what some of the difficulties were until he had had the opportunity to observe at first hand the functioning of the board and administration. The Dawson County Hospital is eighteen years old, occupies a modern fire-resistant building, and was constructed with funds raised in a community-wide drive. The contributors to the original campaign for the hospital's construction funds became the members of the hospital's corporation. In order to make the control of the hospital as representative as possible, the original corporation members established in the hospital charter that the board of directors would be appointed and would select their officers in accordance with the hospital bylaws. These bylaws state that 193

Decision Making in Hospital Administration the board of directors is to be composed of individuals selected by the following groups in the community: the Dawson Chamber of Commerce, to appoint two members, one each year, to serve for two-year terms; the five churches in Dawson, each to appoint one member to serve for two years; the four labor unions in town, each to appoint one representative for an annual term; the two original manufacturing concerns in town, each to appoint one member for a two-year term; the voters, to be represented by the mayor of Dawson and the Dawson county auditor, each serving in an ex officio capacity. This group elects to membership the remaining four members of the board of directors who, according to the constitution bylaws setting up the board, must "represent that portion of the population of Dawson County engaged in agriculture." The bylaws may be modified by vote of a three-fourths majority of the board of directors or by vote of a two-thirds majority of the board approved by a simple majority of the members of the corporation. No provision was made concerning the number of consecutive terms which a member of the board of directors might serve. Each member of the board serves on at least one of the seven standing committees: executive, consisting of the president, vice president, secretary, and treasurer; medical affairs; finance; buildings and grounds; personnel; nursing school; and public relations. Each committee reports monthly to the board. It has been the practice over the years for each of these committees to hold monthly meetings with personnel concerned with the particular committee's area. Thus the buildings and grounds committee meets with the hospital engineer and his assistants, the medical affairs committee meets with representatives of the medical staff, the personnel committee meets with certain of the department heads (there are no personnel officers), and the nursing school committee meets with the superintendent of nursing and her faculty. The present administrator has attended almost all of these meetings, but only because he has made it his business to do so. As a matter of fact, the entire practice of board-employee and board-staff meetings was an informal outgrowth of a keen interest in hospital affairs evidenced by several of the board members who had been reappointed for several years by their own organizations. The result of this pattern of relationship has been a development of hospital employee loyalties to individual board members, which has been reciprocated by favors from board members to department heads, e.g., salary changes for selected employees, approval for hiring relatives, etc. The administrator's role in these meetings was not that of a leader but that of an agent to carry out the decisions made. The administrator has not been a particularly forceful person. He came to the Dawson County Hospital with a good background, but became resigned to operating as a follower rather than a leader when he recognized 194

The Governing Body the power of these board committees. After one trying incident in which he had not received board backing, involving open insubordination of a department head, he had considered resigning. His wife, however, had made friendships in the social groups of Dawson, was busy climbing the social ladder, and promptly put an end to this thought. And so the hospital continued on its way with its board-of-directors meetings the battleground for those differences on policy that couldn't be resolved by individual committees or that were the concern of more than one committee. Each year committee members were reappointed in order not to disturb existing relationships. These reappointments have been possible because of the practice of each of the community groups to reappoint their representatives to the hospital board as long as a desire for reappointment is expressed. Some of the committees perform tasks bearing little relation to jobs suggested by committee titles. For example, the personnel committee which meets with heads of nonprofessional departments, makes decisions on matters of supplies, interdepartmental relations, and practically anything concerning these departments, in addition to personnel. The same holds for the finance committee which meets with the chief accountant, his bookkeeper, and the admitting officer. That is, in addition to going over financial statements the committee makes decisions on credit procedures for individual patients, admitting problems, and personnel matters concerning the admitting, accounting, and business offices. The public relations committee meets only with the administrator, since there is no public relations officer at the hospital, and the committee inspects the post-card questionnaires sent to all discharged patients the previous month, and if one complaint recurs for more than three or four months in a sizeable portion of the returns the committee takes action to eliminate the cause, if possible. The medical affairs committee meets with the elected officers of the medical staff, not at the hospital but at the local hotel where liquor is more easily available. The committee settles matters of new applications, promotions, etc. Staff discipline is not considered a problem since a physician has a difficult time getting on the closed staff of the hospital, but once a member, he is a member for life. The executive committee is the one committee that does not hold separate meetings with hospital personnel or the medical staff. What has made the mayor particularly aware of what he considers the shortcomings of this type of administration are two things. First, he has observed that board meetings are invariably a wrangle between two factions—the church representatives, the Chamber of Commerce representatives, and the manufacturing concern representatives on the one side, and the agriculture and labor representatives on the other. The two ex officio members have in the past sided with the faction to which they felt 195

Decision Making in Hospital Administration they owed their election. This mayor, having been elected on a reform ticket feels his responsibility for independent thinking very keenly. As a result of the wrangling and protracted discussion of all matters coming before the board, action on policies is slow, often taking several months, and more often than not is based upon personality differences. Secondly, the mayor has been somewhat startled to find that hi some of the hospital departments overstaffing and accompanying poor work habits and low output are very evident. Furthermore, his comments on the subject were met by committee members concerned with the attitude of "You tend to your committee and its area of interest, and we'll tend to ours." The service rendered by the hospital is considered poor by the public. Even the medical staff express dissatisfaction with the administration of the hospital, although the present arrangement gives them freedom from administrative "interference." Following an incident of insubordination to himself by a department head, the mayor resolved to bring about a change not only in the administration but also in the board make-up. He feels that the incumbent administrator has demonstrated his incapacity for leadership and should be replaced. He believes that a new administrator should be given the opportunity to suggest the kind of organizational structure for the board to adopt which would be of most assistance to him in the administration of the hospital. The mayor also wishes the guidance of a trained hospital administrator in determining the new organizational structure of the board. He therefore lined up the county auditor and the farm and labor representatives to push through the motion which authorized the invitation to you and several others to be interviewed for the position as hospital administrator. The mayor appointed an interview committee consisting of himself, a farm representative, and a labor representative. Following the vote to replace the hospital administrator, two board representatives of the churches began to support the mayor's position, and he has asked one of them to serve on the interview committee as well. He also hopes to persuade another church representative to support his position and thereby obtain a two-thirds majority support from the board. He has obtained the approval of his supporters on the board to appoint one of the "unconverted" church representatives to the interview committee. The mayor has informed you that the interview committee will be interested in your views on reorganization of the board of directors as part of your interview for the hospital administrative position. You have been gathering background information and have prepared your recommendations for the interview committee. What recommendation would you make to the interview committee of Dawson County Hospital's board of trustees regarding the board's con196

The Governing Body templated reorganization? What factors would you consider when preparing your recommendations? Upon what factors would you place most emphasis? On the basis of the facts known to you, would you accept the position of administrator of Dawson County Hospital? What additional facts would you wish to know? Might the additional information cause you to change your opinion of the position? Explain. COMPLEMENTARY QUESTIONS

1. What support do you feel you would most need from your board of trustees to do an effective job as a hospital administrator? 2. Do you believe the board of Dawson County Hospital should have given the incumbent administrator an opportunity to demonstrate his value, as an administrator, with a board of directors that would support him in handling his administrative problems? Explain. 3. What comment do you make on placing the provisions concerning board of director membership in the constitution and bylaws rather than in the charter of the hospital? 4. What comment do you make on the attitude of the corporation members that the board should be "as widely representative as possible"? 5. If you accepted the position as administrator of Dawson County Hospital, would you first secure any specific understanding with the board concerning their relationship to your administrative staff? concerning your relationship to the administrative staff? Explain. 6. What would be your approach to your administrative staff as the new administrator of Dawson County Hospital? What alternative approaches do you visualize? Why do you prefer the approach which you would use? 7. What understanding as the new administrator of Dawson County Hospital would you have with the board of directors regarding the relationship of the medical staff to the board? to yourself? What would be your approach to the medical staff? 41. MEDICAL STAFF RELATIONSHIPS John Colwell, M.D., director of Brown Memorial Hospital for the past eleven years, has been asked by his board of trustees to discuss at a special board meeting the hospital's practices regarding the admission and readmission of physicians to its medical staff. The purpose of the meeting will be to indicate to a representative from the local county medical society and to the hospital's chief of staff the board's belief that the recent refusal to readmit Dr. Gray to the hospital's staff was justified. Brown Memorial Hospital, 190-bed, general-acute, is located in a populated area on the eastern seaboard. It operates with a closed staff limited to fifty-four members. Appointments to the staff are made only when vacancies occur.

197

Decision Making in Hospital Administration Vacancies on the staff occur primarily when members retire or move to other localities. Retiring members are placed on the honorary staff. They are then permitted to attend an occasional patient if they so desire and if bed space is available. This does not happen often, as the hospital averages 86 per cent occupancy. Honorary staff memberships are in addition to and not included in the quota of fifty-four staff members which applies only to the number of physicians having voting privileges, the right to admit patients to the hospital, and the responsibility to attend charity patients in Brown Memorial Hospital. At the October meeting of the board of trustees all staff memberships are reviewed by the board and annual reappointments made. Applications for staff membership consistently exceed available openings, and selections are made by the board on the basis of the director's recommendations. These recommendations, in turn, are based upon Dr. Colwell's review of applications, follow-up of references, and interviews with applicants. The interviews are usually, but not always, held with the chief of staff in attendance. The procedure followed by the board of trustees in making annual staff reappointments has operated without change for many years. During September of each year the medical staff's executive committee submits to the director its recommendations for reappointment of staff members. The executive committee is elected by the membership and consists of the chief of staff, vice chief of staff, secretary to the staff, and the heads of the four services (surgery, medicine, obstetrics, and pediatrics). The director in turn submits these recommendations along with his own to the board of trustees at its October meeting. The board customarily follows the director's recommendations rather than the staff's for two reasons: (1) the staff executive committee invariably recommends reappointment of all staff members, submitting no evaluation or rating of individuals, and (2) the director does attempt to evaluate each staff member through personal observations and by reviewing medical records and statistics, including tissue committee reports. He does not have the assistance of a medical audit. He seems more concerned with keeping the hospital's standards of medical service high than does the staff itself. The medical staff has claimed, with increasing frequency, that it does little good to present its recommendations to the board since the board always follows the director's recommendations anyway. Members of the board of trustees have replied, informally, that the board relinquishes its prerogatives of decision to no person or group but that it will rely on the judgments of those persons whose advice in the past has proven to be sound. Dr. Colwell began a careful observation of Dr. Gray's actions in the hospital shortly after the first of this year. At that time he read an article by Dr. Gray in the local newspaper in which the doctor attacked milk pas198

The Governing Body teurization laws, claiming among other things that they merely provide a substitute for sanitary milk handling. In subsequent conversation with Dr. Gray, Dr. Colwell learned that not only is Dr. Gray opposed to milk pasteurization but also to compulsory small pox vaccinations and preventive inoculations in general. With regard to actions within the hospital, on two occasions he noted that Dr. Gray had treated patients contrary to recommendations of the required medical staff consultations. On one occasion Dr. Gray had refused to order a lumbar puncture on a patient with a suspected skull fracture after the chief of staff had recommended such a procedure. His reason for refusing was that he "didn't believe in spinal taps." Dr. Colwell kept a careful written record of his findings concerning Dr. Gray and had these with him at this year's October meeting of the board of trustees. He also had the staff executive committee's recommendations which made no mention of Dr. Gray except to recommend him for reappointment along with all other staff members. At the meeting he explained his findings and informed the board of his opinion that Dr. Gray's appointment should not be renewed. Concurring in this opinion, the board reappointed all staff members except Dr. Gray and requested that the director select and present at the November meeting the name of an applicant to fill the vacancy thus created. The board further requested that the director write Dr. Gray, informing him of the action taken. The director wrote to Dr. Gray the following day and heard no more of the matter until two weeks later when the chief of staff came to the director's office. The chief said that he had been approached by Dr. Gray with a request for a hearing before the board of trustees without the director present. The chief was not very sympathetic to Dr. Gray's plea but thought it only fair to transmit the request through the proper channels. He also told Dr. Colwell that he felt he should have been informed of the recommendation concerning Dr. Gray before it was made to the board of trustees. "The staff feels," he stated, "that it is involved in the board's decision not to reappoint one of its members and that it should have been asked to participate in the discussions concerning Dr. Gray." He added that the staff felt alternatives to withdrawing staff membership might have been followed, such as probation or restriction of privileges. At the November meeting, the director presented without comment Dr. Gray's request to the board. The board instructed the director to write Dr. Gray that his request was denied, that as the governing body of the hospital it had made its decision and that it was final. After writing this second letter, Dr. Colwell's next communication about the matter was from the secretary of the council of the Port County Medical Society requesting that the society's council be granted a meeting with the board to discuss the case of Dr. Gray. The board felt that, al199

Decision Making in Hospital Administration though the case was closed, it could at least meet with the County Medical Society representatives with the director present. The board wished to make clear what it considers its role concerning the medical staffing of Brown Memorial Hospital. The board also approved the chief of staff's request to attend the meeting. Accordingly, time and place were established for a meeting, notices sent, and acknowledgments received. Attached to the Port County Medical Society's letter of acceptance was a copy of a resolution which their letter said might be helpful to the board as background material on the County Society's approach to the case of Dr. Gray. RESOLUTION ADOPTED BY THE PORT COUNTY MEDICAL SOCIETY

WHEREAS, hospitals are special institutions wherein the sick and injured are cared for and wherein, because of concentration of facilities and trained personnel, attending physicians are enabled to render more effective treatment to their patients; and WHEREAS, the primary obligation of the physician is to his patient at all times; and WHEREAS, it is fundamental in the considered opinion of the council of the Port County Medical Society that, within uniformly applied bylaws established for the purpose, all original appointments to the attending medical staff, annual renewal of all staff appointments, and the disciplining of staff members, should be exclusively within the control of the attending medical staff of any hospital; and WHEREAS, physicians are reluctant to make representations, in the nature of complaints, to hospital authorities relative to care rendered to particular patients or to the quantity or quality of food served, or in other respects, and are deterred by apprehension of being dropped from the staff, or of being demoted, or of being otherwise penalized; and WHEREAS, not uncommonly, instances are reported wherein the administrative or executive authorities of a local hospital have acted toward a staff member in an arbitrary, discriminatory, or capricious manner, be it therefore RESOLVED that when it has been made to appear, in the judgment of the council of the Port County Medical Society that a member of the Port County Medical Society has, in his capacity as a member of the staff of a hospital, been unfairly treated or penalized as the result of the arbitrary, capricious, or discriminatory action of the administrative or executive board or of the administrator of any hospital in Port County, the council will make representations to the administrative or executive board or to the administrator in sincere effort to secure an equitable solution; and be it further RESOLVED that when, in the process, equitable adjustment is unattainable and the administrative or executive board or the administrator persists in its or his arbitrary and unfair course, the council of the Port County Medical Society shall declare that membership on the attending staff of 200

The Governing Body the offending hospital is incompatible with continuing membership in the Port County Medical Society. You are administrator of the 200-bed Memorial Hospital in nearby Port City and have become a good friend of Dr. Colwell. He has come to you for your frank advice concerning his report at the coming meeting. What comments would you suggest that the director of Brown Memorial Hospital present at the special meeting of the hospital's board of trustees regarding the case of Dr. Gray? What factors do you think should receive the greatest emphasis? What comments would you make concerning the existing practices by which staff memberships are determined at Brown Memorial Hospital? What changes, if any, do you think should be made in the existing practices? Why? COMPLEMENTARY QUESTIONS

1. What is the objective of medical staff control? What do you mean by "control"? 2. What methods can you list for controlling the quality of professional work performed by the medical staff of a hospital? Which methods would you, as an administrator, prefer to use? How might the methods you decide to use vary with a hospital's size? its program? its type of ownership? its affiliations? 3. What is the relationship, if any, between medical staff control as exercised by a hospital's administration and the cooperation and coordination which exists between the hospital's administration and the medical staff? 4. What is the difference between a "closed" staff and an "open" staff? What are the advantages and disadvantages of a closed staff as compared with an open staff from the viewpoint of the patient? the hospital? the physician? How might the relative advantages of open and closed staffs vary with a hospital's size? program? type of ownership? affiliations? location in metropolitan or rural areas? 5. Should members of an honorary staff be permitted to obtain hospital beds without restrictions? Explain. 6. What effect does establishing a closed staff have on the categories of consulting or visiting medical staff members? 7. How might the advantages of a closed staff be affected by increased financial support of medical care through use of prepaid health insurance or tax funds? 8. What effect do you anticipate an increase in third-party payments to hospitals for prepaid health insurance, or financial-support medical care, will have on the standards of quality and quantity of care which will be maintained by the hospital's physicians? 9. As an administrator do you think you might hesitate to recommend 201

Decision Making in Hospital Administration the withdrawal of staff privileges from a physician whose quality of work is below hospital standards because of personal friendship for the physician? How might the possibility of being confronted with this situation affect your approach to members of the medical staff as individuals? 10. What information do you think should be interchanged between a hospital administrator and the medical staff regarding staff professional performance as evaluated by established standards? What possible channels of communication would you consider suitable for transmission of such information? Which channels of communication would you prefer to use? How might your decision vary with the hospital's size? program? type of ownership? affiliation? Explain. 11. Do you think physicians should be permitted to use their own equipment hi performance of their responsibilities in a hospital? to order their own supplies? Explain. 12. If a hospital were establishing a position of assistant administrator in charge of medical staff relations, what do you think should be included in the description of the responsibilities of the position? What qualifications would you establish for a person holding the position? How would the necessity of such a position be affected by a hospital's size? program? affiliations? the past experience of the hospital's administrator? 13. How might the controls applicable to a medical staff be affected by its participation in a public health program sponsored by a government agency? 14. What actions by a member of the medical staff do you think should be grounds for withdrawal of staff privileges? 15. Do you think that it is reasonable to expect that a medical staff would appreciate the exercise of initiative by an administrator to improve the quality of the medical staff? Why, or why not? 16. What are the rights of the hospital with an open medical staff to exclude a particular physician from practicing in the hospital? 17. From an administrative point of view, what are the dangers, if any, in allowing or requiring the medical staff to pay the cost of new equipment for use in the hospital? 18. How might an administrator use accreditation by the Joint Commission on Accreditation to change medical staff practices? 42. ESTABLISHING POLICIES The administrator of Renville Hospital and various members of the board of trustees are experiencing difficulty in reaching common understanding as to how different facets of hospital operation should be handled. The administrator has been asked to express his views on the nature of the misunderstanding and to suggest how common accord can be achieved. The administrator has felt since shortly after his appointment as admin-

202

The Governing Body istrator eighteen months ago that the executive committee should redefine the policies of the hospital toward indigent care. It is in this area, he believes, that the basis may be found for the misunderstanding between himself and members of the board. He discussed the subject at a meeting of the board's executive committee. This committee consists of the president, secretary, treasurer, two other members of the board appointed by the president, and the administrator as an ex officio member. The administrator noted, during his discussion, that out of last year's total of over 90,000 days of patient care rendered, 20,000 days were devoted to the care of indigent patients. Total bed occupancy last year averaged 88 per cent. He added that the general-acute hospital of 280 beds was being reimbursed at the rate of five dollars per day by the various counties of the state for care provided their indigents. The administrator also showed the executive committee that the voluntary, nonprofit institution lost $240,000 last year on the care of indigent patients. Part of this was covered by income of $173,000 from the hospital's endowment fund. He expressed his belief that the hospital should request reimbursement from the counties closer in amount to the average hospital cost, and at least equal to the present average per diem ward charge of ten dollars. The administrator pointed out that at present the private and semi-private patients are being charged for that part of the loss on providing indigent care which is not covered by income of $173,000 from the endowment fund. He then itemized alternative uses of the endowment fund, such as support of the hospital's education program or expansion of the currently limited research program. The executive committee discussed the subject matter presented by the administrator and concluded that it might be well to redefine or restate the over-all policies and objectives of Renville Hospital. The charter and bylaws of the hospital were written in 1890. They originally offered a broad basis for action, but with the change in the times, in administration, and in the membership of the hospital's board of trustees, the charter and bylaws have been modified somewhat and subjected to varying interpretation. The executive committee appointed a subcommittee to meet with the administrator to study the original charter and bylaws of Renville Hospital and the major changes which had been made in the documents up to the present time. The subcommittee was instructed to prepare recommendations for further revision of the documents if considered necessary. Recommendations were discussed during the next general meeting of the board of trustees. Part of the report presented to the board of trustees by the subcommittee noted that the original concept of Renville Hospital was defined in the charter presented at the March session of the state's General Assembly in 1890, as follows: "The purpose of this hospital is to receive patients who 203

Decision Making in Hospital Administration are badly lodged, often in attics or cellars without light or ventilation, and open to the storms of winter, destitute of wholesome food, fuel, and unable to obtain good nursing care. Others included are persons of good and industrious habits such as clerks, journeymen, mechanics, and apprentices whose accommodations in cheap boarding houses are barely sufficient for health. "In addition, there is a large class of patients who can meet the ordinary expenses of board in a hospital but who are unable to pay for professional services. These patients should be provided for as they are in other burroughs, townships, and cities/' The subcommittee proposed a revised statement of purpose which was discussed and modified at subsequent meetings of the board and adopted in final form as follows: "The purpose of the hospital is to be staffed, equipped, and ready to serve the medical and hospital needs of this community and its people from all walks of life; to provide a quality educational program for doctors, nurses, and other personnel in the field of health to the end that they may go out in this and other communities well trained and capable of carrying on the high standards which they are taught here; to promote interest in research so that its staff members may make their contributions of new knowledge to scientific medicine; and to work cooperatively with other community health agencies to improve the total health of the people and to make possible an expanding program of professional services with modern facilities and equipment through a sound current financing program and an increasing endowment." To carry out the above purpose the president of the board outlined nine months ago the following six immediate objectives as being essential in this process: (1) adequate financing; (2) a well-organized medical staff with competent leaders in the various specialties of medicine; (3) modern physical facilities; (4) a cooperative working relationship with other health and welfare agencies; (5) a leadership organization; (6) an informed board of trustees. The president of the board feels that excellent progress has been made toward achieving the above six objectives and toward fulfilling the redefined purpose of the hospital. Certain members of the board, however, express-specific objections concerning the management of the hospital. They believe, for example, that the hospital's 375 employees are too many. This belief stems from the fact that other hospitals in the state have a ratio of personnel to beds 10 to 15 per cent lower than that of Renville Hospital. Other members of the board object that the administrator has been furnishing them with superfluous reports and that they do not have time to read or absorb much that he has been passing on to them. Another segment of the board emphasizes its belief that the hospital 204

The Governing Body still has an obligation to the public of providing hospital care to those who are unable to pay for such care. This group states that indigent care should be financed hi part by current contributions and income from endowment funds, even though the government is legally responsible for the hospital care of a major portion of these patients. This segment of the board points out that a lump-sum payment which amounts to five dollars per day for patient care is made possible by a special act of the legislature each year. They further point out that the legislature is an agent of the public and that they are afraid of the complications that would arise if the hospital demanded more than what the legislature actually appropriates. This same segment of the board also notes that the cooperative spirit which has been developed during the past years with health and welfare agencies might well be jeopardized if the hospital tries to force the counties to reimburse it at higher per diem rates. There have been rumors reaching the board of trustees that the hospital employs too many highly paid specialists on its medical staff. These rumors probably stem from the fact that the director of the department of pathology has one assistant, three residents, and 37 other employees. The department does laboratory work for four other hospitals in the area as well as for the city health department. This is in keeping with the hospital's practice of performing services as the medical-center hospital for the state. The rumors may also be based upon the number of house staff observed in the hospital, which totals 49 in all. The medical staff criticizes the administrator of the hospital for spending too much time working on committees and participating in meetings outside the hospital to the neglect of the operations within. This criticism has been made known to the board of trustees. The medical staff is apparently comparing the present administrator with his predecessor, who rarely participated in committee meetings outside the hospital and who did not approve of such participation. What suggestions would you as administrator of Renville Hospital present to the board of trustees to develop mutual understanding and agreement on the conduct of the hospital's operations? What specific policy decisions -would you recommend? Upon -what factors would you place most emphasis when preparing your recommendations? COMPLEMENTARY QUESTIONS

1. How do you define "policy"? Why are policy decisions needed? What distinction would you make between an organization's policies and its rules and regulations? 2. What factors do you think need to be considered when developing a policy? What groups would you ask to advise on the need for a policy? on the content of a policy? In what order would you ask their advice? What 205

Decision Making in Hospital Administration groups would you not ask concerning the need for a policy or its content? 3. Is it unreasonable to conceive of two policies being promulgated by the same organization that conflict with each other? Explain. 4. Would you consider it advisable to adopt without modification in your organization a policy that is working well in another organization? Explain. 5. Once a policy has been adopted, what factors would you keep in mind when putting it into operation? 6. Who should develop medical staff policies? Who should adopt such policies? 7. What groups that are not an integral part of a hospital's professional or administrative organization are in a position to influence the hospital's policies? How might these groups vary depending upon the hospital's size? its program? its type of ownership? its geographical location? How do you anticipate the influence of these groups will vary ten years from now? 8. Would you resign from your position as the administrator of an organization if your board of trustees did not support or approve a policy which you recommended? Why, or why not? 9. To what extent should the administrator try to influence the board in establishing policy? Do you feel the administrator could have shown better "quarterbacking" in his approach to this problem and the manner in which it was presented to the board? Explain.

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1 1

The Medical Staff

43. MEDICAL STAFF ORGANIZATION

As administrator of Bentson Hospital, you have been actively engaged in reorganizing the hospital administrative staff and improving hospital systems to provide increasingly valuable service to the patients and to the medical staff. These activities have received your main emphasis since becoming the hospital's administrator one year ago. You now feel ready to begin consideration of what can be done to aid the medical staff members to provide increased service to the community through their hospital affiliations. Your previous experience as an assistant administrator in a metropolitan city hospital leads you to believe that changes could be made. You decide, therefore, to determine hi your own mind what changes in medical staff services are needed, to present them to the board of trustees to be assured of its backing, and then to work out a plan of action in cooperation with the medical staff. Bentson Hospital is a 100-bed, general-acute institution and enjoys the distinction, not customarily found in hospitals of comparable size and similarly located in nonmetropolitan areas, of having available to it a medical staff of exceptionally well-qualified physicians. The hospital is situated in a community of some 25,000 inhabitants with no large centers of population nearby to help attract to its staff additional physicians of the caliber of those constituting the present staff. The medical staff's reputation attracts sufficient numbers of patients to maintain an average occupancy of approximately 77 per cent. That such a staff is available to the patients seeking treatment in Bentson Hospital is due largely to the foresight of the board of directors. Since the opening of the hospital in 1919 an attending staff of highly trained physicians and surgeons has been financially subsidized, with the approval of the board of directors, in order to assure the best medical care possible. The attractiveness of the surrounding area as a place to live is another important factor. In addition to the attending staff with eight members are the consulting staff of twenty-one members and the auxiliary staff of 207

Decision Making in Hospital Administration Table 16. Composition of the Medical Staff at Bentson Hospital Specialty Attending Staff * Internal medicine t Surgery t Ophthalmology Orthopedics Pathology t Physiatry Consulting Staff Dermatology Ear, eye, nose, and throat Internal medicine Neurology and psychiatry Neurosureerv

No. 1 3 1 1 1 1 1 1 2 1 1

Specialty Consulting Staff Obstetrics and gynecology Orthopedic surgery Pediatrics Radiology Surgery Urology Dentistry t Auxiliary Staff General practice Grand total

No. 1 3 1 2 4 2 2

22 51

* Of the eight physicians on the attending staff, three hold national specialty board certifications. Two are fellows in their respective colleges. t No outside practice. t Not active.

twenty-two local practitioners. The actual composition of the medical staff is shown in Table 16. The attending staff is responsible for the care of all ward cases as well as for the performance of all major surgical procedures and surgery required by obstetrical cases. Three members of the attending staff do not carry on a private practice outside the hospital, and are sometimes referred to as the resident staff. They receive payment from paying patients who have been referred to them and a salary from the hospital for work performed on indigent cases. The expense of these salaries is a financial obligation which the hospital finds difficult to fulfill. However, the hospital has been able to earn sufficient operating income to meet its operating expenses, including physicians' salaries, over the past ten years. The attending staff provides care for an active clinic service. This has produced some criticism from auxiliary staff physicians since they feel such clinic service does not properly screen out those cases who can pay for such care and should normally go to the private physicians' offices. It is their opinion that this lack of proper screening of private-pay cases offers unfair competition. The attending staff has traditionally controlled the county medical society with the support of the consulting staff. The hospital's net death rate last year was 2.1 per cent, general postoperative death rate 0.8 per cent, gynecological death rate 1.3 per cent, post-operative death rate 0.6 per cent, maternal death rate 0.26 per cent, infant mortality 1.7 per cent, caesarian section rate 5 per cent, consultation rate 27 per cent, and autopsy rate 24 per cent. Members of the auxiliary staff are extended the privilege of caring for 208

The Medical Staff their private cases admitted to private or semi-private accommodations, including obstetrical cases, but are not permitted to perform any major surgical procedures or operative obstetrical procedures. The auxiliary staff has shown interest in the utilization of facilities offered them by the hospital. Table 17 shows the number of cases treated by the auxiliary staff in three successive years. The annual average number of auxiliary physicians treating cases in the hospital is eight. The auxiliary staff also has shown interest by attending staff meetings. The average attendance of regular staff members during the above years was three while the auxiliary staff averaged nine. Auxiliary staff members have cared for 45.5 per cent of all hospital obstetrical cases this year as compared with 20.6 per cent two years ago. Table 17. Number of Cases Treated and Number of Auxiliary Physicians Treating these Cases at Bentson Hospital over Three Years Year First year Second year Third year Total

Obstetric

Other

Total

Physicians

33 88 ,135

1 6 2

34 94 137

8 7 11

56

9

265

26

Eighty-two per cent of the members of the auxiliary staff live and practice in nearby towns. There apparently is little antagonism on the part of these physicians toward the attending staff. They appreciate the willingness of the attending staff to consult with them and assist them at all times to the fullest extent possible. However, members of the auxiliary staff hesitate to refer their private patients to the attending staff when their patients must travel an average distance to the hospital of approximately twenty miles. There is still a marked disinclination on the part of the residents of the rural area to go to the hospital, a persistence perhaps of the viewpoint that only patients about to die go to hospitals. This reaction is being actively combated by the younger physicians beginning practice in the area. They are charging much larger fees for home deliveries than for hospital deliveries, up to double the amount. There is some criticism by auxiliary staff physicians of the number of follow-up visits given their discharged hospital patients by the consulting staff without additional charge. They feel that fees should be charged for calls after discharge and a prompt turning back of the patient to the referring doctor. All members of the auxiliary staff speak of the feeling that they are not a part of the hospital, that while they are welcome at the hospital and given 209

Decision Making in Hospital Administration every assistance, nevertheless, they do not "belong" and have no part in or responsibility for establishing policies, practices, or procedures. All of the physicians on the auxiliary staff recognize the value to them of the high standards of medical practice in the hospital. However, they have not heretofore demonstrated any urge to help maintain those standards, though they would regret seeing them lowered. Less than half of the auxiliary staff members feel they can accept any responsibility for participation hi outpatient clinics because of the time and travel difficulties which would be involved. The general attitude of the attending staff seems to be to increase hospital utilization and improve relations with the auxiliary staff. Although they know of no specific criticism on the part of the auxiliary staff, the attending staff is cognizant of the feeling of the auxiliary staff members about not "belonging." Members of the attending staff have endeavored to stimulate auxiliary staff interest and better relationship through monthly staff conferences, attendance at which has shown some general improvement recently. The attitude of the attending staff is good, indicating a desire for cooperation. What recommendations would you present to the board of trustees of Bentson Hospital regarding the manner in which the hospital and the community's physicians might better provide hospital care to those needing such care? What factors did you consider when preparing your recommendations? Upon what factors did you place most emphasis when developing your recommendations? COMPLEMENTARY QUESTIONS

1. What basic concepts concerning the medical staff's responsibilities for patient care do you think should be held by the medical staff? the administrator? the board of trustees? 2. What are the justifications, if any, for an administrator or a board of trustees to exercise controls over the quality of care which the hospital's medical staff provides to patients in the community? How would you describe the medical staff's responsibilities for controlling the quality of professional service provided to hospital patients by the individual members? 3. Do you agree with the procedure established by Bentson Hospital's administrator whereby he first discussed his ideas on changes in the medical staff's organizational structure with the board of trustees and then with the medical staff? Explain. 4. On what basis do you think it justifiable for a hospital to hire physicians to perform service in the hospital? How might your answers vary with the hospital's size? program? type of ownership? affiliations? the specialty training of the physicians? What other factors might affect your decision? 210

The Medical Staff 5. Do you anticipate that in the future the practice of physicians performing their professional services in a hospital and receiving their personal income from the hospital will extend to greater numbers of hospitals? to more specialization among physicians? What do you consider to be the advantages and disadvantages of such an arrangement from the hospital's viewpoint? the physicians' viewpoint? the patients' viewpoint? 6. What effect do you think the hiring of physicians by hospitals would have on the "private practice of medicine"? What effect would such an arrangement have on the "doctor-patient relationships"? How would you define the "private practice of medicine"? the "doctor-patient relationship"? 7. How do you think increasing the use of prepaid insurance and tax funds to pay for medical care might affect hospital-physician administrative relationships, including financial relationships? 8. Do you think that group practice will ever become a dominant method of organizing physicians to provide professional services for the care of the sick? What is meant by "group practice"? How might the growth of group practice affect hospital-physician relationships? What relationships do you see between group practice and prepaid health insurance? How might the relationship between group practice and prepaid health insurance affect hospital-physician relationships? 9. What effect might a group practice "monopoly" have on the long-run quality of a community's medical care? 10. What effect might increased growth of group practice and prepaid insurance have on the emphasis given to preventive medicine? on the doctor-patient relationship? 11. What action would you take, as an administrator, to secure medical staff cooperation? to secure medical staff coordination? What means of communication would you prefer to use when attempting to secure such coordination and cooperation? How might the action which you would take and the channels of communication which you would use vary with the hospital's size? its program? its type of ownership? its affiliations? 12. What do you think an average ratio of physicians to hospital beds might be? How would the ratio of physicians to hospital beds vary with a hospital's size? program? type of ownership? affiliations? proximity to other hospitals? proximity to metropolitan areas? How would you evaluate whether the ratio of physicians to hospital beds is large enough? too large? 13. What are the space needs of a hospital's physicians as a medical staff? How might the need of a medical staff for space vary with a hospital's size? program? type of ownership? affiliations? proximity to other hospitals? 14. How might a medical staff's organizational structure be affected 211

