THIS IS FOR ALL THOSE HOSPITAL/HEALTH MANAGEMENT STUDENTS WHO OPT FOR HUMAN RESOURCE MANAGEMENT..!

1. Public Disclosure Authorized
Po-lcy,
Planning, and Research
WORKING PAPERS
Healthand Nutrition
Population HumanResources
and
Department
TheWor;dBank
July 1989
WPS173
Public Disclosure Authorized
Hospital Management
Staffing and Training
Public Disclosure Authorized
Issues
Julio Frenk,
Enrique Ruelas,
and
Avedis Donabedian
Public Disclosure Authorized
Hospitals dominate health care, se making hospitals more effi-
cient is crucial to better health care delivery. The authors suggest
an agenda for research.
The Policy, Planning, and Research Cxrnplcx dasinbutes PPR WorkingPapers to disseminatc the finidngs of work in progrcss and to
enonurage the exchange of ideas amoangBank staff and aUothers interested in devclopmcnt issues Thesc papers carry the names of
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2. and Research
Plc,Planning,
Healthand NutrtitonI
Hospitals dominate health care in most parts of The mostly highly recommended subjects for
the world and for a variety of reasons are likely research! in order of priority, are:
to continue being a key factor in the overall
performance of the health care system. Any * Good descriptive studies of the hospital
efforts to improve this performance must there- system and the main aspects of organization
fore give greater hospital efficiency the highest design - to chart, for example, the formal and
priority. informal relations among managers and clini-
cians, the frequency of different arrangements
Aftcr discussing key issues of managerial, for intemal communication, types of departmen-
clinical, and production efficiency, Frenk, talization, and management systems.
Ruelas, and Donabedian suggest an agenda for
research, which would include two types of * The systematic design, testing, and study of
research: explicit quality monitoring and assurance
systems. Such studies should include the
Observational studies that document levels analysis of interactions between managers and
of hospital performnanceand correlate them with clinicians, especially as they constrain clinical
organizational design and environrmental vari- autonomy and decision making.
ables. It is especially imponant to devise and
test sensitive, specific indicators of managerial, * Studies to determine which social, personal,
clinical, and service production efficiency. organizational, and educational factors account
for managerial skill and success in managing a
- Comparative intervention studies that would hospital - to get the information needed for the
introduce planned change in hospitals and assess recruitment and training of successful hospital
the consequences - using control groups as managers.
well as cost-benefit and cost-effectiveness
analyses. * Studies of the structure and dynamics of
medical labor markets, to improve understand-
ing of why there is an oversupply of doctors in
so mary different countries.
This paper is a product of the Health and Nutrition D.vision, Population and Human
Resources Department. Copies are availablefree from the World Bank, 1818H Street
NW, Washington DC 20433. Please contact Sonia Ainsworth, room S6-065,
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The findings, interprctations, and conclusions in these papers do not necessarily represent official policy of the Bank.
Produced at the PPR Dissemination Center

3. - l E-
Table of Contents
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. 1
ANALYTICAL
FRAMEWORK
..... . .. . .. .. .. .. .. .... . . 4
BASICISSUES . ............. .. .. ............ 11
MeasurementIssues.. . . . . . . . . . . . . . . . . . . . . . . 11
SubstantiveIssues ..... . . . . . . . . .. ...... . . . 12
ISSUES RELATEDTO THE TRAININGOF HOSPITALMANAGERS . .
... . . .
. . 25
TOWARDS A RESEARCHAGEMDA ..... . .. ... ... . .... . .. . 29

4. ACKNOWLEDGEMENTS
We are grateful to Dr. Willy De Geyndt for his advice on the
structure and content of this paper. We would also like to
acknowledge the help of Beatriz Zurita, Michal Frejka, and Luis
Miguel Vidal in completing the literature search and organizing the
material. The shortcomings of this paper are solely the
responsibility of the authors.

5. Throughoutthe world, hospitalshave come to epitomizemodern medical
care. For many years, a major policy concern in the health arena was to
provide communitieswith enough hospitals. More recently,however, the
focus of concern has shifted to the overdominantrole of the hospitalwithin
the health system. In developed countriesthere is an excess of beds. In
most developingcountries the concern is that, even without having fully
satisfied overall requirementsfor hospitals,they already absorb such a
high proportionof resourcesthat they seriouslythreatenany effort to
achieve full coverageof the population. Furthermore, is widely believed
it
that a health care system centeredaround hospitals is intrinsically
incompatiblewith the geographic,economic,and culturalattributesof many
populations. In addition,the mix of servicesoffered by hospitals
emphasizingacute, episodic,and curativeactivities-- is believedto
poorly match the prevailingepidemiologicprofile and the populationneeds
for preventiveand continuouscare. This inconsistency becomingeven
is
more marked as an increasing number of countr,es undergo a profound
epidemiologic transition, whereby chronic ailments are becoming more
important,with the ensuing requirementsfor long-termservices that most
general hospitalshave traditionally
had difficultysupplying(Omran 1971;
Frederiksen1969). As with physician supply hospitalsseem to have moved
from deficit to excess without ever having achievedsome kind of equilibrium
(Starr 1982, pp. 421-427).
Evidently,a health system dominatedby hospitals is not the only
possible organizational
model. In fact, for most of the history of health

6. 2
care hospitalsrepresenteda rather marginal element. As Foucault (1978)
points out, during a long period of time the hospitalwas a nonmedical
institution,and medicinewas not a hospital-based
profession. "The
hospital as a therapeuticinstrumentis a relativelymodern concept,dating
from the end of the eighteenthcentury" (Foucault1978). Since then, a
number of social, economic,scientific,and technologicchanges,which have
been summarizedelsewhere (in particularby Rosen 1972), have made the
hospital the "fulcrumof care" (Berki 1972, p. 8).
The dominance of hospitals is one of the most striking featuresof
convergenceamong the health systems of countriesat all levels of economic
developmentand with all forms of politicalrepresentation
(Mechanic1975;
Frenk and Donabedian 1986). Togetherwith the importantprogressthat they
have produced,hospitalshave also given rise to the set of concerns
mentioned above. As the ambitious goal of achievingHealth for All by the
Year 2000 is universallyadopted, it becomes increasinglycrucial to
understandthe functioningof that segment of the health care system where
most resourcesare spent. UNICEF has estimated that, while in many
countries 85% of the national health budget is spent in hospitals,these
serve less than 10% of the population. For example, in Mexico hospitals
represent less than 1% of all the health care facilitiesof the Ministryof
Health, but employ over 40% of the Ministry'sphysiciansand nurses
(Secretariade Salud 1985, pp. 213-319).
Many countriesface, therefore,a double concentration health care:
of
geographicconcentration large urban areas and technological
in
concentration large hospitals (Soberonet.al. 1986). The problem is
in
further compoundedby the effects of concentration the distribution
on of
resources. For instance,in many countriesefforts at regionalization
have

