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Will physicians replace MHAs?: reflections from Australia.

Tom Weil foretells a troubled future for the U. S. health care system as ever-escalating costs force private and public payers to cut down the quantity and range of services delivered, while providers - hospitals and corporate medical practices - coalesce into powerful regional networks that will oppose these cuts. As regional provider networks develop. they will become virtual monopolies within their respective regions, a situation that may call for a much stronger stance on the part of government, both state and federal, in regulating the pricing and the provision of health care.

Within this strife-ridden scenario, Weil sees MHAs. who at least until very recently dominated the upper levels of U.S. health care management, increasingly unable to cope with the situational imperatives. Among the factors militating against the future adequacy of these generalist managers" are:

* Limited ability to interact readily and acceptably with doctors and other clinical personnel.

* Inability to explain to the public at large the necessity for and the implications of reductions in access to health services.

* Lack of clinical technical expertise in devising methods of reducing costs without sacrificing quality of care.

These limitations, says Weil, reflect not only the generalist's lack of clinical training but also deficiencies in the professional training they have received, deficiencies attributable in some measure to the lack of "hands on" management experience among the faculty of graduate health administration programs.

Government dominance over the

Australian health care system,

Is Weil's "future" our "now?"

Weil's article concentrates on the two most expensive elements of both the U.S. and the Australian health care systems - hospitals and doctors. But, in contrast with the U.S. system, both these elements in the Australian system are very much under government control.

At present, more than 80 percent of all acute care beds are located in hospitals either directly under government control or governed by boards of various complexions. All of these public sector hospitals are virtually entirely dependent on government funding. Every Australian resident is entitled to treatment, including all types of medical and nursing care.. in "public" hospitals except government psychiatric hospitals, where patients may be means tested as to their capacity to contribute to the cost of their care). Private hospitals receive no government funding but are licensed and regulated by government health authorities.

The organizational structure and pattern of remuneration of Australian doctors is markedly different from that of their U.S. counterparts. A small fraction of the doctor workforce is employed on a salaried basis within government health authorities or in government-controlled institutions, including public hospitals and universities. But the great majority of doctors, both general practitioners and specialists, regard themselves as private practitioners and work either solo or in relatively small groups. In reality, this notion of "private practice" is something of a chimera, because the bulk of a physician's income is derived from government sources through such channels as Medicare tall residents in Australia are entitled to either free or very heavily subsidized attention from a doctor) and contractual service in government-funded hospitals.

The health insurance industry in Australia is very different from that in the United States. Because Australians are entitled to free medical and hospital care through government Medicare arrangements. there is relatively little incentive to subscribe to a health insurance fund. Very few employers include a health insurance component in employee remuneration packages. The principal benefits payable by health insurance funds relate only to private hospital care or to treatment as a private patient in a public hospital. The number of people paying health insurance premiums has been dropping for several years. Less than 40 percent of the population belongs to a fund. One reason for taking out health insurance appears to be being able to bypass any public hospital waiting list should one require nonurgent surgery.

As regards regional provider monopolies and strong government control of service provision and pricing foreshadowed by Weil, these already exist in Australia, with the difference that the regional networks are operated by government and do not include any element of large-scale corporate medical practice, because this is virtually nonexistent in Australia, except perhaps in relation to pathology services.

The state of the Australian, health care

system, financially speaking

Weil points to the financial situation of the U.S. health care system as the prime reason for changes leading to the demise of the MHAs and an emerging physician executive hegemony. Highlights of the most recent official estimates of health care expenditures in Australia 1982-83 to 1993-94(1) include the following points:

* Total health expenditures reached A$36,369 million in representing an average of A$2,049 per person. (On Dec. 14, the US$ equaled .74 A$.)

* Expenditures for health care, in constant 1989-90 prices, rose by 57.6 percent from 1982-83 to 1993-94, resulting in an average growth rate of 4.2 percent per year. but the trend in the rate of growth was downward, from a high of 6.2 percent in 1983-84 to 3.5 percent in 1993-94.

* Health expenditures per person, in constant 1989-90 prices rose 2.8 percent per year from 1982-93 to 1993-94, but here too, the trend in the rate of growth was downward, from a high of 5.0 percent in 1983-84 to 2.5 percent in 1993-94.

