Foundations of Healthcare Management

Often, individuals with clinical expertise become managers; however, they generally do not have a background in business. They may struggle with shifting their focus from individual patient care and following the directives of others to considering how their unit advances organizational initiatives and how they will manage personnel, oversee resources, and make financial decisions. In contrast, persons with business expertise may become employed in healthcare and lack an understanding of the impact of health issues on persons, families, communities, and society. They may struggle with shifting their focus from maximizing profit and overseeing processes related to selling products and services to considering how their decision-making affects patients' health and quality of life (Khan et al., 2023).

This course aims to present foundational business concepts from a healthcare perspective that clinicians and business persons can apply in their management roles. Topics covered include the unique aspects of management in healthcare, provision of effective and efficient healthcare services, promotion of excellence in the delivery of healthcare, fostering outstanding employee performance, wise use of physical resources, promotion of organizational fiscal success, creation of collaborative relationships and partnerships that advance healthcare initiatives, and strategies of excellent healthcare leaders.

Unlike many industries in which the primary goal is to maximize profit, in healthcare, the goals are two-fold:

• To ensure individuals and society are as healthy as possible and
• To maximize profit.

While many believe at least some level of healthcare is a human right, we live in a capitalistic society where one must pay for goods and services. This results in tension between individuals seeking healthcare, third-party (insurance) payers, healthcare businesses, and the government, which oversees and regulates healthcare(Decker et al., 2020; Gaffney et al., 2023). Healthcare managers must be aware of this tension and meet the needs of all stakeholders to whom they answer.

Healthcare managers should identify and understand where they fall along the spectrum from those who believe everyone should have access to healthcare regardless of their ability to pay to those who believe healthcare should be considered a marketable commodity that should be provided based on market value (Decker et al., 2020; Gaffney et al., 2023). Once they have examined their values, managers should consider their reasons for becoming leaders in a healthcare organization. Clinicians should determine their motivations for leaving clinical practice and becoming administrators. Individuals with a business background should evaluate their reasons for choosing to become an administrator in the healthcare industry. Motivations for becoming a healthcare manager may be to improve the health and lives of those they serve, advance their careers economically, gain power within an organization, grow professionally, and improve the quality of their personal lives (Ofei et al., 2023; Priyanka & Shyamaladevi, 2021). Healthcare managers should examine how their values and motivations may shape risk tolerance and decision-making (Ofei et al., 2023). In most cases, healthcare managers have a mixture of motivations; therefore, each person’s risk tolerance and decision-making may vary based on values, circumstances, and organizational culture.

Whether their managerial unit provides healthcare delivery or supportive services or not, healthcare managers must ensure that their team functions effectively and efficiently. Effectiveness is the degree to which desired outcomes are achieved. Efficiency is accomplishing goals without wasting time, effort, or resources. Once the efforts of a team consistently yield positive outcomes, healthcare managers should focus on developing efficient processes that maintain those excellent results (Kunnen et al., 2023). As individuals and teams demonstrate effectiveness and efficiency, healthcare managers should acknowledge and reward them for their success.

Monitoring effectiveness and efficiency in healthcare is an ongoing process. Attributes that managers may be expected to assess routinely include safety, timeliness, effectiveness, and efficiency. However, healthcare managers are also increasingly asked to measure their units’ impact on equitability and patient-centeredness. Because the measurement of equitability and patient-centeredness is relatively new, managers may be afforded some level of creativity in evaluating how their division contributes to these attributes (Khan et al., 2023; Thomas-Craig et al., 2020). Achievement of safety, timeliness, effectiveness, efficiency, equitability, and patient-centeredness may be measured by select indicators, such as surveys, statistical monitoring, and adherence to regulatory and accreditation standards (Thomas-Craig et al., 2020). (Please see Table 3.)  Managers should ensure that all team members are involved in selecting or, at a minimum, understand the rationale for the quality measures and indicators used to assess and monitor effectiveness and efficiency. A performance review for each metric should occur continuously and systematically and be used to change and improve processes and outcomes (Khan et al., 2023; Kunnen et al., 2023). Organizations that integrate computer systems, such as electronic medical records, financial and reimbursement, and inventory and supply ordering and management, may experience increased communication, productivity, effectiveness, and efficiency.