7. 3
been bedeviledby the tendency of hospitals to mix all three levels of care.
This is.in part due to the weaknessof primary health care (PHC), which
makes it necessary for the outpatientdepartmentsof many hospitals to
become major providersof first-contactcare. Thus, the concentrationof
resources in hospitals is both a cause and an effect of the weakness of PHC.
Another reason for the mixture of levels of care is the tendency towards
"tertiarization" many general hospitals. In either case, the end result
of
is the lack of clear patterns of patient referral,the difficultyof
assigningdefined populationbases to differenttypes of health care
facilities,the coexistencein the same facilityof cases with wide
variationsof complexity,and the inefficientuse of resources.
Because their central position is likely to be maintainedin the
foreseeablefuture, hospitalswill continueto be major determinants the
of
overall performanceof the health system. Any efforts to improve this
performancemust therefore give the highest priorityto hospitalefficiency.
This is the perspectivethat guides the present paper. The purpose of the
paper is to discuss some fundamentalissues of hospitalmanagement,with
special emphasison staffingand training. To achieve this, the paper is
divided into three parts. First, an analyticalframeworkis presented that
helps orient the discussion. Hospitalsare conceivedof as complex
organizations,
with goals, tasks, control systems,and relationshipsof
authoritythat are articulatedin both formal and informalways (Scott
1966). The performanceof the hospital is conceptualized terms of three
in
different types of efficiency:managerial,clinical,and production
efficiency. We also analyze the elementsof the internalorganization
design and of the externalenvironmentthat influencethe level of
performarnce analyzed. Second, some issues that refer to each of the
are

8. 4
elementsof the analyticalframeworkare identified. Finally,a research
agenda that may help to better understandthe issues and thereby to improve
the performance hospitals is presented.
of
ANALYTICAL
FRAMhWORK
Figure 1 presents a schematicmodel for the study of hospital
efficiency. This model begins by positing that there are two major groups
of actors in the hospital:managers and clinicians. Each of the two major
types has many different subgroups. Among the managers, there are distinct
levels, ranging from members of the directorate, senior executives,to
to
the middle and lower echelons. Clinicians,on the other hand, comprisea
variety of professions. Nevertheless, our discussionwe will focus on
in
physicians,since they still constitutethe principalgroup of providers,in
terms of number, importance,autonomy,and economicconsequences the
of
decisionsthat they make. Insofar as the same person can have both
managerialand clinical functions,we speak of ro'les
rather than
occupationalgroups (Allisonet.al. 1983). This is particularlyimportant
for physicians,who often occupy importantadministrative
positions in
hospitals. For the purposes of this paper, when a physicianassumes the
managerialrole, he or she will be considereda manager. As we shall
discuss later on, one of the issues in health care organizationsis
preciselythe convenience having physiciansperform administrative
of
functions. For the time being, however,the point is that the actors are
conceivedof in terms of their roles and not of their professionalorigins.

9. ... .: : ENVIRONMENT ( EPIDEMIOLOGIC, ECONOMIC, POLITICAL)
. . . ....
. .. . .. . . .. . . . . . . . . . . . . . . .
~
:':~ ~ ~ ~~~~~~~~...
~ ~ ~~~~~
.......... . .:: : OR A I A I N D S G ::'--- ..... ............ .... ........
..:... ACTOR.S I..TERVEI..G VARIABLES OCTIVES PRODUCTS
Managerial Decision Making POLICIES-
MANAGFIERS J~MANAGERtIAL
Managerial Skills EfICIENCY SUPPORT
Managerial Autonomy SERVICESS
HEALTH
. Design of Production SERVICE CARE-:
:' Process EFEICIENCY SERVICES
Clinical Decision Making
1ciA p< Clinical Skills CLiiTICAL
EFFICIENCY HEALTH
_________________Clinical Autonomy
.~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..
... . .. ..
Figure I
CONCEPTUALFRAMEWORKFOR THE STUDY OF HOSPITAL 6FFIC[ENCY

10. 6
Figure 1 shows the interaction the two basic groups of actors in the
of
frameworkof a complex organization,the hospital. This interactionis
affected by the specificdesign that the organizationadopts. Furthermore,
the organizationitself is surroundedby an environment,where it interacts
with other organizationsand with formal and informalgroups of clients.
Through its environment,the organizationis shaped, as we shall see later
on, by complex epidemiologic,
economic,and politicalprocesses.
Within the context of specificenvironmentsand organizational
designs,
the core of Figure 1 portraysa dynamic conceptionof the interaction
betweenmanagers and clinicians. Through the operationof certain
intervening
variables,the interactiongenerates a set of products. The
quantity and quality of these products is determinedby the efficiencyof
the organization. In this respect,we propose that there are three types of
efficiency,which ought to be kept analyticallydistinct. We call these
clinicalefficiency(CE), service productionefficiency(PE), and managerial
efficiency(ME).
The distinctionbetween clinicalefficiencyand productionefficiency
has been proposedby Donabedianet.al. (1982). Basically,CE refers to the
productionof health, however defined,whereas PE has to do with the
productionof health services. Thus, CE is the extent to which a physician
"combines,times, and sequencesservices...toproduce the greatest increment
of health, given a specifiedavailableor permissibleexpenditure"
(Donabedianet.al., 1982). The combination,timirg, and sequencingof
health services in the managementof a case is called a "strategyof care"
by these authors. Hence, CE is the efficiencyof the strategiesof care.
The clinicallyefficientstrategywill be the one that produces the largest
improvement health for a given amount of expenditureor, alternatively,
of