Decision Making in Hospital Administration by the hospital's size? program? type of ownership? affiliations? What other factors might affect a medical staff's organizational structure? 15. What is the function of general practitioners in relation to specialized physicians in the performance of a hospital program? How should the general practitioners be included in the hospital's organizational structure? What factors affect the ratio of medical-staff specialists to general practitioners which a board of trustees might attempt to achieve in a hospital? Is it desirable or feasible to evaluate and specify the medical-staff privileges to be granted each physician for patient care as compared to granting the physicians all the general privileges of the medical-staff category to which he is assigned? If the former, who is to make the evaluation and specify the limits of the physician's privileges for providing patient care? If the latter, how is the patient's safety to be safeguarded? 44. MEDICAL STAFF BYLAWS

Dale Hospital is a 50-bed, general-acute, voluntary institution. It is located in Dale County, primarily an agricultural area, in a midwestern state. The surrounding trading area contains somewhat over 7000 persons. The board of directors of Dale Hospital represents a good cross-section of total community interests and is composed of fifteen members, including one physician of the active staff who is also chairman of the medical advisory committee. The present administrator is thirty-one years old, a graduate of a college course in hospital administration, and has been with the hospital for one year. The administrator recently indicated to the board of directors that it had not clearly defined the operating policies and programs for him to follow. The directors replied that the administrator had not kept them informed of operating.trends and activities. One new board member, who had just read about the Joint Commission on Accreditation in Trustees, noted that the administrator had not yet attempted to secure the Commission's approval of the hospital. The administrator had for some time felt that the medical staff bylaws needed review so that they could be used to help change certain practices which he thought were undesirable. He had broached the subject to the board during a meeting three months ago. The physician member of the board rejected the suggested review of the bylaws as unnecessary, wasteful of time and effort, and as a slur on the reputation of the medical staff. The president of the board said, "If the physicians don't recognize the need for revised bylaws, there's no point in our revising them, as people don't obey rules of which they disapprove." The administrator still feels there is a need for revision. He believes that he can gain sufficient support for his idea from the medical staff and the board to put it across. He therefore begins to plan his approach to securing a revision of the medical staff's bylaws. 212

The Medical Staff Formal bylaws and regulations for the medical staff are in effect. They have not been revised for eight years. Provisions are inadequate relative to organization of the medical staff and its committee structure in that the functions of the officers and committees are not clearly defined. Present rules and regulations are silent on procedures for handling professional errors, and there are no provisions for curtailment of privileges or forfeiture of staff membership for failure to attend a minimum number of meetings. There are no requirements that all tissue removed in surgery shall be sent to the laboratory, and that reports on removal of any normal tissue shall be prepared in writing by the pathologist. The medical staff is composed of three groups: the active staff, the visiting staff, and the honorary staff. Bylaws of the board of directors make no provisions for a consulting staff. There is no provision regarding the retirement of older members of the staff or their advancement to an honorary staff capacity. The full board of trustees, at its annual meeting, has the responsibility of electing the active staff. The medical advisory committee, composed of three members of the active staff appointed by the officers of the medical staff, makes a pro forma recommendation for reappointment of active staff members without any formal review or appraisal of individual performance. In recent years the board has not formally acted upon the reappointments. The board's medical advisory committee has informed active staff members of their reappointments. The medical staff's executive committee, whose membership is in effect the self-perpetuating officers of the staff, controls initial appointments to the active staff. The active staff as a whole has no voice in recommending either initial appointments or reappointments. Members remain, on the active staff until they choose to retire from active practice at which time they join the honorary staff. Some members of the active staff have expressed a desire for a consulting staff to which they could belong and be less active than the active staff but more active than if "retired" to the honorary staff. The administrator is empowered by the bylaws to make all appointments to the visiting staff upon recommendation of the medical advisory committee. The appointment of members to the visiting staff is made without reference to the board of trustees or its executive committee, an arrangement which one or two members of the board have considered a usurpation of their authority. The active staff numbers twelve physicians. Four 'of the physicians are certified as specialists by American Specialty Boards. The visiting staff has seventeen members of whom four are American Board specialists. In addition, five physicians hold temporary probationary appointments to the visiting staff. The clinical services of the hospital are organized into three major divisions: medicine, surgery, and obstetrics, with a board specialist 213

Decision Making in Hospital Administration serving as chief of each division. These clinical services are supported with ancillary departments in anesthesiology, radiology, and pathology. The staff specialists in the ancillary departments also are staff members of an 80-bed hospital forty-five miles away. For the past twelve months only one member of the active staff has attended all monthly staff meetings. One third of the staff met the generally acceptable requirements of 70 per cent attendance. One third failed to attend even as many as 50 per cent of the meetings. The record of the visiting staff is dismal, with only 15 per cent attending as many as half of the meetings. This situation regarding attendance at staff meetings tends to confirm reports from physicians and interested key citizens in the area that staff morale is low and that the meetings fail to serve any real purpose. There is no .systematic and conscientious monthly review and analysis of the professional work done in the hospital. In the administrator's opinion, the medical staff does not maintain an acceptable educational program for its members. The educational program is limited to a biweekly clinical-pathological conference of about one hour's duration, rarely longer, open to all physicians practicing in the hospital. A check of the usual indexes for appraisal of the professional services of the hospital shows no unusual deficiencies, on a basis of averages. The annual death rate approximates 3 per cent of discharges. The autopsy rate is just above 40 per cent. The infant mortality rate is slightly above 1 per cent. Only one maternal death has occurred in four years. Post-operative deaths have not been excessive in relation to the number of surgical operations (one in the past twenty-seven months). No anesthetic deaths were reported during the past two years. Consultations are required and obtained in all major surgery, although there is a real question whether they are always recorded in writing and signed in advance of the surgery. Both the administrator and the part-time pathologist agree that all tissue removed at the time of the operation should be immediately sent to the laboratory, and this practice is followed. All tissue analyses are reported in writing, but the pathologist apparently is not reporting specifically the unnecessary removal of tissues. The pathologist claims these situations are handled confidentially by the medical advisory committee and that he would be subject to unpleasant pressure should he attempt to change the pattern of operation. The librarian reports that all medical records are up to date. However, she also reports that there is no systematic appraisal by the records committee of the staff of the quality and completeness of each patient's record following discharge. The medical staff and particularly its officers claim that the usual indexes point out completely that the medical staff is practicing good medi214

The Medical Staff cine. They conclude that there is no need to modify the present bylaws, regulations, or organization. What modification of the medical staff's bylaws would you attempt to secure from the board of directors of Dale Hospital? Why? What efforts would you make to assure yourself as far as possible that your recommendations would be accepted by the board? COMPLEMENTARY QUESTIONS

1. What comments would you make on the board president's statement that "If the physicians don't agree with the need for revised bylaws, there's no point in our revising them, as people don't obey rules of which they disapprove"? 2. What comments would you make regarding the administrator's strategy of having discussed, as he did, revision of the bylaws on a tentative basis with the board of directors ? 3. What comments would you make regarding an administrator's intention to use the process of revising the hospital's bylaws as a means of improving his status as an administrator? 4. What comments would you make relative to the administrator's having indicated to the board of directors that it had not clearly defined the hospital's operating policies and programs for him to follow? 5. Should a member of the medical staff automatically be required to retire to the honorary staff at the age of sixty-five, in your opinion? 6. If the board refused to approve the recommended bylaw revisions, what action would you take if you were the administrator? Explain. 7. What are the advantages and disadvantages of medical staff membership on the hospital's board of directors from the viewpoint of the patient? the hospital board? the hospital administrator? the medical staff? 8. What would be your reactions to a corporation structure which provided that the hospital's medical staff would also be the hospital's board of directors? 9. Would you prefer a strong, dynamic person to act as chief of the medical staff or as a chief of a medical service, or a quiet, reserved type of person? Explain. 10. To what extent do you believe an administrator should be a member of medical staff committees? To what extent should the president of a board of trustees participate as a member of medical staff committees? Explain. 45. MEDICAL STAFF QUALIFICATIONS "The medical advisory committee will not agree to your proposed Amendment C to the bylaws of Memorial Hospital," said Dr. Cruthers, iChairman of the advisory committee. "Furthermore, the advisory com-

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Decision Making in Hospital Administration mittee will express its objections to the board of trustees to your proposing a recommendation on medical staff matters to the board without having the advisory committee present to discuss the subject." Mr. Strong, the hospital's administrator for the past year, replied that he had not attempted to circumvent the advisory committee and that he was primarily concerned at this time with improving the financial operations of the hospital. Memorial Hospital is a 224-bed, general-acute hospital in a northeastern state. Average occupancy is 75 per cent, ranging from 87 per cent on the medical service to 53 per cent on the pediatrics service. The average length of stay for inpatients is 7.4 days. Service is provided to about 30 private outpatients per month and an average of 17 emergency cases per day. The hospital is in need of additional operating and capital program funds. Building rehabilitation, replacement of equipment, and construction of additional space all provide financial problems which the hospital is unable to meet. The local community chest and the county government object to including the expenses for capital improvements in the hospital "costs" used as a basis for determining the amount of financial support for hospital operation. Additional pressure has been felt from osteopathic physicians who seek admission to the staff because they have no other hospital facilities in which to practice their profession. Mr. Strong, after considering the points of view expressed, has prepared a suggested revision of the hospital bylaws concerning the medical staff. Discussion of the proposal with the medical advisory committee has met with opposition, but Strong decides to present his proposal to the board of trustees nevertheless. The medical advisory committee is in effect a self-perpetuating committee composed of the long-time members of the medical staff. The committee has provided a stable source of advice to the board of trustees over the years regarding the hospital's medical staff problems. The advisory committee advises on appointments to the medical staff, on nominations of interns and residents, and assignment of active staff members to their respective departments. The advisory committee states that the proposed modification of bylaws will jeopardize the quality of care provided in Memorial Hospital. The committee notes that last year the total death rate was 3 per cent and the autopsy rate 41 per cent, that the post-operative death rate is not excessive, that no anesthesia deaths occurred in the last 5000 anesthesias, that consultation on major surgery is required, that tissue removed in operations must be sent to the pathologist for normal tissue examination, and that medical records are up to date. The committee points out that 36 of the 57 active staff members are certified by specialty boards as are 11 of the 100 visiting staff members. The committee notes that the chiefs of the four clinical services and three ancillary services are all board-certified specialists. The proposed Amendment C would 216

The Medical Staff upset the traditional practices by which the medical staff governs itself, in the opinion of the advisory committee. Other members of the medical staff have expressed to Strong confidentially their belief that improvement could be made in the standards of medical practice in the hospital. They have noted that attendance at staff meetings is poor and that the bylaws contain no provision for enforcing staff attendance. They've added that there are no written provisions or procedures for reviewing and criticizing professional errors, for an honorary or consulting staff, for the board of trustees' approval of the medical advisory committee's appointments to the active staff, or for the administrator's appointments to the visiting staff. The board of trustees' review of the medical advisory committee's actions is nominal and approval is normally automatic. These medical staff members state that reports on the removal of normal tissue are made only to the medical advisory committee and that there is no systematic appraisal of medical records. Strong keeps the opinions of the medical staff members in mind as he prepares for the board of trustees his proposed amendments to the bylaws of Memorial Hospital. ARTICLE V

Medical Staff Organization Present Section 1. (a) The Board of Directors shall appoint a Medical Staff and shall make such reasonable rules and regulations for control of their practice in the Hospital as it deems to be of the greatest benefit to the care of patients within the Hospital. The Medical Staff shall be divided into honorary, consulting, attending, and visiting groups. The consulting, attending, and visiting groups shall consist of graduates of good character of an approved medical or dental school, legally licensed and authorized to practice in the state, qualified for membership in a County Medical or Dental Society and practicing within a reasonable distance from the Hospital. Members of the honorary group shall have such qualifications as the Board of Directors may deem necessary in each case. Proposed Section 1. (a) The Board of Directors shall appoint a Medical Staff and shall make such reasonable rules and regulations for control of medical practice in the Hospital as it deems to be of the greatest benefit in the care of patients within the Hospital. The Medical Staff shall be divided into Honorary, Consulting, Attending, and Visiting groups. To be eligible for appointment to the Medical Staff the applicant (except a dentist) must have the following qualifications: 1. Graduation from a medical school maintaining a standard of medical education conforming to that fixed by the State Board of Medical Registration and Examination. 2. Satisfactory completion of at least one year of internship in a hospital accredited by the Joint Commission on Accreditation of Hospitals. 217

Decision Making in Hospital Administration 3. A license to practice medicine in the state. 4. Professional and ethical qualifications for the position for which application is made. To be eligible for appointment to the Dental Section of the Medical Staff the applicant must be a graduate of an approved dental school, duly licensed and authorized to practice dentistry hi the state, and qualified professionally and ethically for the position for which application is made. Members of the Honorary Medical Staff shall have such qualifications as the Board of Directors may deem necessary in each case. Assuming that you are Mr. Strong, what proposal would you make to the Memorial Hospital's board of trustees regarding modification of the hospital bylaws? What factors did you consider most important in arriving at your decision? Why? What other factors did you consider in arriving at your decision? COMPLEMENTARY QUESTIONS

1. What procedure would you have followed in preparing and securing a review of your recommendations to the board of trustees if you had been the administrator of Memorial Hospital? 2. What problems do you think need to be corrected in the operation of Memorial Hospital? Why? How are the problems affected by the content of the hospital bylaws? 3. How might your proposals to the board of trustees have been affected if the hospital's average occupancy were 86 per cent? If the hospital had sufficient operating and capital program funds? 4. How might your comments have been affected if Memorial Hospital were located in a southern resort town? 5. What is the purpose of medical staff bylaws? What are the kinds of provisions which should be included in such bylaws? 6. What is the relationship of medical staff bylaws to rules and regulations of the medical staff? to hospital bylaws? to bylaws of the board of trustees? 7. How would you describe the limits of an administrator's concern with the prof essional medical practice in a hospital? 46. IMPROVING THE QUALITY OF MEDICAL CARE Mr. Darrell, director of Dillon Hospital for the past three years, has noticed a considerable reduction in occupancy over the past half year. There is no apparent reason for the lowered census. Upon investigating, he finds that rumors have spread throughout the community that too many unnecessary operations and several illegal procedures are being performed at the hospital. In fact, these rumors have been growing so persistent and loud that even the doctors have begun to suspect each other. There is no way of determining the basis for the rumors, but Darrell and the chief of 218

The Medical Staff staff suspect that they were started by a disgruntled resident who had been discharged because of incompetency. The board of trustees has become aware of the unwholesome atmosphere in the hospital and community, and feels morally obliged to do something about the situation. The board has asked Darrell to submit his recommendations as to what action should betaken. Dillon Hospital is a voluntary institution caring for acute-general cases. There are two other general-acute, voluntary hospitals in the city of a hundred thousand population. Dillon Hospital, with 300 beds, cares for most of the emergency cases in the city. The other two hospitals have 175 and 150 beds, with 84 and 81 per cent average occupancies respectively. The physical plant is typical of a mushroom growth. Various wings have been added as the need for beds increased. The latest 50-bed addition was constructed in accordance with expansion plans for the future. The present old wings are to be replaced. Obstetrics and pediatrics are housed in a non-fire-resistant section of the old hospital. The medical staff is composed of 75 active members and 35 courtesy members. The radiologist and the pathologist on the staff also do some work for the other two hospitals in the city. The medical staff includes specialists in obstetrics, pediatrics, surgery, and medicine. Until recent rumors began circulating, medical care had been considered good by the general public. The chief of obstetrics was considered particularly outstanding and many complicated deliveries had been referred to him. The hospital has experienced with other hospitals in the area an acute shortage of nurses, but in spite of this nursing service has been stable and satisfactory on all services with the exception of the medical service. On these wards the nursing care has been given mainly by nursing aides. There are times when the nonprofessional personnel have to give treatments and administer medications. The accomplishments of the record room are the pride of the hospital and medical staff. Miss Daley, the medical records librarian, sees that all records are up-to-date and complete. All statistics are at her fingertips. The record room has good equipment and sufficient personnel. Equipment for the clinical departments varies in relation to the importance accorded the department by the medical staff. The obstetrical department has the latest and finest equipment. Pediatrics, on the other hand, is struggling along with substandard equipment. Most equipment and instruments required by the surgeons are available. The board is anxious to have the medical practice of the hospital analyzed to find out if the rumors are justified. Although the board of trustees has no direct formal contact with the medical staff it has considered the staff members to be generally competent. This opinion is based upon Darrell's reports and upon comments from personal friends who have been 219

Decision Making in Hospital Administration hospital patients. The board members have relied also on the activity of the staff's credentials committee. Darrell knows, however, that the committee's review of staff applications has been only cursory. The board has raised the possibility of hiring an outside consultant to evaluate the hospital's professional practices. The board is aware of the basic standards of the medical audit but does not know how to evaluate them. The medical staff in general has expressed to Darrell a complete willingness to help clear the hospital's reputation. The staff members note that no systematic large-scale evaluation of medical practice will be conducted at the present time because this is the first occasion that any serious questions have been raised concerning the quality of the hospital's care. The surgical service, however, seems only lukewarm to DarreU's suggestion that a tissue committee be established. The hospital has provided about 97,455 days of patient care each year until the last six months, when 43,510 days of care were provided. The average length of stay of patients is about five days. The death rate has been about 3.5 per cent. Of these deaths, 0.2 per cent were maternal deaths, .025 per cent infant deaths, 1.2 per cent post-operative deaths, and there have been about two anesthetic deaths in the past 8000 operations. Autopsies have been performed on 50 per cent of the deaths. Complications following clean surgical, obstetrical, and medical cases such as post-operative pneumonia, post-operative bronchitis, embolism, and thrombosis of the veins of the extremities occurred last year in 3.5 per cent of the cases. Infections occurred in 2.4 per cent of the clean surgi-* cal cases during the same period. In obstetrics 6 per cent of the cases were delivered by Caesarean sections. The obstetrician, an accomplished specialist, has recommended tubal ligations for patients with heart conditions, arthritis, and tuberculosis. The medical staff conferences have shown good attendance, averaging 57 from the active staff and 26 from the courtesy staff at each monthly meeting. Formal staff consultations are held on 15 per cent of the cases. The hospital was approved by the Joint Commission on Accreditation two years ago. What recommendations do you think Darrell should present to the board of trustees regarding possible action to counteract the rumors of poor care at Dillon Hospital? What recommendations do you consider the most important? Upon what factors did you place most emphasis when arriving at your decisions? How might your recommendations vary with a hospital's size? its program? its type of ownership? its affiliations? the attitude of its medical staffs? 220

The Medical Staff COMPLEMENTARY QUESTIONS

1. What are all the factors of which you are aware that determine the quality of care provided in a hospital? Who or what group is most responsible for maintaining satisfactory control over each factor? 2. What kinds of coordination do you think are necessary to achieve good hospital care? Do you believe cooperation to be a necessary element in securing the needed coordination? Explain. 3. What factors do you consider most essential to securing care of good quality for hospital patients by a medical staff? 4. What is "ghost surgery"? Why is it considered poor surgery? 5. What is "fee splitting"? Why is it condemned by physicians as conducive to poor care? Would you consider fee-splitting objectionable in a hospital which rigidly evaluated physicians requesting surgical privileges against high standards and in which an effective tissue committee were functioning? Why, or why not? Would you object to ghost surgery under the same conditions? Why, or why not? 6. How do you think the quality of care provided hospital patients by physicians might be affected by an expansion of the number of persons covered by prepaid health insurance or eligible for tax-fund support? by an expansion of the benefits from prepaid health insurance or from taxfund support? 7. What do you mean by "quality of care" as provided by physicians? How is it related to "quantity of care"? 8. What is the importance of communication in the development and maintenance of good care? What examples can you list of effective means of communication which may be used to improve patient care? What means of communication do you think should be used which are not used generally by hospitals at present? 9. How might the quality of care rendered an individual patient be affected by the hospital's research program as carried on by the medical staff? What adverse effects might such research have on good patient care? How might the adverse effects be offset? 10. Do you think that to provide the best health care at the present time the country's health resources should be used to emphasize curative or preventive care? Why? Would your answer have been different if the question had been directed toward the care of the peoples of the Middle or Far East? Explain. Would your answer have been different if you had been asked to consider the long-run effects of providing health care? 11. How is "the greatest good for the greatest number" compatible with the efforts to provide the highest quality care for each hospitalized patient? 12. How might the quality of care be affected by a trend toward increased provision of ambulatory care relative to inpatient care? 221

Decision Making in Hospital Administration 13. What factors determine the ratio of surgeons and other specialists to the total number of physicians on the medical staff of a hospital? 14. How might the quality of care rendered to patients be affected by a hospital's size? program? type of ownership? affiliations? location? 15. What comment would you make on a surgical staff's expressed disinclination to send all tissues for examination on the basis that the practice imposes an undue financial burden on the patient? 16. How do you think a determination should be made as to which general practitioners should be permitted to perform surgery alone or as assistants in a hospital that has on its staff a smaller number of surgeons than the surgery work load needs? if the medical staff has general practitioners who have been performing surgery in the past and now has young general practitioners who wish to practice surgery? How would your conclusions be modified if the surgery work load could be handled by the existing surgeons? 17. How would you distinguish between minor and major surgery? What is the relationship of your definition to staff privileges? How does a physician with minor surgical privileges obtain major privileges? 18. Why is a high level of autopsies recommended? What is the best means of obtaining and maintaining a high percentage of autopsies? 19. Can you visualize any justification for a surgeon to use a graduate nurse as an assistant in an operation? 20. How long should an operating room be held for a surgeon after the. scheduled tune when there are patients scheduled for later use of the operating room and there are no other operating rooms available? 47. MEDICAL EDUCATION Only one intern was obtained through the matching plan and only five applications for residency training were received by Holly Hospital this past year. Holly Hospital, a 500-bed, general-acute, voluntary institution, has a quota of ten interns and has sixteen board-approved residencies. This caused quite a disturbance within the medical staff, the board, and the hospital management. The medical staff is convinced it cannot give adequate service to patients, particularly to the average census of 250 ward patients, without the assistance of a house staff. It suggests that the hospital offer more attractive stipends to prospective interns and residents. The medical staff maintains there is a sufficient quantity of needed kinds of clinical material to provide a house staff with valuable clinical experience. The house staff affiliates with an outside dispensary to augment Holly Hospital's outpatient clinical resources. The board of directors has asked the administrator to evaluate the training programs, particularly the interns' training program, to find out what should be offered beyond minimum requirements to attract interns and

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The Medical Staff residents. His recommendations are to be presented at the next joint meeting of the board and the medical advisory committee. The board senses its obligation to the community to sponsor medical education programs because of the insufficient number of university-connected hospital beds available to provide the clinical resources needed. Two other hospitals in the midwestern city of 256,000 population maintain intern and resident programs. These hospitals of 225 and 250 beds filled an average of 60 per cent of their house-staff quotas. None of the hospitals teaches medical students nor is affiliated with a medical school. Holly Hospital is on a stable financial basis and is able to support a specialized education program and can take care of any reasonable expenditures. The monthly stipend of $ 100 per month and room and board to interns and $200 per month plus room and board to residents is standard in the area. No hospital in the area provides more than an additional $50 per month to married interns or residents maintaining an address outside the hospital. Holly Hospital's food and lodging are reputed to be superior to those offered by the other two hospitals with intern and resident programs. The medical staff comprises three groups: the active staff, the visiting staff, and the honorary staff. The active staff numbers 57 physicians, 36 of whom are certified as specialists by American Specialty Boards or by the American College of Surgeons. The visiting staff has just over 100 members, of whom 11 are American board specialists. In addition, 15 physicians hold temporary probationary appointments to the visiting staff. On the whole the active staff is reasonably well balanced as to the age of its members and the range of the specialties represented. Although none of the staff members has had any particular experience or training in the educational field, many have obtained national and international prestige as a result of the papers they have published on research conducted in Holly Hospital. The director of medical education is a new staff member, relatively inexperienced in the field of medical education. He has authority to devise, supervise, and coordinate the teaching activities of the hospital. He is ambitious and interested in a good teaching program but has been unable to acquire the cooperation or the time of the senior attending staff. The medical advisory committee is composed of several older physicians who maintain that the staff should be organized primarily on the basis of the quality of medical care which the staff members provide rather than their interest and ability in teaching. This committee's functions include those usually performed by an intern and resident committee. The hospital management has not interfered with the training program. The board of directors is concerned mainly that the program and physical facilities more than meet the minimum requirements of intern and resident 223

Decision Making in Hospital Administration training. The hospital is approved for internship and residency programs. The medical staff, through the medical advisory committee, is responsible for reviewing the content and operation of the house-staff program, and for evaluating its effectiveness. The medical staff is responsible for providing adequate clinical experience and related teaching necessary to carry out the hospital's program of medical education. The type of educational program offered interns is a one-year rotating internship providing experience in internal medicine (one month), surgery (three months), pediatrics and obstetrics (five months combined), and their related sub-specialties. Some supervised experience is planned in laboratory (two months) and radiologic diagnosis (one month) depending on the demands in the other departments. The interns have complained in the past that their assignments have meant unequal work loads. A sponsor system has been instituted whereby the department head appoints someone responsible for the intern's instruction while the intern is on a specific service. Usually the resident on the service is appointed. The intern works closely with the resident who is responsible for the patients on his service. Each intern is responsible for an average of about forty patients. He takes the histories and physicals on new ward patients, who average 9000 admissions per year, and makes rounds routinely once a day. He sees critically ill patients as often as necessary. Four-year clinical residencies in surgery, medicine, and obstetrics are offered. The first half of the first year is devoted to general orientation in all these services. The second half of the first year is taken in pathology. The second year provides administrative training. The residents supervise the intern service and the house service in the various departments. Specialization in medicine and surgery is given in the third and fourth years. The interns and residents have the opportunity to do a considerable amount of medical practice. They make diagnoses which are usually confirmed by the department heads, write orders, prescribe and make disposition of cases. The interns have full responsibility for the general care of ward patients and for their charts. The residents cover the legal responsibility of the hospital by providing most of the medical supervision of patients during the time when the attending staff is absent. The interns are in attendance during ward rounds, but the staff men are often so busy with their private patients that they do not have time to discuss ward patients in detail. The staff men think it is better for the interns to pursue findings themselves and that if sufficient initiative and interest are displayed by specific interns additional instruction will be given to them. On occasions the attending physician provides instruction, usually showing only interesting or complicated patients. Much time is spent by the interns assisting in major surgery. Little instruction is given in minor surgical techniques. 224

The Medical Staff Laboratory procedures are delegated to a technician as the interns are too busy taking calls for the staff to spend any time doing either routine or complicated procedures. Biopsies are checked by the pathologist although usually not discussed in detail with the house staff. He is willing, however, ,to take the amount of time necessary to answer interns' questions on pathology. The hospital autopsy percentage averages 24 per cent, but interns often feel too busy to take time to observe the autopsies. X-rays are available during ward rounds but the attending staff leaves discussion of them to the formal but infrequent X-ray conferences. The consensus is that the intern will have the services of a radiologist available when he goes into practice, and there are more important aspects to observe during ward rounds than studying films. Clinical-pathological conferences of one hour are held weekly. The programs usually attract less than 50 per cent of the medical staff. The house staff presents cases at these conferences and the discussion is open to the group. Complete medical records have been recognized by the house staff as an important aspect of intern training and hospital approval. The interns have felt the responsibility of keeping adequate clinical records up-to-date. They sign most of the orders for treatment or for special diagnostic studies as well as the progress notes. Case histories and physical examinations written by interns are usually verified by the attending physician. There is no systematic appraisal although the record committee of the staff does check the quality and completeness of some patients' records following discharge. The filing and indexing of records is highly satisfactory. The medical records librarian, a very competent person, codes the diagnosis of the disease or condition after the doctor has made his diagnosis. Thus she knows how the various cases have been indexed. The house and medical staffs at Holly Hospital have access to the excellent medical library of the County Medical Society, located about ten blocks from the hospital, and reputedly the finest in the state. The medical staff has not felt it necessary to duplicate this library at the hospital, where standard textbooks and current medical literature are available in the interns' reading room. Space is available for enlarging the hospital library if such expansion should ever prove to be necessary. Members of the medical staff feel that since they have little time to read the material provided by the hospital library, it is useless to expand this facility when the County Medical Library is so close. The medical staff is of the opinion that job opportunities are good in the area because of the expanding industries and population. The medical staff members freely admit that the extent of their private practices prevents them from devoting as much time to teaching as they really would like to give. 225

Decision Making in Hospital Administration What recommendations would you make to Holly Hospital's board of directors and medical staff with reference to attracting more interns and residents to the hospital? What factors did you consider when preparing your recommendations? To which group would you first present your recommendations? What do you consider the most important factor in the development and maintenance of good intern and resident training programs? COMPLEMENTARY QUESTIONS

1. What basic concepts regarding medical education in hospitals should be given support by a board of trustees? by the hospital's medical staff? 2. What reaction to the hospital's education program do you think should, if possible, be developed in the patients? How can the desired patient attitudes be developed? 3. What are the differences and similarities between hospital educational programs for interns and residents and for medical students? What additional obligations are placed upon the hospital by the conduct of educational programs for medical students as well as for interns? What advantages accrue to the hospital from the conduct of such programs? 4. What coordination is required between the hospital's administration and the medical staff in the conduct of a medical education program? 5. What minimal requirements must be met by a hospital to receive approval for an internship or residency program? 6. How do you believe an expansion of the coverage of persons purchasing third-party health insurance or receiving support for health care from tax dollars will affect programs of medical education? 7. Do you believe that medical education should be subsidized by the use of tax funds? If so, from which level of government? Explain your viewpoint. 8. What steps should an administrator take to assure himself and his board of trustees that the quality of the hospital's medical education program meets established standards for the program? How can the administrator evaluate the quality of a medical education program? Who establishes the standards other than minimum standards of a hospital's medical education program? 9. What attitudes toward the patient and the practice of medicine, if any, should a hospital's medical education program attempt to instill in the medical students, interns, or residents who are participating in the program? 10. What kinds of information are interchanged between the administrator and the hospital's house staff and medical students? What are the channels of communication which you as the administrator might use to exchange such information? Which means of communication would you 226

The Medical Staff as administrator prefer to use for communications with the house staff or medical students? How might your decision be modified by a hospital's size? its affiliations? 11. How do you think a hospital's program of medical education should be used to develop increased understanding of preventive medicine? 12. What are the relationships, if any, between a hospital medical teaching program and a hospital research program? 13. What effect, if any, does a hospital's program of medical education have on the space needs of a hospital? 48. PROFESSIONAL RESPONSIBILITIES

You have been administrator of St. John's Hospital for eight months. Sam Smith, brother of Sadie Smith, age fifty-eight, who was admitted to St. John's three weeks ago, has complained to you that his sister is not making any progress and that he is unable to get any satisfactory report from Dr. Michels who is treating her. Dr. Michels is a young associate of the current chief of the St. John's medical staff. Smith threatened to obtain a court order if necessary to discover what was considered wrong with his sister and what was being done for her. He apparently discussed the subject with his friend on the staff of the local newspaper, because a reporter called you — shortly after Smith left you — to ask "what the story was on the Smith case." You replied that there is no story at the moment as you are investigating the case. On consulting Sadie's chart you find that there is no diagnosis but that the treatment for chronic cholecystitis is being followed. The head nurse expresses the opinion that the patient is no better than she was when admitted. Sam Smith, upon whom Sadie Smith is totally dependent, is a farm laborer. There is some question as to whether he will be able to pay for his sister's hospitalization. Sam Smith has also spoken to his employer, Abe Townsend, who is chairman of your board of trustees. Mr. Townsend mentions the matter to you, and you suggest that a consultation might be in order with Dr. Johnson, the town of Burnett's one specialist, who is on the staff of Good Samaritan Hospital. You add, however, that the poor relationships between Dr. Johnson and the members of St. John's staff make it difficult to arrange a consultation. Mr. Townsend then asks you to discuss the relationships among the doctors in the town on an informal and confidential basis with him and two other members of the board of trustees after the next meeting, scheduled within a few days. He would like your recommendation as to what should be done to develop cooperation between Burnett's two groups of doctors for the benefit of the patients. There are two general-acute, voluntary, nonprofit hospitals in the town of Burnett, which has a population of approximately 25,000, and is lo227

Decision Making in Hospital Administration cated in a Midwestern trade area with a total population of approximately 40,000 persons. Mr. Townsend and others, including the board members of Good Samaritan Hospital, have felt for some time that the attitudes of the physicians in town toward certain of their colleagues is not in the best interests of medical practice, and it would be most beneficial if a way of changing them could be found. Knowing that the administrator of Good Samaritan Hospital is also sympathetic to such a point of view, you begin discussions with her as to the recommendations you will present to your board of trustees. Good Samaritan Hospital, owned and operated by a nonprofit voluntary association, has 28 beds and 8 bassinets; adult admissions last year numbered 1477. St. John's Hospital has 46 beds and 10 bassinets, with an admissions total for last year of 2423. At Good Samaritan Hospital the average length of stay was six days last year as compared with five days at St. John's Hospital. Neither hospital is accredited by the Joint Commission on Accreditation. St. John's Hospital is owned and operated by a Protestant denominational organization. Forty per cent of the area's population profess the faith of the denomination owning St. John's Hospital. Neither hospital is operating at a deficit. Both hospitals are reasonably well equipped. St. John's Hospital recently improved its surgical facilities in an effort to attract more surgical cases to the hospital. There are fourteen physicians practicing in Burnett. Six of these doctors are on the staff of Good Samaritan Hospital and the other eight are associated with St. John's Hospital. Four physicians in the community are of the denomination which supports St. John's Hospital and belong to the staff of that hospital. Both staffs are closed and there is practically no professional contact between the two groups. The County Medical Society is practically nonexistent. Neither staff is formally organized, although each elects a chairman who serves as chief of staff during his tenure of office. The only physician in the area who is a specialist, Dr. Johnson, is a diplomate in internal medicine and is on the staff of Good Samaritan Hospital. At one time he was frequently called upon for consultations at St. John's Hospital on a fee basis, as paid by the physicians requesting his advice. However, St. John's Hospital physicians came to feel that most patients whom Dr. Johnson saw never came back to them. Burnett is 230 miles from the state capital, from which specialists come infrequently for consultations in unusual and critical cases, but it is the usual practice of each group of doctors to consult informally among themselves. Burnett's physicians have developed a certain amount of specialized knowledge through experience, as Good Samaritan Hospital provides care mostly to medical and surgical cases while the emphasis at St. John's 228