* Identifies relatively new quality measures.

Healthcare administrators set the tone for unit and organizational culture at all levels. The culture they create and maintain largely depends on where they fall along the healthcare payment spectrum (available to everyone versus available based on ability to pay) and their motivations for choosing to become a leader in the organization. When leaders are more dedicated to their self-interest than the greater good, building a team focused on furthering the organizational mission is challenging. Excellent managers understand their motivations for seeking their position within the organization and prioritize improving the health and lives of others as part of their personal and professional goals. Employees observe the decision-making and behavior of their supervisor and ascertain whether their manager is committed to excellence in healthcare. Self-reflective leaders who are committed to the greater good foster that same value and behavior in their employees.

A healthcare manager may categorize and measure excellence in six arenas (Colbran et al., 2019):

1. Managerial unit’s contribution to achieving the organization’s mission and purpose.
2. Quality of service with an emphasis on excellence.
3. Finances with a focus on reducing expenses and generating revenue while ensuring outstanding service.
4. Meeting the needs of stakeholders, including recipients of healthcare services, community partners, political entities, and members of the organization’s board of trustees.
5. Promoting professional growth, collaboration, and innovative ideas in team members.
6. Employee involvement in unit and organizational decision-making and benchmarking.

For each area, the manager should guide the selection of measures to determine the unit’s contribution to organizational excellence. Achievement and maintenance of excellence require ongoing monitoring and adopting strategies designed to promote improvement (Kunnen et al., 2023).

Another way healthcare managers may analyze the value a unit contributes to the organization is by using a balanced scorecard approach. The four components of a balanced scorecard approach are:

1. Business processes
2. Customers
3. Finance
4. Learning and growth

The steps for evaluating each of these areas are to (Khan et al., 2023):

1. Identify organizational initiatives that will improve quality and value.
2. Define objectives for each initiative.
3. Identify measurable key performance indicators for each objective.
4. Develop an operational plan to implement strategic activities.
5. Evaluate processes and outcomes based on whether they advance organizational goals.

The mission of a healthcare organization is to promote the health of the individuals, families, communities, and populations they serve. The healthcare manager should understand how the unit they oversee advances the organization’s strategic plan, vision, and mission. The leader should work with their team to develop a strategic plan that aligns with the organization’s strategic plan and showcases the value the unit adds to meeting the agency’s mission. The healthcare manager should also design operational details and unit workflow to be effective, efficient, and advance organizational excellence. Ultimately, the quality of service provided by each unit in a healthcare agency influences the excellence of patient care and patient outcomes.

Human resources practices, from hiring to termination, should reflect best practices, transparent communication, and employee success (Hanners, 2023). Healthcare managers are responsible for creating a culture of fairness, respect, civility, inclusivity, and excellence. Those managers who focus on treating employees fairly, empowering employees to have the authority and responsibility necessary to carry out their role, fostering open and respectful communication, supporting opportunities for professional development, and being kind to employees when they undergo difficult life circumstances often find their employees are loyal to them and the healthcare organization. They may also note that their employees consistently show up for work, are productive team members, and support and empower others (Upadhyay et al., 2022).

A healthy unit and organizational culture promote employee retention and productivity, leading to quality care, achievement of health outcomes, decreased cost, and increased revenue (Hanners, 2023; Ofei et al., 2023). The cost of turnover for each employee is estimated to be approximately $20,560; therefore, retaining talented employees saves healthcare organizations money. In the United States, healthcare organizations lose over $23 billion annually due to employees quitting their jobs. This turnover is primarily attributed to management that does not ensure fair and proportionate workload, collegial relationships with other healthcare team members, opportunities for career advancement, and the ability to effectively meet patients’ healthcare needs (Ofei et al., 2023).