11. 7
the one that produces a certain level of health with the least costly
utilizationof resources. Needlessto say, the improvementin health status
must be attributableto the strategyof care. It is clear that CE is a
componentof the quality of care. The concept has the merit of combining
health outcomeswith resourceconstraintsin the definitionof quality. As
a componentof quality,CE is determinedby the appropriateness the
of
clinical decisionsto select a certain strategyof care, by the skill with
which the strategy is carried out, and by the degree of clinicalautonomy,
i.e., the extent to which the cliniciancan control the content of his/her
own work (Freidson 1970, pp. 71-84).
Even when a physicianhas selectedthe optimal strategyof care, there
may be inefficiencies the process ox producingthe servicesthat form
in
this strategy, leading to a waste of resources. For example,there may be
delays in processingor reportinglaboratorytests, or there may be a low
occupancy rate, or the hospitalmay be using more costly personnel than
warranted by the complexityof tasks. Donabedianet.al. (1982) suggest that
such inefficiencies the productionof servicesshould not be considereda
in
part of the definitionof quality, althoughthey certainlyinfluencethe
level of quality that is achievedper dollar of expenditure. As can be
seen, PE is dependent,not on clinicaljudgement,but on the proper design
of the service productionprocess, so that the amount of servicesspecified
by a certain strategyof care can be produt at the lowest cost.
The concepts of clinicalefficiencyand s-rvice productionefficiency
introducea useful distinctionin the analysis of the substantivefunction
of a hospital, i.e., the productionof services that will generatean
improvement health. In a parallel fashion to the notion of clinical
of
efficiency,Figure 1 proposesthe concept of managerialefficiency.

12. 8
FIGURE 2
DIMENSION TYPE OF RELATIONSHIP
OF
ANALYSIS Ezternal Internal
Povr ad authority
.slatsions vith rolationx betvoe
Political the State managers and
clinicians
- Ovrall economic Characteristics of
Economic codit t production
factor markets .
TYPOLOGY VARIABLES THAT AFFECTHOSPITAL PERFORMANCE
OF

13. 9
Dependingon the level of the manager, the product of ME are policies or
support services: As in the case of CE, ME depends on the appropriateness
of managerialdecisions,the skill in managing the organization(as
evidenced,for example, in styles of leadership,capacityto solve conflict,
handling of time, financialability,etc.), and managerialautonomy,either
from the cliniciansor from officialsat higher levels of decisionmaking.
The two main actors in our model -- cliniciansand managers -- interact
in complexways. We have already seen that each group can interferewith
the autonomyof the other. In addition,because of the characteristics
of
medical work, which is dominatedby professionals,
both groups participate
in the design of the productionprocess and thereforedeterminePE.
The relationshipbetween managers and cliniciansdoes not occur in a
vacuum. It takes place in the context of an internalorganizationdesign,
which in turn is surroundedby an externalenvironment. Followingthe work
of Zald (1970),we can classifythe variablesthat operate inside or outside
the organizationinto economicand political. Figure 2 presentsa framework
for analyzingthese relationships. There are many potentialvariables for
each cell in Figure 2. However,we have includedonly those that are most
pertinent for the analysisof the contextualfactors that affect hospital
efficiency.
Let us first briefly identifythe variablesthat define the exchanges
of a given hospitalwith its externalenvironment. On the political
dimension of analysis,the main set of relationshipsrefers, in most
countries,to those that the hospitalmust establishwith the State, either
because the hospital is part of a larger network of public organizations,
and hence is owned by the State, or because it derivesmost of its income
from social insurancefunds, or, at the very least, because the hospital is

14. 10
subject to the regulatoryauthorityof the State (Frenk and Donabedian
1986). The hospital also faces a complex externaleconomicenvironment. At
its highest level of aggregation,this environmentis formed by the overall
economicsituationof a country. For example, economiccrises impose
several constraintsthat require creativeresponseson the part of both
private and public hospitals. At a more immediatelevel, the hospital
interactswith various product and factor markets. Because this paper
focuses mainly on issues of staffing,the variable that we considermost
importantin this respect is the structureand dynamicsof the labor market,
particularlythe professionallabor markets from which the hospitalmust
recruit its managersand clinicians. In additionto the politicaland
economicvariables shown in Figure 2, the external environmentof the
hospital is defined by the epidemiological
context of the area. As will be
discussed later on, when this context is in rapid transitionit can severely
strain hospitalresources.
Moving to the internalsituationof the hospital, the most important
political aspects of organizationdesign are those that specify the
legitimatepower and authority relationshipsbetween physiciansand
managers. In turn, the economicdimension centers around the design of the
productionprocess. There are several economicmodels attemptingto
understandthe hospitalas a firm (Jacobs 1974). For example,Harris (1977)
has presenteda model based on internalsupply and demand functions.
Regardlessof which model is adopted,some of the basic variables that need
to be understoodin the internaleconomicorganization the hospital
of
includethe definitionof tasks (e.g., the mix of routine and nonroutine
tasks), the divisionof labor, the service productionfunctions,and the
systems for assuringthe quality of the product.

15. 11
Figures 1 and 2 should not be seen as rigid depictionsof what are
really very complex processes. They are not the only possible
representation these processeseither.1 Instead,our conceptual
of
framework is meant simply as a guide to the identification
and analysisof
more specificresearch issues.
BASIC ISSUES
In a first approximation, is possible to identifythree major groups
it
of issues that can orient the formulationof a researchagenda on hospital
management. One group refers to issues of measurement. Indeed, it is
necessary to develop and test specificand sensitive indicatorsof the
various elementsthat are shown in Figures 1 and 2, especiallythe three
types of efficiencythat we have proposed. The second and largest group of
issues are substantive. In accordancewith our general frameworkof
analysis, these include three subsets: (a) those that refer to the
relationships the hospitalwith its external context;(b) issues about
of
the internalorganizationdesign; and (c) those that have to do with the
core of organizational
performance. Finally,the third large group of
issues are related to the trainingof hospitalmanagers for efficiency. We
will next examine each group of issues, so tnat we can then proceed, in the
last section of this paper, to outline a researchagenda.
Neasurin nt Issues
Because of the nature of this paper, we will not go into great detail
in the analysis of the issues that deal with the operationalization
and
For a differentthough related approach,see Kovner and Neuhauser
(1983).