The Medical Staff Hospital has been on obstetrical and pediatric cases and to a lesser extent on internal medicine. If a patient cannot obtain locally the medical care he needs he is sent to one of the hospitals in the state capital. What recommendations would you present to your board of trustees as to the proper action needed to develop an amicable relationship between the medical staffs of the two hospitals in Burnett? What action would you take with regard to Sam and Sadie Smith? What factor do you consider the most important to emphasize in the development of good inter-staff relations? Upon what factors did you place most emphasis when arriving at your decisions? COMPLEMENTARY QUESTIONS

1. Do you think it reasonable to expect that the boards and administrators of the two hospitals in Burnett would be inclined to develop cooperative relationships when their medical staffs do not? 2. If Sam Smith carried prepaid health insurance, would you as the administrator permit the insurance company to examine the patient's medical records and question the care which the patient is receiving? If a governmental agency were supporting Sadie Smith's medical care, what rights would the agency have to inspect the medical records and modify the care being given? 3. As administrator of St. John's Hospital, would you discuss with the administrator of Good Samaritan Hospital the recommendations you plan to present to your board of trustees? Why, or why not? 4. What is the purpose in attempting to develop good relations between medical staffs of different hospitals which have overlapping service areas? 5. What is the most important factor in the practice of high quality medical care in a community that does not have within its boundaries the specialized professional resources needed for complete good medical care? 6. Who is basically responsible for the ethical practices of a medical staff? Who has responsibility for controlling the ethical practices of a medical staff? What authority does each responsible group possess? How might this responsibility be exercised? 7. Are any additional requirements of medical ethics incurred by establishing and operating a teaching program? a research program? a program for the care of the indigent? 8. If a physician has demonstrated gross incompatability with the medical staff and the hospital's administration, should that be considered sufficient grounds for suspension of staff privileges? Who should initiate the action, the administrator or the medical staff? If an administrator wishes to have a member of the medical staff suspended, what steps should he follow when attempting to secure suspension? 9. Is a hospital ever justified in helping an attending physician collect 229

Decision Making in Hospital Administration his professional fee by adding it to the hospital bill and collecting both charges together? Explain. 10. Do you think the hospital's or the physician's bill should be given priority for payment by the patient? How can the hospital enforce the priority you wish to see established? How might the priority vary with the hospital's program? type of ownership? 11. What is the responsibility of the hospital when a hospitalized patient desires to change physicians? 12. Should members of the medical staff be permitted to make purchases from the hospital for non-hospitalized patients? How can the practice be controlled? 13. What action should a hospital take when a non-emergency sick person seeks admission saying, "I'm a stranger to the community and don't know any doctors here"? 49. SELECTION OF ANCILLARY STAFF

Mills Hospital, a 550-bed, voluntary general hospital, is the only large teaching hospital in a service area of 500,000 population. It is approved by the Joint Commission on Accreditation. The hospital is approximately eighty years old, its policies have been very conservative, and changes have been gradual. Local steel industry has kept the hospital heavily endowed throughout its history. Many of the endowments have been restricted but not enough to hinder a certain flexibility of hospital operation. The hospital's operations have closely followed old customs, however, since the area and the hospital are rich in tradition. Mills Hospital is a teaching hospital accepting interns for a two-year program and offering four-year residencies in the clinical services and in psychiatry, pathology, radiology, and anesthesiology. Since there is no medical school in the city, the hospital has been receiving most of its house staff from a highly regarded medical school seventy miles distant. The faculty of the medical school maintains an active interest in the quality of the teaching program at Mills Hospital and has expressed to the administrator a willingness to be of assistance in any improvement of the hospital which will aid its teaching program. The trustees are an active, forward-looking group. They obtained within the past year a progressive director for the hospital. The future plans of the board are to develop a modern medical center at Mills Hospital which will actively aid the physicians and hospitals in the surrounding area to provide specialized care to their patients. The medical center also will enhance educational opportunities for Mills Hospital's interns and residents. The medical staff is dominated by men of the old school. Many of the active members have followed in the footsteps of their fathers or ancestors 230

The Medical Staff who were charter members of the staff. The tone of the staff is steeped in the strictest of traditions. Staff members are loyal to the respective medical schools with which the hospital has been connected. They favor applicants for staff appointments who are of the right social standing, who embrace the approved religion, and who express the correct political views. Therefore, the professionally best qualified men have not always been selected for membership on the executive staff. The board is now faced with the problem of selecting a pathologist as director of the department of pathology. The previous director has just resigned to accept a similar post in a larger city, after twenty years as department director at Mills Hospital. His resignation becomes effective in three months. The board can foresee the possibilities of vacancies in the other specialties of radiology, anesthesiology, and psychiatry due to age limitation and retirements because of illness. The hospital pathology department serves five hospitals through its central laboratories and hence employs three full-time pathologists, a biochemist, and a bacteriologist, with a total staff of sixty. There are in addition nine residents in pathology working in the laboratories. The associate director of pathology has been in his position at this hospital for eighteen years, is well qualified academically, is well liked by the staff, has the resigning director's recommendation, and is anxious to get the job. The other assistant director is an older man with mature judgment. He is interested primarily in scientific research. There are no existing statements of the qualifications required of persons in the positions of director or assistant director of the pathology department, the incumbents having been chosen many years ago. However, full-time medical directors of ancillary services must meet certain minimum professional requirements in accordance with hospital bylaws, including graduation from an approved medical school and completion of an approved internship and an approved residency in the specialty. The board realizes that it has the final authority under the hospital's bylaws to approve the full-time appointments for directors of the ancillary services. The board still is concerned, however, whether the nominations which are made by the medical staff will be in accordance with traditional standards rather than in accordance with the need for a dynamic, progressive department administrator and program director. The board believes the department director should understand and approve of the medical-center concept. The administrator is aware of the shortcomings of the laboratory service and attributes them primarily to a lack of comprehension of the medicalcenter concept. The present staff of the pathology department has not been giving prompt service, or the kinds of service desired, to the five hospitals 231

Decision Making in Hospital Administration purchasing central laboratory services. It has emphasized its relationships with old friends on the Mills Hospital medical staff. The administrator has some evidence that the medical staff is dissatisfied with the present laboratory services. He believes the lack of a sense of administration by the director of pathology and a contentment with the traditional way of performing work is the cause of dissatisfaction within the medical staff. In addition to the problem of selecting a pathologist within the next three months the administrator is concerned with establishing a procedure for selecting medical directors to fill future vacancies in other services. What procedure do you believe should be established for the recruitment and selection of a pathologist for Mills Hospital? Why? How -would you develop and establish the procedure? COMPLEMENTARY QUESTIONS

1. What qualifications do you believe should be possessed by a director of an ancillary department? How might your conclusions vary with a hospital's size? program? type of ownership? affiliations? 2. What are the relationships of the director of an ancillary department to the medical staff? to the hospital administrator? to the outpatient department's director? Do these relationships vary with the hospital's size? program? type of ownership? 3. How would you as an administrator assure yourself that the quality and quantity of work performed by an ancillary department were satis-i factory? 4. Under what conditions might a hospital not recruit and select its own directors of ancillary services? What other methods may a hospital administrator use to obtain competent ancillary service for his hospital? 5. How might the functions of ancillary departments vary with the size of the hospital? with the program of the hospital? 6. How might an administrator attempt to influence the hospital's medical staff to increase the number of consultations with directors of ancillary departments? 7. In what different ways do you think a hospital's medical staff should use the clinical data collected by an ancillary department's operation? What limitations do you think should be placed upon a review of such data by persons other than the medical staff? 8. How might the hospital's ancillary services be used to support a preventive medicine program in the area surrounding the hospital? What limitations do you think should be placed on the use of the ancillary services in such a manner? Why? 9. To whom should the heads of ancillary departments be administratively responsible? How might this vary with the size of the hospital? with the hospital program? What other factors might affect such a decision? 232

The Medical Staff 10. With what areas of the hospital is it desirable to have the ancillary service areas in close physical proximity? Why? How might your conclusions vary with the hospital's emphasis upon inpatient, outpatient, or preventive medicine programs? 11. How would you as an administrator justify the allocation of the ancillary department's personnel, time, and resources to support medical education? to conduct research? What limitations, if any, would you place, on the time allotted to performance of such functions? 12. How much space in square feet would you allocate to the X-ray and laboratory areas of a 200-bed, general-acute, voluntary hospital? How would your answer vary with a hospital's size? type of ownership? program? affiliations? What other factors might affect such a decision? 50. THE RADIOLOGIST'S COMPENSATION

Elbridge Hospital is a 250-bed, general-acute hospital owned by a nonprofit association. It furnishes medical, surgical, pediatric, and obstetrical services, and has clinical laboratories, an X-ray department, and a blood bank. There is no outpatient department although an outpatient service of approximately 4000 visits annually is anticipated when funds become available to construct additional space for such a department. At the present time the X-ray work is supervised by a part-time radiologist, Dr. Banks. He is. compensated by a fee for each film read or therapeutic treatment given, except for a few part-pay or free patients in which cases his services are donated. The volume of work has risen to such an extent, however, that the board of trustees feels the interests of the patient would be better served by a full-time radiologist. This decision has the full approval of Dr. Banks, who has recommended that a younger man be secured. Dr. Banks has three roentgenologists associated with him, any one of whom is qualified to fill the full-time position. Dr. Banks has stated that he has no objections if you, as the hospital administrator, discuss the subject with his associates. They are all regarded favorably by the board of trustees. The board of trustees has been thinking of compensating the new radiologist on a straight-salary basis, but your preliminary discussions with Dr. Banks and his associates have convinced you that two of the associates would not consider such an arrangement acceptable. This position is consistent with the strong resistance of all radiologists, pathologists, and anesthesiologists in the area to salaried compensation for services rendered in a hospital. The third associate expressed no personal aversion to the straight-salary basis of compensation. All three of the roentgenologists would prefer a rental arrangement, whether the rental fee were a fixed sum, or a sum based on department income, or a fee per private case. 233

Decision Making in Hospital Administration it now devolves upon you to present to the board your recommendations for the type of compensation to be offered, together with estimates of the net income which would accrue to the hospital and to the prospective radiologist. During the past year there were 9218 X-ray films taken, 1222 fluoroscopic examinations, 9054 deep treatments, and 833 superficial treatments. You believe from talking to the radiologist that the number of examinations for inpatients would increase approximately 25 per cent when increased floor space for the X-ray department can be found. The average daily occupancy of the hospital was 94 per cent last year. The X-ray department occupies 2100 square feet in the main hospital building, including a control room, a chart room, a cystoscopic room, a fluoroscopy room, a reading room, and offices. Waiting patients are accommodated in the corridor. The department is staffed by six technicians, three clerk-secretaries, and two orderlies. Total annual payroll is approximately $36,000. The principal equipment consists of the following: 1G.E.300MA 1G.E. 400 KV constant potential 1 G.E. 100 MA 1 G.E. 220 KV self-rectified 2 portables 1 G.E. 100KV Original cost of equipment was $65,000 seven years ago. It is estimated that an additional 300 MA combination fluoroscopy and radiography machine is needed to handle present volume and that an additional 200 MA machine should be planned when the outpatient service is begun. It has also been recommended that the 100 MA machine be converted to a Table 18. Statement of Operating Expenses for One Year at Elbridge Hospital Type of Expense

Type of Expense

Amount

Office Printing, stationery and supplies Maintenance

Personnel Administrative $ 98,700 Operating (professional) 495,200 Operating (nonprofessional) 420,650 70,855 Maintenance Plant Fuel 24,000 Light and power 14,600 City water and sewage 1,800 8,500 Telephone and telegraph Housekeeping and supplies 6,900 Laundry supplies 3,400 Dry cleaning 635 Repair and replacement of equipment 8,120 Repair and replacement of furnishings 3,400

Structure

. .$15,900

Equipment

22 000 21,500

Miscellaneous Collection Insurance Public relations Labor relations service

825 14,100 9,000 450

Legal and accountating fees

General

234

Amount

9 Qftfl

6 200

The Medical Staff 200 MA and that the 220 KV be converted to a 250 KV, although the latter machine is still regarded as an effective machine. The income of the department for the past year was $139,000 (exclusive of the fees collected by Dr. Banks, which amounted to approximately $20,000)., and the direct expenses of the department amounted to $78,000. Of the 115,238 square feet of space hi the hospital buildings exclusive of the nurses' residence, 31 per cent is hi the patient areas. A condensed statement of expenses for the year at Elbridge Hospital is given in Table 18. What would you recommend to the board of trustees regarding the method of determining the compensation to be paid to whoever is selected as the radiologist? What are your estimates of the net income which would accrue to the hospital and to the radiologist both now and after inpatient and outpatient volumes have been expanded? What alternative methods of compensation did you consider? Why did you select the method noted above? What is the most important factor in determining the method of compensation? If your X-ray department's director were providing similar services to other hospitals, would you recommend a different method of compensation? Why? What additional factors, if any, would you have to consider when arriving at your decision? Why? COMPLEMENTARY QUESTIONS

1. Does the method of compensation of the director of an ancillary department alter his relationship to you as the administrator? to the medical staff? Does any one method of compensation tend to make your job of administrator easier? more difficult? 2. What is the relationship of the hospital X-ray or laboratory department to the radiological or laboratory services provided in physicians' private offices? to the radiological or laboratory services provided by the local health department? to the services provided by the local tuberculosis and health association? 3. Should directors of ancillary departments be permitted to use hospital facilities for their private practice? Should such physicians be permitted any private practice at all? If the use of hospital facilities for private practice is to be permitted, what policy should be established relative to the scheduling of private patients? How would you enforce the policy? 4. If ancillary departments perform services for the medically indigent and bill such patients at less than established charges, what steps would you take to avoid any criticism of unfair competition with practices of physicians who may be providing similar services in their private offices? 5. What do you consider to be the advantages and disadvantages of a contractual arrangement whereby directors of ancillary departments hire 235

Decision Making in Hospital Administration the technical personnel working within their departments from the income they receive from the hospital? 6. How might the care of the medically indigent hospital patient be affected by the method of compensation to the ancillary department's director? 7. How might the method of compensation to the ancillary department's director be affected by the provision of clinical instruction to medical students? by a medical-school faculty appointment? by the conduct of research programs for or i^onjunction with a medical school? 8. Would you as an administrator favor or reject in whole or in part the practice whereby directors of ancillary departments would submit separate bills to patients receiving their services in the hospital? Explain. 9. What controls do you believe would be most effective for preventing abuse of a prepaid health insurance contract provision authorizing payment for ancillary service provided to outpatients? What problems would such controls create for the administration of your hospital? How might these problems be circumvented? 10. Do you believe that a hospital is "practicing medicine" or "exploiting physicians" by claiming an increased percentage of income received for ancillary services rendered in the hospital as the total income from ancillary services increases? Why, or why not? 11. Do you consider as valid the claim by physicians that payment of salaries to physicians providing ancillary services will lead to salaried positions for surgeons, obstetricians, and other medical specialists, and that this will be followed by control of the practice of medicine by the hospital's administration? Why, or why not? What do you consider the advantages and disadvantages of the hospital's hiring salaried physicians of the various specialties? How might the disadvantages be overcome? 12. Would you as a hospital administrator advocate before the city council or state legislature the allocation of tax funds for payment of ancillary services for the medically indigent? What would your arguments be? 13. Do you believe that less reliance should be placed upon income from ancillary service as a source of hospital revenue and more upon the room rate? What problems are associated with this approach to hospital finance and how might they be overcome? How would such an approach affect financial relationships with directors of the hospital's ancillary departments? How would this approach be related to the establishment of an inclusive-rate system for hospitals? 14. What policy would you recommend relative to payment of fees to ancillary department directors for consultations on hospital inpatients? 15. If the ancillary department director receives compensation on percentage of gross or net income or on a commission basis, do you believe the basis for calculation should be patient charges or collections? 236

The Medical Staff 51. UTILIZING LABORATORY AND X-RAY FACILITIES Mr. Albert Miller, director of Atherton-Hospital, has been asked by his board of directors to look into ways and means of expanding the work done in the laboratory and X-ray departments of the hospital. The board thinks that such an expansion would be a desirable first step in the development of an outpatient department. The board feels that before outpatient facilities are actually provided and a department established, the medical staff should be encouraged to use to a greater extent the diagnostic service provided by Atherton Hospital's laboratory and X-ray departments. Laboratory space totals 1100 square feet in which approximately 14,000 examinations are performed annually while nearly 3000 radiologic examinations are performed in a 550-square-foot area. An outpatient department is considered a necessity by the board of directors for two major reasons. First, the board believes it an obligation of Atherton Hospital to its community and the surrounding area to provide something more than the inpatient care to which its service has been restricted since its founding in 1914. The board believes that unless outpatient department services are provided the hospital will not be fulfilling its responsibilities in the total health pattern of the area. Secondly, there has been talk at recent board meetings of the need for expanding Atherton Hospital within the next two or three years. No action has been taken to investigate the need for expansion, but average occupancy rates have been climbing slowly, and on peak occupancy days it is necessary to use corridor space for patients' beds. One of the members put it this way, "Whether it (an outpatient department) goes in before or after the expansion, it ought to be a big help in any money-raising campaign." As a preliminary step to all of the above plans, however, Miller feels strongly that the medical staff should be encouraged in every way possible to make more use of Atherton Hospital's present laboratory and X-ray facilities in the diagnosis and treatment of inpatients. It is his opinion that outpatient activities, dependent as they are on laboratory and X-ray facilities, are doomed to failure unless and until the staff can be educated to use these same facilities to a much greater extent in their diagnosis and treatment of inpatients. Atherton Hospital, one of two hospitals serving the city of Ashton (population 40,000), is a 100-bed, nonprofit, general-acute institution governed by a board of fifteen men representing the leading local membership of a national Protestant church group which sponsors the hospital. Financially the hospital is fairly well off. It has no endowment but does have some financial backing of its operation from the church, limited to a maximum annual reimbursement of $10,000 for operating deficit. Further, the board of directors believes that Atherton Hospital is morally obligated to its sponsoring church to operate without a deficit in order to 237

Decision Making in Hospital Administration conserve church funds for work more in the spiritual sphere, such as missionary activities. As a result of careful budgeting, a high occupancy rate (27,500 patient days last year), and the prosperous condition of the city and surrounding area, there has been no deficit for the past three years. Certain individual donors have indicated a willingness to provide up to $10,000 for capital expenditures this year if it will not be necessary to ask the church to supply funds for an operating deficit. Atherton Hospital has not yet been inspected by the Joint Commission on Accreditation of Hospitals. Full accreditation, Miller believes, will depend upon improvement in several areas, including development of complete medical records. More substantiation is needed for treatments prescribed. The development of a properly organized and operating tissue committee is needed, with its findings discussed in more frequent staff meetings. Ashton, the city of location, is primarily a trade center for an agricultural area extending about twenty miles east and fifty miles in all other directions. Population of this area, including Ashton, is 80,000. The area is prosperous at present but suffered severely from the depression of the 1930's. There has been a continuous movement of young people from agricultural to urban occupations. Ashton's town fathers have been trying, with success, to attract new businesses to the area to "keep the young people close to home" and to help decrease the town's dependency upon farm prosperity. The other hospital in town is St. Mary's, a 180-bed, general-acute hospital operated by an order of Catholic sisters. The hospital provides ambulatory care to a limited number of private patients (4000 visits per year). Ashton's population is approximately 25 per cent Catholic. Nearly 20 per cent of Ashton's physicians are Catholic. All of Ashton's qualified physicians are eligible for medical staff privileges at either hospital. Fifty miles east of Ashton lies the state capital, a city of 200,000 population, in which are located the nearest hospitals to Ashton and the nearest training facilities for nurses, technicians, and other professional personnel. Miller has been in hospital administration six years, having entered the field from a position as executive secretary of a national fraternal organization. His first hospital job was that of personnel director of a large teaching hospital. After three years in that position, he went to a 70-bed general hospital as director. He came to Atherton Hospital six months ago. In the 70-bed hospital, the medical staff had standing orders in effect for complete urinalysis, blood count, and chest X-ray on all admissions, as well as orders for certain other procedures according to admitting diagnoses. At Atherton Hospital, no such standing orders are in effect, and it appears to Miller that far too much use is made of private-office laboratory 238

The Medical Staff facilities in diagnosing and treating hospital patients. About 15 of the 40 doctors on the Atherton staff have more or less extensive office laboratory facilities staffed by persons trained on the job by the doctors. These individuals also serve as secretaries, receptionists, etc. Use is made of these office facilities not only by the doctors owning them, but also by other practitioners referring work to them. Miller realizes that these office laboratories are convenient to. many of the referring practitioners although some have expressed a desire to use hospital laboratory facilities if they are improved. Miller questions, however, whether tests done in the offices are always valid and dependable. He is especially concerned when they are done on hospital patients prior to admission and then are used in place of hospital laboratory tests. The hospital laboratory is staffed by two registered technicians who alternate in providing "on call" coverage for both the laboratory and X-ray departments. No pathologist is employed by the hospital, and such tissue pathology work as is done is sent to St. Mary's, which has a full-time pathologist. Nominally good relationships exist between the pathologist and Miller. The laboratory space is not crowded, and although the equipment is not new, it is adequate and kept in good condition. The work done averages as follows, on a monthly basis: hematologies, 1110; urinalyses, 430; bacteriologies, 115; spinal fluids, 20; chemistries, 120; basal metabolisms, 15; tissues, 50; for a total of 1860 tests per month. Laboratory earnings average $2480 per month and direct expenses $ 1700. Fees for individual laboratory tests are reasonable, but patients requiring a large amount of laboratory work still find the total charges high. The X-ray department retains the half-time services of a radiologist (paid $350 a month) who also has a private practice in town, where he owns complete diagnostic equipment although it is housed in crowded quarters. He performs approximately 5000 X-ray examinations per year, nearly 50 per cent of which are conducted in the hospital. He is prominent in the county medical society and is a popular man with the county's doctors. His actions indicate that he considers his salary inadequate compensation for his hospital work, which he continues only as a favor to the hospital. He appears much more interested in his private work. On one occasion since Miller's arrival, an accident victim was sent to the radiologist's offices for X-rays before being brought to the hospital for reduction of a fracture. Equipment in the department includes an 11-year-old stationary unit with fluoroscopic attachment, a 14-year-old portable unit, a darkroom, and viewing and filing cabinets. One registered technician is employed who spends part of her time in the bookkeeping office and has no "on call" time. The department earns about $1200 to $1400 a month, and its direct monthly expenses average about $700. 239

Decision Making in Hospital Administration In years past, one of the staff members has done some reading of X-rays for the hospital. He can no longer continue reading hospital films because of the work-load incurred by his contract with local firms for compensation cases. In fact, he has arranged to employ a radiologist as his assistant and has offered a plan for sharing this man's time and pay. What comments do you believe Miller should present to Atherton Hospital's board of directors concerning the staffing and utilization of the hospital's laboratory and X-ray facilities? What factors do you think he should consider when arriving at his decision? Upon what factors do you think he should place most emphasis? COMPLEMENTARY QUESTIONS

1. What methods may be used to secure the services of scarce, highly trained personnel in the ancillary departments of hospitals such as the Atherton Hospital? How might the methods used vary with an increase in the size of the hospital to 150 beds, 200 beds? Would the methods vary with the kind of ancillary services provided by the hospital? 2. What should be the relationship of a hospital administrator to the medical director of an ancillary department concerning the administration of the department? in determining the scope of the department's services? 3. How would you as a hospital administrator assure yourself and your hospital board that the quality of ancillary services is "satisfactory"? 4. What action is the hospital administrator justified in taking to secure modification of the content and use of the medical record? 5. What effects do you think an expansion in volume of hospital ambulatory care will have on a hospital's ancillary services? 6. What are the most important factors in securing full utilization of a hospital's ancillary services? What do you mean by "full utilization" of ancillary services? 7. As a matter of policy, do you believe interns should be permitted to perform X-ray examinations on a specific patient without prior consultation with the radiologist or radiological resident? Would you modify your policy in its application to the laboratory department? to the anesthesia department? 8. What would you estimate a rule of thumb ratio would be of X-ray floor space to the number of examinations and treatments? of laboratory floor space to volume of examinations made? of X-ray films and laboratory examinations to the number of patient days in a general-acute hospital? How might the ratio vary with changes in a hospital's size? program? type of ownership? affiliations? 9. What is the hospital's legal authority and responsibility concerning the ownership of the X-ray film of the hospital inpatient? of the hospital outpatient? 240

12 General Executive Management 52. BOARD OF TRUSTEE-ADMINISTRATOR RELATIONSHIPS

Karin Falls Hospital is a nonprofit, community general hospital with a capacity of 75 beds and 20 bassinets. It serves fifteen townships in a midwest state and is rapidly becoming a center for medical care and health protection in the area. The institution is approved by the Joint Commission on Accreditation of Hospitals and is a member of the American Hospital Association, the regional hospital association, and the state hospital association. The hospital's board of trustees is actively planning a fund drive for the expansion of Karin Falls Hospital to 150 general-acute beds. A community survey has found that the need for expansion exists, as recognized by the medical staff and the hospital's administrator. An architect has prepared preliminary plans. The state health department has indicated that if the plans are considered satisfactory and if community funds can be raised in the proper amount, there is a good possibility that federal tax funds for hospital construction will be allocated to enlargement of the Karin Falls Hospital. The board is finding resistance to the fund drive, however. The people of the area recognize the need for and want an expansion of the hospital facilities, but they feel that the hospital is more the administrator's hospital than theirs. The active and influential members of the community resent the autonomous manner in which the administrator operates the hospital, as he considers it necessary to do. They especially resent his resistance to their efforts to express their views through representation in the hospital corporation membership. The administrator has held his present position for eleven years. The Karin Falls Hospital Corporation is made up of approximately two hundred corporators who meet annually for the election of trustees. The board of trustees consists of thirty-three corporators. At each annual meeting, eleven trustees are elected for a term of three years. The trustees of the corporation have an annual meeting immediately following the annual 241

Decision Making in Hospital Administration meeting of the corporation. At that tune they elect officers and an executive committee of twenty members. Seven executive committee members constitute a quorum for the transaction of business. The board of trustees considers itself responsible for the quality of medical and professional care given the patients, for the policies of the institution, for the appointment of the staff, for the action of all employees, for the building and equipment, and for the keeping of accurate records of financial and other activities of the hospital. However, many members of the board of trustees have lost sight of their responsibility to the organization and have been willing to let the administrator assume policy-making authority. This situation has been growing for several years. The administrator has held his position for eleven years. He is sincerely interested in the hospital and, being a rather aggressive person, has assumed more and more control. Of course, it could have been his attitude that since some of the responsibilities normally assumed by a board were being neglected, it was better for him to take charge than to let certain tasks remain undone. Some people of the community believe that the administrator has exercised single-handed control and has been allowed to carry on many functions that normally are those of the executive committee. The one-man control has apparently been more evident to new members of the board, and particularly those on the executive committee, than to many who have served for a number of years. The new members believe that in some instances the executive committee has been no more than a rubber stamp for the administrator. The younger men have felt that their interest and efforts are of no avail as the older members always vote in support of the administrator. Therefore several of the new members resigned because they felt that the committee should have taken a more active interest and voice in the direction of the affairs of the hospital. Some of the older members believe that the ideas of the younger group are radical and they therefore preferred to go along with the policies of the administrator. Most of the members have been on the board for several years, as board members *may succeed themselves for three-year terms indefinitely. Unfavorable public relations have followed from the feeling of influential citizens that the board is unable to control effectively the hospital's operation. Members of the public informed about the hospital apparently no longer wish the administrator to continue as the executive officer of the board's executive committee or as a member of the various functional committees of the board or even as a member of the board. There apparently is no feeling, however, that the administrator leave his position of administrative responsibility, as it is generally conceded that he has done a good job of running the hospital. The hospital has never had a financial audit or an outside medical audit. 242

General Executive Management This has disturbed some of the younger members of the board, who also feel that employees have been underpaid and that equipment purchased has not been of the best quality. Each year, at the first meeting of the executive committee, the president appoints from the members of the committee four standing committees: a finance committee of seven members including the treasurer; a nominating committee of three members; a building and grounds committee of three members; and a policy committee of three members. The purpose of the finance committee is to devise ways and means of procuring funds for the support of the hospital and to manage and invest funds. At present, the board does not operate the hospital with an annual budget but instead functions with a deficit financial plan whereby the community is asked to make up the deficit to clear all accounts or to provide additional funds for improvements or new equipment. The requested amount has never exceeded $12,000, and in every instance, the people of the community have subscribed to the required amount and usually more. Several of the people of the community have expressed their appreciation of the fact that the deficit has been small; however, they have also said that they would willingly subscribe more if they knew that the members of the community had a stronger hand in the hospital's management. These people are the influential community members whom the board has been counting on to lead the hospital's fund drive and to secure the major portion of the needed funds. The executive committee has therefore taken a more serious view of the community's demands for the board of trustees to take a vigorous part in the conduct of the hospital's affairs. One of the younger members of the executive committee has been asked to study the situation and to present his recommendations at the next meeting of the executive committee regarding action which should be taken. As that member of the executive committee of the board of trustees, what comments -would you make to the committee at its next meeting regarding board of trustee-administrator relationships? What alternative comments would you consider? Why did you select the alternative you have chosen? What did you consider the most important factors supporting your conclusions on the subject? What were considered the most important factors against your conclusions? COMPLEMENTARY QUESTIONS

1. How might the functions of a board of trustees vary with the size of the hospital? with the hospital's program? with affiliation with other hospitals? with an affiliation with a medical school? with the type of hospital ownership? Under what conditions, if any, would you consider it unnecessary for a hospital to have a board of trustees? 243

Decision Making in Hospital Administration 2. How might the functions of the hospital administrator hi relation to the board of trustees vary with the size of the hospital? with its program? with affiliation with other hospitals? with a medical school? with the type of hospital ownership? 3. What do you believe to be the advantages and disadvantages of making the hospital administrator a member of the board of trustees? a member of board of trustee committees? an officer of the board? the president of the board? How would the functions of the hospital administrator become different if he should become a board member? How might his responsibility for the day-to-day operation of the hospital be modified as a board member? 4. Do you expect that the number of hospital administrators who serve as members of the board will increase in future years? Explain. Would you make the same forecast for administrators of hospitals of all sizes? with all kinds of programs? with all kinds of ownership? Explain. Would you as a hospital administrator wish to be a member of your board of trustees? In what capacity would you care to serve if you were a board member? Why? 5. What do you, as an administrator, think a board of trustees should establish as criteria when interviewing candidates for the position of hospital administrator? 6. What criteria would you as an administrator apply when evaluating a board of trustees during an interview for the hospital administrator's position?, 7. Do you believe a member of the medical staff should be a member of the board of trustees? Explain. Would your opinion be different if you as administrator were also a member of the board of trustees? Why? What methods of communication between the board of trustees and the medical staff can you list? Which method do you prefer? Why? Would the size of the hospital affect your preference? 8. What methods of communication between the administrator and the medical staff can you describe? Which would you prefer to use as an administrator? Why? Would the size of the hospital affect your preference? What other factors might you consider when selecting and developing your channels of communication with the medical staff? 9. What constitutes a good, comprehensive monthly report of the administrator to the board of trustees? What other means of communication to the board of trustees might you use as a hospital's administrator? 10. If the president of the board dominated the board, how would your approach to the board of trustees be affected? 11. As a hospital administrator, would you want the board to provide you with general or detailed and specific board policies? Why? 12. If the administrator of Karin Falls Hospital decided not to accept the 244

General Executive Management board's recommendations for future board-administrator relationships, what action could he take? 53. MEDICAL STAFF RELATIONS

"The chief of staff has complained to me that the medical staff is not being kept abreast of happenings at the hospital," said Mr. Braum, president of Elwood Hospital's board of trustees, to Mr. Claire Davies, the hospital's administrator. "The chief gave me a number of examples," went on Mr. Braum, "including the fact that no notice was given that a medical records librarian had been acquired and was on duty; and that it was even difficult to receive outside calls when making rounds in the hospital. I can vouch for the last complaint," Mr. Braum added, "as I tried several times to return a call from the chief which he made from the hospital. I was unable to reach him although I learned later that he was in the hospital at the time!" Mr. Davies replied that he too was aware that contact with the medical staff was not all that it should be. He noted that since his arrival six months ago, he had been rather busy planning a personnel program and had spent considerable time as a member of the state Blue Cross Commission and as secretary of the state hospital association. He reminded Mr. Braum that he had committed himself to the extra-hospital responsibilities by agreement with the board before coming to Elwood Hospital. He added that he had made a special effort to keep the professional staff informed of hospital activity by placing notices on the bulletin board, in the doctors' lounge, in the surgery, and in the record room. Apparently the notices had failed to reach all of the staff members. There are approximately fifty doctors on the staff. Mr. Braum and Mr. Davies discussed the subject further and concluded that the board should consider during its next meeting just what information should be given to the staff and what means of informing the staff should be used. Several of the complaints Mr. Davies has received from the medical staff are related to its members' own inattention or failure to make use of information given earlier in the year at staff meetings—the members had apparently forgotten the announcements. Davies regularly presents some comments at each monthly staff meeting, his only formal or regular contact with the medical staff as a group. Insofar as the specific complaints passed on by Mr. Braum were concerned there seemed, first of all, to be little need to issue formal notices to the staff that a medical records librarian was on the job, as the decision to hire such a person had been extensively discussed with the medical staff's executive committee. Secondly, installation of a new loudspeaker system for notifying doctors of their calls has been scheduled, and Mr. Davies intends to describe the system to the 245