* Health expenditures, as a proportion of gross domestic product (GDP), rose from 7.7 percent in 1982-83 to 8.5 percent in 1993-94, but, again, the trend in the rate of growth was downward, from a high of 5.0 percent in 1983-84 to 3.5 percent in 1993-94.

Looking at changes in expenditures on hospital services 1984-1985 to 1992-93, the Australian Institute of Health and Welfare estimated an annual growth rate of 2.5 percent at constant 1989-90 prices (8.2 percent at current prices), with a marked downward trend in the growth rate over the past three years of that period. For doctors, services, other than those provided under contract or on a salaried basis in public hospitals and thus included as hospital costs, expenditures rose at an average annual rate of 5.2 percent at constant prices. Expenditures on pharmaceuticals rose at an average rate of 6.3 percent per year.

Putting these categories of expenditures into some perspective, hospital services accounted in 1992-93 for 38.0 percent of all health expenditures, down from 43.4 percent in 1986-87. Over the same period, expenditures on doctors, services rose from 17.8 percent to 19.6 percent, while expenditures on pharmaceuticals rose from 8.7 percent to 10.5 percent of all health expenditures.

In summary then, one sees some upward movement in the cost of providing health care to the people of Australia, but, overall in the past few years, there has been a marked slowdown in the rate of growth of health expenditures.

Who makes the decisions in the

Australian health care system?

Perhaps the single largest factor in differentiating the past, present. and future of the Australian health care system from that of the United States is the sustained dominance of government over Australia's hospital system. Because hospitals have, since the first days of settlement in Australia, been actual or potential agencies of government authorities, their operation has been manipulable by political parties, by Individual politicians, and by bureaucrats who are at least nominally answerable to their political masters. Thus, key decisions regarding the management of the most expensive component of the health care system have been kept largely out of the hands of hospital managers, the organized medical profession, and private health insurance agencies - or where these elements have had some apparent scope for independent action, ultimately government has had the financial clout to guide or tie their hands.

Of course, Australian politicians, like those elsewhere, are heavily dependent on their professional advisors. In the health field, their advisors have been, at least until @O years ago, the most senior officers in the federal and state health authorities, mostly doctors and physician executives.

Before looking at the changes of the past 30 or so years, a word about the development of professional training of health service executives in Australia - a development in which both medical and nonmedical administrators trod the same pathway.

Professional training for health service


In 1956, a relatively young Australian university, the University of New South Wales, with substantial financial support from the W.K. Foundation, established a School of Hospital Administration. The new school offered a three-year MHA program modeled more or less on the U.S. pattern. But, at that time, professionally oriented master's degrees were something of an innovation in Australian universities, regarded with scorn by many traditional academics and with some suspicion by graduates of baccalaureate programs. After all, the bachelor's degree gave entree to the learned professions - law, medicine, and the Church! Recruitment into the University of New South Wales MHA program was a trifle slow; 10 years after its inception, it had produced but two graduates!

However, in the school's early years its existence was justified by providing undergraduate training to hospital and health service management personnel. The major teaching activity was in educational programs decentralized to the the states and leading to the MHA (bachelor of health administration) degree. Entry to the program was limited to people already employed in some administrative capacity within the health field. Completion of the course took at least six years of part-time study. This external studies course attracted health personnel from throughout Australia it was for years the only university-based health administration training program in Australia), including a number of senior physician executives who previously had had no access to formal training in health administration.

Recognizing the need for a shorter course to meet the needs of physician executives and other health administrators, the school (renamed School of Health Administration in 1969) introduced in the early 1970s a one-year, on-campus, post-graduate master's-level program. Among those involved in the final development of this program was a Visiting Professor from the University of Missouri, none other than Professor Tom Weil! This postgraduate course received enthusiastic support from government health authorities across Australia. Collectively, the school's non-physician graduates, whether awarded BHAs or master's degrees, correspond to the group Weil refers to as "MHAs."

By the late 1970s, almost all of the government health authorities at both the federal and state levels were either headed by or included in their most senior ranks physician executives who had graduated from the school. Physician graduates from the school also occupied chief executive officer or director of medical services positions in the major hospitals. Other graduates from the school occupied many other senior posts within government health authorities and the public hospital system.

