Victoria Hospital Redesign Initiative

Case Study Solution

14th March 2013

GROUP NUMBER FIVE FATIMA AJMAL SYED NAUMAN UL HAQ HAQQI NAYYARA RAHMAN

VICTORIA HOSPITAL REDESIGN INITIATIVE Executive Summary and Background: Victoria Hospital was a major hospital in South-Western Ontario. In addition to being a core community health provider, with up to 500,000 patients treated annually from the province and region, it also provided specialized health services, ambulatory care services and was successful in attracting a workforce of highly qualified medical professionals, especially consultants. It pioneered medical research, allocating $7million in research grants per year. Up to 1,100 students benefited from its medical teaching annually, in over 20 disciplines. Collectively, more than 4000 employees provided the bulk of healthcare services that made Victoria Hospital indispensable to the people of South Western Ontario. Together with its Teaching Hospital Arm, extremely healthy doctor: bed ratio (almost 1:1), Victoria Hospital could be seen as an Institutional Pillar of Health Care in Ontario. Unfortunately, this role was not upheld (or valued) universally. Its principal source of fundingthe Provincial Government had been retrenching funding assistance generally, and in particular, sought operational efficiency as a criteria for fund allocation. Though Victoria Hospital had succeeded in balancing its budget for 13 years, this was not enough. Funding continued to decline, its fee structure was unfavorably altered, (thereby losing its benefit as a Teaching Hospital) and its aim to consolidate both wings of the hospital was thwarted. Issues: Ostensibly, Victoria Hospitals issues were fairly obvious: Issue Decreased and declining funding by the government, which was reflective of the overall economic condition of Ontario. Cost restructuring and expansion. This was the product of several internal/external developments: Prior rapid expansion (before 1995-96)Capital outlay carried over Capital expenditure in clinical and technological advancements Delisting of revenue generating health services High internal costs in salaries and wages (70% of the total budget) and this was expected to rise! Teaching benefit replaced by standardized fee. Proposal to consolidate two wings of hospital, at $100 million rejected. If implemented, it would bring savings of $2-4 mill annually. The hospital incurred the highest cost in the province. Business moving to consultants and physicians Government recommendation to move cardiac and neurosurgery to University Teaching Hospital Conventional vertical structure of departmental silos was not working. There was a lack of synergy in teams, a dearth of holistic thinking and needless task duplication and complexity of routine tasks. Lack of consensus between Board of Directors and a lack of cooperation amongst staff regarding strategic realignment. Area/Origin ExternalGovernment Impact Costs

Internal and external

Costs

External Internal External External

Costs and Administration/ Management Costs Revenue and patient (market) base Administration/ Management Administration/ Management Administration/ Management

Internal

Internal

Duplication of acute care teaching services No coordination of city-wide health services.

Internal External

Administration/ Management Administration/ Management

These issues did exist, in fact. But they were symptoms of the real disease, rather than the disease itself. Courses of Alternative Action: The CEO, Dr. Linden Frelick, already reluctant to downsize, was pressed to make some quick changes. He proposed the following three key measures: a) Align organizational structure via inter-disciplinary teams and strategic partnerships for seamless patient care b) Redesign system of production to cut costs, turnaround time and improve service. c) Develop high-revenue generating entrepreneurial strategies Dr Frelick was determined to realize the hospital's vision. He proposed the following steps to achieve his three broad strategic measures : A) Create prototype teams for interdisciplinary function. Based on their success, future teams could be established. B) Establish Financial Task Forces, staffed with middle managers and physicians. Their internal reception and implementation had been lukewarm and half-spirited. The Vice Presidents, who had been made change-leaders were unenthusiastic. They stalled and resisted change. There was also the apprehension that the change management process may take too long. Analysis: Dr Frelick has the right ideas---there is a need to streamline the business, make it flatter, and ensure that those on-board are utilized better. There is a need for intra-preneurial thinking within the hospital. The issue is with the way he is going about it. The problem with prototype teams is that there is still no individual performance measurement system. Hence, there is no way to observe if the silo thinking process has broken or not. It also creates the further problem of free -riding on the team, with physicians delegating tasks to other medical professionals and concentrating on research activities themselves. Two flaws exist with the Financial Task Force Teams too. The first is that they are staffed with middle managers and physicians. i.e. people who are workforce intermediaries. They are not action-driven (like lower level staff); and they lack the authority to take strategic decisions (like upper-level staff). They can make recommendations at best, and as we have seen, the hospital workforce is deeply talented in being able to ignore and override those. The second flaw is that all of whom [Task Force members] were conducting their regular duties in addition to the new challenges of the redesigned initiative. They are not dedicated resources to this initiative. The physicians are already divided between their research and medical practice responsibilities. Now, with a third obligation can we expect to see some real action from them? Dr. Frelick has also concentrated most of the change initiative inward. His attitude towards government funding has been passive and accepting. This is wrong. The hospital already has a very positive record and has given the government no cause for the declining funding. Further, as the case mentions, the