Decision Making in Hospital Administration doctors soon, stressing the need for them to light their names on the "in" board if the system is to work properly. There are some items that Davies feels should be called to the attention of the medical staff or its executive committee if the subject of interchange of information is to be discussed. He wants to inform the staff of the medical records librarian's concern over the admission of a large percentage of the patients without admitting diagnoses and the lack of conformation to the Standard Nomenclature of Diseases for the few admitting diagnoses that were made. He also wants to express his concern over the low occupancy in the recently completed annex of 60 beds and 22 bassinets. Previously, as a 100-bed general-acute hospital competing with fourteen other hospitals in a southern metropolitan area of 600,000 persons, Elwood Hospital had accrued small annual operating surpluses. The annex was constructed because of an 87 per cent occupancy ratio. The medical staff had given its assurance that the addition would be well filled with patients. The first six months' experience resulted in an operating deficit for the hospital of $ 12,804.60. Two other problems disturb Mr. Davies. One is the backlog of undictated medical records. He thinks the staff should be aware that a dictating machine is located in the X-ray department and may be used either there or in the doctors' room for dictating records. The second problem, disturbing to the director of nurses also, is the discharge of large numbers of patients between 7:30 and 8:00 P.M., when the nursing coverage is lighter than during the day. Mr. Davies thought it had been agreed between himself and the chief of staff that the staff would discharge patients during the morning. Mr. Davies also believes that relationships with the members of the medical staff in its twelve divisions would improve once the staff's antiquated bylaws were revised. What recommendations do you think Mr. Davies should present to the board of trustees of Elwood Hospital regarding the kind of information which should be provided the medical staff? Regarding the form and channels of communication between the administrator and the medical staff? What alternatives did you consider? What factors do you consider most important in causing you to recommend the alternatives you selected? COMPLEMENTARY QUESTIONS

1. Do you believe the subject of administrator-medical staff communication is one which needs to be discussed by a board of trustees? Why, or why not? 2. What comments would you make on the direct contact between Mr. Braum and the chief of staff? What formal channels of communication do you think should exist between a board of trustees and the medical staff? 246

General Executive Management 3. Do you think Mr. Davies should continue to have devoted time to his extra-hospital assignments? Why, or why not? 4. What do you consider to be the most important factors in the development and maintenance of good relations with a medical staff? What basic concepts should be understood and practiced by a hospital administrator in achieving good medical staff relationships? What basic concepts should be understood and maintained by the medical staff? How can an administrator help a medical staff to understand such concepts? 5. What difference, if any, should be recognized when developing a public relations campaign directed at a medical staff as compared with one aimed at some other "public"? 6. How might the assignment of authority and responsibility to a hospital's administrative staff for the development of good medical staff relations vary with a hospital's size? its program? its type of ownership? its affiliations? 7. How might the problems of developing good relations with a medical staff be affected by a hospital's size? its program? its type of ownership? its affiliations? 8. How do you believe hospital-medical staff relations might be affected by a trend toward increasing use of prepaid insurance and tax dollars to support medical and hospital care? by the method followed when billing a patient for professional services and when receiving payment for such services? 9. What distinction, if any, would you make between good hospital relations with a medical staff and friendly relations with a medical staff? 10. If you, as an administrator, had to choose between friendly relationships with the medical staff and a status quo in the quality of the medical staff, and an unfriendly relationship with the medical staff and improved professional quality of care rendered the patients, which would you choose? Explain. Under what conditions might you realistically decide differently? 11. What is the importance, if any, of friendly medical staff relations to hospital-medical staff coordination and cooperation? 54. MEDICAL STAFF AND ADMINISTRATION The administrator of Clyde Hospital submitted his resignation to the board of trustees two weeks ago, giving six weeks' notice. His resignation was submitted in response to the board's request. John Mernick, administrator of a 210-bed, general-acute hospital located sixty-seven miles to the north, has heard of the resignation and has applied for the position. He has been looking for an opportunity to assume the responsibilities and receive the financial remuneration as administrator of a hospital about the size of Clyde Hospital, which has 400 general-acute beds. Mernick also 247

Decision Making in Hospital Administration prefers to remain within the midwestern state in which Clyde Hospital is located. During his interviews with Clyde Hospital's board of trustees, Mernick learns that, in the board's opinion, the most important problem awaiting the new administrator is the improvement of administrative-medical staff relationships. The board has learned that while the medical staff generally characterizes relationships with the resigning administrator as reasonably pleasant, each staff member expresses dissatisfaction or reservation about some specific aspect of hospital operations. The most prevalent criticism is directed at the failure of the administrator to provide the medical staff with adequate interpretation of the management problems of the hospital. Some staff members feel that other staff members attempt to interfere with the internal management of the hospital and that the administrator has been far too lenient in tolerating such interference. A significant number of key members of the staff have lost respect for the administrator's competence to meet decisively the hospital problems which arise. Many medical staff members believe the hospital is overstaffed and that low-salaried personnel are loafing. Others believe that "plush" accommodations have been provided for administrative personnel at the expense of patient facilities, particularly for ward care of medically indigent patients. After seeing the ward facilities, Mernick concurs in the need for their improvement. Most medical staff members claim the administrator has supported inadequately the intern and resident training program. Needed equipment, facilities, and supplies have not been provided, in their opinion. There is widespread resentment among the medical staff against the plan developed by the administrator and adopted by the medical staff to help finance the educational program. Under this plan, each staff member is assessed one dollar for each of his private patients cared for in the hospital. Payment is now voluntary, but the contributing members (about one third) are irritated by the failure of the remainder of the staff to support the educational fund. Clyde Hospital's board of trustees asks Mernick to discuss administrative-medical staff relationships with the administrator and the medical staff and to then give the board his views on how the relationships might be improved. The administrator believes he has been made a "scapegoat" by the board of trustees. Most of the board members, he says, are indifferent toward their responsibilities and are uninformed on hospital operations and programs. He feels the board failed to provide him with adequate policy and program guidance. Consequently he has had to attempt singlehandedly to improve staff practices which he considered deficient. At the same tune, the administrator feels he didn't have the board's full confidence and that he therefore couldn't be as forceful as he wanted to be. He 248

General Executive Management described how he became the target for the medical staff's resentment; when the issue was taken by the staff to the board, the solution of the board was to ask for his resignation. The administrator was surprised, as he had made an effort to keep the few key board members informed and sympathetic to his objectives. He thinks, however, that when the rest of the board members voted to ask for his resignation, they were at least partially expressing their resentment of the board's domination by the few. The administrator expressed a variety of more specific criticisms of the board of trustees, including views that the board does not insist upon conformity to rules and regulations by members of the medical staff and does not withdraw privileges for major infractions; that the board lacks the courage to put an end to special privileges for several prominent members of the medical staff; that it does not understand and makes no effort to become familiar with either the educational program or the general objectives of the staff for improvement of the hospital's medical care program; that the board is more concerned with details of administration and financial problems than with the care and welfare of the patients; and that many individual board members evince little interest in serving the hospital and are doing so only because of the prestige attached to affiliation with the community service institution. The administrator added that while the executive committees of the medical staff and the board of trustees maintain cooperative interrelationships, the medical staff as a whole would support his comments about the board of trustees. Mernick finds confirmation of the views of both the administrator and the board of trustees during his discussions with the medical staff. The younger staff members contend that the administration has not purchased the new equipment and provided the new facilities necessary to apply the advances in medical science. These younger staff members also express some impatience with what they consider lack of progressiveness on the part of the older members. Little intra-staff friction was noted by Mernick other than that associated with the special privileges extended to the senior attending staff members by the board of trustees and the medical staff's executive committees. There is a noticeable lack, Mernick feels, of a sense of belonging or a strong feeling of loyalty to the hospital by the staff. The medical staff's lack of pride in the hospital is thought by many to be a reflection of the general community attitude toward Clyde Hospital. Mernick learns from further discussions that eligibility for full membership on the attending staff is solely by promotion from the assistant attending staff after at least five years' service at that level. Three years' service as a courtesy staff member is required for eligibility for membership on the assistant attending staff. All licensed physicians residing within the hospital service area may join the courtesy staff. Full members of the 249

Decision Making in Hospital Administration attending staff are eligible for the senior attending staff after ten years' service. At present the senior attending staff consists of six men, of whom three are chiefs of service and five are diplomates of American specialty boards. The total staff at present numbers 143, of whom two are on the consulting staff, 64 on the attending staff, and 77 on the courtesy staff. There are no honorary members at this time. Diplomates or fellows of American specialty boards or colleges number 54, all of whom are on the attending or consulting staffs of the hospital. The staff members belong to a relatively young age group. The medical staff is organized into practically all of the major clinical departments, including a general-practice section. However there is neither an organized neuropsychiatric service nor a department of medical rehabilitation. All appointments and reappointments to the medical staff are made for a period of one year by the board of trustees upon recommendation of the executive and credentials committees of the medical staff. Appointment to the position of chief in each of the various clinical services is made by the board of trustees from the senior and full attending staffs. It is understood that in practice the chiefs of service are expected to retire from their positions when they become eligible for advancement to the consulting staff after thirty years of service. The medical staff's bylaws specifically provide for automatic termination of active membership upon "absence from three consecutive meetings or from one third of the regular meetings for the year, without acceptable excuse." Last year eleven staff members presumably failed to meet these bylaw requirements. Mernick finds that the officers of the medical staff, the administrator, and the board of trustees all failed to take any definitive action to terminate the active staff privileges of these members or to censure their respective chiefs of services. Mernick finds that the last American College of Surgeons survey of the hospital rated its services at 89 per cent, and that the Joint Commission on Accreditation has approved the hospital. A study of the indices for appraising the professional services shows that the net annual death rate of patients discharged is just under 2 per cent; the autopsy rate was 40 per cent last year and is 30 per cent this year; the post-operative death rate was 1 per cent for the last six months; the post-operative infection rate has been practically nil for the past two years; last year the Caesarean section rate was 0.16 per cent; the maternal death rate was 2.7 per cent; the infant mortality rate was 2.26 per cent; and there were three deaths in 7015 anesthetics administered last year and two deaths in 5593 anesthetics administered to date this year. Mernick learns that consultations are required on all cases of serious illness and for all obstetrical cases requiring Caesarean section. Tissues removed surgically 250

General Executive Management are examined, and there is no indication that an excessive amount of normal tissue is being removed. Medical records are kept reasonably up-to-date although a few medical staff members have to be continually prodded by monthly publication of lists of delinquent records. Progress notes in the medical records of at least two of the clinical services were found to be unsatisfactory by the last medical audit. Except for the urology, the orthopedics, and the eye, ear, nose and throat divisions, a reasonably acceptable program for maintaining the professional standards and interest of the staff is conducted. A modern medical library exists for use of the medical and house staffs, but the space and facilities are inadequate to permit study and reading, particularly for the house staff. Clyde Hospital was incorporated forty years ago as a nonprofit association. The hospital serves an agricultural population over the western section of the state, and the population of a city providing cannery, meatpacking, and transportation services to the area. The hospital's service area contains approximately 250,000 persons. The population is served by two other voluntary, nonprofit hospitals, a 160-bed, general-acute, denominational hospital, and a 240-bed, general-acute hospital. These two hospitals had average occupancies last year of 84 and 92 per cent respectively as compared with Clyde Hospital's average occupancy of 79 per cent. The administrator told Mernick that he was as willing to spend money to improve hospital services as the next man but couldn't with the hospital operating each year at a cash deficit of $15,000 to $25,000. What comments do you think John Mernick should present to the board of trustees of Clyde Hospital concerning how the hospital's administrative-medical staff relationships might be improved? What factors did you consider when arriving at your conclusions? Upon what factors did you place most emphasis? Why? COMPLEMENTARY QUESTIONS

1 .What do you think should be the relative responsibility and authority of the attending, courtesy, honorary, and consulting staffs? 2. What factors affect the number and type of clinical services into which a medical staff may be organized? 3. What are the relative advantages and disadvantages to the patient, the doctor, and the hospital of a requirement that a doctor limit his staff membership to one hospital? 4. What comments would you make on the desirability of a hospital administrator also being a physician? 5. Do you think the problems of developing and maintaining good administrative-medical staff relationships will be increased or decreased if group practices become more prevalent? Why? 251

Decision Making in Hospital Administration 6. If a hospital's medical staff has organized itself into a group practice and hired a clinic manager, what do you think should be the relationships between the clinic manager and the hospital administrator? Why? 7. How might variations in a hospital's size, type of ownership, program, or affiliations affect administrative-medical staff relationships? 8. Under what conditions, if any, might you take administrative action that would result in poor administrative-medical staff relations? 55. ORGANIZATION OF ADMINISTRATIVE STAFF On assuming duties three months ago as administrator of the 700-bed Russell Memorial Hospital, Howard McKelvey found that as the hospital had grown physically, its management organization, from the top executive level on down through the departments, had never been the subject of conscious planning or thought. He found that he had stepped into a situation in which twenty department heads, all of equal rank in the organization, reported directly to the administrator, each separately and about fifteen of them daily, although not at regular hours. Many of the department heads, he found, were serving merely as chief clerks, making no decision without a conference with him. For example, he was asked for approval of all salary changes, as there were no fixed salary scales for employees other than nurses. He was asked about menus, about selection of paints, about collection efforts on specific accounts receivable, about vacations, and about routine purchases. In short, McKelvey was immediately burdened with a multitude of routine decisions concerning each department; he had no assistants. It was true that some of the department heads were capable people and usually had the answer to their problems before coming to McKelvey, but they came for approval nevertheless because, as they put it, "We were definitely instructed (by McKelvey's predecessor) that he was the boss and would make the decisions in this hospital." McKelvey's predecessor had made all decisions on personnel and purchasing questions, having no assistant on personnel matters and a mediocre purchasing agent functioning primarily as a reorder clerk. McKelvey soon sensed that his predecessor had maintained a "balance of power" in Russell Hospital by giving encouragement here and there and treating each department head as an individual, pitting one against another and actually creating rivalries and jealousies in order to make himself the "king-pin" in the organization. He apparently kept hospital policies flexible, never committing himself on paper, to give himself freedom for developing his approach to his department heads. The department heads were made to feel that cooperation with the boss was the important goal (and incidentally the way to keep their jobs) and that cooperation with everyone else was secondary as long as the boss was

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General Executive Management satisfied. Their salaries varied widely, evidently as a measure of the administrator's whim. As a result of the previous administrator's attitudes, the organization was anything but well knit and coordinated. McKelvey more than once found himself in the position of judge and jury in some inter-department squabble. At times he wondered whether he was actually administrator of one hospital or governor of twenty separate principalities, each concerned exclusively with its own destiny. Decisions were of necessity made to solve particular emergencies because McKelvey simply had no time for over-all planning; he was continuously under pressure to solve routine matters. In addition, he had to sign every purchase order and every check; this alone took much of every morning. The functioning of Russell Memorial Hospital was neither uniformly bad nor good but reflected the ability of the particular department head involved. Each department head hired and fired his employees at will. Surprisingly enough, departments demonstrating the best performance in terms of low job turnover, high morale, and generally efficient operation were those which McKelvey had expected to show the opposite. For example, the staff of orderlies, whose chief reported directly to McKelvey, were an industrious group, loyal to the chief orderly arid accepting his leadership in an admirable spirit. The same situation prevailed in the dietary department. These two department heads, particularly, seemed to be "naturals" for their jobs, having a knack for bringing out the best performance of their employees. The nursing department, on the other hand, was a headache to McKelvey. The supervisor of nursing service and education (the title of this department head) seemed to have little control over her department. It was not uncommon for her subordinates to come directly to McKelvey with grievances. Job turnover in the nursing department, particularly in the graduate floor nurse and head nurse classifications, exceeded 150 per cent in the immediate past year. Morale was low, and the department head's chronic complaint to McKelvey was, "Nurses today just don't seem to want to work. You give them orders, and they quit or give you a sassy answer." Nurses' salaries are on a par with those in other hospitals in the state. The salaries of all employees are slightly below those paid in hospitals of comparable size throughout the southeastern region. Nurses' residences are old and have not been well maintained. The disturbing thing to McKelvey was that apparently his predecessor had made this type of organization work although the department supervisors did not appear to have either a feeling of loyalty to the administrator or a feeling of accomplishment in their work. When McKelvey arrived, the average cost of operation per patient day seemed well within the limits which could be expected. The hospital's rates, other than for city cases, 253

Decision Making in Hospital Administration were comparable to those of the city's other hospitals. An annual surplus of $60,000 had been developed in the past two years. The medical staff was well organized and composed largely of specialty board men who had been able to develop a modest research and education program over the previous superintendent's resistance. Russell Memorial Hospital had not progressed as much as other hospitals in the past fifteen years. McKelvey's predecessor had proceeded on the theory that a hospital is a place for the essential care of the sick inpatient at lowest cost, nothing more. His relations with the city officials had been cordial, probably the result, at least in part, of his willingness not to press for full payment of the cost of care of indigent patients (33.6 per cent of average occupancy). He had felt that it was the obligation of the hospital to share this cost with the city. At present the city paid an all inclusive per diem rate of five dollars per patient plus a lump sum of $5000 yearly. The city was currently paying the other voluntary general-acute hospitals of the city $8.50 per day. The administrators of these hospitals thought that the per diem reimbursement from the city could be raised "considerably" if the city were not able to threaten to send more of the patients receiving the tax-fund support to Russell Memorial Hospital. When the former administrator decided to retire, McKelvey was brought in to replace him. At that time the board of trustees evidently had little concern about the internal organization of the hospital, being satisfied with its financial status. However, the board has appeared to be open to suggestions. McKelvey described the administrative situation to the board during his third monthly meeting. He asked that sufficient time be allotted during the next monthly board meeting for a thorough discussion of a new organization chart and of the action he would propose at that time. The board agreed to take whatever time would be necessary to discuss his proposals with him, and McKelvey is now completing his recommendations for discussion during the board meeting next week. What proposals do you think McKelvey should present to the board of trustees of Russell Hospital regarding the administrative situation in which he found himself? What alternative proposals would you consider? Why would you select those which you consider preferable? What would you consider the most essential factors which McKelvey should keep in mind when determining the content of his proposals? COMPLEMENTARY QUESTIONS

1. Do you think McKelvey should have been aware of the administrative situation in which he found himself before he accepted the administrator's position? How could he have discovered these administrative problems before accepting the position? If you had known of the problems associated with the job, would you have accepted an offer to take it? Why? 254

General Executive Management 2. What do you consider to be the advantages and disadvantages of McKelvey's predecessor's attempt to maintain a "balance of power"? •Under what circumstances, if any, do you think such an objective might be justified? 3. What justification would you give, if any, for changing a pattern of operation that permitted the hospital to provide essential care to sick inpatients at a low cost? Would you attempt to justify such a change if it resulted in a higher per diem cost? 4. If you became the administrator of a hospital that had a successfully operating organization, would you under any circumstances change the organization? Explain. What is meant by "change the organization"? 5. What organizational principles would you keep in mind when developing a new organization? Do the principles vary from those you would consider when reorganizing an operation? Explain. What do you mean by "reorganizing" an operation? 6. What conditions are necessary to successful delegation of authority? What responsibilities must an administrator accept when delegating authority? What duties are placed upon him after delegating authority? 7. What is the objective of "organizing" an operation? 8. What effect, if any, does hospital size have on its administrative organizational structure? How might the administrative organizational structure be affected by hospital program? by kind of ownership? by affiliation with other hospitals? by affiliation with a medical school? 9. How would you attempt to evaluate the qualifications of the members of your hospital's administrative staff? How would you determine how much each should be paid? 10. Where would you want the offices of your administrative staff to be located in relation to yours as the hospital administrator? Why? How might your decisions on their location be modified by your hospital's size? its organizational pattern? its affiliation with other hospitals or a medical school? 11. If you had been in McKelvey's position, would you have told the board of trustees that your proposals at the next meeting would include a new hospital organization chart? 12. What changes do you foresee in organizational structures of generalacute hospitals five years from now? ten years from now? 13. How would you determine whether the administrative needs in your hospital were large enough to justify your hiring an assistant? How would you "sell" your board on the need for hiring an assistant? 56. ADMINISTRATIVE OPERATION Miss Edna Sherman, director of Wright Hospital for the past year, has come to the conclusion that she must do some reorganizing in order to

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Decision Making in Hospital Administration make more effective use of the personnel in her purchasing, admitting, and bookkeeping departments. The board of trustees has agreed to her request for time to discuss the subject at their next monthly meeting. The purchasing and issuing activities of Wright Hospital amount to about a half-time job for the purchasing agent. This person, during her twenty years at the hospital in this capacity, has assumed many other responsibilities such as the laundry and elevators, and in general has been a "trouble shooter" or "expediter." The purchasing agent is fifty-eight years of age, seventeen years Miss Sherman's senior. She is the person who knows where everything can be located and whom to call about practically anything that might happen. Among the employees she is respected and holds about as much authority as the director. She is very careful, however, never to give Miss Sherman cause for feeling that her own authority is not complete, but Miss Sherman is aware of her power. The purchasing agent is also well known and respected by the board of trustees. Her pay is $250 per month. The accounts-receivable personnel consist of three women, all over sixty, two of whom work full time (40 hours per week, which is standard throughout the hospital) and one who comes in when the other two are swamped with work. This occurs at least once a month and usually more often. Of the three, one of the full-time women is apparently entirely satisfactory as to meeting the public, cooperating with other employees, and maintaining a satisfactory quality of work. The other full-time woman is unsatisfactory in all of these respects. The latter, however, has been with the hospital for fifteen years and has managed to convince nearly everyone that she is indispensable. The third woman is perhaps the most satisfactory of the three but has been working only part time until her youngest child can enter school in another year. The work in this department is sufficient in quantity for two persons, in the opinion of Miss Sherman, but not three. Salaries in this department are $200 per month. The accounts-payable personnel change frequently, about once every year. The current person in this job is, as usual, a young girl just out of high school. She views her job as a way to earn money until she marries in two or three months. Her work is such that every month the purchasing agent is called upon to straighten out the books and prepare the financial statements with the office manager. The salary for the accounts-payable position is fixed at $175 per month, which is the amount experience has shown to be necessary to attract recent high school graduates. The admitting personnel consist of two women, aged fifty-four and twenty-two, who are almost continually at odds with each other. The older woman has been employed by the hospital for two years, the younger for one year. The quality of work of the younger woman far surpasses that of the older. Salaries for each are $200 per month. 256

General Executive Management A year ago the hospital was organized by a union, and the shop steward is the older of the two admitting clerks. The union is currently challenging the board's intention to lower the compulsory retirement age from sixtyfive years to sixty. The hospital does not participate in any employee social security, retirement, or annuity plan. The union believes the hospital should eliminate present exceptions to the ruling that calls for retirement at age sixty-five before lowering the compulsory retirement age limit. The hospital has no organization chart, but the board knows many of the hospital personnel and is quite familiar with their duties. There has been no suggestion of dissatisfaction with the hospital's organizational structure on the part of either the board or the administrative staff. The medical staff has voiced complaints about the service patients have been receiving upon admission and, on occasion, when discussing their hospital bills. The medical staff otherwise indicates satisfaction with the service the hospital provides. The board of trustees appears satisfied that Miss Sherman is doing a creditable job as the hospital's administrator. The physical layout of the hospital is such that five separate rooms, each approximately the same size, 12 by 16 feet, are used as follows: one on the ground floor, adjacent to a receiving dock and storeroom, is used by the purchasing agent. One on the first floor is used by the accounts-payable and payroll clerk and office manager. Across the hall from this room are three others: one is used by the admitting department and telephone switchboard operator, one is used by the medical records department, and one by the accounts-receivable department. The rooms are connected only by the corridor. Miss Sherman's office, also used as the board room, is across the hall from the medical records room. It measures 12 by 25 feet. Wright Hospital is a nonprofit, nonsectarian hospital of 120 beds. It is located in a town of 22,000 population and has a service area containing approximately 34,000 persons. Since the hospital just meets its expenses, on the average, Miss Sherman has been told by her board of trustees to watch salaries and other expenses very carefully and to give no increases in salary unless absolutely necessary. Miss Sherman takes account of this factor as she proceeds to prepare a plan to secure more effective performance of the purchasing, admitting, and bookkeeping functions. She then determines her approach to the board to secure their approval of her plan. What plan do you think Miss Sherman should establish for improving the operation of Wright Hospital? What alternative plans would you consider? Why select the alternative for which you have expressed your preference? What objective is Miss Sherman attempting to accomplish? What problems must she consider in endeavoring to reach her objective? 257

Decision Making in Hospital Administration COMPLEMENTARY QUESTIONS

1. What difference is there, if any, in solving an organizational problem by changing the formal organizational structure and changing the personnel operating within the framework of the formal structure? Can either one be changed without changing the other? Explain. Would the formal organizational structure or the staff implementing it receive the greatest emphasis from you as an administrator? Explain. 2. What do you consider to be the advantages and disadvantages of a compulsory retirement age? What age would you establish for compulsory retirement? 3. How would you describe the effect of physical proximity upon administrative relationships? 4. What is your reaction to the approach that "time" will solve administrative problems if but given the opportunity to do so? 5. What administrative problems are solved, at least partially, by the preparation of job analyses, specifications, and classifications? What administrative problems are created by the preparation of these management tools? 6. How might your plan for improving Wright Hospital have varied if you had been the administrator for six months? for five years? if your hospital had been government owned or operated? affiliated with a medical school or medical center? 7. How might your relationship to a situation as found in Wright Hospital vary as administrator of a 200-bed hospital? a 500-bed hospital? a 1000-bed hospital? 57. FIXING RESPONSIBILITIES At Talbot Hospital, a 210-bed hospital in Talbot, Mississippi, a pattern of responsibilities had grown with the institution, with the result that several departments now perform functions entirely distinct from those which ordinarily would be assigned to them. This lack of planning led to a situation in which duplication of jobs, lack of effective supervision, and responsibility not paralleling authority had caused a serious morale problem among the supervisory staff. The board of trustees became aware of the situation and asked the previous administrator what action should be taken. The administrator had said that the hospital needed the board's approval of an organization chart which he had previously prepared for them. The board approved the chart, but after six months with no apparent progress toward solution of the hospital's problems, the board discharged the administrator and hired you as his replacement. During the interview you were asked to give your opinion of the hospital's organization. The board seemed to like your conclusion that the chart was about what one would expect for Talbot Hospital and was, on the surface at

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General Executive Management least, a good chart. You added, however, that the absence of a personnel officer would perhaps need investigation. You have been on the job now for two months. The board expects you to report at the next regular monthly meeting the action you believe should be taken to meet the hospital's problems. You have therefore been reviewing the hospital's operation to determine the content of your report. The admitting department of Talbot Hospital is responsible for the admission of all patients, for the collection of patients' accounts, for making reservations for incoming patients, for approving requisitions for X-ray and laboratory service for charity inpatients and outpatients, for approving drug prescriptions for charity patients, for issuing receipts for patients' valuables left with the hospital, for checking accounts of patients before their discharge, and for collecting fees for physicians and private-duty nurses when requested. Emergency cases and outpatients are admitted to the emergency department. Private patients have their admission cards filled out on the nursing floor. These cards and those from the emergency room are sent to the admitting department, but frequently are not sent promptly. It is the expressed responsibility of the admitting department to check these cards for omissions and to follow up on credit arrangements in each case. This requires several daily trips to the nursing floors and the emergency room. At night all admission forms are filled out in either the emergency room or on the nursing floors. Cash received in payment for services rendered is collected in the admitting, laboratory, X-ray, emergency, and outpatient departments, as well as the business office. Personnel serving as cashiers in all departments other than the business office are primarily engaged in other tasks and thus are not under the business officer of the hospital. The physical structure of the hospital is such that the emergency and outpatient departments are in a separate building connected with the main building by a tunnel All other departments serving patients are in the main building. The housekeeping department considers itself responsible only for the general cleaning of the main hospital building. It is not responsible for the emergency room, outpatient department, interns' residence, or nurses' residence; the first two are under the department heads concerned, and the residences under the director of nursing service and education. According to payroll classification, all maids, orderlies, and cleaning personnel are the responsibility of the housekeeping department. Orderlies, however, receive what supervision they get from the director of nurses. Seamstresses are responsible directly to the administrator and are hired and discharged by him. Maids, orderlies, and cleaners are hired by the purchasing agent and their time and personnel records are kept by him. He also discharges these employees when necessary. Certain housekeep259

Decision Making in Hospital Administration ing operations such as cleaning furniture and Venetian blinds are carried on by nursing personnel, and there is no clear line of demarcation between the cleaning jobs which are to be done by housekeeping personnel and by nursing personnel. A linen room matron supervises the issuance and maintenance of linen and the operation of the laundry. She is responsible directly to the administrator but does not hire laundry personnel. This, too, is done by the purchasing agent. Persons sent to the purchasing agent by department heads for discharge are often transferred to another department instead. This has the effect of building employee loyalties to the purchasing agent rather than to the department heads supervising the employees on their jobs. Furthermore, it has an adverse effect on the morale of the supervisory staff by depriving them of full control over their employees. The supervisory staff admits that the purchasing agent usually follows its wishes regarding discharge of employees but notes that the control is in his hands. It is this very situation that has caused you to examine the entire organization. The laundry manager, upon being questioned about a lag in production in the laundry, came back with this reply, "With the poor help I get from Winston (the purchasing agent), what do you expect? If I could round up my own help down town and hold my own whip over them, sure I'd produce. I can't spend half my time teaching them and the other half scrapping with Winston about them and still operate a decent laundry." Your curiosity has been aroused, naturally, as to how the purchasing agent was able to develop his position of strength. You find that he has been with the hospital five years, after many years as a successful businessman in Talbot. A cardiac condition caused his retirement at the age of fifty-eight, but still wanting to keep busy, he secured his present position through the influence of three good friends on the board of trustees. The board apparently had an understanding with your predecessor that the purchasing agent's talents should be used to whatever extent possible, and the purchasing agent's title of assistant administrator on the recently approved organization chart is an example of the understanding. You remember now that some board members told you that a personnel officer is not needed in the organization because personnel functions are being adequately handled by the assistant administrator/The medical staff likes the purchasing agent. He is known to be generous in approving its purchase requests. Moreover, his wife is active socially with the wives of many of the medical staff. He was considered for the position of administrator but turned it down on his doctor's orders. You find that the supervisory staff does not regard and does not wish to regard the purchasing agent as an assistant administrator. Your pred260

General Executive Management ecessor apparently felt the same way, as he never officially announced the change in title from purchasing agent to assistant administrator. The purchasing agent has been after you to give him the official status described by the approved organization chart. The medical staff has a reputation for providing care of good quality and has done much to make Talbot Hospital the leading hospital in the area, at least from the public's viewpoint. Financially the hospital is not in satisfactory condition. Hospital income is usually less than expense by $15,000 to $20,000 a year. The per diem expense is $1.32 higher than the next highest average per diem expense of the area's hospitals and $2.05 higher than the average for the area. Wage rates are comparable to those of other hospitals, but the hospital has difficulty in recruiting and holding professional personnel. The ratio of professional and nonprofessional personnel to patients at Talbot Hospital is no higher than the average of other area hospitals. You hope to be able to reduce Talbot Hospital's expenses. It is with this background that you begin preparing your report for the next regular meeting of the board of trustees. What report would you make to Talbot Hospital's board of trustees as to what should be done to improve the hospital's operation? What alternative courses of action did you consider? Why did you select the alternatives you chose to present? COMPLEMENTARY QUESTIONS

1. How might a board of trustees become aware of hospital problems other than through reports from the administrator? Are the board's channels of communication affected by the hospital's size? Explain. 2. How might you have varied the content of your report if you had been the administrator for six months? Do you think you should have waited six months before discussing your report with the board? Explain. 3. Do you think you should have been aware of the problems existing in Talbot Hospital prior to accepting the position of administrator? What would have been your channels of information? Would you expect the board of trustees to have discussed the hospital's problems with you during your interview? If they had, what comments would you have made concerning them? 4. Would you have accepted the position of administrator of Talbot Hospital if you had known of the problems with which the new administrator would be confronted? Explain. 5. What organizational principles would you keep in mind when reviewing the situation faced by the administrator of Talbot Hospital? Would they be different from those you would consider when establishing a new organization? 261

Decision Making in Hospital Administration 6. What personal characteristics would you require a subordinate to have before delegating authority to him? What kind of comments would you make to a subordinate at the time you assign him additional responsibility and authority? What additional responsibility would you have to accept, with respect to the subordinate, when delegating authority and responsibility? 7. How would you achieve "coordination" and "control" in the operation of your hospital? Would your problems of coordination and control vary with the size of the hospital? with its program? with its affiliation with a medical school or other hospitals? with its kind of ownership? Explain. How might your method of achieving coordination and control vary with your hospital's size? its program? its affiliation with a medical school or other hospitals? its kind of ownership? 8. What changes, if any, do you see in the methods of inter-hospital coordination and control which will be used by administrators of generalacute hospitals five years from now? ten years from now? 9. Do you believe that all persons on the same administrative "organizational level" should be classified in the same salary range? Explain. What factors determine the salary range of a supervisor? Would you as an administrator agree to paying someone under your supervision a salary greater than your own? Why, or why not? 58. DEVELOPING PROCEDURES

"In recent months we have become rather disturbed about several aspects of hospital operation that have come to our attention. We would appreciate your investigating these situations arid indicating to us at the next board meeting what you think should be done about them." Mr. Burns, president of the board of trustees, made these statements to you on your second day as administrator of Marcy Hospital. You had been hired to replace Mr. James Lyons, who had resigned one month ago to take advantage of an excellent business opportunity. Mr. Burns described to you the situations which concerned the board. One situation cariie to the board of trustees' attention from the nursing director's comments during a recent meeting of the School of Nursing committee of the board. She had remarked that the personnel problems of her department were not made any easier by the supply problems she had to solve daily. The committee's questions brought out that she had major difficulty hi obtaining supplies when needed. The storeroom is opened promptly at nine o'clock by the chief storekeeper and closed an hour later. He greatly discourages emergency requisitions. They must be cleared with the department head and signed by the administrator. The chief storekeeper is firm in requiring adherence to this routine and apparently had persuaded your predecessor, Mr. Lyons, to accept his view that 262