New faces in the corridors of power

In the 1970's, after decades in the wilderness, the Australian Labor Party won a national election. A Labor government with a radical health platform - universal free health care coverage to be provided through a universal health insurance program - took office. That platform had been crafted by academic health economists rather than by physician executives.(2)

Although the Labor Party did not remain long in federal office during the '70's, its advent marked the beginning of a new movement in the management of health services in Australia. Within a few years, many of the most senior posts in the federal and state health authorities were no longer filled by physician executives, but they also were not filled by nonmedical MHAs or BHAs. Rather, the positions have been taken by long-serving generalist bureaucrats whose previous service has not necessarily been the health field and who, in many cases, have no formal training in health services management, by relatively inexperienced public servants who had graduated from diverse (not health administration) training programs, and by people from outside the public sector. Within the hospital field, too, one has seen in some of the larger hospitals the introduction into senior executive positions of people who are neither physicians nor professionally trained health service managers.

The current trend to "regionalization" of health administration in Australia has produced a cadre of regional managers whose composition varies somewhat from state to state. For example, in 1992-93 in Queensland, where the state health authority is headed by a physician executive Director General, more than half the 13 regional authorities were headed by physician executives, while in Victoria, with the state health authority headed by a nonmedical General Manager, only one of eight of the regions had a physician executive as Regional Director.

A system in movement

It seems to take at least five to ten years, in some instances much longer, for health service innovations originating in Britain and the United States - including those that don't seem to work very well - to cross the Equator and become implanted in Australia. At the moment, Australian health authorities are somewhat slowly trying to adapt DRGs to the Australian hospital system, flirting with payer-provider splits, and tentatively shifting a few public hospitals into the private sector. The private insurance funds, with the support of the federal health authority, are attempting to entice private hospitals into contracts as preferred providers and, with very strong opposition from the Australian Medical Association, trying to convince medical specialists to provide services to their dwindling numbers of subscribers on a contractual basis.

Do physician executives or MHAs play any significant role in these movements? And are there other significant figures involved in initiating or implementing these changes? As for implementation, all three groups are involved to a greater or lesser degree, depending on the nature of the change. But for initiation, one would have to look at specific innovations in particular situations - a task too demanding for the scope of these comments. However, one can say that the "others" have been a very significant force for change.

Well, will they or won't they?

Returning to our title question, it seems that in Australia, so far, MHAs have not replaced physician executives, nor, conversely, have physician executives replaced MHAs. The two groups have grown up side by side. This parallel development was, for at least a number of years, fostered by their sharing a common training background. To some degree, both groups have, at the highest levels of the executive pyramid, been - what is the appropriate word, "augmented" sounds kinder than "eclipsed" - by "outsiders."

For the future, it seems likely that physician executives and MHA groups will continue to play both complementary and parallel roles. It remains to be seen whether outsiders will be able to sustain the initiatives for which they were engaged.

By the way, the recently appointed head of the federal health authority is a nonmedical MHA, a graduate of the University of New South Wales School of Health Administration. While there, he was one of Tom Weil's students!


John C. Dewdney, MBBS, MD, SM, DPH, FFPHM, FAFPHM, FRACMA, FACHSE, sometimes Head of the School of Health Administration, University of New South Wales, Sidney, NSW, Australia, is currently a Visiting Fellow, School of Medical Education, University of New South Wales. He may be reached at School of Medical Education, University of New South Wales, Sydney. NSW 2052, Australia, 61-2-385-2500, FAX 61-2-663-4946.


[1.] Australian Institute of Health and Welfare. "Australian Health Expenditure - 1982-83 to 1993-94," Australian Health Expenditure Bulletin No. 11, Oct. 1995.

[2.] Scotton, R., and Macdonald, C. The Making of Medibank. Australian Studies in Health Service Administration No. 76. Sydney: University of New South Wales, 1993.
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Title Annotation:medical hospital administrators
Author:Dewdney, John C.
Publication:Physician Executive
Date:Feb 1, 1996
Previous Article:Why will physicians in this new environment replace MHAs?
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