decreased funding was a result of government payments towards elderly care and pensions which typically is the demographic that needs the most healthcare expenditure worldwide. With low federal investment in Ontario, the province needs self-sustaining revenue-generating organizations. And Victoria Hospital is already one of themit is owned by a 130-member corporation. Dr. Frelick needs to promote a more positive image of the hospitaland the aforementioned suggestions make no mention of that. There is a lot of conflict-of-interest at work too. Research is cannibalizing resources that could be spent on treatment. But no alternative action to this has been proposed. Yet there is no evidence that the funding being directed to research contributes to the hospitals direct profitability or not. Perhaps $7 million is too large an amount to direct to research alone, and this could be revised and re-directed to hospital reengineering. There is already a movement towards out-patient and ambulatory-care services in the local health industry. i.e. healthcare is going from brick-and-mortar to click and mortar. So perhaps Dr. Frelick should re-think the need to consolidate both hospital wings, and should either divest of the research wing. Alternatively, the researchers could self-fund the research wing by going on lecture tours, teaching in other areas etc. This would cost less than the current $100 million, and would generate much more than the current saving of $2-4 million per year. A common flaw in the suggestions was that they failed to identify the Act-Actor Gap. The result was that several uninterested stakeholders were brought on board, whereas more interested (and effective) stakeholders were left out. To fulfill full capacity utilization, re-think the role of other medical professionals in the hospital. Big management breakthroughs were coming from nurses, not doctors. Nurses were already active in administration. Patients preferred nurses to physicians, as mentioned in the case. Further, each medical function operated with assistance from 60 service departments. So it was wrong to allocate so much importance and funding to one field in medicine (ie research and consultancy) while downplaying the importance of the rest. In redesigning systems of production, implementing the Patient Care Guidelines And Pathways Effort would bring in the following benefits: Research based recommendations Deliver similar care to patients with similar conditions (cost and resource efficiency and standardization) Made clinicians work together Reduced complexity and duplication Online coordination of clinical information

If implemented, this could break the silo-thinking that prevailed. To make it truly effective, evaluation and management of employees would have to stop being department-specific, and be made team-specific. Currently, physicians were not interested in administration, yet blamed admin for failing inter-disciplinary teams. This would bring in more individual accountability.

Recommendations: The discussion has established that while the hospitals income was declining, the demand for its services was not. People would continue to fall sick, and patients would continue to be under the hospitals care. It was also established that both internal and external inefficiencies were contributing to the escalated costs of the hospital. To counter these, the truest option was not to stop or decrease health service offering, but to redesign it so that it reflected Victoria Hospitals vision of a caring, resource-efficient, progressive and contemporary healthcare organization. This would address its external stakeholders (patients, government, and the competitive scenario). Recommendations must also consider a way of best utilizing and sustaining the hospitals internal stakeholders (physicians, consultants, nurses and other health professionals and the management staff). It was time to evaluate how these internal stakeholders could be best used, and how their contribution could be used to weather the current financial crunch the hospital was undergoing. Recommendation 1 Permit stock options for the Vice Presidents Motive Purpose/Objective Impact Area Required Victoria Hospital is already It will bring in muchCosts and a 130-member company, needed revenue and will Revenue owned and operated by provide a direct incentive Victoria Hospital to the Vice Presidents to Corporation. So the stock contribute more actively to option facility should the hospitals profitability. already exist. No extra-legal It will also make them less legwork required resistant to efficiency measures The local market scenario Full capacity utilization of Management; was towards out-patient consultants Marketing and and ambulatory care Revenue services, which meant that current in-house capacity was idle (i.e. being wasted). To receive fair funding so that the business-processreengineering process can be completed without compromising quality To capitalize on an existing demographic: Government funding was going to pensions, and employee benefit, so this was a very lucrative area A reason Dr Frelicks team and BoD has resisted his suggestions is because he comes across as someone with a soft approach. This abrupt measure would make Cost effective resource allocation Costs; Change Management

Export and aggressively market health/consultancy services to other provinces. The hospital already had a specialty in Womens and Childrens Care, Cardiac, Life support, Cancer Care and Trauma Aggressively promote Victorias services via a marketing campaign, particularly to the public sector. Promote elderly care services, such as physiotherapy and cardiac/orthopedic care

Ability to resist divestment of cardiac unit (as proposed by the government)

Revenue; Marketing

Absorb (or threaten to absorb) staff laid off by other hospitals

Staff laid off by other Cost, Human hospitals would be cheaper Resource to absorb, and it would be easier to replace the current staff

Slash research funding; make it self-sustaining

Move towards preventive care practices (eg gyms, recreation, psychology).

Redesign evaluation criteria for physicians

Move to outpatient services; focus on ambulatory care rather than hospital stay. Patients are increasingly well-informed about treatment alternatives.

10

Increase role of nurses

them sit up If doctors have to pay for their research projects themselves, they will be a lot more interested in medical practice-which will help generate those funds. They will also be interested in choosing projects that have the most immediate relevance to medical practice In the given economic condition, Ontarios leisure industry (clubs, sports centers etc) were likely to have experienced a blow too, so there was a market for a cheaper, healthier avenue of exercise etc. No additional investment needed by Victoria To make them serious about medical practice, evaluation should be functional-team specific, and not department specific This would free resources (bed, ward staff); accede to the patients wish to participate in the treatment plan. It would also diminish the hospitals obligation, since the decision making process closely involve the patient The Regulated Health Professionals Act gives opportunities to 22 medical professional areas

To streamline research; make funding more relevant

Cost, Capacity Utilization; Clinical Innovation

Better resource usage of idle capacity (eg physiotherapy units)

Capacity Utilization; Revenue Generation

Salaries take up 70% of the budget. This is a way of making sure that money is well spent Decreased legal spending; decreased capital expenditure

Cost; Human Resources; Administration

Cost; Marketing

It would be cheaper to appoint/promote nurses in charge of staff management than physicians. It would get better results too

Cost, Capacity Utilization, Human Resources