General Executive Management the department heads should plan their supply needs more carefully. The nursing director admitted that the stores department appears to be an efficiently operated unit. The stock is always up-to-date, purchase requisitions are processed promptly, and department heads are notified as soon as ordered shipments arrive. The chief storekeeper had ten years' experience in industry before coming to Marcy Hospital. The nursing director, Miss Grey, was asked by the board's School of Nursing committee what she had been doing to improve the operations of her own department. She replied that she had been too busy with employment and staffing problems to devote as much attention as she would like to other projects such as improving nursing procedures or defining relationships with other hospital departments. She reported, however, that in reply to her repeated requests for assistance, Mr. Lyons had given her permission to hire an assistant who was to spend the major part of her first month at the hospital on procedural development. Mr. Lyons had also advised her to send her assistant to an institute on methods study and to send her to other hospitals to study their procedures. However, Mr. Lyons announced his intention to leave the hospital a week after this conversation so Miss Grey had decided not to hire an assistant until she had discussed her problem with the new administrator. Miss Grey also reported that she had found it difficult to effect definite nursing procedures because of the lack of clarity of the medical staff's wants. Standing orders and standard procedures have not been developed by the medical staff, many physicians are not definite in their day-to-day orders, and almost every physician has different ideas as to the care which the nurses can and should provide. The committee members objected to Miss Grey's criticism. The board of trustees approved the existing staff rules and regulations seven months before the new hospital began operation four years ago. The board members believe they are still satisfactory. Likewise, the twenty local general practitioners approve of the staff rules and regulations. These physicians originally prepared them for presentation to the board of trustees with the help of five or six specialists in the community. The board members pointed out to Miss Grey that the counsel and advice of the American Medical Association was obtained in drafting the rules and regulations. Miss Grey replied that the eight specialists added to the staff in the past four years and the consulting specialists from the city almost all believe that staff procedures need to be prescribed more clearly and in writing. She added, however, that the physicians have conflicting opinions as to what the future medical staff procedures should be. Miss Grey's complaint concerning the chief storekeeper was later discussed by Mr. Burns with Mr. Sears, the hospital accountant, who is in charge of the business office, the storeroom, and the admitting office. 263

Decision Making in Hospital Administration Mr. Sears first defended the attitudes of the storekeeper and then registered a complaint against Miss Grey. He said that Miss Grey has been refusing to accept responsibility for newly admitted patients until nursing aides have taken the patients to their rooms. She uses as her excuse the efforts of Mr. Sears to have admitting procedures assist as much as possible the work of the business office. Mr. Sears maintains that as the supervisor of the admitting offices, he is justified in this approach. More important, he asserts, is the necessity to control carefully all aspects of hospital operation affecting the hospital financially because of the continuously difficult problem of balancing the hospital's cash budget. The board of trustees has learned that both the medical staff and the dietitian are concerned with the admitting situation. Members of the medical staff say that some of their admitting orders given to the admission officers are not entered on the patients' charts. They also say that if they attempt to give admitting orders to the head nurses on the floors, the nurses tell them they have nothing to do with patients until they actually arrive on their nursing units. The dietitian reported to a member of the board of trustees that she is not being notified promptly of the arrival of patients on the nursing units. She said that, according to established procedures, her department is to be notified of a patient's admission at the time he comes under the care of the nursing department. She believes the intent of the procedure was to have her department notified at the time the patient leaves the admitting office but that because of the current misunderstandings, she has not been receiving adequate notice. The dietitian commented also on the situation concerning the issuance of supplies by supporting the nursing director's remarks. The dietitian said that she often changes menus and other routines rather than attempt to process an emergency requisition. Mr. Sears informed Mr. Burns that he and Miss Grey had been asked by Mr. Lyons to agree upon admitting procedures and to place them into effect, but when Mr. Lyons left, they thought it best to wait until they could discuss this with the new administrator. The hospital's existing intra- and inter-departmental procedures have been established by individual department heads. Quite naturally the latter procedures have been developed to be of assistance primarily to the department which developed them and secondarily to other departments. No over-all effort has been made to establish definite or written procedures. Mr. Lyons felt that procedures should remain flexible to meet the constantly changing conditions found in any new organization. Marcy Hospital is a 150-bed, voluntary, nonprofit institution located near a river in the central section of the country. The hospital serves a population of 46,000, including 32,000 in its city. The new hospital plant was built to replace an old, non-fire-resistant hospital that had been serv264

General Executive Management ing the community for nearly fifty years. James Lyons was hired as the hospital's administrator six months before it opened. During that six months' period, he was very busy equipping the hospital and employing a staff. The board of directors is a young, energetic group of seventeen men. Many of them are business executives living in the area but working in larger neighboring cities. They have wanted to be very active in helping Mr. Lyons with establishing and operating the hospital. Mr. Burns is a financier and has given liberally of his time to aid the business operation of the hospital. Mr. Lyons was pleased with this assistance because his own business background was not strong. Mr. Sears has worked closely with Mr. Burns and the rest of the board on financial matters and is considered by the board to be "a good man." You learn that Mr. Burns had suggested that he and Mr. Sears prepare and present to the board a hospital budget and that Mr. Lyons had favored this suggestion. Mr. Lyons thought that the hospital ought to have a budget and that the board would accept with little opposition a budget Mr. Burns had helped to prepare. Mr. Lyons felt that Mr. Burns and Mr. Sears were the two persons most familiar with the financial requirements and most able to estimate the financial resources needed to meet the hospital's requirements. What comments do you think you should make to the board of trustees of Marcy Hospital concerning the aspects of hospital operation about which the board is disturbed? What factors would you consider when preparing your comments to the board? Upon what factors would you place most emphasis? Why? COMPLEMENTARY QUESTIONS

1. At what point in the process of developing a new hospital program should a hospital administrator become concerned, if at all, with the procedures involved in the execution of the planned program? 2. How would you define "procedure"? "method"? "system"? 3. What are the relationships of procedures to executive control? 4. How might the development of procedures aid, or make more difficult, the development of cooperation between hospital organizational units? How might the attitudes of cooperation within a hospital organization affect the execution of procedures? 5. What are the relationships between procedures and communication? 6. How might the techniques used to develop procedures vary with a hospital's size? program? type of ownership? affiliations? 7. What are the relationships of procedures to the quantity and quality of work performed? 8. How might the importance of procedures to the effective operation 265

Decision Making in Hospital Administration of a hospital vary with a hospital's size? type of ownership? program? affiliations? 9. How might the physical characteristics of a hospital building affect the need for and use of procedures? 59. ESTABLISHING CURRENT REPORT CONTENTS Lares Hospital, a 250-bed, general-acute hospital is located in a midwestern city of 300,000 population. A nonprofit institution, the hospital is governed by a board of trustees composed of fifteen members. The majority of board men are young and alert executives. To maintain a predominance of young men on the board has always been a policy, as the hospital received its start and support from the city's younger set. Five members are elected each year for three years and may succeed themselves for one term. John Dodge, president of the board, is thirty-five years old. Other members vary in ages from thirty-seven to fifty-five. There are only three members over fifty. Five of the board members have had no previous contact with hospitals. The board members remarked to the president that they could not evaluate the internal processes of the hospital on the basis of the reports and information given them by the administrator. Clyde Munter, director of Lares Hospital for four years, had deliberately refrained from presenting complete information or statistical data to the board. He felt that the members of the board were too busy in their respective businesses and too occupied with community social events and country club activities to be burdened with information other than financial statements. The hospital's continued operation without a deficit, apparently with the good will of the public, seemed to justify his approach. The hospital's condition may perhaps be illustrated by its 93 per cent average occupancy over the past year, of which Mr. Munter is quite proud. Mr. Munter, a man in his sixties, was of the opinion that the board members were too immature to appreciate the complicated hospital problems. The board sensed this attitude, and there was growing agitation to replace the director with a younger qualified director. The board was hesitant to act as Mr. Munter had been a board member himself, is an influential citizen in the community, and has only three years left before he retires. The board finally decided to make another attempt to work with the director. The members very pointedly informed him that they would insist upon the submission of adequate written reports at board meetings so they could be as fully informed as a board should be on the activities of the hospital. Mr. Munter now calls for numerous reports from his department heads and passes most of the information directly to the board. He submits a detailed annual report in addition to a monthly report given the board

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General Executive Management members at their regular meetings. He also sends them weekly reports of food and laundry costs. Food costs at Lares Hospital are average for the area, but laundry costs have been increasing, and a change may have to be effected. The board is notified of each change in personnel on the staff. Reports of intra-departmental meetings are sent to the board, which also receives a copy of the monthly medical statistical summary. Since the board set up a special fund for landscaping, it is given a weekly progress report on grounds improvement. Mr. Munter has always had daily conferences with each of his department heads. Once a week, on Friday afternoons, all department heads participate in a joint conference. The following reports are submitted to the administrator by the department heads: Daily 1. Raw food cost 2. Surgery list 3. Trial balance 4. Admissions and discharges 5. Weight of laundry processed 6. Fuel consumption Weekly 1. Balance sheet 2. Percentage of uncollectibles 3. New employees, discharges, and resignations 4. Number of meals served, by type of patient 5. List of critically ill Monthly 1. Outpatient visits 2. Narcotic balance sheet 3. Nursing hours per patient 4. Census reports 5. Total occupancy 6. Physicians index 7. Cost per served meal Mr. Dodge is pleased to have more information but agrees with the rest of the board that the individual members are too busy to give all the reports sufficient attention. The department heads' reports are of interest to the board but are far too detailed. Having received the reports for several months, Mr. Dodge decides that the board should specify what reports it wishes to receive from Mr. Munter and at what intervals. Mr. Dodge

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Decision Making in Hospital Administration therefore asks you, as chairman of the board's finance committee, to be chairman of a special board committee of five members with the assignment of preparing appropriate instructions on the subject for Mr. Munter. Mr. Dodge also asks Mr. Munter to explain to the board what reports a director should receive from the department heads. Both reports are to be presented to the board at its next regular meeting. What reports do you think the board of trustees of Lares Hospital should receive from Mr. Munter, and how frequently should they be received? What reports do you believe Mr. Munter should receive from his department heads? COMPLEMENTARY QUESTIONS

1. Do you believe it an advisable policy to maintain a predominance of young men on a board of trustees? Explain. 2. What comment would you make on the board members' complaint that they could not evaluate the internal processes of the hospital on the basis of the reports and information given them by Mr. Munter? 3. As an administrator, would you prefer a board relationship which found your board members interested in extensive reports on the hospital's operation or a relationship which found them interested only in summary reports? Explain. 4. What comment would you make on Mr. Munter's belief that board members of Lares Hospital were too immature to appreciate the complicated hospital problems? 5. If Mr. Munter continued to be unable to provide satisfactory reports to the board, what action would the board be justified in taking? Explain. 6. What are the purposes of reports? In what ways can they be used? 7. What do you consider the essential factors to be kept in mind when determining the content of the reports? 8. What different methods of presenting reports can you describe? What are the advantages of each method? Which method would you prefer? Explain. 9. What effect does hospital size, program, type of ownership, and degree of affiliation with medical schools or medical centers have on the need for reports? on the method of presenting the reports? on the content of the reports? on the method of preparing the reports? on the use of the reports? 10. How can reports be used to assist hi the integration of one hospital's program with another, or with a public health program? 11. What is the importance of reports when dealing with agencies outside of the hospital? 12. Do you think the expense of report preparation worthy of serious attention by the hospital administrator? Why, or why not? 268

General Executive Management 60. EVALUATING HOSPITAL SERVICES Garver Hospital is a 200-bed, general-acute, voluntary, nonprofit institution located in a midwestern state. Paul Tyler, formerly the personnel director of a large teaching hospital, is the new director. He is in the process of reviewing the total operating picture of Garver Hospital as a basis for preparing a report to the board of trustees. The board of trustees wishes to learn of the deficiencies which exist, if any, in the hospital's program content or the quality and quantity of its service. The board also wishes to learn how any deficiencies discovered may be remedied. The former director has stated that the financial and statistical data show the hospital to be functioning very well and meeting the minimum standards of the American Hospital Association more than adequately. The medical staff justifies the hospital's efficiency by pointing out that the practices of the staff and hospital meet the standards of the Joint Commission on Accreditation of Hospitals. Mr. Tyler begins his review of the hospital's basic statistical data. He finds that for the past year to date, the hospital has been operating at an 85 per cent occupancy. The average length of stay is six days. The readmission rate on discharged cases is approximately 40 per cent. No statistics have been kept as to length of stay by service except for obstetrics, where the average length of stay is four days. Maternity beds number 12 per cent of the hospital's bed capacity. The total death rate has been 2 per cent of admissions, excluding deaths occurring within the first forty-eight hours after admission. Autopsies are conducted by the hospital pathologist on 20 per cent of all hospital deaths. Post-operative deaths account for 2 per cent of the total deaths excluding newborn. Anesthetic deaths have occurred at the rate of 2 per 7000 anesthetics administered. The maternal death rate is 0.25 per cent, and the infant death rate is 2 per cent. The ratio of personnel to patients is 1.9:1. Of bedside care to patients, 30 per cent is given by the professional nursing staff. All laundry is done by a local commercial firm. Almost all pharmaceutical solutions are purchased from commercial houses. Nursing hours per patient day average 2.5 hours. The income has been $20.53 per patient day for the past two years, while the average cost per patient has averaged $18.50. It has been the practice of the hospital to accumulate a depreciation fund for the last four years. The total of the fund at the present time is $111,000. Collections have averaged 97 per cent of billings during the past five years. Total general-fund cash investments and accounts receivable amount to 50 per cent of total general-fund assets, with general-fund cash and investments amounting to 70 per cent of total cash investments and accounts receivable. The hospital does not have the advantage of a large endowment to sup269

Decision Making in Hospital Administration plement its income from hospital services to patients. The hospital attempts to limit care of the medically indigent to emergency cases or "partpay" patients through unanticipated uncollectible accounts. Payroll averages 54 per cent of total operating expense. In the review of medical practice, Mr. Tyler could find no glaring deficiencies. The death rate is low, as might be expected because difficult and complicated surgical procedures are not performed at Garver. Medical staff conferences meet the minimum requirements, and the same 75 per cent of staff members who attend most meetings are the most important men on the staff. Only qualified physicians are accepted on the staff. They ask each other's advice on nearly 12 per cent of their cases. Most of the men are young. Qualified board men head the various clinical services. A yearly medical audit is performed by a medical staff committee which decides upon the adequacy of the medical records and whether or not there have been errors in practice made. They refer to the full staff cases where staff action is indicated or which may have an educational value. The analysis of work performed is done to meet standards of the Joint Commission on Accreditation and is not used as a basis for appointments or appraisal of competence. There are no board men on the staff in psychiatry and contagious diseases, as it has been the practice of the hospital not to admit these types of patients. Chronic care is not provided except in the acute emergency stage if beds are available. The hospital will occasionally provide ambulatory services to private patients upon specific request of their physicians but does not perform other outpatient work. What report would you as the administrator make to the board of trustees regarding the deficiencies, if any, which exist at Garver Hospital? How do you think the deficiencies which you may have noted can be corrected? What limitations would you place on the value of collecting and using the data you considered when preparing your report to the board? COMPLEMENTARY QUESTIONS

1. What is a "standard"? 2. How might the usefulness of standards vary with a hospital's size? program? type of ownership? geographical location? affiliations? 3. What standards would you use to evaluate the operations of your hospital? How are the standards developed and by whom? What limitations would you place on their application in your hospital? 4. What are the advantages and disadvantages of averages? of ratios? 5. What comment would you make on the relative emphasis which an administrator should place on standards as compared to the individual 270

General Executive Management competence of the people in his organization? How might the relative emphasis be affected by the organization's size? program? type of ownership? affiliations? 6. What relationships do you think might exist between standards and the financial requirements for the operation of a hospital? What effect do you anticipate increased use of prepaid health insurance and tax funds for the support of medical care will have on the standards used for hospital operation? 7. Under what conditions, if any, would you as a hospital administrator require rigid adherence to a standard, knowing that your action would cause a human relations problem? 61. LEGAL EVALUATION

Frank Brown has been a cantankerous, difficult patient ever since his admission and particularly since his cholecystectomy last Monday. Now, on Saturday morning, he insists that he never felt better in his eighty years and wants to be discharged so that he can attend a party that evening hi the old persons' home in which he is living. He says that Dr. Adams, his surgeon, told him that he could be discharged on Saturday in time for the party "if everything looks all right when I return." Dr. Adams has been out of town at a medical meeting for four days. He has not yet returned, and Dr. Smith, who has been looking after Mr. Brown in the absence of Dr. Adams, is at his lake cabin for the weekend, twelve miles out of town. The head nurse phones Dr. Smith, who says that while the patient seemed to be progressing satisfactorily when he last saw him on Friday, he would prefer that the patient not be discharged until Dr. Adams can see him. Mr. Brown continues to demand to be discharged, and the head nurse relates the facts of the situation to the nursing supervisor, who hi turn asks the advice of Central City Hospital's administrator, Mr. Alberts. While Mr. Alberts is talking with the nursing supervisor, Mr. Brown walks unattended into the office, dressed in his street clothes, and angrily demands his valuables. He announces that a few minutes ago he was scalded on his abdomen by hot water when the top of a hot-water bottle he had been using opened. He says the hot-water bottle had been too hot anyway and that it had opened as he was trying to remove it. "This was the last straw," Mr. Brown adds. "I've called the manager of the home, told him the whole situation, and told him to send someone over here for me because I'm leaving," Mr. Alberts first tries to persuade Mr. Brown to return to his room, but Mr. Brown adamantly refuses. Mr. Alberts then attempts to obtain a signed release from Mr. Brown. Mr. Brown tells him, "You're not going to get me to sign anything, and if you won't give me my valuables, I'll just have to send the sheriff after you." With that remark, Mr. Brown angrily stalks out of Mr. Alberts' office and down the corridor toward the lobby. 271

Decision Making in Hospital Administration As Mr. Brown turns the corner into the lobby, he slips on the freshly waxed floor and falls. Mr. Brown appears to be hi a condition of shock after his fall and makes little protest as he is helped to his room. A doctor on the floor is asked to look at Mr. Brown. He suspects that Mr. Brown is hemorrhaging internally, has a call placed to Dr. Smith, and orders immediate transfusions for Mr. Brown in the operating room. Before Dr. Smith arrives, Mr. Brown dies. Mr. Alberts asks Dr. Smith whether an autopsy should be performed. Dr. Smith says that probably one should be done but that he would prefer waiting until Dr. Adams returns. Mr. Alberts calls the chief surgeon, who says that most certainly an autopsy should be performed promptly and that he will be at the hospital shortly with the pathologist if he can get in touch with him. He asks that permission for an autopsy be obtained if at all possible. All persons concerned are aware that for the past six months there has been increasing talk that young Dr. Adams has been performing too many unnecessary operations. The pathologist has remarked several times to the administrator that the normal appendices and gall bladders removed by Dr. Adams have been higher in number than the average of those removed by other surgeons on the staff and the rate of removal of normal tissue has been above the normal indices upheld by the Joint Commission on Accreditation. Mr. Alberts discussed the subject with Dr. Adams, who said that all his operations are justified by clinical signs and symptoms, and that all his patients were benefited by whatever surgery he performed on them. With the arrival of the warm summer season, the number of objectionable surgical procedures performed by Dr. Adams decreased, and no further action concerning the situation was taken. Mr. Alberts notifies the business manager of the old persons' home in which Mr. Brown was living of Mr. Brown's death. He asks whether Mr. Brown has any relatives who could sign the autopsy authorization. The business manager replies that the only relative to his knowledge is a nephew living about a thousand miles away. This nephew, he says, has evinced no interest in Mr. Brown since Mr. Brown gave all his material possessions to the home in payment for admission. The business manager expresses his own concern, however. In fact, he insists upon an autopsy and says he will come to the hospital immediately to sign the authorization. The old persons' home has been paying Mr. Brown's hospital and doctor bills. The business manager comes to the hospital and signs the authorization. The pathologist performs the autopsy, with the chief surgeon and Dr. Smith observing. The autopsy finds that the patient died of internal hemorrhaging, attributable to the surgery received, and also finds a post-oper272

General Executive Management alive infection. The pathologist then notes that he had previously reported the surgically removed tissue as diseased but that he had expressed considerable doubt as to whether it was sufficiently diseased to have necessitated removal. Dr. Smith in the meantime questions Mr. Brown's nurse as to why he had been given a hot-water bottle. The nurse, Miss Irwin, replies that Mr. Brown had complained of a stomach-ache beginning about Friday noon and that she had thought a hot-water bottle would make him feel better. Dr. Smith then asks her why she had not notified him of Mr. Brown's complaint and recorded her observation in the medical record. Miss Irwin says that most of her patients during her nursing career have been old persons, that they frequently complained of stomach-aches, and that she often gave them hot-water bottles which apparently relieved the discomfort. Mr. Alberts questions the nursing supervisor, who routinely hires nursing personnel, about Miss Irwin's background. He learns that Miss Irwin came to the city six months ago and began taking care of an older lady as a semi-nurse and companion. The patient died, and shortly thereafter Miss Irwin decided to seek employment and remain in the city. She claimed to have received her R.N. degree from a hospital school of nursing in another part of the country. The nursing supervisor says she checked Miss Irwin's character references from persons located in the city. After receiving good reports, she had hired her one week ago. She adds that she had intended to check Miss Irwin's training and work experience but that, with the pressure of other duties, she had not yet done so. Although aware of the hospital's policy to check references before hiring employees, in view of the severe nursing shortage she had felt that almost anyone was better than no one. Mr. Brown's nephew is notified of his uncle's death. On arriving in town, on Monday, he states that he will sue the doctors, the hospital, the nurse, the old persons' home, and any other people who had anything to do with his uncle's death. He adds that before he is finished, the newspaper will do more than report the death routinely as it had done the day before. Investigation of Miss Irwin's background on Monday reveals that she is not licensed as a registered nurse by the state but as a practical nurse. Her hospital training was that of a practical nurse, and her working experience has been exclusively the care of convalescent and aged persons. Mr. Alberts has had little experience in dealing with legal problems. Before coming to Central City, he served as an assistant administrator in a 150-bed hospital in a large city. He has been administrator of Central City Hospital for nearly two years and is considered by his board to be a very level-headed person. The hospital does not carry liability insurance. Legal problems are usually handled by Mr. Murray, a young, energetic, and capable lawyer on the board of trustees. He is keenly interested in helping 273

Decision Making in Hospital Administration the hospital but is frequently out of town, traveling on business throughout the state. Mr. Alberts has handled the few legal problems that have arisen in Mr. Murray's absence. The board has instructed him to continue to do so but to discuss each situation with Mr. Murray as soon as possible. Neither of Mr. Murray's two partners has been of much help to the hospital. One is semi-retired and feels unable to do more than limited and scheduled work. The other, a young man, is more interested in his private practice than in the hospital or civic affairs. Mr. Alberts wishes he had Mr. Murray's counsel during this weekend of Mr. Brown's death; however, Mr. Murray is out of town until Tuesday. Little advice can be obtained from the fourteen other members of the board of trustees. This group is composed of bankers, housewives, a school superintendent, an engineer, a real estate executive, ministers, farmers, merchants, but includes no lawyer. The board has steadily turned down Mr. Alberts' requests for hospital liability insurance on the grounds that "it isn't necessary in a small town." Central City Hospital is the only hospital located in an agricultural community of 21,500 people. The immediate trade area serves an additional 15,250 persons. The hospital is a voluntary, nonprofit organization of 120 beds and 30 bassinets. It does not operate a school of nursing, attempting instead to obtain its nurses from a large metropolitan area in the midwestera state located sixty-two miles to the east. What action do you think Mr. Alberts should take in the situation which has resulted from Mr. Brown's death? What factors did you consider when arriving at your conclusions? Upon what factors did your place most emphasis? Why? COMPLEMENTARY QUESTIONS

1. What resources for legal opinion are available to a hospital administrator? What resources would you prefer to use, as a hospital administrator? Why? 2. What different kinds of problems of hospital construction and administrative operation can you list which would benefit in their solution from legal advice? 3. What abilities and attitudes would you want to find in a lawyer concerned with hospital legal problems? How do you believe such a lawyer should be selected for a new hosptial? 4. What circumstances or conditions would indicate to you the feasibility and desirability of several hospitals' jointly hiring legal counsel? With what legal problems do you think such counsel might most likely be concerned? 5. What action do you think a hospital administrator can take to avoid involvement of his hospital in legal controversies? 274

General Executive Management 6. What control should a hospital exercise over actions of its legal counsel? How should such control be effected? 7. With what persons concerned with hospital operation should the thinking of a hospital's legal counsel be coordinated? Why? How might such coordination be achieved? 8. What effect might a hospital's size, program, type of ownership, or affiliations have on its need for legal counsel? on the legal resource which it chooses to use? 9. What steps can be taken to make good legal advice concerning hospital problems more, available to small hospitals?

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13 Human

Relations

62. THE EMPLOYEE WHO QUIT

The little nurses' aide was in tears. She said she was quitting her job at the end of the day, and quit she did. Here is her story: "When I first came to work here I was told that part of my job was to get the fresh linen when it came back from the laundry and count it and put it on the shelves. That was all to be part of my job and that's what I've always done. "Now this new director of nurses comes along and tells me that the administrator isn't satisfied with the linen. He says the hospital is short of linen all the time, and either somebody is making off with it or else it isn't being returned from the laundry. She says he thought we were counting the linen before as well as after sending it out to be washed. Well, she knows as well as I do that we don't do it that way. "See, in the old days they had student nurses here and they used to count the dirty linen. Then they gave that job to a janitor when the school was dropped and he was the one doing it when I came here. When he quit, nobody did it. Now they want me to do it for them but I won't, not even if they DO give me a mask and gown to wear. That's a janitor's job! Yo know how you would feel about it yourself. That's a janitor's job and they're asking me to do it. I just told her, if I were a student nurse and that was part of my training, I wouldn't mind doing it. (She began to cry again.) I don't know whether I'm getting it across to you at all, how I feel. It's just beneath me, that's all. I'm a nurses' aide and I'll never be anything else but a nurses' aide and I'm not going to do it." What was the problem behind the problem of counting the linen? What factors did you consider when arriving at your decision? Upon what factors did you place most emphasis? least emphasis? Why? COMPLEMENTARY QUESTIONS

1. Why do men work? What causes them to work with enthusiasm? 2. Are there any "dirty jobs" in a hospital which are seen to have great dignity? 276

Human Relations 3. Could a task regarded as having low status be re-assigned in a way to make it acceptable? 4. Is status something which troubles people only at one occupational level? 5. Would it be possible to run an institution where all work was seen as equally important? 6. Why do we find job hierarchies in so many organizations? 63. THE INDIVIDUAL IN THE ORGANIZATION The administrator of a 500-bed, general-acute hospital stopped in the admissions office to speak to the head of that department. Administrator: "Mrs. Booth, will you do me a favor? Will you go out of your way to be nice to Dr. Halsey? I'd like to see him changed from a sourpuss to a sweetpuss, if that is humanly possible." Mrs. Booth: (She has been frowning but now a reluctant smile comes across her face.) "Well, Mr. Stewart, I'll do what I can but it won't be easy. He hates me. I hope you realize I'm on his blacklist." Administrator: "Don't think you are unique in that respect, he hates me, too! Hasn't said a civil word to me in six months. They are having all kinds of trouble up in surgery, too. You know, Mrs. Booth, Dr. Halsey used to be one of our finest surgeons. He was head of our surgical staff here for years but finally had to give it up. Since then he lost his wife and his daughter in an automobile accident. He has become harder and harder to deal with, demands all kinds of extra service and feels persecuted if he doesn't get it. Well, let's try to change him, shall we? I regard it as a challenge. Let's give him everything he wants, for awhile, say YES to him n matter what he requests, and see if we can't make some kind of change there." (The administrator leaves the room.) Mrs. Booth (to friend): "I'm going to have a hard time explaining this to my staff. Dr. Halsey has been a thorn in our side. When I first came here he almost drove me frantic. He'd phone in for a room for one of his patients and when I would say there wasn't anything available, he'd shout, 'Well, he's coming in anyway and you FIND him a room!' And he'd slam down the receiver. When I had grown older and wiser I'd phone him right back and say, 'Dr. Halsey, you go right ahead and send that patient in, and when you come looking for him you can look down in emergency surgery because that's where he will be.' You can see why he hates me, can't you? Actually, we have been getting along better lately. Maybe it is just a truce of war. "It makes it hard to be told to give special preference to one doctor. I can see Mr. Stewart's point, all right. Dr. Halsey is an old man and he has worked here a long time. I'd really like to help him. The thing is, every time we give special preference to one doctor we get into trouble. There is

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Decision Making in Hospital Administration too much competition for beds around here. The doctors aren't supposed to come in and look at the room reservation book, but they do. They walk right in and look over my shoulder, and if they see that somebody else's patient received a room out of turn, they raise Cain. And what can we do? From now on I'll have to give Dr. Halsey's patients first choice and how can I possibly explain that to the others? It doesn't seem fair to the nice, considerate ones to put him ahead just because he is so nasty. Maybe I should make a notation in the reservation book, 'per orders of Mr. Stewart.' Hmm. That would certainly take the heat off me but I bet he'd hit the roof when they all came in to him, complaining." This administrator had been trying for some time to get his medical staff to arrange for the orderly retirement of older physicians. Until this time no attention had been given to this problem. In the absence of policy, and assuming that this doctor was still doing adequate professional work, how would you recommend he handle Dr. Halsey? What factors would you, consider when arriving at your decision? Upon what factors would you place most emphasis? least emphasis? Why? COMPLEMENTARY QUESTIONS

1. In a large institution, how far can an administrator yield to the needs of any individual, and to what extent must he hold to rules and regulations? 2. What channels of communication should a hospital administrator use in handling delicate interdepartmental matters? 3. How can the admissions office be protected from undue pressure when beds are at a premium? 4. When exceptions are made to a general rule, what punishment can the organization be expected to take? Are any rewards to be expected? 5. What is the relationship between professional competence and social acceptability of individuals within a medical institution? Do they always go together? Does one ever tend to compensate for the other? 6. How much of a reward do you think hospital people find in the respect their fellows show for their professional competence? Is this reward equally available at all levels of the occupational hierarchy? 64. THE SMALL GROUP Harold Bean was a new and ambitious administrative resident at Thomasville Hospital. He went around earnestly hunting for places he could "reform." One place obviously in need of help was the telephone switchboard. Turnover among the employees was high, and the administrator told Mr. Bean that the operators were complaining of overwork and too little pay. There were five operators in all, the chief operator being named Kitty. Mr. Bean checked the payroll records and time sheets. He figured out precisely what the turnover was, the working hours and the pay of each

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Human Relations girl. Then he contacted the local Bell Telephone Company branch and found that, comparatively speaking, the hospital turnover was indeed high and the wages low. He brought his facts to the administrator and was told that nothing could be done about raising wages at that tune but that he could see what could be done about reducing the turnover. Mr. Bean had learned that the Bell Telephone operators worked a regular eight-hour day with two days a week off. The hospital operators were working what he termed "funny shifts." For example, Kitty worked mornings from 7:00 to 12:00 three days a week and from 7:00 A.M. to 3:00 P.M. three other days, with one day off. Mr. Bean had worked "funny shifts" himself on previous jobs he had held, and he decided that nobody wants to work that way. He figured out a schedule similar to that used at the Telephone Company whereby all the hospital operators would rotate with one another, working eight-hour shifts on a five-day week with two consecutive days off. He drew up a schedule for a month in advance, had the appropriate records drawn up in the office, and then informed the operators of their new schedule. To his surprise the result was catastrophic. Kitty began to scream, quite literally, in the middle of the lobby. She insisted that she would quit if they forced her to work the new shift, that she "couldn't stand" working more than five hours a day at the switchboard. Mr. Bean knew that this was nonsense; she already worked eight hours a day on three days a week. He reminded her that she would get two whole days a week off, but to no avail. To his disgust, instead of firing Kitty as he recommended, the administrator quietly advised him to shelve his new scheme because they couldn't afford to lose their chief operator. Kitty was so upset by all this that she was out sick two days the following week. Since the switchboard was thus short of help over lunchtime, the administrator asked Mr. Bean to act as lunch relief. He confessed afterward that he went "almost stark raving mad" at the switchboard. Everybody wanted to use the telephone at once. One of the doctors, unable to get a line, came down to inquire whether the switchboard had gone out of commission. Mr. Bean roared at him, "No, confound it, it hasn't! I only wish it would!" This experience made Mr. Bean realize that the telephone operators were too heavily laden, and he resolved to lighten their burdens by taking away some of their extraneous duties. For one thing, they were sorting the patients' mail in their "spare time." For another, they acted as impromptu receptionists for visitors who drifted into the lobby between visiting hours. Mr. Bean recommended that a full-time receptionist be hired for the lobby and that she be given the chore of handling the patients' mail. This was done. Mr. Bean remarked later, "She was a charming person, too, and very 279

Decision Making in Hospital Administration nice with the public, but those operators treated her like dirt." The operators wouldn't give the receptionist a kind word. Moreover, they wouldn't answer any of her questions, and as a new employee she was quite lost. After a miserable week, she left. A second receptionist was hired and the same thing began to happen again. The new woman reported that if she left her desk even for a minute, she returned to find the patients' mail all mixed up. Meanwhile the telephone operators were complaining bitterly to the administrator that they were never considered for "promotions." They asked why it was that whenever a promotion came along, an outsider got it. The administrator finally offered Kitty an opportunity to fill a vacancy as assistant cashier, but Kitty indignantly turned it down. What was wrong with the telephone operators? How would you have handled this situation if you were the administrator? What factors did you consider when arriving at your decision? Which factors did you tend to emphasize? Why? COMPLEMENTARY QUESTIONS

1. How can employees be motivated to accept change? 2. What is the difference between the formal and the informal system of relationships within an organization? To what extent should the informal system be respected? 3. What is the role of the small group within an organization? What functions does it perform, what price does it exact? 4. Can administration predict how employees will evaluate changes in policy? What is meant by group culture? What is meant by symbols? 5. When should administration punish mischievousness? What is meant by levels of behavior? 6. What is meant by a management prerogative? 65. DEPARTMENTAL RELATIONS This situation demonstrates the influence of human characteristics on organizational effectiveness. To gain the most from it, it is suggested that the situation be role-played by five persons, each taking one of the roles indicated below. The scene is laid in the office of the assistant administrator of a large, voluntary, general hospital. Three employees have just entered the room in search of a conference. It is late afternoon. Take it from there, improvising the conversation and trying to find a suitable resolution of the problems they present within the bounds of good organizational practice. ASSISTANT ADMINISTRATOR, SAMUEL JONES You are a newly married man, aged twenty-nine. You have been serving as assistant administrator of this hospital for six months and feel that things 280