16. 12
measurementof the conceptsproposed in our analyticalframework. It should
be pointed out, however, that a great amount of methodological
work is
required in order to answer such basic questionsas the following:
-- What are sensitiveand specific indicatorsof managerial,
clinical,and service productionefficiency?
- - How can one assess such attributesas managerialor clinical
judgement,skills, and autonomy?
- - What is the appropriatemeasure of hospitaloutput? If services
are considered,how should one account for the groups of activitiesthat go
into a hospital day? Should certain by-productsof the hospital, such as
information,professionaleducation,research,and referral,be included?
If output is conceived in terms of health status,what measures are there
availableto solve the problem of attribution, that a change in health
so
status is validly related to hospitalcare?
-- Given the multidisciplinary
nature of hospital care, how can one
relate each output to the contribution distinct inputs? Conversely,how
of
can one assign specificportions of an input (e.g., time equivalentsof
physicians)to the productionof multiple outputs?
These are just a few of the methodologicalissues that would need to be
solved in any specificstudy of hospitalperformance.
Substantive Issues
External Environinnt. Whole disciplines are devoted to the study of
the epidemiologic, economic, and political conditions that prevail in a
society. On the other hand, our main interest focuses on the performance
core of hospitals,especiallyas it is affectedby training and staffing.
Hence, our analysisof the externalenvironment the hospitalwill
of

17. 13
necessarilybe limited. Nevertheless,it is fundamentalto keep in mind
that no research agenda on managerial,clinical,or productionefficiency
can be completewithout at least some consideration the environmental
to
conditionsthat shape the organization.
A first problem arises in the precise definitionof what is external
and what is internal. Indeed, definingthe boundariesof any organization,
and especiallyof a human serviceorganizationsuch as a hospital is not a
straightforward
matter (Hasenfeld1983). For instance, it could be stated
that one of the guiding principlesof the primary health care approachis to
limits of health care facilities
deliberatelyblur the organizational so
that they outreach into the communitywith active programsof health
promotion,disease prevention,and early detectionof cases. As Miles
et.al. (1982) point out, "the definitionof the organization's
boundary
should be consistentwith the problem under investigation." In our case,
the purpose is to operationallydistinguishbetween those processesthat
take place within given hospitalsand those that are externalto any
individualhospital.
Bearing the foregoingcaveats in mind, we can proceed to considersome
issues that derive from the epidemiologic,
economic, and political
environmentof hospitals.
EpidemioloticEnvironment. The fundamental issue here refers to the
capacity of hospitals to adapt to changingpatterns of morbidity and
mortality in the community. This issue is particularlysalient in some
developingcountries that are experiencinga complex epidemiologic
transition(Soberonet.al. 1986). It is beyond the scope of this paper to
make a detailed analysisof the present characteristics
and likely evolution

18. 14
of this transition. Suffice it to point out the followingcritical
problems:
-- What information systems can hospitals devise to opportunely
identify new trends in basic epidemiologicand demographicvariables?
-- What economicallyfeasibleschemes are there to convert current
hospital capanityso that it respondsbetter to the aging of the population
and the emergent:s chronic ailments? What new linkagesmust hospitals
of
develop with other health care facilitiesso that they can provide the
necessarycontinuityfor the long-termmanagementof chronic diseases?
-- How must the staffingof hospitals adapt to new epidemiologic
and
demographiccontexts? Is it possibleto retrain specialistsso that they
can take care of differentconditionsor age groups? What is to be done
with specialtiesthat become epidemiologically
obsolete (witness,for
example, the case of phthisiologyand of tuberculosishospitals)?
PoliticalEnvironment. Out of the whole gamut of politicalvariables
that confronta hospital,we will concentrateon those that have to do with
its relationshipto the States 2 In a long process that began approximately
in the eighteenthcentury (Foucault1977; Rosen 1972), the State has become
the largest owner, payer, or regulator in the health industryof practically
every country, so much so that Donnangelospeaks of the "universality"
of
State interventionin medical care (1975, p. 4). In fact, it would be
impossibleto understandthe dominant role of hospitalswithout referenceto
the fact that, especiallysince the 1950s, a growing number of governments
>-2
itshas become increasinglycustomary in the literature, adopt the
we
narrow definitionof the State as the institutions governmentproviding
of
the administrative, legislative,and judicial vehiclesfor the actual
exerciseof public authorityand power, instead of the broad definitionof
the State as the total politicalorganization a society, includingits
of
citizens.

19. 15
adopted and stimulateda paradigm of medical care based on specialtycare of
high technologicalcomplexityin hospitals (Frenk 1983). Likewise,the
current concern with the high cost and low coverageof hospitalshas been
largely promptedby governmentsthat begin to shift towards a new paradigm
based on the tenets of primary health care. Even the search for formulas to
stimulate private sector participationin the financingand provision of
health care have many times been conductedby governmentsthat seek to
reduce their financialrisk in this area. In fact, those countrieshave
adopted explicit formulasto reduce State interventionhave found that the
public vctor still remains as the principal actor in the health field (for
example see Klein 1984).
There are two major spheres in which the relationshipbetween the State
and the hospitals has direct consequencesover the performanceof the
latter. The first one refers to the reimbursementformulas,which have been
shown to affect the internalpower equilibriumbetween managers and
clinicians(Young and Saltman 1983; Spivey 1984). The second deals with the
limitationsthat governmentimposes on managerialautonomy,especiallyin
public hospitals that form part of larger bureaucracies
such as ministries
of health. 'AAnumber of importantissues derive from these two spheres:
-- What reimbursement
mechanismsexist that will generate incentives
for managerialand service productionefficiency,without reducingclinical
efficiency?
3 Actually, such limitationson managerialautonomyalso appear to take
place in private multihospitalsystems (Weil and Stam 1986). Thus, an
importantquestionfor researchwould be to find out whether the critical
variable is the type of ownershipof the hospital -- public versus private -
- or the existenceper se of an additionallayer of managersthat control
several hospitals.

