Framing the question
Hospitals are hard organizations to change. Publicly owned and operated hospitals even more so. In many countries, both managers and staff anticipate, despite constant calls for improvements in efficiency, quality, and responsiveness, that little will be different tomorrow or next year. Similarly, politicians, seeking to outflank these intra-institutional expectations, have learned to introduce major reforms early in their term to maximize what leverage they have over public hospital managers and staff.
This creates a narrow window for organizational change in public hospitals which, combined with the standard political hazards [
1], still has only a relatively low probability of success, and thus further reinforces the view of hospital management and staff that ‘this too shall pass’.
Conversely, while public hospitals remain broadly insulated from major policy-driven change, there continues to be rapid successful change in the practice of medicine. This can be seen in clinical treatments, diagnostic technology, in reduced lengths of stay and increased ambulatory treatment, all in spite of a shift to patients being older, more complex and with increasing amounts of chronic disease.
Taken together, these conflicting trends result in most public hospital change being technical and functional rather than organizational and institutional. Even as clinical responses change relatively rapidly, departmental and institutional routines remain broadly insulated, ensuring organizational stability for many regular daily activities. This can be an important positive from the perspective of hospital staff, and, sometimes, patients, but not always for the latter if it means long waits in a traditional outpatient department or the other tedious things that patients have to do to accommodate ingrained hospital routines. In routine operating aspects, stability also can mean organizational stasis and inertia regarding clinical issues as well as larger policy and management objectives – an important negative from the perspective of health sector reform [
2].
This intricate pattern of public hospitals’ internal resilience and external resistance can be observed in a variety of countries and in a range of different financial and institutional circumstances. Among the most visible examples have been the mixed success achieved over the past 20 years to eliminate unacceptably long waiting times for elective procedures in English and Swedish hospitals [
3,
4]. Further examples can be observed in the slow pace of organizational and institutional change in public hospitals following major reform in the English NHS [
5] and resistance to structural change in the Norwegian [
6] health systems; the unsteady development of hospital level semi-autonomy in some newly built hospitals in some Spanish provinces [
7], and the complexity of introducing elements of institutional self-management in Estonia [
8]. Examples of similar reactions to efforts to introduce major organizational change can be found in Portugal [
9] as well as in Israel [
10].
Academics have proposed a range of theories to explain and/or mitigate this common public hospital behavior. In the early 1990s, there was discussion among political scientists about path dependency as the source of institutional obduracy [
11,
12] as well as the potential value of “big bang” as against “incrementalist” approaches to generate change [
13]. The early 1990s also saw the rise of New Public Management theory, calling for private-sector-derived managerial strategies such as contracting out services [
14] and “steering not rowing” in the organization of public sector service provision [
15]. Public Administration theorists explored why contracting in public sector institutions, once introduced, was difficult to manage effectively [
16]. More recently, ideas from complexity theory have been invoked [
17], although these perhaps have more utility in explaining why organizational change is so difficult than they do in identifying strategies that might achieve it.
Inside the health care sector, a variety of fiscal and regulatory solutions have been put forward to try to address this conundrum. Paying hospitals according to Diagnostic-Related Groups (DRGs) changed the financial incentives for hospital managers [
18], and, in some cases, clinicians. Attempts were made to increase the power of these incentives by adding pay-for-performance to DRGs to target hospital staff behavior more effectively [
18,
19] so as to reflect different value streams within healthcare [
20].
Throughout this period, turning away from public sector control by creating semi-autonomous public hospital management [
21], private sector contract management for public hospitals [
15,
22], privately built and managed but publicly paid new public hospitals [
23,
24], and also full privatization of existing public hospitals [
25,
26] have all been suggested and, in a number of countries in different circumstances and with a wide range of limitations, introduced. Simultaneously, in tax-funded health systems like England, a panoply of new regulatory bodies were established (National Institute for Clinical Excellence (NICE); Commission on Health Improvement (CHI); Monitor; Care Quality Commission; etc.) to try to rein in poor quality and/or inefficient managerial practices in individual institutions.
All of these measures have had at least some effect on hospital behavior and institutional outcomes [
27,
28]. This has been generally positive but the effect has often been less powerful than expected and not necessarily what was intended [
29]. However, most evoked reaction from the forces of institutional status quo, and nearly all have had a relatively short half-life in generating effective organizational change [
30].
This complex response from public hospitals is not always inappropriate or misguided [
31]. Many of the characteristics of successful organizations and professional and managerial practice can easily tip over into behaviors that thwart change. This poses questions which are a core governance issue for both policy and management in public hospitals: when does the positive and necessary need for day-to-day organizational stability decay into a negative and obstructive form of organizational stasis?
a)
Where is the boundary between organizational resilience and organizational resistance?
b)
When do appropriate professional interests and caution evolve into inappropriate resistance to change?
c)
When does organizational or professional culture cross the line into territorialism?
d)
When does the hospital’s concern about income stability become protectionism?
e)
When does top-down regulation become unhelpful interference in essential managerial prerogatives?
Who makes these decisions, and what type of response is possible? In privately owned hospitals, responsibility rests with senior management, and their jobs may well depend on how rapidly and effectively they respond. But how does this major institutional process play out in public hospitals?
This paper’s approach
This article sets out a framework for conceptualizing why public sector hospitals are so hard to successfully change and suggests a pathway toward better strategies to address these issues. It makes two tightly intertwined arguments.
The article’s first contention is that, to date, there has often been poor specification of the problem. In particular, the traditional metaphors or analytic frameworks used to steer decision-making for public hospitals continue to be conceptually limited and insufficient for thinking about the problems they are supposed to frame.
The second argument examines the core structural problems that public hospitals present. The paper contends that there are 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 come together in an institutional environment shaped by a set of three external contextual factors that further constrain effective management and reform of public hospitals.
The first contextual limitation is the inherent and increasing complexity of delivering high quality, safe, and affordable modern inpatient care in a hospital setting and across organizational boundaries [
32].
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. These mechanisms are also often in conflict with the role of professional medical authority (which has been already discussed above as the second structural limitation in hospitals).
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.
Thus the paper’s second argument is that this combination of six institutional characteristics – three structural dimensions and three contextual dimensions – helps explain why hospitals generally, and public hospitals in particular, are different in character from other areas in the public sector, and the difference in the demands they place on political decision-makers. It also suggests the importance – indeed the primacy – of sophisticated organizational level management as the key building block of effective public hospital behavior, and the consequent importance of correctly aligning policy to facilitate that core central objective.
The central argument of this paper can be summarized, then, as follows. First, existing standalone analytic frameworks inadequately describe the policy and management quandary that public hospitals present. Second, the three plus three analysis delineated above provides a better (but probably still incomplete) framework for understanding and re-directing public hospital decision-making and outcomes. The sections that follow below explore these ideas in more detail.