The leadership style of the healthcare manager is a significant factor in employee job satisfaction and is directly associated with the retention of employees (Ofei et al., 2023). (Please see Table 4.) Excellent healthcare managers promote a sense of responsibility and belonging in their employees. Engaged employees feel secure and valued. In turn, they improve organizational effectiveness and efficiency by being mission-focused, positive, collaborative, innovative, and productive individuals. Healthcare managers should inspire employees to believe their work is meaningful and contributes to advancing organizational priorities. They should also be kind and supportive of their employees’ goals and needs. Engaged employees are accountable and focused on excellence in healthcare delivery (Priyanka & Shyamaladevi, 2021).

In healthcare systems, a manager should build a cohesive team that advances the organization’s strategic plan, vision, and mission. The most productive teams respect and appreciate differences in members’ ideas and work styles, address conflicts directly and kindly, and focus on the unit’s goals and responsibilities. Each employee and team should know how they contribute to improving health outcomes and be valued for those contributions (Veazie, 2023).

A health manager ensures effective and efficient use of space, equipment, supplies, inventory, and other resources. Costs of physical resources are increasing at a rapid rate(Veazie, 2023); therefore, to promote unit and organizational profitability, healthcare managers must accurately identify what physical resources are necessary, how those resources should most effectively and efficiently be used, and how to obtain these resources in the least costly way possible (Ali, 2022). Ultimately, the healthcare manager is responsible for procuring adequate physical resources and documenting that physical resources are used appropriately.

Healthcare managers should include their team in determining necessary resources and carefully selecting, effectively utilizing, and evaluating the costs and benefits of each physical resource. Employees included in the resource decision-making process are more likely to use resources effectively and efficiently than those not (Kunnen et al., 2023). When appropriate, the manager should evaluate the use of space and configuration of furniture with a team of employees.  Equipment should receive preventive and scheduled maintenance and routine inspections to identify issues. Team members should be consulted to determine what supplies and equipment are needed, when supplies should be reordered, and where they should be stored or located (Ali, 2022).

Specific areas of waste that healthcare managers should reduce or eliminate include errors, unnecessary movement, waiting, and unnecessary inventory or supplies. Correcting errors requires energy and time that could be used to improve services. For example, suppose a patient receives an incorrect medication. In that case, additional monitoring is needed to prevent, identify, and treat potential adverse outcomes, and valuable time is spent documenting the error and determining strategies to prevent future medication errors. Utilizing space so employees, patients, equipment, and supplies require the least movement promotes efficiency. In general, items used every hour should be within arm’s length, items used once a day should be within a short walk, and items used less frequently should be stored in a central area. System- and workflow should be designed to minimize waiting for patients, families, and employees. Waiting is both inefficient and frustrating. Frustration diverts mental and emotional energy from productive endeavors. Unnecessary or out-of-date inventory or supplies take up valuable space that could be used for relevant purposes. Reduction of these and other inefficiencies has been shown to reduce hospital nurses’ wasted time from 3.5 hours to 1 hour in an 8-hour shift (Ali, 2022).

Healthcare managers are responsible for developing and adhering to a budget and ensuring fiscal documentation and accountability. They may also need to be able to secure fiscal resources through grants and advancement. Healthcare organizations have significant expenses and often fail to receive expected revenue. For example, since 2000, hospitals have provided $745 billion in uncompensated care throughout the United States, and payments from Medicaid, Medicare, and private insurers have been reduced. Financial operations must often be maintained without additional funding and with delayed reimbursement (Veazie, 2023).

Managers who focus on healthcare excellence will achieve high levels of patient satisfaction and staff productivity and add fiscal value to their organization. Good healthcare management practices make good business and financial sense. A correlational study using a national sample of 3,594 hospital-year observations examined the effect of strategies that promote a culture of inclusivity, diversity, and equity. Findings revealed that hospitals with culturally competent leaders and staff had statistically significantly higher operating margins and profitability than those that did not embed inclusivity, diversity, and equity into hospital culture (Upadhyay et al., 2022).

Excellent, effective, efficient operations improve profitability by increasing a healthcare agency’s competitive advantage. Individuals expect to receive outstanding care that improves their health and is delivered professionally, competently, courteously, and timely. Healthcare managers who proactively adjust all operations of their unit so they exceed expectations are more likely to be successful than those with a more passive and indifferent approach to customer service. Doing things right the first time efficiently utilizes personnel, time, and physical resources, decreases cost, and increases revenue (Ali, 2022).