20. 16
- - Should the State attempt to control hospital performancemostly
through incentivesystems based on reimbursement, should it attempt more
or
direct supervisionand control? What is the role of consumergroups in this
process? How can accountability the public be maintainedin government-
to
run hospitals?
-- In the case of public hospitals,should goals be set by each
hospital,or should this be a functionof the larger public organizationto
which the hospital belongs? Should ministriesof health actually run
hospitals,or should their role be limited to setting,enforcing,and
supervisingstandardsof care? What mechanismsare there to increase
managerialautonomy in public hospitals? What are the consequencesof
decentralizing
goal-settingand operating authorityto hospitals in a
previouslycentralizedsystem? What formulasare there to monitor
performancein a decentralized
public system?
Rcono ic Environment. Issues dealing with the economicenvironmentof
the hospitalwill be approachedat two different levels. The first one
refers to the overall economicsituation of a country. The second one has
to do with the immediateenvironmentrepresentedby the markets in which the
hospital must act.
The fundamentalissue at the higher level of analysis is the adoptive
responseof hospitalsto situationsof economiccrises such as the ones
faced by many developingnations. Economic crises seem to have a dual
effect on hospitals. On the one hand, health conditionstend to deteriorate
so that the need for hospitalservices increases. At the same time,
however, the standardpolicy response to such crises has been to cut budgets
for social programs, includinghealth care (Brenner1979; Brenner and Mooney
1983; Soberon et.al. 1986). Public hospitals face an additionalburden,

21. 17
since they have to absorb part of the demand previouslysatisfied by private
facilitiesthat a growing number of clients can no longer afford. As
hospitals in many countriesattempt to deal with this complex set of
strains,several importantresearchquestionsemerge:
-- What are the cost savings and effectiveness alternativemodes
of
of providingservicesthat have traditionallybeen the domain of general
hospltals,such as normal deliveriesor minor surgery? Is it economically
and clinicallyfeasible in developingcountriesto shift to alternative
settingsfor care that may satisfy a larger volume of demand at lower costs
(e.g. "birth centers"or ambulatorysurgery centers)?
-- What are the effects of new methods of financing,such as
communityprepaymentschemes,which can be implemented deal with some of
to
the consequencesof economiccrisis on the utilizationand financingof
hospitals?
-- What mechanismscan be designedto improve the flow and control of
material resourceswithin hospitals so that waste can be prevented?
-- More generally,what is the repertoireof survival strategiesthat
hospitalsmust employ under conditionsof economic strain?
Intimatelylinked to this last questionis the whole issue of the ways
in which hospitals participatein the product and factor markets that form
their immediateeconomic environment. As we pointed out earlier,our
current focus on issues of staffingmakes it necessaryto restrictthe
discussionspecificallyto labor markets.
The entire world has witnessed a dramatic increase in the supply of
physicians. As Kindig and Taylor (1985) demonstrate,this increasehas
occurred in countriesat all levels of economicdevelopment. From 1950 to
1979 the number of physiciansper 10,000 people grew by 96X in

22. 18
industrialized
countries,by 223% in centrallyplanned economies,by 164% in
middle income nations,and even by 29% in low income countries. The growing
supply of physicianschanges the operatingenvironmentof the hospitals in
two fundamentalways. First, it gives the hospital,as an employer, greater
leverageto impose working conditionsthat are more favorableto its
interests. Second, as the competitionfor profitableclinicalpositions
increases,it is likely that more doctors will shift from patient care to
management (Tarlov 1983). Indeed, it has been shown that physicians'career
preferencesare significantlyaffectedby their perceptionsof the medical
labor market (Frenk 1985). As the conditionsin this market become more
difficultfor doctors,they will increasinglyseek stable employmentthrough
salariedpositions,with less clinicalautonomy,larger managerial
responsibility,
and greater stratification
within the medical profession
(Freidson1985). Furthermore,to the extent that in many developing
countriesthe increasingsupply of physicianshas not been accompaniedby a
similar growth of paramedicaland technicaloccupations,it is not
unrealisticto expect that some doctors will fill less skilled positions in
the hospital, giving way to a new kind of medical underemployment. In sum,
the main issues that derive from the foregoingconsideraticns
can be
synthesizedas follows:
-- What are the implicationsof an increasingsupply of physicians
for the hiring and staffingpractices of hospitals? Should the substitution
of physiciansfor less skilled positionsbe allowed and even encouraged?
Should hospitalsexpand their staffs of residents to accommodatethe growing
demand for graduatemedical education,or should they strictlymaintainthe
number that they require to fulfill their medical care functions?

23. 19
-- In order to contain competition,practicingphysiciansare likely
to impose barriersto the attainmentof hospital privilegesby their younger
colleagues. Should managementinterveneto reduce such barriers? Should it
press for an increasein salariedpositions at the hospital?
-- Faced with a choice between physiciansand administrators the
as
senior managers of the hospital,what criteriashould guide the higher
authoritiesin their hiring policy? Should physiciansbe preferred,as they
are in many countries,simply because they have the knowledgeabout the
substantivefunctionsof the hospital? Or should managerialefficiencybe
the guiding criterion?
As can be seen, some of these issues begin to have a direct bearing on
the design of the hospital, a topic to which we turn next.
OrganizationDesign. Organizationdesign has been defined as "the way
authority,responsibility
and informationare combinedwithin a particular
organization"(Kimberlyet.al. 1983). A design allows "to tailor the
organizationso that it can monitor its environmentand respond to the
constraintsand opportunitiespresentedby the environment..."(Kimberly
et.al. 1983) and to achieve coordinationand integrationof tasks across
parts of the organization(Lawrenceand Lorsch 1967).
There are two main issues that determinedifferent types of designs:
how activitiesshould be grouped within the organizationand how decisions
will be made. In fact, these issues illustratetwo differentanalytical
dimensionsof the same concept. On the one hand, the organizationdesign is
representedby the structure,i.e., the type, number, and size of units,
spans of control,and the arrangementof units along the lines of authority.
On the other, one can identifythe more subtle and dynamic elementsof a
standardization,
design, such as degree of centralization-decentralization,

