Bridging the cultural gaps.

Traditionally, medicine - or, more precisely, physicians -have had the upper hand. Hospital administrations looked to their boards of trustees for operational and budget decisions and then hired nurses and other staff. The physician, as a member of a voluntary hospital staff, enjoyed the privileges of admitting patients and allocating the hospital's resources. The system, not the most efficient or effective according to the principles of management, worked because third parties picked up the tab through a system of open-ended financing based on retrospective cost-based reimbursement.

The ascendancy of the administrator, now the president and CEO, has been shaped by financing. The large influx of funds when Medicare joined the third parties offered the opportunity to expand administrative staffs, and prospective, case-based pricing using diagnosis-related groups meant the physician on the voluntary staff became less of a free agent and more of a team player. His or her behavior and a hospital's financial survival were now locked together. The hospital president and CEO became responsible for operations, budgets, and - most of all - personnel, as hospitals are labor - intensive industries.

The table on page 4 summarizes the contrasting concerns and mechanisms of medicine and management. Medicine emphasizes personal responsibility for the care of the patient; management emphasizes delegation of authority and responsibility. Medical care in the United States emphasizes the specialist; management requires the abilities of the generalist. The medical practitioner is compelled to master a body of knowledge to ensure expertise; the manager is trained to orchestrate the expertise of others. The physician treats disease at any cost; management must address resource allocation and limitations. While physicians deal with individuals or families, management deals with consumers aggregated into markets. One of the most distinctive contrasts between medicine and management is the character of initiatives. Medicine is reactive, while management is anticipatory. The physician stands ready to provide the highest quality health care when consulted by the patient. The manager is concerned with the proactive determination of priorities.

The Contrasts between Medicine and Management

Medicine                                 Management
Personal responsibility                  Delegation
Specialists                              Generalists
Possession of expertise                  Orchestration of expertise
No cost too great                        Resource limitations
Individuals (patients)                   Markets (consumers)
Reactive                                 Anticipatory
Authoritative                            Entreprenurial
Professional standards                   Consumer perceptions
Accreditation, licensure, certification  Job description
Income targeters                         Income maximizers
Independent practice                     Group process

Management seeks gains at the margin through productivity; medicine pursues precision in diagnosis and treatment. For the physician, quality is predominantly determined by professional judgment, while the manager perceives it as determined by the evaluations of diverse stakeholders. The manager faces competition from newly emerging entities entering markets. The physician is protected by accreditation, licensure, and specialty certification. In the corporate sector, positions are defined by job descriptions and then filled; the physician with a specialty designation carries the job description from setting to setting. Managers are presumed to be income maximizers. Physicians are income targeters seeking a comfortable income and then trading off additional income for leisure time or preferred pursuits. Medicine is an endeavor driven by solo practitioners' interests and aspirations. Management is a group process.

The corporate practice of medicine is a concept that has long been anathema to the American Medical Association, whose crusade against it began in state legislatures after World War II. The experiences of thousands of physicians who had been drafted into the military and subjected to the workings of a large bureaucracy no doubt contributed to the widespread suspicion of corporate practice. Nevertheless, it is a concept that evolved over the ensuing years until the introduction of health maintenance organizations in the 1970s.

Starr announced "the coming of the corporation,"[2] and Relman speaks of "the new medical-industrial complex."[3] The health care version of corporate production functions and entrepreneurial factors is represented by delivery systems distinguished by various financial mechanisms and patterns of organization. The governance and management of health care systems provide the direction to make them purposeful and effective in meeting population needs, and the variation in values, priorities, size, and scope is extensive. The components and interrelations in health care systems are diagrammed in figure 1, below.

The major distinction between corporations and health care systems is in their governance and management. Corporations are hierarchical in the accountability of the executive leadership to the board of directors and shareholders. In health care systems, governance and management tend to be more collegial and collaborative. Although the systems encompass sophisticated scientific knowledge, highly trained professionals, elaborate facilities, and costly state-of-the-art technology, the essential ingredient in health care remains a personal interaction between a physician and a patient or a patient and a nurse. Dentists, pharmacists, optometrists, physical therapists, social workers, and other health professionals expand the boundaries and dimensions of health care. It is a social endeavor comprising billions of interactions annually.

