Public hospitals are well known to be difficult to reform. This paper provides a comprehensive six-part analytic framework that can help policymakers and managers better shape their organizational and institutional behavior.
The paper first describes three separate structural characteristics which, together, inhibit effective problem description and policy design for public hospitals. These three structural constraints are i) the dysfunctional characteristics found in most organizations, ii) the particular dysfunctions of professional health sector organizations, and iii) the additional dysfunctional dimensions of politically managed organizations. While the problems in each of these three dimensions of public hospital organization are well-known, and the first two dimensions clearly affect private as well as publicly run hospitals, insufficient attention has been paid to the combined impact of all three factors in making public hospitals particularly difficult to manage and steer.
Further, these three structural dimensions interact in an institutional environment defined by three restrictive context limitations, again two of which also affect private hospitals but all three of which compound the management dilemmas in public hospitals. The first contextual limitation is the inherent complexity of delivering high quality, safe, and affordable modern inpatient care in a hospital setting. The second contextual limitation is a set of specific market failures in public hospitals, which limit the scope of the standard financial incentives and reform measures. The third and last contextual limitation is the unique problem of generalized and localized anxiety, which accompanies the delivery of medical services, and which suffuses decision-making on the part of patients, medical staff, hospital management, and political actors alike.
This combination of six institutional characteristics – three structural dimensions and three contextual dimensions – can help explain why public hospitals are different in character from other parts of the public sector, and the scale of the challenge they present to political decision-makers.