24. 20
formalization,
mechanismsfor coordination,communicationand control, as
well as rewards systems.
This section will be focused mainly on the structuralissues. Since
there is a more evident relationshipbetween the more dynamic elements of
the organizationdesign and organizational
performance,these will be
analyzed in the followingsection.
Three types of structureshave been traditionallyidentified:
functional,divisional,and matrix (Daft 1983). Functionalstructuremeans
a divisionof labor into departmentsspecializedby functionalareas, i.e.,
departmentsof surgery,medicine,nursing,medical records,and so on.
Kimberly et.al. (1983) mention that this type of structure is more common in
relativelysmall (100-200bed) communitygeneral hospitals. On the other
hand, divisionalstructuresare organized around serviceshaving, in many
cases, their own clinicaland administrative
support services. This type of
structuremay be seen more often in large teachinghospitals (Howe 1969).
Finally, matrix structuresare the most infrequentones in hospitals. They
are characterized a dual authoritysystem designed to improvelateral
by
coordinationand informationflow across the organization'1euhauser1972,
Gray 1974).
All of these possible configurations
might respond to traditional
arrangementsof the structurerather than to actual environmental
demands or
to the need to improve organizational
performance(Mintzberg1981). If one
considersthe possible role of hospitals in primary care provided through
outreachprograms,one could ask which of these structuralalternativesis
the most appropriate(Shortell1984; Aday 1984).
In addition, it is very importantto consider the particular
characteristic hospital structureswhere two chains of command coexist.
of

25. 21
For Mintzberg (1981),hospitalsare a "professionalbureaucracy,"since
their structuralconfiguration who must be
relies on trained professionals
given considerablecontrol over their own work. In this case, one can
identifyparallelhierarchies,one for the professionals
and another for the
support staff.
The existence of two main chains of command in hospitals -- medical
--
staff and administration has been well documentedby several authors in
developed countries (Perrow 1961; Georgopoulos1962; Bucher and Stelling
1969; Engel 1969; Scott 1973; Robb 1975; Longest 1980; Shortelland
Evashwick 1981; Scott 1982; Leatt et.al. 1983; Kinston 1983). However, in
developingcountriesthe high predominance cliniciansover professional
of
managers in hospital administration
might blur the limits between the two
hierarchies. This is even more so when one considersthat in most
government-owned
hospitalsphysiciansare salaried;therefore,they are
accountLblenot to the medical staff organizationbut to the administration.
From all these aspects of the structuraldimensionof organization
design in hospitals,several issues can be identified:
-- Since physicianspredominatein top administrative
positions,can
two chains of command still be clearly identified? Is the scope of their
expert power clinical,managerial,or both? How is this situation
influencingthe professionalautonomyof cliniciansand professional
managers?
- - What structuralarrangementsare necessary to improve the balance
between these two groups so that technicalexpertise in medicine and
administration
can be better allocated?
-- Within this particulartype of structure,how and by whom are the
goals of the hospital defined?

26. 22
-- Communicationbetwoenmembers of differentprofessionalgroups in
hospitals has always beer a difficulttask, not only because of their
different backgroundsbut also because of deficienciesin organization
design (Robb 1975). This is also true with regard to communicationbetween
providers and clients. How can hospitalorganization better designed to
be
improve the flow of informationbetween departments,providers,and clients?
(Hasenfeld1983).
-- What are the differentimplications the organizational
of design
of private versus public hospitals for clinical,managerial,and production
efficienc,?
-- What are the advantagesand disadvantages functional,
of
divisional,or matrix structuresfor hospitals in developingcountries?
-- What might be the best alternativesfor structuringthe hospital
organizationaccordingto their external context,size, and types of
servicesprovided?
-- In light of the goal of "Health for All by the Year 2000," what are
the best alternativesfor designingthe hospital organization, as to
so
provide better access and utilizationof hospital resourcesby the
population?
-- Which environmental
variableshave major effects on hospital
design? What is their impact? How are these variablesoperatingto
influencehospitaldesign in developingcountries?
Ortanizational
Performance. Improvingorganizational
performanceis
perhaps the most importantchallengeto any hospitaladministrator. Shultz
and Johnson (1976) have proposed some selectedmanagerialpracticesfor
improvingperformance. These practiceswere grouped within three main

27. 23
areas: managementof quality,managementof costs, and managementof
conflict.
Managementof quality involves,among other things,the implementation
of assessmentand monitoringsystems and quality assurancemechanismsbased
on a sound organizationdesign. The latter includesmanagerialdecisions
regardingthe degree of standRrdization
and formalization clinicaland
of
non-clinicaltasks, the degree of decentralization,
and the implementation
of adequate coordinationand communicationmechanismsthrough the
developmentof quality assurance programs. Furthermore,managerial
decisionshave to be made regarding the types of incentivesand specific
control mechanismsfor clinicalperformance.
Another very importantaspect of the managementof quality is the issue
of staffing. Several authors have studied the relationshipsbetween
hospitalmedical staff organizationand the quality of care (Shortelland Lo
Gerfo 1981; Flood and Scott 1978; Roemer and Friedman 1971).
On the other hand, staffing is also a relevantaspect of the management
of costs. Pauly (1978),Garg et.al. (1979), and Sloan and Becker (1981)
have analyzed differentaspects of the relationshipbetweenmedical staff
and costs. The ratio of managementto productionpersonnelas it affects
the efficiencyof hospitalshas been studied by Rushing (1974).
Scott and Shortell (1983) have made an extensivereview of the
literatureon these topics under two major areas: effectiveness(qualityof
care) and efficiency. These include the managementof quality and the
managementof costs. It is very importantto mention that both managerial
practices require a well designed informationsystem that allows managers to
obtain a real image of hospitalperformanceso that decisions are made on a
more solid basis.
I , .