But the American corporation is evolving. Increasingly, accountability is being viewed as an obligation owed not just to shareholders, but to "stakeholders," a group that includes more than merely those who own stock in the corporation. The needs and expectations of these diverse stakeholders - suppliers, communities, governments, and consumers - have meant that CEOs focus more and more on the outside environment and rely on chief operating officers for internal management.

Can health care systems be far behind? The stakeholders of health care systems are diverse and powerful. Moreover, the health care CEO presides over a similarly varied constituency. The classic levers of corporate management, such as accounting, are less useful than communication, negotiation, and persuasion skills. The health care systems model suggests a negotiated relationship between the provider and the patient, or subscriber. The dual accountability to stakeholders will be increasingly political in the coming era of resource allocation and rationing. Indeed, the 21st Century will likely see a transition from the management model to the political model of institutional leadership. The CEO will be less a president and more a prime minister, leading multiple constituents and fully recognizing that, in addition to electoral renewal by a board, one must be ever ready to win a vote of confidence from one's peers.

Like planning and management in health care, governance has evolved in recent decades from an informal process, chiefly in hospitals, to one concerned with disciplined corporate budgeting and financial accountability. Once, managers were called superintendents or administrators and were responsible for attending to details, not creating strategies. Boards of trustees characteristically took their lead from medical staffs composed of physicians on voluntary appointment. At trustee meetings, it was not unusual to hear the question, "What do the doctors want?" The emergence of health care from a sovereign profession, however, has had far-reaching implications for governance. The yielding of the Marcus Welby scenario to health care systems is altering the authority, autonomy, and prerogative of the physician, who is being transformed from a solo player to a team player. Trustees, in turn, are increasingly shouldering their fiduciary accountability for the institutions - composed of nurses, managers, technicians, as well as physicians - that serve patients.

Although predominantly voluntary and not-for-profit, health care systems can be grouped in the following categories: entrepreneurial, eleemosynary, ecclesiastical, and elected. Entrepreneurial systems compete for capital in equity markets. Eleemosynary, or charitable, not-for-profit institutions include most voluntary community hospitals. Ecclesiastical institutions are a variation accountable to religious authority as well as the community. Institutions in the public sector - those managed by the federal government or operated as state or municipal hospitals - are accountable to the electorate and are therefore called elected. While values, goals, and missions vary, the delivery of medical care to the patient can be almost identical across institutions.

The allocation of hundreds of billions of dollars for health care uses markets, regulation, government, and often a complex combination of all three. Not surprisingly, every special interest in American society has a position of advocacy on health policy. The adaptation, modification, and implementation of policy, therefore, is pursued by multiple institutions and individuals operating separately but usually interacting in the private, independent, and public sectors. Such participation in the shaping and implementation of societal priorities constitutes what Myrdal calls the "institutional infrastructure of modern organized society." Public policy, he observes, "is now decided upon and executed in many different sectors and on different levels."[4]

The infrastructure in health care is the organization and arrangement of constituents that are supportive of the endeavor. Most of the health care enterprise attempts to synthesize private- and public-sector initiatives and accountability; it is the interaction of these sectors with each other and with national policy considerations that contributes to the institutional infrastructure shown in figure 2, above. In the center are the prototypical health care systems, representing thousands of organizations and institutions. They can be said to be embedded in the institutional infrastructure. The pluralism of health policy from the national perspective is shown in the diagram both by government policy and programs and by voluntary and private-sector initiatives. Prospective payment by diagnosis-related groups and resource-based relative value scales are illustrations of government policy and programs. The Joint Commission on Accreditation of Healthcare Organizations; managed-care initiatives of Aetna, CIGNA, and Prudential; and the Liaison Committee on Medical Education for the accreditation of schools of medicine are examples of voluntary and private-sector initiatives.[5,6]

These national initiatives interact with health care institutions in private markets, the independent sector, and public services. The majority of health care initiatives are in the independent sector; public services represent a third and private markets a tenth of the total. These latter two health care institutions are influenced mainly by political accountability and economic incentives, respectively, in the infrastructure.

Health policy reflects constant evolution as society seeks to develop optimal incentives for, and constraints on, physicians, nurses, hospitals, insurers, patients, and other stakeholders in health affairs. Some initiatives, such as licensure, accreditation, and certification, span a century; other modifications, such as prospective case-based payment with diagnosis-related groups and resource-based relative value scales, emerged during the 1980s. Health care systems now seek to define a middle ground of nongovernment community responsibility in the public interest: a social utility, a quasi-governmental organization, or a franchised service with government standards and regulation.

