Monthly Archive: July 2013

Hospitals Taking the Accounting Medicine

Diagnosis, treatment and health care services in Switzerland are covered by law through health insurance – as in many other European countries. Every person living in the country is subject to this insurance, enforced by residential municipality. Coverage for health care services is very good: usually supply outstrips demand and patients have a choice where and how they want to be treated. During the last 20 years the cost of health insurance grew dramatically because of cost explosion in health care.

Politicians and government ministries exerted more and more pressure on health care organisations as the cost of health care accelerated. Hospitals had to report about service performance, the quantity of patients treated, in what occurrence and quality. The newest development in this endeavour is a case-mix measurement named diagnosis-related groups (DRG). After many attempts to define the services of hospitals in terms of number and distinctiveness of patients treated, DRG has been applied for the first time in Switzerland in the year 2012 (FOPH 2013). This makes the country a very late adopter of DRG, as it was used for cost reimbursement and pricing purposes in the USA since the 1990s and subsequently in other countries (Dixon 2008, pp. 85) like the UK (where it is called hospital-resource groups – HRG), and Germany.

“These developments had the effect of changing the way hospital managers, particularly at the front line, thought about patients, diagnostic procedures, treatments, care and staff, in economic and manufacturing terms rather than social and human terms. The economic concerns of central government were brought to bear on internal organisational affairs of hospitals.”       (Dixon 2008, p. 86)

Increasingly, performance is measured in monetary terms and focusing on value-for-money criteria. Changes in the way hospitals think about patients will beyond doubt also contaminate Switzerland. Patients are dismissed from their hospital beds as soon as possible in order to outperform the lump compensation. The danger is that patients become an economic commodity rather than sick people in need of specialist treatment (Public Administration Select Committee, 2003, “perverse consequences”). DRG costing and pricing feigns precision to resource allocation and comparison between clinics, departments and hospitals (Dixon, p. 87). It is no surprise in the light of such economic concerns that process thinking, process optimisation or re-engineering plays a predominant role in hospital strategies (Stephenson and Bandara, 2007).

“In the public sector where there may be limited capability to assess simple bottom-line outcomes such as profitability, it becomes tempting for those who evaluate these organizations (governments, regulatory bodies, the public) to judge them on the basis of their processes”.     (Lozeau et al. 2002, p. 538)

But, as Porter (1996) argues in his seminal essay, operational effectiveness is necessary, but not sufficient to superior performance.