Human Relations have been going well. You have respect for the administrator and his respect for you seems to be growing. You are gradually getting to know the people who work in the hospital but, for the most part, are well acquainted only with the heads of departments and the employees of your own office. A good proportion of your knowledge about the rest of the personnel is based on hearsay. You have gathered from remarks made in your presence that things aren't entirely perfect over in the admissions office but aren't clear about the details. Mrs. Booth, head of the admissions office, is a woman of obvious culture and an attractive and pleasant person to talk to. You gather that she used to do volunteer work here and had served various other charities. Your general impression is that of a gentlewoman who has run out of money and really needs this position. Perhaps the reason you think so is that she seems anxious about her work and a little apprehensive when any criticism is made of her department. She seems to get along extremely well with the patients of all social classes and there are never any complaints from them when she is on duty. You gather that this is an improvement over an earlier situation and that the administrator is grateful to her for this. Complaints still arise occasionally when she is not on duty. You have heard rumblings of dissatisfaction from two sources. The doctors have complained about Mrs. Booth's complete lack of system in handling room reservations. Every doctor seems to think that favoritism is being used, with his patients being on the losing side of things. You have no idea whether this is unique to this hospital or whether all doctors talk like that. Other grumblings have reached your ears about employees being dissatisfied with their working conditions but you don't know what this is all about. You have a dim recollection of a conversation between the administrator and the personnel manager. A complaint had been made about the lack of courtesy on the part of an admissions clerk on the night shift. The administrator had commented on the fact that the admissions office had too many employees of lower-class background who didn't know how to meet the public. That was why he put Mrs. Booth in charge in the first place, even though she had no administrative experience whatever. Now, for some reason which he couldn't fathom, the caliber of the rest of the admissions staff seemed to be going down rather than up. Couldn't the personnel manager please keep this in mind the next time he hired someone for that office? Since then you have the impression that another employee was hired. You recall passing her in the corridor one day and wondering what her social backgound was, but you never got around to asking anybody about it. Today the administrator is away, attending a convention, and you have been left in charge during his absence. It has been a full day for you. Just 281

Decision Making in Hospital Administration before quitting time a delegation of employees from the admissions office enters the outer room and asks the secretary for an opportunity to speak with you. You invite them to enter your office. There are three young women, none of whom you know by name. The new one whom you saw in the corridor that day seems to be the spokesman for the group. She enters the room first, sits straightest, and is the first to speak. ADMISSIONS CLERK, ELIZABETH ADAMS

You are a woman of thirty-five. Your father and former husband were lawyers, and you were in charge of a law library before leaving to be married just ten years ago. This marriage was unfortunate and ended in divorce. You had something of a "nervous breakdown" afterward and went back to live with your parents. Now your mother has died and your father is ill. The doctor recommended that you get some kind of work which would keep you too busy to sit around thinking about your own troubles. You took the position at Brooks General Hospital because it sounded interesting and because the personnel manager hinted that there might be room for advancement for you. At present you take "histories" from incoming patients, not a very impressive job, but you think you might be promoted to take charge of the evening shift where you would do the interesting work of booking reservations and making decisions about which patients are to get what rooms. Nobody has promised you this, but it is your guess that this is what the personnel manager had in mind when he hired you. At present you find your work routine. After three months you feel you are wasting your education unless a promotion comes soon. The other girls in the office aren't as well educated as you and are somewhat limited in their interests. Otherwise they are pleasant people and you like to work with them. A constant problem, however, has been your relation with Mrs. Booth, the head of the admissions office. You can't quite figure out what she has against you but suspect that she is afraid of the competition you represent. Mrs. Booth is a terrible administrator. She has no system about reservations, breaks every rule of good administration, and irritates her staff by refusing to schedule hours of work until the last possible moment. Once she forgot it completely and went off for the weekend without telling the girls who was to work which shift. This set the girls against one another, each one thinking she should have a turn at the easier shift. It doesn't bother you especially, you are glad to work any time you are needed and feel you are more loyal to the hospital than the others; you are more responsible. When the other girls complained to you about the poor working conditions which result from Mrs. Booth's mismanagement, you were the one 282

Human Relations to suggest going to talk it over with the assistant administrator. The others were taken aback by the suggestion and you were taken aback by the fact that this has been going on for a year and a half and nobody has taken action on it at all. You feel it is the administration's job to regulate such things, and why not call it to their attention? You get the girls to consent to this and you lead the way. ADMISSIONS CLERK, JULIA FILIST

You are a married woman, twenty-six years of age, and have worked for Brooks Hospital for eight years. Your husband works in a service station and you are saving to buy furniture and hope ultimately to make a down payment on your own home. Now you live in a little apartment. You are anxious to begin having children but feel you can't afford it yet. Meanwhile you try to spend as much time with your husband as you can, but it isn't easy because your working hours are haphazard and so are his. You came to this position right from high school. At first it didn't amount to much of a job. The nurses took the patients' histories and forwarded them to you to type. You only greeted the patients when they came in and turned them over to a page who took them upstairs. Now everything has changed and you actually take the case histories yourself. It makes your job more interesting to you. You like to meet the people, especially the poorer ones who seem timid and shy. It makes you feel that your work is important because you can often help them just by being sympathetic and listening to their stories. Sometimes they insist on telling you their whole life history but you try to be patient and not interrupt them. Of course, this makes it hard when the office is busy. One thing that makes you unhappy is to see the rich people get special privileges. There is one thing you don't like about Mrs. Booth, the head of the admissions office. She always gives special attention to the rich ones. Part of this, you realize, is because the administrator wants her to. He wants to get donations from them later and you know the hospital needs the money but still it makes you uncomfortable. Another thing you don't like about Mrs. Booth is that she doesn't have any system. She is forever coming around changing room reservations and that makes the doctors and patients furious. They complain to you and all you can do is tell them it was Mrs. Booth's idea, not yours; you just work here. Mrs. Booth seems to wander in and out of the office at will, as if she isn't used to working for a living. She goes out for coffee and stays half an hour. Sometimes she takes a two-hour lunch period and she thinks nothing of quitting half an hour ahead of time if there is a big sale in town. It makes it hard for you because you have to do her work as well as your own. The office is especially busy in the late afternoon and it is hard for you not to resent being stuck with the work. 283

Decision Making in Hospital Administration Actually you like Mrs. Booth. You get angry with her but she is a nice person all the same and she is pleasant to the people who come into the office. In this respect you admire her more than any of the others, because they get irritated and brusque, whereas Mrs. Booth is always patient. You just wish she could get more system into things. The major problem right now is the working hours. Mrs. Booth never lets you know ahead of time when you will have to work and when you will be off duty. It makes your husband furious when you can't plan ahead. He wants you to quit this job; he never did like the idea of your working, but you know that you need the money and have to put up with things. When Mrs. Booth forgot to schedule the weekend, that was the last straw. Now Miss Adams says you should talk to the assistant administrator about it. Perhaps that is the sensible thing to do, but you hate to go over Mrs. Booth's head. However, something must be done and what other choice have you? You decide to go ahead and let Miss Adams do the talking. ADMISSIONS CLERK, NORMA LEE

You are forty-one but people think you are only about twenty-five. You touch up your hairline just a little where it is getting gray and try to dress and act like a younger woman, which is easy most of the time because you feel young. The fact remains that you have had a lot of experience and can see what is wrong around here from your knowledge of other jobs. You have worked here now for eight months. You used to be in charge of a claims department for an insurance agency and know that people have to be checked up on. It isn't that you don't like people, you just are wise enough to know that they pull fast ones if you aren't careful. You also know that rules should be kept if an office is to be orderly and well run; otherwise nothing but trouble results. This office is driving you crazy. You got this position through an employment agency. The last job you had was as a sales representative; but you had found yourself living out of a suitcase and decided you wanted a position where you stayed in one place. The work here is simple enough and you can manage the patients all right. The problem is with the head of the department. Mrs. Booth, in charge of the admissions office, is a real lulu, as far as you are concerned. You can't understand why they ever gave her this position in the first place, except that she makes a nice appearance. Of course, she has been rich in her day and knows a lot of the wealthy people around here, perhaps that is the reason. She certainly doesn't know anything about running an office. If you were running things you would have it really systematic, and make the doctors and patients toe the line, but Mrs. Booth is forever making exceptions. That sets everybody against everybody else 284

Human Relations and the charges of favoritism are always in the air. Well, that is the hospital's problem, not yours, although you get tired of explaining to people why they can't have a semi-private after all. The thing that gets you down is that she won't schedule your hours in advance. After all, a girl is entitled to some private life and how can you plan when you don't know when you will have to work over a weekend or holiday? It isn't fair. This last weekend was the absolute limit — she went off and never did make out a schedule. You had plans for Sunday and so did Julia, so who was to say which one of you had to give up her plans? You finally got your way and Julia worked, so you don't feel too bad about it. Now Miss Adams wants you to go to the administrator and complain. Frankly you don't see it. Complaining only gets you a bad name with management. You think the simplest way to do things is just to nag and complain around the office until Mrs. Booth does something-—not that it has worked so far, because it hasn't. Perhaps this way will work. _At any rate, you can try it. Your idea is to let Miss Adams carry the ball. It was her idea, wasn't it? You don't really like her very much anyway; she is so superior in her attitudes. If anybody is to get into trouble about this, it might as well be her. At this point you can't afford to lose this position. HEAD OF ADMISSIONS OFFICE, CAROLINE BOOTH You are sixty-two years old. You always thought life would be easier by the time you reached the sixties, but it hasn't worked out that way. Since your husband died the money just seemed to disappear and now your sister is ill and you have to help support her family. It is all you can do to keep up appearances. You always enjoyed working at Brooks Hospital and did volunteer work here for years. It was appallingly plain to you that the hospital needed a warmer, more sympathetic admissions office. You were forever confronted with aggrieved patients who had been outraged on the doorstep by demands for money or by unsympathetic treatment. The trouble was that the hospital couldn't afford to pay wages high enough to get people with sufficient poise and background to do admissions work well. That is why you let the administrator talk you into taking this position on a temporary basis. That was a year and a half ago. You know you have helped the hospital in many ways. You convinced them to separate the admissions office from the credit department, setting it up in its own suite of rooms. You had to threaten to quit to get them to do it, but now you have a tranquil place to greet newcomers and have made it a warm, pleasant room with pictures you brought from home and comfortable chairs. You are sure the patients are receiving better attention 285

Decision Making in Hospital Administration than they ever had before. You get deep satisfaction from that, and from dealing with them face to face. Your problems are three-fold. First, the doctors! They are impossible! You had no idea how individualistic doctors are and how each one demands that his patients get the best rooms immediately, if not sooner. You have learned from experience that it doesn't pay to make exceptions and wish you could establish a firm basis of first-come, first-served. The trouble is, you can't. The administrator is always interfering, and that is your second problem. He is forever asking you to change reservations in order to give special privileges to somebody. You know he has pressures working on him, too, that the board members telephone him and ask for special privileges for prospective donors, or for their families and friends. The third problem is the personnel manager. You get alongjfine with your employees and just wish you were left alone to handle them your own way. You know the personnel manager thinks they aren't from the right background, but there is Mrs. Filist, as warm and kind a person as one could wish to meet. You feel you could train her to be a fine admissions person. Her attitudes are right and that is the important thing. Now Miss Lee is something else again. If you knew how to get rid of her, you would, but she is too clever for you. She never fails to be properly deferential to you and her work is efficiently done, so you have no excuse, but her attitudes are intolerable. All the complaints from patients come from the shifts that she works. Now the personnel office has persuaded you to take in Miss Adams. You were critical of her from the start, although she had excellent references. You suspected that a divorced woman would be embittered and cold and you think you were right. She is very efficient and obviously thinks you are incredibly stupid. She has been here three months and makes no secret of the fact that she feels capable of running the office singlehandedly. You resent the fact that the personnel office pushed her on your department and are beginning to wonder who is running your office, you or Miss Adams or the personnel manager? When the assistant administrator tells you that your employees came to him with complaints, you are astonished and deeply hurt. Why didn't they come to you? This is just another example of the way people in this hospital go right over the head of the supervisor to the front office or to personnel. How can you command respect in your office if other people are always interfering? You are ready to quit but can't afford to and this dilemma is really pulling you apart. You have never been so unhappy in your life. How would you, as assistant administrator, handle this situation? What factors did you consider when arriving at your decision? Upon what factors did you place most emphasis? 286

Human Relations COMPLEMENTARY QUESTIONS

1. To what extent does knowledge of the life history of an employee help in the understanding of his present conduct? 2. What land of grievance procedure should employees follow, and at what point, if any, should it reach the executive offices? 3. To what extent should employees be seen as having "fixed personalities" and to what extent should they be seen as capable of being molded by on-the-job influences? 4. Can a reasonably intelligent person be equally effective in any hospital department? 5. Are business values and humanitarian values necessarily antagonistic? In which hospital departments will they be most likely to come into conflict? 6. To what extent are relationships within a department the result of personality combinations and to what extent are they shaped by organization and official policy? 7. When a department head feels insecure and inadequate in any repect, what will be the effect on relationships among the work force? Can such tensions be eased by executive action? 8. What is the proper role of the personnel department? To what extent does top administration influence inter-departmental relations? 9. When a department head is found adequate in some respects and inadequate in others, what are the alternative courses of action open to top administration? 66. THE UNPOPULAR HEAD NURSE You are administrator of a general hospital of 300 beds. There is a chronic shortage of nurses among all hospitals in this city. Your own nursing department has been reorganized by the director of nurses who was appointed to the position two years ago. She now has two assistants, one in charge of nursing service, and one in charge of nursing education. Five head nurses were upgraded to become supervisors over nursing floors. In general you have respect for the director of nurses' judgment, although you feel she still requires some counsel on the way she handles people and organizational problems. This is Monday morning. She is in your office giving her daily resume of conditions and mentions a human relations problem she has encountered. It seems that on Friday afternoon at change of shifts, three graduate nurses from a floor called "Harris 4," a floor for semi-private patients, came in a group to see her. They complained of the head nurse on their unit, saying she treated them as if they were students. She annoyed them by giving all kinds of picayune orders. She spent most of the day sitting at her desk, and instead of accompanying the doctors on their bedside rounds, she ex287

Decision Making in Hospital Administration pected the graduates to do this for her. The director of nurses listened to their story, told them she would think it over, and meanwhile they should go back to work and see if they couldn't try harder to see their head nurse's point of view. She was a conscientious worker and this was a busy and difficult floor to supervise. That was Friday afternoon. On Saturday none of these graduates reported for duty. The director of nurses doesn't think this was planned among them. She personally telephoned all these women one at a time and her strong impression was that none of them knew that the others hadn't come in. One girl said that she had stayed home because of a very sore foot but that if she had known the others weren't coming in, she would have made a special effort to get there. This girl told the director of nurses that her morale was so low that her present impulse was to stay home if she didn't feel quite up to par. She had no real incentive to come to work. The director of nurses comments, "Already rumors are beginning to circulate. I overheard a group of private-duty nurses talking about it in the dining room. One said, 'Did you hear there's a strike on up on Harris 4?' You know, that is bad." You ask the director of nurses how old this head nurse is. The director replies, "She's about fifty-five, and perhaps that is part of her trouble. She hasn't kept up with the times and now she just sits at her desk and doesn't go near the patients. That is what worries me most. She should see the patients at least once a day when the doctor isn't present. Besides, there is the matter of how she treats the graduates. She treats them the way we used to treat students years ago. I heard rumors of discontent there before. Not long ago she ran into trouble with a practical nurse but I thought it was just a matter of personalities clashing. Now I wonder whether it wasn't part of this same picture. For a long time Miss Hinckley ran a very good floor. She is still an efficient organizer and does a conscientious job of assigning the students so that each one gets proper experience. It is the graduates who are complaining." How do you think this situation should be handled? Who should handle it? What action would you take, as administrator? What factors did you consider in reaching your decision? What emphasis did you place on each? COMPLEMENTARY QUESTIONS

1. Where does responsibility lie for disciplinary action within one department? 2. Should a department head feel free to discuss disciplinary problems with her superiors? 3. How direct should a hospital administrator be in counseling a department head? When does counseling result in too great a dependency? 288

Human Relations When does it improve communications within a hospital? When does it harm them? 4. How long does it take for a new organizational arrangement to function smoothly? What is meant by "cultural lag?" 5. What is the responsibility of administration for keeping supervisors fresh in their perspectives? What techniques are available? 6. Has there been a change in authority relations within the nursing department? If so, what adjustment problems can be expected to occur and what can administration do about them? 7. How should control be exerted over graduate nurses as they work with patients on the average hospital floor? How can you ensure good patient care? 67. TWO DEPARTMENT HEADS

You are assistant administrator in a hospital of 600 beds. You sit down next to the personnel manager in the coffee shop and find that she is quite upset about something. You ask what the trouble is, and she begins talking with great intensity. Personnel Manager: "Sometimes I don't know what is expected of me around here, I honestly don't. Remember my talking to you about Katherine, the. little girl who works in the doctors' library? She's the one I discovered shortly after I first came here, who was practically starving trying to support herself and her mother on the wages she was getting for typing in the medical records department. She's very retiring, but she is a sweet little thing — and really very bright. Well, we got her moved to the doctors' library then and that helped her somewhat but still her salary was quite low. Now the girl who is secretary up in the operating room section is going to have a baby and I thought that at last we could get Katherine into a position that paid a good salary and that was worthy of her skills and training. I checked with the doctors and they were willing to go along. I thought it was awfully nice of them, too, because it meant they would have to train somebody else for the library work. "Well, the position in the operating room, as it turns out, comes under the jurisdiction of the medical records department so I had to work through Miss Quinn. (Her lips tightened.) You know how Miss Quinn feels about the personnel department! She just can't see that we have any excuse for living at all. Anyway I suggested to Miss Quinn that she try out a couple of people for that O.R. job, including Katherine. I sent her three good prospects but Katherine seemed to come out head and shoulders above the others. At least that's what the doctors told me and they should know, they are the ones who will have to work with her. So what do you think Miss Quinn decided? She decided she doesn't want any of the three, she wants to promote one of her own girls from medical records! How do 289

Decision Making in Hospital Administration you like that? A girl who has worked for the hospital about two months, and there is Katherine who has worked here five years still stuck in the doctors' library. Excuse me for raving, I realize I'm too excited about this, but it hurts me to see somebody treated unjustly. I think it's just plain mean." Assistant Administrator: "What do you think should be done about it?" Personnel Manager; "I think it is time that administration set a firm policy! It comes down to the fact that the separate departments have too much autonomy around here; it is bad for the hospital. That's what kills morale. Each department head hangs on to the people under her even when it is to the employee's advantage to transfer to a better job. They are all jealous of each other and when personnel tries to do something about it they accuse us of interfering." THE OTHER SIDE OF THE STORY

Later in the day you drop by the medical records room to get the other side of the story from the department head. Medical Records Librarian: "In the first place, the medical records room is over-staffed. That sounds funny coming from me, I know. I'm the one always complaining that we don't have enough people. What we don't have enough of is the right kind of people. All the personnel department sends me are typists. Right now I have three typists when all we really need are two. You see, I thought this one girl was going to quit and so hired another one but the first one decided not to quit and here we are with all three of them. If I can send her upstairs to the O.R. it means there will be a vacancy on my staff and maybe I can get them to hire somebody for me who knows something about medical records, for a change. "I realize you like the personnel manager but I think you also realize that some of us don't share your high opinion of her. The thing that gets us is, she is always trying to put something over on you. Remember the time she brought in a new girl and paid her one-ninety-five a month when all the others were only getting one-eighty? Boy, there was the dickens to pay when that word got around." Assistant Administrator: "As I recall, that was because we were in process of changing our policy toward lunch money at that time, wasn't it? We decided that new employees would get cash instead of free lunches. Wasn't that the reason for that fifteen dollars? We just hadn't gotten around to giving the others their choice between the free lunches and fifteen dollars extra cash a month." Medical Records Librarian: "That's right, it was the lunch money but nobody knew that at the time. Nobody had said a word to me about it. How could I explain it to my group when they came to me all upset about that new girl getting more money than they were? It put me in a very em290

Human Relations barrassing position. What happened was that I had to go to bat for all the rest of them, even when it didn't make much sense. One of those girls in particular I was thinking of dropping. She wasn't very good at the work and here I was getting her a raise! Well, I had to, don't you see? To keep peace in the department. It just didn't seem fair to them that a new girl should get more money than the old ones. The personnel office shouldn't have tried to pull a fast one over on us like that. "Now they think they can tell me who to put in the O.K. job. It isn't Katherine; I have nothing against Katherine, although she was quick enough to leave me stranded when that library job was offered to her. It is just that it seems better all around to move Grace up to the O.R., that's all. It works out better all around." BACKGROUND DATA

This personnel office is three years old. There have been three personnel managers. The present one has been here a year and a half. You understand that she is dissatisfied and looking for a position elsewhere. The other department heads have never taken kindly to any of the personnel managers. At this time the personnel office operates as an employment agency. A department head will notify it that a vacancy is about to occur. Personnel then advertises for applicants, screens out the obviously undesirable ones, checks the references of the others, and finally sends the best ones to the department head and she makes the final selection. The department head does all the necessary training, supervising, disciplining, and any firing that needs to be done. Transfers are very infrequent. The departments within the hospital have virtual autonomy. The administrator treats personnel like the others. When a dispute arises between it and other departments, he tends to favor the older ones. Except for these occasional disputes, the department heads seldom see the personnel manager, conducting most of their business with her department by telephone. There are inter-departmental meetings once a month, but the administrator does most of the talking. The administrator has asked the assistant administrator to make recommendations for the improvement of the total organization. // you were the assistant administrator, how would you handle this situation? What recommendations would you make to your superior? What factors did you consider in reaching this decision? What emphasis did you place on each? COMPLEMENTARY QUESTIONS

1. What is the appropriate role of the personnel department hi a hospital? 2. How long does it take for a new staff office to be accepted within an 291

Decision Making in Hospital Administration ongoing organization? What action is necessary on the part of administration? 3. How much opportunity is there for employees in hospitals to be upgraded? How can such opportunities be maximized? 4. What degree of autonomy should hospital departments have over their own affairs? Will it be the same in all cases? How can the parts be organized into a smoothly functioning whole? 5. What techniques are available for improving inter-departmental relations? 68. HOSPITAL POLICY AND MORALE

You are the newly hired administrator of a 100-bed, general-acute hospital in a rural area. This hospital has been experiencing serious financial problems. The board of trustees hired a new administrator last year, with the understanding that he was to place the institution on a firmer financial basis. The man lasted ten months and then left for another position which paid more money. The board was somewhat relieved to see him go, for the following reasons. After a brief interval while he studied the situation, this administrator had put a series of reforms into effect. He had raised room rates to match those of hospitals in nearby cities. The admissions office was ordered to ask for a week's room rent in advance. Patients were advised to handle their hospital bills as they would any other installment buying, getting the money through the local bank at 6 per cent interest. Delayed accounts were placed in the hands of the local collection agency after three months instead of the previously customary six months. All these changes the administrator had discussed with the board before they were put into effect. Though in accordance with practices used in hospitals elsewhere, such policies were new to this town, and patients and their families were outraged. Criticisms were very sharp and the public relations of the hospital in the community took a sudden turn for the worse. The head of the business office had worked there for years and given quiet, satisfactory service. She quit under this administrator. After he left, the president of the board had coaxed her back to run the hospital until you were hired. The doctors were united in their criticisms of the administrator and the gossip is that they told the patients that hospital charges were too high. You aren't too sure whose side the nurses were on, but have reason to think that at best they were sitting quietly by while their families and friends complained about hospital bills. Despite all these handicaps the hospital's financial state unquestionably improved under this administator. Since he left, it has been slipping down again although his policies are officially still on the books. Now you are in office. The board has asked you to see what could be 292

Human Relations done to improve public relations and at the same time to keep the hospital on the black side of the ledger. What would you do? What action is most appropriate for the administrator to take at this time? What factors did you consider in reaching this decision? What emphasis did you place on each? Why? COMPLEMENTARY QUESTIONS

1. When is an administrative fiat a desirable way of meeting a problem of hospital-wide dimensions? When is it not desirable? 2. What other techniques are available for meeting hospital-wide problems? 3. What role should the board of trustees play in hospital-community relations? 4. What role should the medical staff play in hospital-community relations? 5. Can relationships among hospital personnel, and between them and administration, be seen as a key to public relations problems? How can they be mobilized? 6. What is meant by formal and informal communication systems within an organization? Are they necessarily antagonistic? 7. Can a hospital raise its prices and improve public relations at the same time? 69. A CRISIS SITUATION

You have been administrator of a 500-bed, voluntary, general hospital in a seaport town for several years. You are in the midst of a building program. The old buildings are considerably antiquated, the plumbing being especially bad in one wing. Now a new building is completed but no furnishings have been moved into place as yet, and no staff has been hired to maintain it. The old wing is crowded with private and semi-private patients, about twenty-five to a floor and there are three floors. The director of nurses telephones you at your home as you are eating breakfast. She states simply that an emergency has arisen and will you please come as soon as you can. When you arrive at the hospital she informs you that a patient died two days ago of an undiagnosed disease. He was cared for on the second floor of the old wing. Now three other patients on that same floor are showing similar symptoms. The man who died was a well-built male about thirty years old. He was brought to the hospital from a local hotel, at 9:30 P.M., having flown in the day before from a foreign country. His physician, one of the younger men on the staff, was unable to diagnose the ailment but did not consider it to be especially serious. The patient received antibiotics and intravenous fluids. The night nurse reported that he grew steadily worse but that she was surprised when 293

Decision Making in Hospital Administration he died. He had seemed to be a strong and normally healthy person. His body was still in the morgue and his relatives were reported to be en route from another part of the country. You telephone the laboratory and find that the pathologist and bacteriologist are already hard at work trying to establish the cause of this patient's death. They are afraid the results will be inconclusive since the man had been given antibiotics. You call the public health officer, a friend of yours, and he comes over at once. By eleven o'clock it is clear that the three patients in question are seriously ill from a disease of unknown origin. It is also clear that the postmortem and laboratory tests will be inconclusive. It is obvious that there is possibility of a highly contagious and virulent disease. The health officer demands that the strictest possible measures be taken to prevent its spread. What would you do now? Who in the hospital must be informed of the danger hi order to help cope with it? Can and should this information be kept from the public, and if so, how can this be done? What series of steps should be taken in a case such as this, and what sequence should they follow? What factors did you consider in reaching your decision? What emphasis did you place on each? Why? COMPLEMENTARY QUESTIONS

1. How do you train your personnel to meet the danger of contagion and to handle the gossip about it? 2. What does it do to the morale of a hospital to meet a crisis of this sort? Can it be prepared for in advance? 3. What kind of press relations does a hospital require in order to get the newspapers to cooperate in a matter of public interest? 4. What kind of relationships does a hospital require with local public health agencies if both are to do their work to greatest public advantage? 5. Under what circumstances should a hospital administrator act with prompt, vigorous, and autocratic decisiveness? How can people be trained to respond to such a command? Is it antagonistic to democratic authority relationships to train people for such emergencies?

294

14 Fiscal Management 70. BALANCING INCOME AND EXPENSE Victory Hospital, a 132-bed, general-acute institution in a midwestern state, has financial difficulties in common with many other hospitals, i.e., its operating and other income is not sufficient to meet expenses. It has been rather fortunate in the past in having resources to absorb these deficits. However reliance upon a sizable endowment fund bequeathed twenty years ago has placed the hospital in the position of operating last year on an income of $21.40 per patient day, with a cost per patient day of $26.15. Efforts to increase the endowment fund have met with little success in the past decade, perhaps because the public has been unconvinced of the need for its increase. Over the years, rates and charges have always been set at a level so that with the income from the endowment fund, total income would just slightly exceed expenses. The philosophy or unwritten policy regarding charges has been, over the years, to keep charges for service at a comparable level with those of other hospitals of similar size in the surrounding area but to give services surpassed by none. Accordingly services are provided by the hospital without charge to the patient, a medical anesthesiologist giving full-time services at an annual salary of $15,000; a pathologist giving two thirds of his time at an annual salary of $9000; and a physiatrist giving one day a week, for which he receives $4000 annually. Full-time radiology services are provided by a group of specialists who receive 50 per cent of the billings. Last year this amounted to $38,500. The dietitian, according to a policy approved at least tacitly by the board of governors, purchases only the best grades of all commodities used in her department and makes every effort to dress up patients' meals with colorful tray covers, provides a birthday cake for each patient celebrating this anniversary in the hospital, and tries to convey a sense of personal attention generally. A similar policy obtains with respect to other supplies bought by the purchasing agent. To

295

Decision Making in Hospital Administration buy only the best grade of merchandise, in short, is the hospital's buying policy. These policies were in effect at the time you were hired as administrator. Wages and salaries paid are not planned according to any over-all pattern. However they are competitive with the city's industrial wages, which are somewhat higher than in most other hospitals in the area. Nurses' salaries are higher than those paid in surrounding hospitals. The hospital has no school of nursing and staffs its floors with all graduate nurses except for three nurses' aides. An attractive nurses' residence is provided in addition to salary; but for those nurses, technicians, and other professional personnel living away from the hospital, a monthly allowance of fifty dollars is paid. A forty-two hour week had been in effect for all employees for the past ten years. Of the hospital's 132 beds, 40 are in four wards of ten beds each, 42 are in single rooms, and the remainder in semi-private two-bed rooms. Occupancy, until a year ago, had been 60 to 80 per cent for private accommodations; 55 to 70 per cent for semi-private accommodations; and 30 to 50 per cent in the wards or ten-bed rooms. Neither income nor expense had been computed according to accommodation; but following a rate increase a year ago, the occupancy pattern changed markedly for the first time. Private-room occupancy dropped to a low of 35 per cent, semi-private occupancy rose to 75 per cent, and ward occupancy rose to 85 per cent. In the wards, self-paying patients outnumbered city and state patients by more than two to one after the rate change, whereas until that time these had been equal in number. This change in relative occupancy of the various classifications of accommodations was the upsetting factor in this hospital's finances. A year ago increasing costs of labor and supplies had indicated a need for an increase in rates if expenses were to be met. No budget was used, but income from the endowment fund was predicted to be close to $130,000, and an estimate of patient earnings was made, if rates remained as they were, at $470,000. Expenses the previous year had amounted to $630,000 and the following year were expected to go to $685,000. Since endowment income is relatively stable from year to year, a 15 per cent increase in all charges and rates was voted by the board and put into effect. Rates before the increase were comparable with those of other hospitals in the area. The other hospitals increased their rates approximately 6 per cent, leaving Victory Hospital's rates approximately 9 per cent above the average of the other hospitals. The town which Victory Hospital serves felt a somewhat unusual business slump during the year which was in no way regional or national but which may have been partly responsible for the shift in occupancy. At any rate, the recession did not materially affect hospital expenses. The town's 296

Fiscal Management economy is recovering from the business slump but is not recovering strongly. The hospital's expenses not only went to the expected $685,000, but they exceeded the estimate by $20,000. Income from the endowment fund, as expected, amounted to $132,000. But income from patients and all other sources was $550,000. Since depreciation was not provided for, and since the principal of the endowment fund was frozen, the deficit had to b$ met somehow. As a matter of fact, the deficit was offset a small amount at a time during the year by loans at no interest from one of the local manufacturing concerns owned by a man who also served as president of the hospital board. Victory is the only hospital in a town of 30,000 population. There is no other hospital within thirty miles in any direction. As may have already been presumed, the hospital is considered by the townspeople as a wealthy institution. No particular attention has been paid to public relations, for these are quite good in view of the fact that the hospital pays its employees well, and patient care is excellent in all respects. The townspeople have in the past always preferred Victory Hospital to the other hospitals in the area, but some grumbling about the high ra*tes is now heard, partly perhaps because of national publicity given the cost of medical care. Some of the medical staff have joined in the complaints about high rates, saying that they feel responsible for the welfare of their patients and that they send them to Victory Hospital now only when necessary. The board shares the concern of the president of the board that the hospital not incur future deficits larger than the amount of the endowment fund. The board has therefore asked you, the administrator for the past six months, to suggest what steps should be taken to keep the annual deficit within manageable limits. You have agreed to discuss the subject at the next meeting of the executive committee of the board. What recommendations would you make to the board of trustees concerning the future balancing of income and expense at Victory Hospital? What alternatives did you consider? Why did you prefer the alternative you finally selected? What factors did you consider most essential to emphasize when preparing your recommendations? COMPLEMENTARY QUESTIONS

1. What expenses do you consider justifiable for inclusion in the hospital costs which you are trying to cover with income from patients? How might these expenses be altered by the amount or purpose of the hospital's endowment? by the size of the hospital? by its program? by its kind of ownership? by its affiliation with other hospitals or with a medical school? by the hospital's type of accommodations? 2. Do you believe it justifiable to charge patients different percentages 297

Decision Making in Hospital Administration of the hospital's average costs because of the type of accommodation they occupy? because of prepaid hospital insurance they hold? because of their support by tax funds? Why, or why not? 3. Do you believe that it is economical to pay higher salaries to your supervisory employees than those paid by other hospitals? Would you adopt such an approach in your own hospital? What factors would you consider when arriving at your decision? 4. Would you place more emphasis on decreasing or minimizing hospital expenses or increasing the patient volume in your hospital? Explain. 5. In what ways would you endeavor to tell your hospital's financial story to the public? When during the year would you consider it a propitious time to tell such a story? Why? 6. What order of priority, in general, would you give to the kind of expenditures within your hospital which you would make with available funds? Would you emphasize quality or quantity of service or both? Explain. Can you envision a situation under which your answers would be different? Discuss. 7. Rank in the order of importance the sources of income which you believe will be available to you for your hospital ten years from now. Explairi your ranking. Would your answer vary depending upon the size of the hospital? its program? its ownership? How do you expect your estimate of the importance of future sources of income, if valid, will alter the present pattern of hospital financial operation? of hospital administration? 8. What do you think might be the advantages and disadvantages of integrating your hospital's program with other agencies, voluntary or official, with respect tofinancingthe program? ' 9. Do you believe that a new hospital plant actually reduces the financial demands of hospital operation? 10. What sources of income are available to support education and research programs in hospitals? Do you believe that federal tax funds should be used to support such programs? Explain. 11. What is meant by "part pay" and "free care"? How should such care be financed? 12. Do you believe depreciation and reserve for bad debts should be included hi hospital costs? If so, should such expenses be funded? Explain. 13. What are "courtesy discounts"? What justifications do you recognize for granting of courtesy discounts? To whom would you give courtesy discounts in your hospital, and how much? What factors would you consider when establishing the courtesy discount policy for your hospital? 14. What effect do you anticipate the increased use of diagnostic facilities will have on the financing of hospital care? 15. What is your comment on the unionization of hospital employees from the fiscal standpoint? 298