The health care enterprise can readily be seen as a sovereign profession when measured by its advocacy of the patient, professional accountability, and compassionate care. But it is also a vast industry if measured by its numbers of physicians, nurses, hospitals, nursing homes, pharmaceuticals, and insurance companies and by the staggering magnitude of its technology. As we deal with the health care enterprise of the future, it is incumbent on us to recognize when we measure it as a profession and when as an industry. Any attempted change in the industry will affect the profession, and vice versa.

Can the finest principles and practices of medicine and management prevail in health care? Yes, if physicians, nurses, managers, and other health professionals appreciate the context within which they work - the dimensions, character, and requirements of health care and the challenges of infinite needs confronting finite resources.

Thoughts on Health Reform in the Next Congress

The While House is already preparing a modified proposal for consideration by the next Congress on health care reform. It will no doubt be more moderate and less extensive than the last effort. Even though health care reform will continue to be an issue, whether it will result in legislation is an open question. We can anticipate a difference of perspective on the need for and the extent and focus of health reform between the U. S. House of Representatives and the U.S. Senate, despite the move of the majority of both houses to the Republican Party.

In the House, Newt Gingrich (R-Ga.), if he is true to past form, will continue to take a strongly conservative, noninterventionist philosophy toward health care. The extent of reform that will emerge from a Gingrich-led House will be insurance reform and a push for medical savings accounts. In the past session of Congress, these two elements constituted the core of his proposals.

We should anticipate that Sen. Phil Gramm (R-Tex.) will offer similar proposals in the Senate. Although these two individuals have staked out the more conservative positions of the Republican Party, it is still an open question as to whether this type of health reform will pass. The Democracts will argue that incremental approaches are doomed to failure in the long term.

Sen. Robert Dole (R-Kan.), the new Majority Leader and a member of the Senate Finance Committee, will also be a prime player in any health care debate. He tended toward the middle road until about six months prior to the election. His tilt toward the right on health care constituted a "politics-of-the-moment" position and a recognition of the strength of the more conservative elements of the Republican Party. Any health care reform proposal he puts forth must, therefore, consider the strength of the Gramm-Gingrich diad. After all, the Iowa and New Hampshire primaries are a short 14 months away.

In sum, it's unknown whether the Democrats and the Republicans can work together. The majority position is narrow for the Republicans, so the ability of one party to dominate the other is questionable. The question will be: Is it in the Democrats' best interests to help the Republicans pass legislation, or should the Democrats hold the Republicans hostage and depict them in a bad light for the next campaign?

We may see the same fractionation witnessed in the past Congress. If the rhetoric of the post-election period become reality, perhaps there is a chance for some degree of health reform. But don't count on rhetoric to become reality.

References

[1.] Kissick, W. "Health Care Management According to Ben Franklin." Journal of Health Administration Education 7(4):723-33, Fall 1989. [2.] Starr, P. The Social Transformation of medicine: The Rise of Sovereign Profession and the Making of a Vast Industry. New York, N.Y.: Basic Books, 1982, pp. 420-49. [3.] Relman, A. "The New Medical-Industrial Complex." New England Journal of Medicine 303(17):963-70, Oct. 23, 1980. [4.] Myrdal, G. Beyond the Welfare State: Economic Planning and Its International Implications. New Haven, Conn.: Yale University Press, 1960, P. 47. [5.] Skolnick, A. "Joint Commission Will Collect, Publicize Outcomes." JAMA 270(2):165, July 14, 1993. [6.] Schwarz, M. "Liaison Committee on Medical Education: Past Successes, Future Challenges." JAMA 268(9):1091-2, Sept. 2, 1992.

William L. Kissick, MD, DrPH, is George Seckel Pepper Professor of Public Health and Preventive Medicine, School of Medicine, and Professor of Health Care Systems, Wharton School, University of Pennsylvania, Philadelphia. This article is adapted from Dr. Kissick's book, Medicine's Dilemmas: Infinite Needs Versus Finite Resources, published in 1994 by Yale University Press. Copyright 1994 by Yale University Press. Reproduced with permission.