28. 24
Managementof conflict is of paramount importancein hospitalsgiven
the different professionalgroups involvedin patient care. Organization
design, along with goal setting and negotiatingskills, are the best
elements for managing conflict. Again, a neat organizationdesign tends to
improvecommunicationand coordinationand to prevent conflictby defining
authorityand responsibility
among hospital staff.
Finally,organizational
performanceseems to be associatedwith a
linkage to the organizational
environment, appropriateorganization
an
design, and the existenceof informationsystems that provide awareness of
organizational
functioningand the opportunityto take correctiveaction
(Scott and Shortell 1983).
Many issues could be raised around organizational
performance. Some of
them have already been mentioned in other sectionsof this paper,
particularlywith regard to the relationshipsbetween the organizationand
its externalenvironmentand some aspects of the organizational
design.
Nevertheless,there are still other relevant issues that deserve some
consideration:
-- Which are the most common mechanisms in developingcountriesto
link hospitalswith their external environment?
-- What is the role of communitymembers in the administration
of
hospitals?
-- What should be the compositionof hospital boards?
- - Since quality assuranceexperiencesare only beginning in many
developingcountries,what might be the strategiesfor implementingquality
assuranceprograms? What might be the characteristics an information
of
system in order to run an efficientand effectivequality assuranceprogram?

29. 25
- - Three types of quality assurance systems can be identified
accordingto the degree of decentralization
and involvement hospital
of
staff: centralized,decentralizednonparticipative,
and decentralized
participative(Ruelas 1986). What should be the degree if decentralization
for quality assuranceactivities? What are the best mechanismsfor
involvinghospital staff in quality assuranceprograms?
- - How much standardization
and formalization professional
of
activitiesis necessaryto assure quality of care?
- - What might be the incentivefor cliniciansto increasetheir
compliancewith standardsof care?
-- Who should supervisethe differentprofessionalactivitieswithin
the hospital?
- - What should be the adequateratios of general practitioners/
specialists,doctors/nurses,
clinicalpersonnel/support
personnel,according
to case mix in developingcountries,in order to maintainan efficient level
of hospitalperformance?
- - What should be the criteria for establishing medical staff/
a
residents ratio that assures adequatesupervisionand quality of care?
-- How can the participation cliniciansin hospital-wide
of decision
making be improved?
-- What kind of coordinationand communication
mechanismsmight be
implementatedamong hospitaldepartmentsin order to prevent ccnflictsand
improve continuityof care?
ISSUES RELATED TO THE TRAININGOF HOSPITALKANAGE
In accordancewith the frameworkproposedin this paper, managerial
efficiencyis a result of three main components:managerialdecisionmaking,

30. 26
skills, and autonomy. We have alreadymentioned several aspects of
managerialdecisionmaking directedat improvinghospitalperformance,as
well as some issues regardingthe relativeprofessionalautonomyof managers
within the hospital structure.
According to Katz (1974), there are three kinds of skills necessary for
an effectiveadministrator adequatelyperform his or her role:
to
conceptual,technical,and human skills. On the other hand, there are
several studies that attempt to elucidatethe differenttypes of roles that
administrators
perform (Mintzberg1975; Kuhl 1977; Allison et.al. 1983).
The developmentof managerialskills to adequatelyperform different
roles depends on two importantaspects:experienceand training. Given the
complexityof hospital administration,
learningthrough the day to day
experiencemight be a trial-and-error
process that is very costly for the
organization. On the other hand, even though formal training cannot
substitutefield experience,it provides a broader frame of reference for
decisionmaking and facilitatesthe learningprocess from field experiences.
Ruelas and Leatt (1985) have proposed that trainingprograms should be
designedconsideringthree aspects:the level of the executivewithin the
structure,and the kinds of roles to be performed to deal with these
problems. At the same time, the developmentof conceptual,technical,and
human skills should also be consideredaccordingto the hierarchicallevel
of the hospital executive. Specificprogramsand contentscan then be
established.
It is interestingto mention that hospitaladministration a
is
relativelynew discipline. Hospitals in North America have been under the
dominationof differentgroups (Perrow 1961). At some point in time
trusteesdominated. The basis for their control was primarilyfinancial.

31. 27
Then, major decisions had to be based upon a medical competencethat
trustees did not posses, so physiciansbecame the dominantgroup. When
hospitals became more complex organizationsand needed more coordination,
acquired increasingpower.
hospital administrators
This evolutionmight not be the same in developingcountries,where
physiciansstill tend to dominateand where hospital administration not
is
well establishedyet. The implications this situationare twofold:
of
first, there is a need to provide clinicianswith a better understandingof
hospitaladministration that they can improve their managerial
so
health care
performance;second, it is necessary to professionalize
managementby developingformal trainingprograms in this field, which by
necessity will include physiciansas well as other occupationalgroups.
Different alternativesfor providingadequate trainingin hospital
have to be better explored in developingcountries,namely,
administration
master's, doctoral, continuingeducation,and even undergraduateprograms.
Sending students to developedcountriesrepresentsa differentkind of
alternativethat must also be considered.
The following issues illustratejust some of the major questionsthat
need to be answered:
-- How are managerialproblemsperceived by hospitalexecutivesat
different levels of the hierarchy and different types of hospitals in
developingcountries? How can trainingprograms be designed to take account
of such variation? What should be the main contents?
-- As trainingprogramsfor health servicesadministratorsface
one response
growing competitionfrom programs in businessadministration,
has been to emphasizethe strictlymanagerialaspects in the curriculum,at
the expense of health contentssuch as epidemiology. If, however,hospitals

32. 28
must respond to their changingepidemiologicenvironment,this trend could
have very negative consequences. What new trainingapproachescan be
devised so that future health care managersdo receive the complex contents
of managerialscience,while at the same time preservingthe fundamental
conceptsand methods of epidemiology? If such an integrativeapproach is
not feasible,would it then be necessary to have an epidemiologist the
in
senior managementgroup of a hospital?
-- How should existingtrainingprograms in health care
administrationrespond to the increasein the number of physician
administrators? Should new programs,different from the traditional
master's degrees,be designedto meet the special backgroundsand needs of
physicians?
-- Regarding the level of training,would undergraduateprograms in
hospital administration useful? Should professionally
be orientedor
academicallyoriented postgraduateprograms be predominantin developing
countries? Should there be a sharp distinctionbetween both types? What
should be the role of master's,doctoral, and continuingeducationprograms
in order to meet the need of traininghospitaladministrators developing
in
countries?
-- How convenientare residencyperiods,under what circumstances,
and for how long?
-- Is there enough faculty in developingcountries to supporthigh
quality education in hospitaladministration? What might be the strategies
for faculty development?
-- How useful is the trainingof professionalsin foreign countries,
as opposed to concentrating their nationalexperiences? What strategies
on
should be consideredto assure that experiencesobtained abroad will have an