Fiscal Management 16. Should a hospital depend upon earnings for expansion of facilities? Why, or why not? 17. Would you consider a nonprofit hospital justified in attempting to set aside some "profit" for that "rainy day"? 18. Is the policy of asking for a week's deposit in advance desirable in your estimation? How would you limit the application of such a policy? What other deposit policy would you consider adopting for your hospital? 19. What do believe the admission policy of a city hospital should be? What should be the relationship of a city hospital's admission policy to the admission policies of the voluntary hospitals in the area? 20. Do you believe an official agency is justified in expending tax funds to construct and operate a new hospital, or operate an existing hospital, when voluntary hospitals of the community are not filled to capacity? Explain. 21. What basis for reimbursement to voluntary hospitals do you think should be used to pay for care provided to tax-supported patients? for care provided to patients with medical-care insurance? What alternative bases did you consider? What are the advantages and disadvantages of each from your viewpoint as a hospital administrator? from your viewpoint as the administrator of the fund-dispensing agency? 22. Do you believe the patient should be asked to pay the hospital's insurance expenses, e.g., fire, malpractice? 23. Should changing rates affect the patients who are already in the hospital, or should it apply only to the new admissions? 24. Would you provide coverage in your hospital's business office after 5:00 P.M. and on Saturday, Sunday, and holidays? 25. What procedures would you establish in your hospital to collect the maximum amount that the patient is asked to pay? 26. Would you as an administrator be willing to make your income and expense figures available to other hospitals in your area? What do you consider to be the advantages and disadvantages of such action? 27. Should patients owing bills be readmitted to a voluntary hospital? If so, under what conditions? to what accommodations? 28. How may medical staff members be prevented from "meddling" in the financial arrangements between the hospital and the patient? 29. What should be done, if anything, with the medical staff member who persistently insists that the patient pay for his personal services before the hospital bill is paid? 30. What resources are available to the hospital to check the financial resources of the patient? 31. How can hospitals and Blue Cross companies assist each other in public relations programs? In what other ways can they be of assistance to each other? 299

Decision Making in Hospital Administration 32. Should state insurance commissions have any control over hospital rates? Why, or why not? 71. INCOME FOR THE MEDICALLY INDIGENT In the fiscal year just ended, Fulbright Hospital experienced its second year of having to use some of the principal of its endowment in order to cover operating expenses. The board has asked you, as the hospital's administrator during the past four years, what action should be taken to prevent the use of any more endowment principal next year. In fact, the board indicated it would like to finance the hospital's operation during the next five years so as to replace endowment funds used over the past two years. The hospital provided a considerable amount of ward care last year, amounting to 50 per cent of its total measured in patient days. Operating expenses for the year were $1,820,000, not including building depreciation. Since it had been determined in the past that cost per private patient day differed by only a few cents from cost per semi-private patient day and ward patient day, only the total average cost was used by the management. The hospital had an average occupancy of 89 per cent and an average length of stay of five days. Private patient days amounted to 32,500, while income from private patients was $582,500. Semi-private patient days were 32,800, and income from this classification was $455,300. The uncollectible income had averaged $10,000 and $13,600 per year over the past two years for the private and semi-private patients respectively. The hospital's rates are comparable, although slightly higher, than those of the other hospitals of the city. The hospital's expense per patient day is also slightly higher than in the other hospitals of the city. Fulbright Hospital is located in a western city of 250,500 population. There are three other hospitals in the city, all voluntary general-acute, with 150, 200, and 300 bed complements. Their occupancy rates last year were 76 per cent, 80 per cent, and 85 per cent respectively. Good relationships exist between the administrators of the four hospitals and between their boards. Ward patients received 64,700 days of care last year, of which one third were self-pay and the remainder classified as city or county patient days. Of the so-called self-pay ward patients, some could pay full charges (which were set below cost), and others were able to pay only a part. These patients who paid part of their bills were classified as self-pay ward patients because, for one reason or another, they were not eligible for government aid. Some were transients, others unwilling or ineligible to take the pauper's oath required by both the city and county before aid could be given. At any rate, income from self-pay ward patients amounted to $150,000. 300

Fiscal Management Of the two-thirds patient days acknowledged by the city and county to be their responsibility, three fourths were city and one fourth county. The city acknowledged as its responsibility "needy" persons, in need of hospital care, residing within the limits of the city. Likewise the county accepted as its responsibility "paupers" needing hospital care residing in the county but outside the city limits. The city paid Fulbright Hospital at a rate of four dollars per day all inclusive, which rate has been in effect for ten years. Annually, in addition to the per diem fate, the city pays a lump sum of $5000 to the hospital. This lump-sum payment was a concession to which the city agreed five years ago, in place of a change in the per diem rate, to placate hospital officials. The county, on the other hand, agreed a year and a half ago to pay for its patients at a rate of five dollars a day room rate plus extras not to exceed three dollars a day and not to exceed seven days. The board had considered asking the city for the same amount of reimbursement but had deferred pending the outcome of last year's election of city councilmen after which the board hoped for a more favorable response to such a request for an increase. Thus the city paid, during the year just ended, $134,400 for care of patients accepted as its responsibility, and the county for its patients paid a total of $74,900. From an endowment fund approximating three million dollars, earnings of $120,000 were realized in the past year. One possible source of income which has been considered is additional tax funds as allocated by the city council. In approaching the city council, you realize the attitudes of some of its members assume importance and must be given careful consideration. In the first place, an active taxpayers' association backed and succeeded in electing to the council during last year's election three of the council's eleven members. This association has as its one main purpose the keeping of taxes at the lowest possible figure regardless of what means are necessary. It is an active group, although not large, and backed its three candidates on the basis of their promising economy in city government and no increase in taxes. Since these men replaced two old-line machine politicians and one new candidate sponsored by the political machine heretofore in control of all elections, "economy at all costs" is constantly emphasized in the council. Three of the machine politicians maintained their positions as councilmen, four councilmen were elected by organized labor, and one by the well-to-do district. Second, the hospital, which is the only one in the city accepting ward patients and doing charity work, is considered to be a wealthy institution by all council members and by the community as well. Its board of governors included members of the old wealthy families of the town and some of 301

Decision Making in Hospital Administration the new industrialists. These people are conscientious in their desire to provide good hospital care to all elements of the town and county but nevertheless represent what the community has dubbed the "Country Club set." Third, the city council is being pressed by all city departments for more funds. One of the more desperate is the school department. Pay scales are so low in the schools that the experienced and well-trained teachers are leaving for other cities, and new teachers and other personnel are difficult to attract. Furthermore, the bonded debt of the city has reached a level very close to the statutory limit set for the city by the state, and state aid for the city's schools amounted to only fifty dollars per pupil last year. A certain amount of sympathetic understanding of the hospital's financial problems can be expected from the executive branch of the government, however. The newly elected mayor is a member of the city's leading social set and is a personal friend of Fulbright Hospital's board members who supported his leadership in the promotion and organization of a reform city administration. The county is governed by a board of six county commissioners, two elected each year. As is the case with the city, county revenues are raised primarily from property taxes. However, the county is more fortunate than the city in the matter of revenue since it shares with the state on one basis or another in the state gasoline tax, state liquor and cigarette taxes, and one or two other state taxes whereas the city shares only in the liquor tax. The commissioners seem somewhat more realistic in their approach to the hospital's cost problems, probably because hospital care for county patients is not a large item in the county budget and because the pressure for economy (from taxpayers) and for funds (from county agencies) is not as acute as in the city. Community Chest activities in this city are not developed to anywhere near the degree found in many other areas, primarily because the principal charities have been endowed and financed by wealthy individuals or families in town. Financial support from this source has almost vanished, however, as is the case generally throughout the county. As recently as fifteen years ago, there was no Community Chest, and it was established at that time not so much to raise money as to stimulate community-wide interest in local welfare activities. Since that time it has grown, but it is estimated that its contribution to its member agencies has never been over 50 per cent. Fulbright Hospital has never been a member of the Community Chest, its board feeling that membership would gain the hospital little and would be detrimental to the hospital's public relations in that any upward change in rates would be criticized. As a matter of fact, until this last year there had not been any financial need for hospital membership in the Community Chest. 302

Fiscal Management What action would you recommend to the board of trustees to ensure that the principal of the endowment fund would be maintained or increased? What factor do you consider most important to keep in mind when considering the situation confronting Fulbright Hospital? COMPLEMENTARY QUESTIONS

1. What do you believe the objective of voluntary hospitals should be in the provision of care to the medically indigent? Do you think the objective is different from what you would have established fifteen years ago? Explain. If the two statements of objective are different, do they indicate a trend? What do you anticipate the objective will be ten years from now? 2. What do you think should be the source of financial support for the indigent patient? the medically indigent patient? What community organizational structure would you propose for providing the actual care of such patients in modern physical facilities by capable professional persons? 3. What criteria would you apply to define an indigent person? a medically indigent person? 4. Should voluntary hospitals continue to feel responsible for the care of the medically indigent? Why, or why not? 5. What conditions or factors do you think will increase the number of persons receiving medical and hospital care financed by federal tax funds? How might such an increased assumption of responsibility by the federal government affect the financing of voluntary hospital care? 6. What are the arguments for and against governmental financial support of the medical care of all or portions of the public? If the government is to provide such support, what limits would you place on the patient benefits which it would finance? What limits would you establish on the eligibility of the public to receive government support? Should government payment for hospital care be made on the basis of actual hospital care expenditures incurred or to purchase prepaid hospital insurance? Should beneficiaries of government support be required to contribute financially for their support? 7. Do you believe it feasible and appropriate for governmental agencies to secure medical care in voluntary hospitals for those persons for whom it has accepted financial responsibility? Under what conditions might such a plan become appropriate? 8. On what bases would you justify the federal government's constructing and operating medical-care facilities? Would the establishment and operation of veterans hospitals be justified by these bases? What are the arguments for and against the expansion of the federal hospital system? What effect do you believe such an expansion would have on the establishment and operation of voluntary hospitals? Explain. 9. On what bases would you justify the state government's constructing 303

Decision Making in Hospital Administration and operating medical-care facilities? On what bases would you justify the constructing and operating of medical-care facilities by municipalities? How are purposes of each of the three levels of government similar or different in the provision of medical care through its own facilities? How might the operation of the facilities be interrelated? In what areas do you believe the hospital authorities on the three governmental levels might disagree concerning their relative responsibilities? 10. How do you believe "compulsory health insurance" would affect your career as a hospital administrator? as a Blue Cross official? as a public health administrator? as a health and welfare council director? 11. In what ways does a governmental medical-care program relate to a public health program? If voluntary hospitals should perform some of the functions of the government's medical-care program, how would their program relate to their community's public health program? 12. What are the advantages and disadvantages of locating the physical facilities for the performance of a community's public health program in close proximity to the community's medical-care facilities? What factors govern the actual location of public health facilities? 13. What effects might the assumption of responsibility for medical care by a governmental agency have on the staffing of voluntary agencies? 14. What factors affect the degree to which a voluntary hospital provides care for the medically indigent patient? 15. How do you define "part pay" and "free" care? 16. How might you comment on the contention of a governmental agency purchasing services from your hospital for the care of persons for whom it has assumed financial responsibility that the per diem rate of reimbursement for its patients should be less than the hospital average per diem cost because the hospital's out-of-pocket costs for the care of such patients are less than its average costs? 17. What advantages and disadvantages to medical education programs do you think might follow an expansion of financial support of medical care by tax funds? How might the disadvantages of support by tax funds be overcome? 72. HOSPITALIZATION INSURANCE

Community Hospital is a 75-bed, voluntary, general-acute hospital located in a rural area of a midwestern state. The area served by the hospital contains approximately 20,000 persons whose primary occupation is agriculture. The area has known prosperity since World War II, and one third of the hospital's patients have allocated some income to hospital insurance, mostly Blue Cross. The people remember the pre-war depression, however, and with the area's traditional lack of experience with large cash budgets, Community Hospital has had a difficult and continuous 304

Fiscal Management public relations problem when attempting to justify increasing hospital expenses and rates. Community Hospital is one of thirteen hospitals in the state which filed notice six months ago with the Hospital Services Association (Blue Cross) that they will withdraw or terminate their contracts effective March 1 of this year. The hospitals have an informal agreement to act conjointly in this matter. They are mostly small hospitals, many of which are located in the area surrounding Community Hospital. The thirteen hospitals hope to force Blue Cross to provide contractual relations which are more favorable to the smaller hospitals. In anticipation of contract discussions with Blue Cross, you have asked the board to determine the contractual arrangements which it thinks should be established, and the board has asked that you, as administrator, present them at their next meeting with the possible alternatives and your recommendations. As part of your presentation, you plan to review the present Community Hospital experience with reimbursement from Blue Cross for care rendered to their subscribers. You have an analysis prepared of 85 Blue Cross patients' bills for last year at Community Hospital (Table 19). In addition, there were five outpatients who accumulated fifty dollars in miscellaneous charges which were fully allowed under the Blue Cross contract. These patients stayed 410 days in the hospital. The average length of stay was 4.8 days compared with the state average of 5.5 days. The present rate of payment to the hospital by Blue Cross per patient day is $5.94 for ancillary services of inpatients and $7.81 for each outpatient visit. The room and board that the hospital allows to the subscriber is reimbursed in full to the hospital. Table 19. Hospital Charges and Subscriber Allowance for 85 Patients under Blue Cross Contract at Community Hospital Service Room and board Nursery Operating room (including blood and plasma) Surgical dressings Drugs Serums Laboratory Oxygen therapy and physical therapy X-ray Electrocardiogram and basal metabolism rate Services not covered Total

305

Charges

Allowance

.$2,700.50 103.00

$2,046.00 103.00

1,527.50 10.40 1,321.60 17.50 222.00 74.00 168.00

1,527.50 10.40 1,321,60 17,50 222.00 74.00 124.00

15.00 9.35

15.00

$6,168.85

$5,461.00

Decision Making in Hospital Administration This is the third contract between the hospitals and Blue Cross in the last fourteen years and it became effective January 1 of the present year. The contract includes the following provisions: Member hospitals are paid a maximum of 95 per cent of their ancillary allowance and 100 per cent of the room and board allowances made to Blue Cross patients in accordance with the terms of their contract with Blue Cross. Each hospital is to be paid an average per diem rate based on the individual hospital allowances made to Blue Cross patients from January through June of last year. This average per diem rate cannot exceed 110 per cent of the individual hospital cost of operation for the period, excluding depreciation and interest. The payments to individual hospitals now are not based upon an area average but are actually based upon the cost of operation. Furthermore, it is optional on the part of the hospitals whether they wish to submit cost statements or accept the average per diem rate paid to them as a final figure. Several hospital administrators claim that the accounting systems, especially in smaller hospitals in the state., were not designed so that comparable and accurate cost data could be obtained. Blue Cross claims to have added three additional accountants to their staff primarily for the purpose of checking the cost statements of those hospitals that submitted them. You have been with the hospital only for a period of six months, and the above analysis which you had prepared has made you quite concerned as to what the experience will be by the end of the year on Blue Cross patients. The present method of payment had been in effect for six months. The method of payment to hospitals by Blue Cross for Blue Cross patients in this midwestern state has been in a state of flux for the past several years. Briefly, the Blue Cross subscribers' contracts combine an indemnity and a service basis. Blue Cross patients are allowed a flat allowance per day for room and board, which varies depending on the type of contract with a maximum of eight dollars per day being allowed. Other services such as operating room, anesthesia, surgical dressings, drugs listed in the National Formulary and U.S. Pharmacopeia, oxygen therapy, physical therapy, basal metabolism rate, electrocardiogram, administration of blood and blood plasma (not blood or plasma itself) are allowed in full under the Blue Cross contract. X-ray service carries a maximum of fifteen dollars allowance for each admission. The agreement which was in effect fourteen years ago provided that Blue Cross would pay to the hospital 90 per cent of all allowances which each hospital made to its Blue Cross patients according to the terms of their contracts. This method of payment proved to be an injustice to the larger hospitals in the state who provided more ancillary services than the state's smaller hospitals because the more services that they provided, the greater proportion would be their loss. 306

Fiscal Management To combat this situation, larger hospitals increased rates on ancillary services, and after eighteen months the rates were way out of proportion to costs. The smaller hospitals in the state objected to this type of arrangement because they believed that the method of payment to the hospitals should be tied to the cost of the services provided. They feel that their charges for ancillary services are closer to cost and that they could not, within their own community, raise rates for ancillary services in the same proportion that the hospitals hi metropolitan areas had raised their rates. Community Hospital was one of the hospitals that found it difficult to increase the ancillary charges. Blue Cross officials stated that if the situation continued, Blue Cross would be in serious financial difficulties since 65 per cent of all Blue Cross patients were hospitalized in the larger hospitals in the metropolitan areas. As a result, a second method of payment to hospitals was negotiated. The second agreement, which went into effect three years ago, was as follows: the hospitals of the state were divided among three areas, the first being a large metropolitan area consisting of three cities in the southwestern part of the state. The three cities have a population of 1.3 million out of a total state population of 3.5 million. The second area was a city of 250,000 population located hi the northwestern part of the state. The third area consisted of the hospitals, including Community Hospital, in the remaining, less densely populated portion of the state. Within each of these areas, the average experience of all Blue Cross member hospitals was computed. The average per diem rate was so determined that each hospital made allowance to Blue Cross subscribers for the ancillary services and room and board received in accordance with their Blue Cross contracts. This average experience was based on the period of one year preceding installation of the plan. The average experience of each member hospital was also computed. Blue Cross agreed to pay each hospital 90 per cent of its average per diem rate, except that this per diem rate could not exceed 110 per cent of the area average. Room and board allowances remained on an indemnity basis, and the hospital was paid 100 per cent of the amount Blue Cross allowed to the patients. This agreement had the effect of stabilizing the charges for ancillary services, which is what Blue Cross desired. However, a trend developed which found room and board charges increasing out of proportion to the costs of operation. Smaller hospitals in the state again claimed that holding them to the area average was an unfair method of limiting the per diem payment, because of the variation in bed complements among the hospitals which made up this average. They again suggested that some method of payment to hospitals be tied to a cost basis, and the third contractual relationship was established. What alternative hospital-Blue Cross contractual arrangements would 307

Decision Making in Hospital Administration you consider when preparing your recommendations to the board of Community Hospital? Which alternative would you recommend? Why? COMPLEMENTARY

QUESTIONS

1. What are the most important factors to consider in hospital-Blue Cross contractual arrangements from the hospital's point of view? from the point of view of Blue Cross? from the patient's point of view? 2. What do you believe should be the objective of a Blue Cross hospitalization plan? 3. Would you as a hospital administrator like to see hospitalization insurance plans other than Blue Cross increase their number of subscribers? Explain. 4. Do you think the government should attempt to provide financial support for the hospital care of the public? If the government is to provide such support, what limits, if any, would you place on the patient benefits to be granted? the portion of the public to which it is to be available? If the government is to support financially the hospital care of the individual patient, should tax dollars be expended on the basis of care rendered, or to purchase prepaid insurance? If tax funds are to be used to pay for prepaid insurance, should the government establish and operate its own insurance plan or use an existing nongovernmental insurance plan? If the government is to purchase prepaid insurance from a nongovernmental insurance firm, do you believe it should purchase such service from Blue Cross insurance companies or other insurance companies? Explain the reasoning behind your answers. 5. What benefits not now provided do you think Blue Cross plans should provide their subscribers? What problems do you see in providing such benefits? How do you think the problems can be solved? 6. How would you describe the dividing line between that portion of the public which should receive hospitalization insurance from nongovernmental agencies and the portion of the public which should receive such protection from the government? 7. What are the advantages and disadvantages of the indemnity type of medical-care insurance to the patient? to the hospital? to the insurance company? What are the advantages and disadvantages of the service type of benefit coverage for medical care to the patient? to the hospital? to the insurance company? 8. Do you think expenses for teaching, research, depreciation, and interest should be included in the "costs" which are to be covered by payment for care rendered to Blue Cross subscribers? 9. Are "costs" of any importance when considering hospital relationship to commercial insurance companies as compared to hospital-Blue Cross relationships? Why, or why not? 308

Fiscal Management 10. Do you believe that the hospital payments for care rendered to Blue Cross subscribers should be related to "costs," to hospital charges, to allowances granted Blue Cross subscribers, or to negotiated rates? Explain. Under what conditions might it be necessary from the hospital's viewpoint to relate its payment from Blue Cross to "costs"? Under what conditions would Blue Cross be apt to consider it desirable ta relate payments to "costs"? 11. Do you believe hospital administrative courses should train men for the field of Blue Cross administration? 12. What information should Blue Cross executives know about hospitals? What information should hospital administrators know about Blue Cross? How can each obtain the information you believe they should have? 13. What responsibility do you believe hospital administrators and Blue Cross executives should assume for the conduct of each other's businesses? What organizational structures would you suggest to aid in the accomplishment of such responsibility? 14. What standards do you think Blue Cross organizations should require hospitals to meet before they are eligible to receive reimbursement for care rendered to Blue Cross subscribers? 15. How do you believe hospital reimbursement for care rendered to -Blue Cross subscribers should be affected by the hospital's size? by its program? by its ownership? by its charges? by the economic class which it serves? by other hospital insurance protection for the patient? by whether or not the hospital participates as a member hospital in the Blue Cross plan? by the hospital's affiliation with a medical school? by the hospital's affiliation with a medical center? 16. When a hospital has found it necessary to increase rates, should it be expected to continue service to members of Blue Cross or compensation cases at the old rates? 17. What arrangements do you think could be made with a Blue Cross organization which would permit the use of inclusive rates without requiring the submission to Blue Cross of individual patient charges for room rate and ancillary services? 18. What effect do you anticipate that the increasing use of diagnostic facilities will have on hospital-Blue Cross contractual relationships? 19. Would you establish a policy in your hospital of asking Blue Cross subscribers for a deposit upon admission? What factors would govern your decision? 20. Do you believe subscribers to health insurance plans, or beneficiaries of such plans, should in all cases be asked to contribute toward the premiums paid for such plans? 21. What do you consider the advantages and disadvantages of plans with "deductible" benefit provisions? 309

Decision Making in Hospital Administration 22. Do you think subscribers should be permitted to enroll in health insurance plans as individuals rather than in groups? What justification would you give for charging such persons higher premiums? Under what conditions do you think it is unjustified to charge individual subscribers higher premiums than group subscribers? 23. What is the distinction, if any, between hospital service and medical service plans? 24. What are the advantages and disadvantages of associating prepaid medical-care insurance with the group practice of medicine? Do you consider such a practice unethical? Explain. What do you think should be the relationship of the medical profession to group payment plans for hospital care? for physicians' services? Explain. 25. What risks are assumed by a hospital when it joins a group hospitalizationplan? 26. What control should a group hospitalization insurance organization exercise over the amount and kind of care given in accordance with the organization's contract? over the financial operation of the organization providing such care? How might such control be exercised? 27. What control should the patient and the hospital exercise over the amount and use of financial reserves which are accumulated by a group hospitalization plan? How might such control be exercised? 28. Do you believe group payment plans for medical care on a large scale will hasten or retard the development of compulsory health insurance? Why? 29. What are the advantages and disadvantages to the nation's medical education program of an increase in the purchase of prepaid health insurance? How may the disadvantages be offset? 30. What factors are increasing the costs of providing patient care, thereby placing increased emphasis on finding improved methods of financing medical care? 73. PHYSICIAN'S SERVICES INSURANCE The 610-bed, voluntary, general-acute Cabot Hospital is located in a large metropolitan area of a middle Atlantic state. The hospital is approximately seventy-five years old and has a history of good hospital care. Hah0 of its beds care for ward cases. The admissions for one year total 16,824, and outpatient visits number 3522. The hospital is a member of the American Hospital Association, the state hospital association, the Blue Cross plan. It conducts an intern and resident program and a school of nursing, and is accredited by the Joint Commission on Accreditation of Hospitals. The medical society has developed a plan for prepaid surgical and hospital medical-care insurance called Physician's Services Insurance. This 310

Fiscal Management development poses a number of problems "which make it necessary to reexamine certain of the policies of Cabot Hospital. This is particularly true as Cabot Hospital has patients representing 30,000 ward patient days who carry Blue Cross health insurance, many of whom may also enroll in the medical society's plan. As the administrator of Cabot Hospital, you have discussed this subject in a preliminary fashion with your board of trustees. The board has asked you to prepare your recommendations as to the action it should take in the situation. The traditional policy of the hospital for seventy-three years has been that a physician may charge for the care given a patient in the hospital only if the patient occupies semi-private or private accommodations. The doctor has not been permitted to make a charge for care of a ward patient. The bulk of the teaching cases have been ward patients. Now that many employers are providing medical and surgical insurance coverage to their employees, the hospital needs to define the relationship of patients with such insurance to the teaching service. The corollary policy of the hospital concerning the classification of these patients as to type of accommodation also needs review. The medical staff and the administration of Cabot Hospital share the concern of the board of trustees over the effect of the operation of a Blue Shield plan on the hospital's teaching program and the policy prohibiting collection of physicians' fees from ward patients. The medical staff and the hospital's administration recognize the importance of working together to answer the questions involved for the benefit of the patient. They also recognize that future acceptance of prepayment plans for physicians' services depends in large measure upon their ability to provide the patient with the service which he believes he is purchasing. The teaching and consultation program of Cabot Hospital is noted for its outstanding contribution to the state's health services. An average of fifteen interns and thirty-four residents are trained each year. They become leaders in their respective fields as they leave the hospital's training program to perform services throughout the state and the country. The medical staff and the hospital's administration are also viewed by medical personnel throughout the state as a primary consultation resource on the medical and administrative problems with which they may be confronted. The services of the teaching program are recognized as dependent upon continuation of the large number of ward patients whose care the hospital has been able to finance. Of the total of 195,621 patient days last year, 101,006 were ward patient days, as compared to 94,615 private patient days. Ward patient days supported by the eight dollars per day Blue Cross contract totaled 44,345 days. Corresponding average daily census data last year was 541 for all patients, 283 for ward pa311

Decision Making in Hospital Administration tients, 258 for private patients, and 112 for ward patients holding Blue Cross policies. The hospital's board of trustees believes it can continue to finance the care of ward patients. The more pressing consideration is whether the Blue Shield insurance plan will mean a reduction of the number of ward patients through assignment to semi-private accommodations. Such an assignment would permit the medical staff to collect fees for the services rendered to the patients. It is known that the medical staff believes it should be able to collect fees for services to Blue Shield patients. The justice of the situation is acknowledged by the board, as it realizes the patient has paid for the service received. It has been suggested that if the Blue Shield patient is to be assigned to semi-private accommodations, the least the hospital should do is demand full payment of semi-private hospital rates from Blue Cross. Blue Cross hospital payments are set at the level of average hospital costs for ancillary services but pay only eight dollars per day for room and board as compared with the ward rate of fourteen dollars. A significant percentage of ward patients participating in Blue Cross plans are apt also to become members of Blue Shield plans. If the hospital's teaching program loses the benefit of such patients, there is little justification for continuing to receive less reimbursement from Blue Cross than average hospital costs. This is particularly the case when only 50 per cent of the difference is found to be collectible from the Blue Cross patients. Another complicating factor which would appear to reduce the number of ward patients available to the hospital's teaching program is the effect of a patient's request for a physician who is not a member of the hospital's attending staff. Even if the physician happened to be on the attending staff, he might not be on the service at the time of the patient's admission. Further, if the patient chose an attending physician on service, the relation of patients to the teaching program would also need study, including the care to be provided by the house staff. Instructions in the admitting department are that all patients shall have a free choice of a physician. If the patient does not have a physician, he is shown a list of physicians in the proper service from which to choose. If no physician is so chosen by the patient, the doctor on call for that particular day is to be assigned in the same manner in which Workmen's Compensation Act cases have been handled, i.e., the newest on service is to be called to take the case. However, elective cases which do not require immediate treatment will be distributed among the members of the service who are on duty at that time. Some members of the hospital's administration have felt that the hospital should receive a part of any payments which might be made to physicians for care rendered to teaching cases. This viewpoint is considered 312

Fiscal Management justified because of the care provided to teaching patients by the house staff and other full-time physicians paid by the hospital. It is noted further that the physicians are able to charge the patient a separate fee in addition to that received from Blue Shield insurance benefits if the patient's annual income is over $2700 as a single person, $3300 with one dependent, or $3900 with two or more dependents. The medical staff does not support the viewpoint expressed by some of the administrative staff. The medical staff is less united on the method to be followed for distributing among members of the attending staff any payments which might be received from ward patients with Blue Shield insurance. Some staff members believe the physician performing the service should receive the payment for that service. Other physicians think that all payments should be pooled and evenly distributed among members of the attending staff. A few members of the attending staff believe the income from physicians' service to ward patients should be pooled and applied to expenses of the teaching or research programs. It is difficult to devise an answer to the questions posed by the care of Blue Cross and Blue Shield patients through comparisons with the experience of other hospitals. Cabot Hospital performs a dual and unique service in the state by functioning as the medical-center hospital for the state and also as the municipal hospital for its city of location. A decision permitting physicians to receive payment for service provided Blue Shield patients who are also teaching patients would present certain administrative difficulties during the admission of patients. Many patients applying for admission to Cabot Hospital do not even know whether they have Blue Shield protection, although their employers or unions may be paying for their Blue Shield coverage. The admitting officers, therefore, are often without the basic information needed to determine the kind of accommodations to which the patient should be assigned or whether the patient should be permitted the choice of a private physician. In the outpatient department such information would determine, with minor exceptions, whether the patient would be eligible for admission to outpatient clinics. The decision as to whether an attending staff member should be called to care for an emergency admission would also depend in part upon such information. The nature of the emergency would, of course, be a factor as welt. You have been administrator of Cabot Hospital for the past ten years. You are now being asked to evolve the course of action which should be taken by the various groups within the hospital with reference to the Physician's Services Insurance Plan. You are also expected to guide the development of a plan of action in such a way as to secure both mutual understanding and mutual agreement regarding the plan by the various hospital groups concerned. 313

Decision Making in Hospital Administration What recommendation would you present to the board of trustees of Cabot Hospital as a result of the development of the Physician's Services Insurance Plan? What alternative recommendations did you consider presenting to the board of trustees? Why do you prefer the recommendation you have selected for presentation to the board? COMPLEMENTARY QUESTIONS

1. In what sequence do you think the groups concerned with the development of a recommendation should be asked to consider it, comment upon it, and approve it? 2. Do you think physicians will be apt to approve within the next five years the development of a service type of contract for Blue Shield plans to replace the existing form of an indemnity contract? Why, or why not? 3. Do you think the growth of Blue Shield plans would increase or decrease the likelihood of "government control of medicine"? Why? 4. How do you think the growth of Blue Shield plans would affect, if at all, the quality or quantity of care which patients would receive from physicians? Why? 5. How would you describe the contractual relationship between physicians and patients as established by Blue Shield plans? 6. Would you favor the growth of the number of prepaid insurance plans as sponsored by physicians engaged in group practice? What limits, if any, do you think should be established on the benefits to be provided by such plans? What limits, if any, would you place on eligibility for enrollment in such plans? 7. Do you believe the federal government should support with tax funds the development of group-practice prepaid insurance plans? Why, or why not? 8. Do you have any objections to the idea of hospitals operating their own prepaid insurance plans for physicians' services? Why, or why not? 9. What kind of controls do you feel Blue Shield plans are justified in establishing over expenditures of funds on the basis of reports submitted by physicians? 10. Do you believe that the use of company or union pension funds to purchase prepaid insurance for physicians' services is a justified expense? Why, or why not? 11. Do you believe a Blue Shield plan should pay for care given to patients who would have otherwise been provided free hospital care (e.g., tuberculosis patients)? Explain. 74. BUDGETING

Riverbury Hospital, located in a midwestern city of 34,000 population, has operated without financial loss for the three years since Dayton 314

Fiscal Management Hughes assumed the position of administrator of the 110-bed, generalacute, voluntary institution. The board of governors have shown themselves to be progressive and keenly interested in seeing that all patients at Riverbury Hospital receive good patient care at lowest possible costs. The board recently became concerned over the financial operations of the hospital. They have asked Mr. Hughes to ask you, as administrator of a 550-bed, general-acute hospital with which Riverbury Hospital has a service and teaching affiliation, to review with Mr. Hughes the financial operations of Riverbury Hospital. They further asked that you and Mr. Hughes discuss with the board at a special meeting what can be done to improve the financial operation of the hospital. Shortly after Mr. Hughes assumed the administratorship of the hospital, the board of governors requested that a system of budgetary control be established. At their May meeting, the board directed Mr. Hughes to prepare a comprehensive budget for the fiscal year (September 1 to August 30) to be presented to the executive committee of the board for approval not later than August 1. Complete details for formulating and developing the budget were deemed the responsibility of the administrator, and the board of governors requested that the actual financial operations be reviewed with the budgeted operations at least every three months with the executive committee of the board. The actual pattern and scheduling of development of the budget has not changed appreciably since its inception. Mr. Hughes and the business office manager have developed each annual budget with the assistance of department heads. (See the accompanying organization chart of Riverbury Hospital.) Each department supervisor is asked to submit to the administrator a list of their personnel needs for the coming fiscal year as well as a list of the present personnel whom they recommend for merit salary increases. Mr. Hughes and the business office manager review the requests and determine the amount of merit salary increases which can be granted to departments. They also decide on the number of additional personnel that can be added within the operating budget which they establish for the next fiscal year. Since Mr. Hughes is also purchasing agent for the hospital, he determines what additional expense will be incurred through increased supply prices. After analyzing patient-day volume for the past year, Mr. Hughes and the business office manager estimate what the anticipated patient-day volume will be for the next fiscal year and adjust anticipated operating expenses accordingly. When budgeted operating expenses have been determined, the business office manager estimates what income will be forthcoming on the basis of current rate structures and what additional income will be needed to cover additional operating expenses for the next fiscal year. After the budget has been submitted to the executive committee of the 315

Organization chart for Riverbury Hospital.

Fiscal Management board and been given final approval, each department head is given a statement showing his or her authorized expenditure for the next fiscal year segregated into separate figures for salaries and for supplies. The department heads are given freedom to expend the department budgetary allocation in accordance with department needs so long as the expenditures do not exceed the allocation. At least every three months, each department head is given a statement showing a comparison of his department's actual expenditures to date with the budgeted expenditures, the latter being one twelfth of the annual budget times the number of months for the year to date. If a department has exceeded its authorized expenditure for the three-month period, the administrator usually calls that department head to his office for a conference to determine the reasons for the over-expenditure, and an attempt is made to adjust the budget for the balance of the year. If the department's expenditures are not in excess of the budgeted amount, the administrator usually does not confer with that department head. During the first six months of the current year, the administrator has conferred with several of the department heads because of over-expenditure, especially the director of nurses and the superintendent of buildings and grounds. The director of nurses is not only responsible for the nursing service, school of nursing, operating room, and delivery room budgets, but also is responsible for the admitting office, emergency room, and housekeeping and linen room budgets because of her extensive knowledge of the operations of these areas. The business office manager is responsible for the pharmacy budget as well as the budget for business office functions since the pharmacy does very little prescription work in the hospital, and only a part-time pharmacist is employed. The superintendent of plant maintenance has responsibility for both the plant maintenance and the laundry budgets since he has an extensive knowledge of the operations of the hospital laundry. As a result of these conferences, departmental budgets have been frequently revised during the first six months of the year, and some of the department heads, the director of nurses particularly, have complained to Mr. Hughes that too much of their time is being taken up by these conferences with him regarding the budget. Mr. Hughes believes these conferences are educational both to him and to the department heads and that he has made greai progress in instilling in most of his department heads the value and need for budgetary control of departmental operations. He believes that in time the director of nurses will realize that the hours consumed in these conferences are valuable to her as a guide in the operations of the departments for which she has budgetary responsibility. No formal budget ever has been prepared for capital expenditures. Department heads request equipment items at the same time that they submit suggested merit salary increases and request additional personnel. The 317

Table 20. Comparison of Income and Expense at Riverbury Hospital for the Past Three Years and Six Months

Item

First Year

Second Year

Last Year

Current Current Actual Budget 6 Months 6 Months

Earnings from patients Routine care Nursery care Outpatients

$177,830 $194,300 $195,500 $108,000 $100,200 9,400 10,200 10,200 5,200 5,000 900 1,000 1,100 600 700

Total Ancillary services

$188,130 221,070

$205,500 241,100

$206,800 242,800

$113,800 124,900

$105,900 126,500

Total earnings $409,200 $446,600 $449,600 $238,700 $232,400 Allowances and discounts .. 15,000 21,000 19,500 12,500 11,000 Net earnings Auxiliary income

$394,200 $425,600 $430,100 $226,200 $221,400 6,500

6,900

8,000

3,700

7,200

Net operating income

$400,700

$432,500

$438,100

$229,900

$228,600

Operating expenses Wages and salaries Supplies and expense

$222,000 $244,000 $254,600 $136,900 148,000 161,000 166,400 89,600

$133,000 87,000

Total Net operating gain Supplementary income

$370,000 $405,000 $30,700 $27,500 3,000 3,500

$220,000 $ 8,600 2,000

Total. Non-operating expenses

$33,700 $31,000 $21,100 $ 5,500 $10,600 700 1,000 1,100 500 600

Net income Capital expenditures

$33,000 16,000

Excess income ...

$ 17,000 $ 16,000 $ 10,000 $

Operating income per patient d a y . . Operating expense per patient day Net operating gain per patient day

$421,000 $226,500 $17,100 $ 3,400 4,000 2,100

$30,000 $20,000 $ 5,000 14,000 10,000 , 4,000

$10,000 6,000

1,000 $ 4,000

$13.79

$14.68

$14.86

$15.13

$15.68

12.74

13.74

14.28

14.91

15.09

$1.05

$ .94

$ .58

$ .22

$ .59

318

Fiscal Management administrator submits to the board with the operating budget a list of those equipment items which he and the business manager have determined are needed most urgently, together with their probable prices. The administrator usually informs the department heads verbally as to which requests for equipment have been authorized by the board for purchase during the next fiscal year. Tables showing data on income and expense were submitted to the executive committee of the board after the first six months of the current year (Tables 20, 21, 22), at which time the budget was reviewed with actual operating expenditures. It was at this time that the board asked Mr. Hughes to contact you. Because of constantly increasing operating expenses, rate increases have been authorized annually by the board of governors as recommended by Mr. Hughes. Private room rates now are three dollars more than the older Table 21. Operating Expenses at River bury Hospital for the Current Six Months Department Administration Dietary Laundry and linen Housekeeping Plant maintenance and operation Medical and nursing X-ray Laboratory Operating room Delivery room Anesthesia Nursery Pharmacy Total

Actual

Budget

Increase or (Decrease)

$ 20,000 40,000 10,000 15,500 14,200 64,500 15,000 6,600 10,500 5,000 5,400 3,800 16,000

$ 18,000 39,000 9,000 13,500 14,000 65,000 14,300 6,400 11,000 5,500 5,800 4,000 14,500

$2,000 1,000 1,000 2,000 200 (500) 700 200 (500) (500) (400) (200) 1,500

$226,500

$220,000

$6,500

Table 22. Selected Operating Statistics at Riverbury Hospital for the Past Three Years and Six Months

Type of Patient

Current Current Actual Budget First Last Second Year 6 Months Year Year 6 Months Patient % Patient % Patient % Patient % Patient % Days Occ. Days Occ. Days Occ. Days Occ. Days Occ.

Adislt and children ...29,054 70 29,470 Newborn .... 4,700 46 5,110 Total

33,754

65 34,580

71 29,474 71 50 5,213 51

15,195 2,585

74 51

14,579 71 2,534 50

66 34,687 67

17,780

69

17,113

319

67

Decision Making in Hospital Administration rates, semi-private rates are two dollars more, and no change has been made in ward rates. Rates for ancillary services have not changed materially in three years with the exception of operating room, delivery room, and anesthesia, all of which have increased approximately 25 per cent. Xray and laboratory rates have remained unchanged as the hospital has attempted to encourage additional use of these facilities by the medical staff in order to secure more thorough diagnostic services for the patients. Drug charges to patients have increased 10 per cent over three years. Rate calculations have not been determined on the basis of the rates of other hospitals in the area, but they happen to be comparable to those of the nearest hospital which is forty miles away. The operating costs of the other area hospitals are unknown. Within the next sixty days, a new 75-bed hospital will be ready for occupancy in a city ten miles from Riverbury Hospital. Riverbury's present chief of surgery has been appointed chief of staff of this new 75-bed hospital and will leave Riverbury's staff on June 1. He has expressed dissatisfaction with the services provided by the hospital for the medical staff, such as lack of equipment and poor staff rooms. This point of view is shared by other staff members in varying degrees. A new industrial plant under construction at present on the outskirts of the city in which the new hospital is located will bring a population influx of approximately ten thousand persons to this area. Mr. Hughes anticipates an immediate rise in occupancy because of the defense activity but believes that it will be only temporary since the new 75-bed hospital will serve mainly the area immediately surrounding the defense plant. He expects that Riverbury Hospital's occupancy will return to its norm of 70 per cent soon after the 75-bed hospital is opened. What comments on the financial operations of Riverbury Hospital would you make to the hospital's board of trustees? What alternative comments did you consider? Why did you select the comments you -would present? COMPLEMENTARY QUESTIONS

1. How would you have reacted, as administrator of the 550-bed teaching hospital with which Riverbury Hospital was affiliated, to the Riverbury board's request that you review the financial operations of the hospital and present your conclusions to the board? 2. What is a "budget"? What objective would you hope to attain by the preparation and use of a budget? In answering this question and those that follow, give consideration to both operating and capital program budgets. 3. What factors do you believe are most essential to consider when preparing a budget? using a budget? 4. How might the value of a hospital budget be affected by a hospital's 320

Fiscal Management size? its program? its type of ownership? How might the content of a budget vary with a hospital's size, program, type of ownership? How might the assignment of responsibility for the preparation of a budget be affected by a hospital's size, program, or type of ownership? 5. How might the preparation of a budget be affected by increased public purchases of prepaid health insurance and increased tax-fund support of the medically indigent? 6. What channels of communication would you use to develop understanding of a hospital budget by the board of trustees? the medical staff? the employees? the general public? 7. What is the relationship of a budget to the standards of program quality and quantity which are applied to the hospital's operation? 8. How might an administrator use ratios during a budgeting process? How might their use vary with a hospital's size? program? type of ownership? 9. If budgeted expenses do not equal budgeted income, what courses of action are available to an administrator? How might each course of action be accomplished? 10. What effect might affiliation or coordination with a medical center, medical school, or public health department have on the process of preparing a budget? on the content of a budget? on the use of a budget? 11. What factors would you consider in comparing the budgets of two hospitals having the same number of beds? 12. Should the value of donated services and commodities be included as hospital income? How should the services or commodities be valued? 13. Should income from governments be classified separately from income from patients? Would your decisions be affected by whether the money is received on a per diem or block grant basis? Why, or why not? 14. What is the relationship of a budget to the hospital's accounting system? to the hospital's organizational structure? 15. How do you measure the volume and money value of free service when preparing a budget? 16. How do you define bed capacity, bed complement, occupancy ratio? Costs per patient day? What consideration is given to outpatient service? to infant days? 75. INCLUSIVE RATES By putting into effect a system of inclusive rates as opposed to one of room rate plus specific charges for "extra" services, the administration and board of directors of Carburg Hospital had hoped to eliminate the following troublesome aspects of the latter system: (1) A few private and semiprivate patients with very high bills found themselves either pauperized by the expense or unable to pay. In addition, collection expense was higher

321

Decision Making in Hospital Administration for these accounts because of the additional time spent by the social service and credit department officials. (2) Late charges often necessitated sending discharged patients additional bills for services not included in the statement presented at discharge. Here too collection on these items was a problem, and the nuisance to patients was very apparent judging from complaints received about supplementary bills. (3) The unpredictability of the amount of "extra" charges incurred also caused annoyance to patients. Several members of the board of trustees feel that this one complaint more than any other makes the public hesitant about obtaining hospital and medical care. With these factors in mind, an inclusive-rate schedule was established in accordance with plans made by the administrator and placed in effect by the board of trustees. Rates were determined after studying the accounts of a thousand discharged patients and averaging the following data: days of stay, room charges, "extra" charges (excluding so-called luxury charges such as telephone, newspapers, radio rental, etc.) both in total and by days on which rendered (up to 21 days). The sample taken was weighted in proportion to the incidence of classification in various services, such as surgery ward, semi-private and private; medicine ward, semi-private and private, etc., so that the sample would reflect the actual patient distribution among the total population. Inclusive rates were based upon these averages of the "extra" charges and "room" charges, taking into consideration occupancy in the various classifications. The amounts of the rates were set so that, if charged to the patients sampled, earnings would equal those obtainable under the old rate schedules. To this schedule was added an amount to cover expected additional expense due to increased use of certain facilities, notably laboratory and Xray. As finally determined, the room factor in the inclusive rate included very much the same services as the old "room charge," i.e., room, meals, general nursing care, formulary drugs, etc. The surcharge factor included special drags, laboratory, diagnostic X-ray, operating room, delivery room, anesthesia, physical therapy, and emergency room. Not included in the rate were telephone and radio rental, supplies sent home with patients, blood donors' fees, special appliances, and X-ray therapy. Whether or not to include X-ray therapy was one of the questions causing some controversy among the board. It was finally decided to exclude this service even though it defeated, to a certain extent, one of the purposes of an inclusive rate (equalizing charges) because it was a service of abnormally large cost and used with such a small number of patients. The new rate plan, announced in the local paper and in booklets distributed to staff members, is shown in Table 23. The inclusive-rate plan was presented to the medical staff and the hospital's administrative staff and employees when it reached its final form. 322

Fiscal Management Table 23. Schedule of Inclusive Rates (Per Day of Service) at Carburg Hospital No. of Days 1 2 3 4 5 6 7 8 9

Private

.$ 19.50 37.00 54.00 70.00 85.00 99.00 113.00 127.00 141.00 Each additional day . 11.00

2-Bed Room

3 -Bed Room

Ward

$ 17.50 33.00 48.00 62.00 75.00 87 00 99.00 111.00 123.00 9.00

$ 1700 32.00 46.50 60.00 72.50 84.00 95.50 107.00 118.50 8.50

$ 1600 30.00 43.50 56.00 67.50 7800 88.50 99.00 109.50 7.50

The hospital grapevine had carried news of the proposed plan all through its development, however, as the hospital's administration had made no secret of it. The announcement to the medical staff at a staff meeting outlined the goals hoped for, the objectionable features of the present rate schedule which the new plan was expected to overcome, and the philosophy of the inclusive rate. The announcement took about half an hour, after which booklets containing the new rate schedule were distributed to the staff members for distribution by them to the patients being referred to the hospital. The same approach was taken with the administrative staff, and they were requested to transmit the information to the hospital employees. Specialists serving the radiology and pathology departments were on salary, which was raised 10 per cent in each case to compensate for expected additional work load. The only other specialist, a physiatrist, had been reimbursed on a per patient basis, and this arrangement was continued. An announcement was released to the two daily newspapers in town, on the fourth day after the staff was notified, with very much the same information as was given to the medical staff. Two weeks after the newspaper announcement, the plan was inaugurated. From the time the plan was announced to them, the medical staff as a group was somewhat hostile to it. They told the administrator they would have liked an opportunity to comment on the new rate system simply because it affected the patients for whose welfare they were responsible. The administrative staff was neutral in its expressed reaction to the plan. The employees seemed mostly confused about the whole idea of a new rate system. After the inclusive-rate plan went into effect two and a half months ago, it was found that the staff was using the ancillary services to a much greater extent than had been anticipated by the administration. The staff 323

Decision Making in Hospital Administration apparently developed very quickly the philosophy that "as long as the patient is being charged for all the extras, he might as well get them." Indeed, those doctors who started out under the plan ordering procedures as they always had, were met with this argument from the patients themselves, at least from those patients not receiving rather complete laboratory services. The result of all this, after three months, was an 86 per cent increase in use of the laboratory, a 70 per cent increase in use of the X-ray department, and a somewhat smaller increase in use of the other ancillary services offered. Additional laboratory and X-ray technicians were employed, but space limitations in these two departments made the work load very trying on the employees; morale suffered as a result, and job turnover jumped. There was also a 50 per cent increase in departmental expense in X-ray and one of 60 per cent in laboratory, as indicated in monthly operating expense statements. The pathologist and radiologist demanded another salary increase of 30 per cent and 25 per cent respectively. The patients' attitude also affected the nursing staff. It was found that patients adopted a more demanding attitude toward the nursing service, apparently feeling that payment of an inclusive rate justified more detailed, personal attention than heretofore. In its relations with the public, and specifically patients, Carburg Hospital found that patients would compare Carburg's rates with the room item of the rate schedule of other hospitals in the area and want to know why the rates were so different. Most of these questions could be satisfactorily answered at the time of admission, but the mere explanation of what an inclusive rate meant usually put patients on their guard to be sure that they got "their share" of services. This meant that the business office employees, particularly the cashiers, received numerous complaints from short-stay patients in for minor procedures or observation. Some of the patients tried to bargain for a discount on the basis that few or no "extras" were received; others simply objected to the amount of the bill. The business and admissions employees meeting the public resented the additional strains being placed upon them, and there was a general adverse reaction to the efforts being made to economize through reductions in the number of business office staff. Two other general hospitals, one a nonprofit voluntary like Carburg and one a Catholic hospital, are located in the city. Neither is as large as Carburg (300 beds), and neither has an inclusive-rate schedule. Most of the doctors on the Carburg Hospital staff are also, on the-staff of one or the other of these two hospitals, and a new trend in admissions to Carburg became evident after a few months of operation with the inclusive-rate system. It seemed that noticeably fewer tonsillectomies and other relatively simple surgery and fewer "uncomplicated" medical patients were being admitted to private and semi-private accommodations. The conclusion 324

Fiscal Management reached by the administration was that staff members were referring patients with simpler diseases to one of the other hospitals in the town in the belief that hospital charges would be less for such patients. As a result of all these reactions, the hospital's financial status has distinctly worsened. The business manager reports that the comfortable balance between income and expenses has disappeared and the books show a serious deficit for the past two months with likelihood of it increasing if present trends continue. At the present deficit rate the reserves would be depleted in eighteen months. The administrator was aware that certain problems associated with the operation of Carburg Hospital's inclusive-rate system were having deleterious and cumulative effects on patient care and the smooth administration of the hospital. His efforts to discuss workable solutions with the administrative and medical staffs met with little success, and the attitude appeared to be "if you'd talked to us about this earlier, we could have told you this would happen." The administrator knew from his two years' experience in the hospital that the board of trustees was not inclined to place much consideration on the advice of the medical staff or hospital employees when arriving at major decisions. The board thought such an approach likely to incur unnecessary delays in action and to be more confusing than helpful. The board preferred instead to develop its own ideas and then "sell" them to the groups concerned. Would you, as administrator of Carburg Hospital, discuss the subject of inclusive rates at the next meeting of your board of trustees? If you would, what would be the purpose of such discussion? What comments would you make to the board? What action, if any, would you ask the board of trustees to take? Upon what factors did you place most emphasis when arriving at your conclusions? COMPLEMENTARY QUESTIONS

1. What arguments could you develop for and against an inclusive-rate system in addition to those outlined in the situation described above? Evaluate them. Are the arguments against the inclusive-rate system inherent in the system itself or in the manner in which it is developed and implemented? Explain. 2. How might the advantages and disadvantages of an inclusive-rate system, as compared to a day rate plus extras system, vary with a hospital's size? program? type of ownership? affiliations? 3. What objective are you attempting to achieve when establishing the amount of the hospital rate? the rate system? Would the objectives vary with the size of the hospital? with its program? its type of ownership? 4. What do you believe are the most important factors to consider when establishing hospital rates? Explain. 325

Decision Making in Hospital Administration 5. What effect does payment from insurance companies have on the amount of hospital rates? on the basis used to determine the amount of hospital rates? on the system of hospital charges which is used? How might the effects of payment from governmental agencies differ, if at all, from the effects of payment from insurance companies? How might the effects vary with a hospital's size? program? type of ownership? affiliations? How might the effects be different five years from now? 6. At what times during the year would you consider it more favorable to establish new rates than at others? Explain. 7. What comments would you make, if any, concerning the amount of the hospital rates in comparison with other hospitals' rates if attempting to persuade the medical staff to send more patients to your hospital? 8. What do you believe to be the relative importance of hospital rates and the reputation of the medical staff on the development and maintenance of a high occupancy rate for the hospital? 9. Do you believe that the expenses of a hospital's teaching and research programs should be included in the "costs" to which you relate your charges to the private patient? to the insurance companies? to governmental agencies? to nongovernmental agencies? Explain. 10. Do you anticipate that hospital rates will increase or decrease over the next five years? Why? What effect will your anticipated change in rates have on the methods of financing hospital care? 76. COLLECTING HOSPITAL CHARGES

Mr. Lamoert, administrator of Ortonville Hospital, has just been asked by his board of trustees to discuss with them during the next monthly meeting any changes considered likely to improve the hospital's collection policy and procedures. The request was made following board review and discussion of certain hospital statistics (Table 24) which Lambert thought would be helpful in its scheduled discussion of the hospital's collection experience. The board also asked Mr. Lambert to exclude from his recommendations reference to admission policy and practices, the board believing them to be acceptable to the interested individuals and groups in the community. The board feels in any event that improvement should first Table 24. Selected Statistics on the Collection Policy and Procedures at Ortonville Hospital Current 9 Months

Item

Net loss on uncollectibles $94,669 Percentage of income uncollectible 6.29% Net accounts receivable $198,344 Percentage of net income in average accounts receivable 41.8%

326

Last Year

Two Years Ago

$141 506 7.71% $197650

$82,448 703% $158001

40.1%

36.9%

Fiscal Management be made in collection policy and practices. The board also stated that it does not wish at this time to consider changes in the hospital rate structure or the basis on which it is determined. The board studied the statistics presented by Mr. Lambert and questioned him concerning Ortonville Hospital's existing collection policies and practices. It was learned that at the time a patient is booked by his doctor, a credit information card is completed. Unless he is covered by Blue Cross insurance or considered an excellent credit risk, a deposit is then requested from the patient to cover one week's hospital stay if (1) the credit bureau indicates the responsible party is a poor risk, (2) the hospital has had poor previous credit experience with the responsible party, or (3) the patient is not a county resident. One board member noted that in a recent joint executive committee meeting, the doctors expressed objections of the medical staff and patients to the existing implementation of the policy. Written requests to obstetrical patients requesting advance payment have not been made because of such objections. No admission deposits have been requested from emergency patients. Weekly statements of account are delivered to each patient's room, and patients are furnished a statement at the time of discharge which points out that additional charges might be made as charges for the last few days' care are received and posted. Patients, or their responsible parties, who are unable to pay the full amount of the statement at time of discharge are referred to the credit manager, who develops a payment plan. The plan is formalized by the patient's signature on a promissory note. Following discharge and the receipt of a completed statement, the patient is sent three collection letters over a ninety-day period. One member of the board stated that he heard from the union leader in his plant that each letter contained a threat or ultimatum. Recovered accounts this year have averaged about $2500 per month. Unrecovered accounts are sent to three collection agencies and are given further consideration only by totaling, for bookkeeping purposes, the amounts received by the agencies. The county, under state law, is responsible for the hospital care of indigent and medically indigent residents. However, the county expresses major concern over the rapidly increasing costs of the care rendered by the hospital. Lambert has registered a protest over the failure of the county to pay hospital costs. The county is currently paying the hospital $ 175,000 per year for the care of county patients. County patient days have totaled 8.2 per cent of all hospital patient days for this year. The county is also paying 50 per cent of the services rendered to the medically indigent including both residents and transients. Lambert has noted that the hospital has lost $11,833 on patients accepted by the county this year. He feels the county has been arbitrary in refusing to accept financial responsibility 327

Decision Making in Hospital Administration for some patients. The county commissioners have told one board member that they can't be expected to act as a collection agency for the hospital. The city of Ortonville has refused to accept any responsibility for hospital care of indigent emergency cases, including those brought to the hospital by city police officers. The issue is important to Ortonville Hospital because of its location in the resort area of a south-central state. In many cases it is not known until after the patient has left the hospital whether he is a resident of Ortonville or an out-of-state transient. The state legislature recently defeated bills providing for hospital liens or billing of the state motor vehicle bureau in cases involving automobile accidents. Twenty-one per cent of the hospital's patients are from state counties outside Oswego County as compared with 76 per cent of the admissions from the county. Collection problems posed by the out-of-county patients are accentuated by the lack of credit information concerning the patients and their need for the specialized care not obtainable in their counties. The county welfare departments are often reluctant to pay for the more costly care provided by Ortonville Hospital. Analysis of hospital admissions finds that 47 per cent of the admissions carry some form of prepaid hospitalization insurance, 23.5 per cent by Blue Cross and the remainder by nine commercial insurance companies. Workmen's compensation covers ~6.3 per cent of the admissions while 11.3 per cent of the admissions receive financial support, at least in part, from voluntary or tax-supported health and welfare agencies. At the end of one year's employment, charges to hospital employees as inpatients and outpatients are reduced by 50 per cent, and to their families by 25 per cent. Blue Cross subscribers receive care at no additional charge; nursing school graduates and medical and dental staff members receive a discount of 33VS per cent while their families receive a 20 per cent discount. All other physicians, graduate nurses, ministers, and their families receive a 10 per cent discount, as do city police and firemen and their families. Hospital students receive free care. Discounts for this year have totaled $ 1912 for ministers, $3167 for doctors, $8553 for employees, and $10,242 for "other" discounts, excluding county charity allowances and miscellaneous charity allowances, the latter amounting to $5576. Total deductions this year are 2.7 per cent of gross earnings. The auditor's study of bad debts during the past four years finds that 7.71 per cent of charges for hospital services have been charged off as uncollectible. This experience rate has been applied to hospital revenue and a reserve of 34.11 per cent of accounts receivable created. Accounts are aged and charged off annually. Mr. Lambert has been administrator of Ortonville Hospital for nearly eight months. He has found little difference between the costs or rates of Ortonville Hospital, a 296-bed, general-acute hospital, and the other 328

Fiscal Management voluntary nonprofit hospital in Ortonville, a 200-bed institution. Ortonville Hospital's average census was 224 last year, and the average length of stay was 7.2 days, which compared with the other hospital's 81 per cent occupancy and 7.0 days average length of stay. A tuberculosis hospital and an air force hospital in the area provide care to selected segments of the population. Mr. Lambert begins to review the factors he considers pertinent to suggestions for change in the hospital's collection policies and practices in preparation for his recommendations to the board of trustees at the next monthly meeting, What recommendations for change in Ortonville Hospital's collection policies and practices would you recommend to the board of trustees? What factors did you consider important as justifying your recommendations to the board of trustees? What other factors did you consider, and why did you place less emphasis upon them? COMPLEMENTARY QUESTIONS

1. What basic principles or concepts do you think should be considered when developing credit and collection policies and practices? 2. What is "credit"? "part pay"? "free care"? "indigency"? "medical indigency"? 3. What factors force a hospital to extend credit, if any? 4. What reasons can you suggest as to why a hospital's credit policy needs periodic review? 5. What influence has a medical staff on the increase of a hospital's accounts receivable? What other factors influence the amount of the accounts receivable? 6. What is the relationship of a credit policy to a hospital's objectives? to a hospital's admission policy? 7. How might a collection policy be affected by a hospital's size? type of ownership? program? affiliation with a medical center or medical school? 8. What organizational structure would you establish in a 200-bed, general-acute, voluntary, nonprofit hospital to implement a credit and collection policy? How might the organizational structure vary with a hospital's size? type of ownership? affiliations with a medical center or medical school? 9. What control do you think the administrator should exercise over the implementation of collection policies, and how should he exercise such control? 10. What coordination do you think is necessary between the performance of a credit function and other functions of the hospital? How should such coordination be achieved? 11. How do you believe a collection policy should be developed? Under 329

Decision Making in Hospital Administration what conditions would you develop a collection policy in some other manner? Why? 12. What personnel qualifications do you consider minimal for those persons performing a credit function? Why? 13. Do you believe communication to be an important factor in a successful collection program? Explain. 14. What statistical standards would you use when evaluating the performance of a collection program? What limitations would you place on their validity? Why? 15. What do you believe to be the space requirements of a credit and collection program? What should be the physical relationship of the area for the performance of a credit and collection function to other areas of the hospital? 16. What effect do you think prepaid health insurance plans will have on credit and collection programs in the future? How do you think taxfund support of hospital care will affect credit and collection programs and policies in the future? 17. What is the relationship of collection policies and practices to the rate structure? What should be the relationship of rates to "costs"? Do you believe hospitals should obtain a higher percentage of income from patients through daily room charges as opposed to charges for special services? What factors affect such a decision? 18. What comment would you make on the board's decision to eliminate from its immediate study of the collection program any consideration of the hospital's admitting policy and practice or the hospital's rates for reimbursement from patients and third-party payers? 19. What are the community attitudes which you might expect regarding collection policies, and what effect would you give to them when developing collection policies? 20. Under what conditions would you expect a board of trustees would wish to establish and implement tight collection policies? 77. FINANCIAL STATEMENTS Bilbur Hospital is a 150-bed, general-acute, nonprofit, voluntary institution located in an east coast town of 30,000 population. The nearest hospital, of the same size and ownership, is located fifteen miles away, in a town of 25,000 population. Mr. Harry Anderson, the hospital's administrator for the past two years, has just finished supervising the preparation of comparative financial statements on the hospital's operation during the past fiscal year. (See Tables 25, 26, and 27.) He is now considering how he will interpret the statements to the board of trustees at its first meeting of the new fiscal year next week, on January 16, 1957. Mr. Anderson is therefore gathering in330

Table 25. Comparative Balance Sheet for 1955 and 1956 at Bilbur Hospital Item Current assets Cash in banks and on hand Patients' accounts receivable Patients' notes receivable Inventory of supplies Total Invested funds Building fund , Total Fixed assets Land Buildings Machinery and equipment Furniture and fixtures Furnishings Total Other assets Prepaid insurance Prepaid rentals Total Total, assets

December 31,1955 Assets $

75,625 60,020 10,400 27,060

$

21,030 80,150 30,600 49,7.30

$ (54,595) 20,130 20,200 22,670

$ 173,105

$ 181,510

$

8,405

$ 840,000

$ 871,700

$

31,700

$ 840,000

$ 871,700

$

31,700

$

$

23,830 394,720 143,310 37,770 6,690

$

$ 571,190

$ 606,320

$

35,130

$

2,150 1,700

$

1,140 .. .

$

(1,010) (1,700)

$

3,850

$

1,140

$

(2,710)

$1,660,670

$

72,525

$

$

3,300 3,220 20,000 1,320 13,130

23,830 388,710 123,110 35,540

$1,588,145

Liabilities Accounts payable $ 28,440 Accrued payroll 18,710 Notes payable Reserve for bad accounts 19,110 Reserve for depreciation, buildings 202,740 Reserve for depreciation, machinery and equipment 56,130 Reserve for depreciation of furniture and fixtures 25,210 Reserve for depreciation of furnishings Surplus 1,237,805 Total liabilities

Gain or (Loss)

December 31,1956

$1,588,145

331

31,740 21,930 20,000 20,430 215,870

6,010 20,200 2,230 6,690

64,250

8,120

28,420

3,210

1,258,030

20,225

$1,660,670

$

72,525

Table 26. Comparative Statement of Gain and Loss for 1955 and 1956 at Bilbur Hospital Gain or (Loss)

December 31,1955

December 31,1956

$ 462,120 132,670 108,070 46,660 82,520 700 60,880 26,070

$ 500,020 151,600 139,160 51,770 85,060 970 64,620 24,690

$

37,900 18,930 31,090 5,110 2,540 270 3,740 (1,380)

Total Departmental expenses

.$919,690 918,030

$1,017,890 994,280

$

98,200 76,250

Departmental gain or (loss)

.$

$

$

21,950

Item Departmental revenue Room and board Operating room and dressings Drugs and medicines X-ray ..-. Laboratory Physiotherapy Maternity patients Sales of meals to employees

Other income Ambulance Collections on accounts charged off.. Sale of garbage and junk Sundry interest and discounts Refunds Telephone and sundry charges to patients Total

Total Net gain or (loss)

23,610

640 1,140 110 630 ...

1,090 960 140 890 330

450 (180) 30 260 330

1,110

1,200

90

$

3,630

$

4,610

$

980

$

5,290 17,030

$

28,220 19,770

$

22,930 2,740

$ (11,740)

$

8,450

$

20,190

$

28,520 850 12,630 2,100

$

33,220 900 15,340 2,000

$

4,700 50 2,710 (100)

$

44,100

$

51,460

$

7,360

32,360

$

59,910

$

27,550

Operating gain or (loss) Other deductions (reserve for bad debts) Net operating gain or (loss) Non-operating revenues Interest and dividends on invested funds Rents Rental charges to employees Sundry revenues and donations

1,660

$

No. of patient days Net gain or (loss) per patient day

43,600 $.74

332

44,150 $1.36

550 $.62

Fiscal Management Table 27. Comparative Statement of Departmental Expenses for 1955 and 1956 at Bilbur Hospital Item Administration Medical and surgical School of nursing Dietary Operating room Housekeeping Plant and maintenance Laboratory X-ray Obstetrics Pharmacy Central dressing room Free work and discounts Loss on Blue Cross cases Total

December 31,1956

December 31,1955

Increase or (Decrease)

$ 57,100 224,460 66,470 164,840 74,800 80,540 61,240 56,590 31,900 58,960 41,400 43,350 10,130 22,500

$ 52,420 201,930 55,770 156,140 68,670 74,210 61,100 52,540 30,110 54,550 35,710 45,270 4,900 24,710

$ 4,680 22,530 10,700 8,700 6,130 6,330 140 4,050 1,790 4,410 5,690 (1,920) 5,230 (2,210)

$994,280

$918,030

$76,250

formation, in addition to the financial statements, which he believes necessary to sound interpretation to the board of the hospital's financial experience. Anderson finds that the outstanding accounts receivable balance of $80,150 on December 31, 1956 consisted of 1956 accounts only. Of the 1955 balance of $60,020, $48,160 had been collected during 1956, and $11,860 had been charged off against the reserve for bad accounts as uncollectible. Of the $10,400 in notes receivable on the books on December 31, 1955, $5900 had been paid, and the remaining balance of $4500 had been charged off against the reserve for bad debts as uncollectible. Included in the $30,600 outstanding on December 31, 1956 were four accounts totaling $13,400. Credit arrangements have been made on these four notes, and total monthly payments of $140 have been received for the past three months on these four notes. No satisfactory credit arrangements have been made on the remaining $17,200 outstanding in notes receivable as of December 31, 1956, and Mr. Anderson doubts if the hospital will collect more than 10 per cent of this amount. A forward buying policy was approved by the board for 1956 primarily because of threatened shortages in some drug items, stainless steel ware, hypodermic needles, other medical supplies, and various kinds of textile supplies. During the year, collections on pledges to the building fund totaled $45,000, gain on securities sold in the fund totaled $1000, and $14,300 was transferred to the general fund. This building fund has outstanding at the present time in pledges $377,000, of which $125,000 will become 333

Decision Making in Hospital Administration due and payable in 1957, $130,000 in 1958, and $122,000 in 1959. No expenditure may be made from this fund for general operating purposes, but it is permissible to reimburse the general fund from the building fund for additions to or remodeling of existing buildings — the building fund cannot be used for equipment replacements or additions. Extensive building renovations were scheduled for the next two years. A new building program was being considered for the post-renovation period. During 1956, remodeling and enlarging of the X-ray department was completed on July 1 at a total cost of $6010. New X-ray equipment was purchased at a cost of $8290. A new classification of fixed assets was installed on January 1, 1956 called "Furnishings," as recommended by the auditors in their 1955 audit. In this account will be controlled all small items such as wastepaper baskets, lamps, stainless steel basins, etc., the cost of each item being below $25.00 and whose depreciable life will not exceed five years. The auditors recommended that an inventory be made of all of these items and that when a complete inventory has been obtained, the value of the items included should remain at a constant figure on the books and all future replacements should be charged directly to expense while additions should be added to the inventory. The figure of $6690 represents only a partial inventory; it is anticipated that by July 1, 1957 the complete inventory will b