33. 29
impact in the country of the traineeswhen they return? How useful are
exchangeprograms between developedand developingcountries? What should
be done in order to take advantageof such programsso as to achieve a
balance between academicquality,on the one hand, and relevanceto the
context of the trainee,on the other?
TOWARDS A RLAR AGUD
Most of the issues that ve have discussed throughoutthis paper
represent importanttopics for research. The fact that we posed them as
questionswas intended,precisely,to emphasizetheir researchability
and to
convey the sense that it is necessaryto seek answers through sound studies.
The problem,of course, is that the number of issues is too large to
constitutea workable researchagenda. It is necessary,therefore,to
establish priorities. In this last section of the paper we will briefly
sketch what such prioritiesmight be.
A first consideration designinga researchagenda on a topic such as
in
hospitalmanagement is to strive for a balance between relevanceto decision
making and excellencein the strict adherence to the norms of scientific
research (Frenk et.al. 1986). Within this broad guideline prioritiesmust
be defined on two aspects: the type of research and the topics to be
researched.
With respect to the former,we believe that the order of priorities
should begin with observationalstudies that document levels of hospital
performanceand correlatethem with organizationdesign and environmental
variables. Apart from offeringbasic descriptiorns
that are much needed,
especiallyin developingcountries,such studies would make it possible to
operationalize
and measure the constructsthat we have proposed in our

34. 30
analyticalframework. As indicatedin the section on measurementissues, it
is particularlyimportantto devise and test sensitiveand specific
indicatorsof managerial,clinical, and service productionefficiency. In
addition, it is necessary to determine the internaland external correlates
of these dimensionsof performance.
Observationalstudies would make it possibleto diagnosethe most
criticalareas for the second type of research,namely, interventionstudies
that would introduceplanned change in hospitalsand would assess its
consequences. It is fundamentalthat interventionstudies be based on
comparativedesigns. Indeed,a problem with evaluationsof the
effectiveness specific interventions the frequent lack of control
of is
groups, which makes it impossibleto attributeany observedchange to the
interventionitself, rather than to another source of variation. Thie
externalvalidity Ofthese typesof studies is also often threatenedby the
choice of highly specificsites that make it very difficultto generalize
the findingsand to truly build a body of knowledge. If the ideal
randomizedtrials cannot be achieved,then quasiexperimental
designs with
clear control groups should be used. These kind of studies should be
complementedby cost/benefitand cost/effectiveness
analysesof the
interventions(Wortman1983).
Turning to the prioritieson the topics for research, it must be
stated, at the outset, that any ranking of topics is doomed to seem
arbitrary,unless it is based on some explicitmethod to poll the
perceptionsof large numbers of experts and consumersof research.
Nevertheless, will attempt to offer what we believe is a preliminarylist
we
of the most urgent areas for inquiry,particularlyin developingcountries.

35. 31
The first need is for good descriptivestudies of the hospital system
and of the main aspects of organizationdesign. In many developing
countrieswe are lacking the most basic information the compositionand
on
characteristics hospitals. Critical items that are often not known
of
include the exact magnitudeof the private sector, the proportionof total
health care resourcesthat is absorbed by hospitals,and the unit costs for
specifichospital services,to name only a few. Furthermore,there is a
lack of data on the structure of hospital organization. Whereas in
developedcountriesextensive empiricalstudies have been conductedto
define, for example,the two lines of authority,in many developingnations
we are often ignorantof the ways in which formal and informalrelations
among managers and cliniciansare structured. Likewise, it is necessaryto
know the frequencyof differentarrangementsfor internalcommunication,
types of departmentalization, and management systems.
Beyond broad descriptionsof the structureof hospitals in developing
countries,the second priorityrefers to the systematicstudy of quality
monitoringand assurance systems. In the final analysis,hospitalsshould
be producing improvementsin health, however we define it. The design and
testing of explicitsystems to assure the quality of care would therefore
seem to be of the utmost importance if we are to gain some understanding of
what exactly are hospitals contributing society and at what cost. Such
to
studies should includethe analysisof the interactionsbetween managers and
clinicians,especiallyas they constrainclinicalautonomyand decision
making. As pointed out earlier in this paper, there are several variantsof
quality assurancesystems for hospitals. Assessing their relative
effectivenessand costs should be a high-priorityitem on a research agenda.

36. 32
The third area for research centers around the social, personal,
organizational,
and educationaldeterminants managerialskill. Indeed,
of
we need to know what are the factors that account for different degrees of
success in managinga hospital. These studies should not be limited to
psychologicalvariables,although they should certainly include them. The
challenge,however, is to ascertainthe relativecontributions managerial
to
skill of personalvariablesversus educationalbackgroundand organizational
structure. Clearly,this kind of study would have major policy implications
for the recruitmentand trainingof hospitalmanagers,which in turn might
help to alleviate the critical shortageof skilledmanagementin
underdevelopedcountries.
Finally, the magnitude,repercussions,
visibility,and universalityof
physicianoversupplymake this a high priorityfor research. In this
respect,we are in need of studies about the structureand dynamicsof
medical labor markets,which would allow us to understandthe origins of the
oversupplyof doctors and the reasons why it has occurred in such a wide
variety of countries. The coexistence,in many nations, of medical
underemployment
with lack of universalaccess to medical care is probably
the most eloquent indicatorof the shortcomings current ways of
of
organizinghealth systems. Hospitalsare undoubtedlya major part of this
picture. We should thereforeunderstandthe consequencesthat the
oversupplyof physicianshas for the operationand staffingof hospitals,
and for the design of innovativetrainingprograms.
While still incomplete,this initial researchagenda might begin to
illuminatesome of the basic issues that concern policy makers, managers,
clinicians,and clients in the common search for higher levels of efficiency
and equity in health care.

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