Healthcare products or services should add value to the lives of individuals and their families. Healthcare managers should talk with patients and other stakeholders and adjust services based on the information provided. Generally, patients report they want services that result in improved health and are reliable, accessible and provided pleasantly and respectfully. When services meet customers’ needs and exceed their expectations, they will likely be loyal customers. Retaining patients is five times less expensive than recruiting new patients (Ali, 2022).

Healthcare organizations that focus on efficient processes reduce waste and increase profitability. Waste is categorized as defects or errors, overproduction, inefficient transportation, waiting, excess inventory, unnecessary movement, doing work that does not add value to the organization, and inadequately using employees’ skills and talents. Healthcare managers should identify waste, work with their team and others to reduce waste, and determine the quality and fiscal effect of improving processes (Ali, 2022).

A healthcare manager must develop and maintain collaborative internal and external relationships and partnerships that advance the unit’s organizational contributions (Kee et al., 2023). A healthcare manager should ensure that personnel display collegiality and share ideas and expertise with internal and external stakeholders. Many individuals, groups, and organizations believe that collaboration improves the quality and quantity of healthcare services that an organization can provide; however, major barriers to collaboration include a culture of competition, limited time to establish and maintain partnerships, differences in mission and regulation, inadequate funding, power differences, and lack of clarity about the responsibilities and mutual benefits of working together (Gidlow et al., 2024; Kee et al., 2023). Healthcare managers may promote collaboration by accurately communication with partners promptly, educating staff about collaborative strategies they can implement, modeling working well with other organizational units and outside agencies, and evaluating and sharing outcomes of collaboration(Gidlow et al., 2024).

Effective and efficient management and leadership are challenging because of the complexities of the healthcare system; however, a clear vision for the managerial unit, emotional intelligence and integrity, and excellent communication skills will enable managers and the units they oversee to be invaluable to the healthcare agency they serve (Santa et al., 2023). Healthcare managerial behaviors and decisions profoundly impact the health and quality of many individuals’ lives; therefore, excellent leaders continually examine and adjust their actions to achieve desired outcomes.

New healthcare managers should have mentors in different arenas, such as fiscal, personnel, and strategic areas. They should also participate in structured training programs that provide knowledge and apply evidence-based best practices for healthcare leaders. Specific training may include clear and professional communication, effective conflict resolution, managing difficult or dangerous situations, and fostering emotional intelligence (Ofei et al., 2023).

Many healthcare leaders mistakenly believe they listen to and hear the concerns of patients, employees, and other stakeholders. However, they may be juggling multiple responsibilities and unable to divert their attention to be fully present with someone else. They may also have difficulty recognizing that their perspective may be only one way to view an issue or that they do not have all the answers to their unit's problems. Leaders may not be able to drop everything to hear the concerns of others, but they should prioritize listening over other responsibilities when a time-sensitive safety issue is involved. When they cannot stop what they are doing to listen to others, they should follow up as soon as feasible. Most importantly, they should put their perspective, biases, and filters aside and endeavor to understand the perspectives of others (Ofei et al., 2023).

They should realize that the factors they use to define excellence are only one method of determining excellence. Others who work with and for them may view excellence differently. Colleagues and employees appreciate consistency and predictability in a healthcare manager’s behavior so they understand acceptable norms. Leaders who solicit input from others, listen to and understand different viewpoints, and remember the issues raised by each stakeholder make wise decisions and engender confidence in their leadership. Clinicians who have worked their way up in a system may have had many jobs in the organization, which can predispose them to favor areas in which they have experience or have developed relationships and micromanage employees in areas in which they are less comfortable. Healthcare managers often select new hires based on “goodness of fit.” They should recognize that this hiring criterion can sometimes lead to homogeneity of thought, exclude diverse individuals and ideas, and lead to monolithic thought and decision-making (Geisler, 2023). Conflict is inherent when working with people, so healthcare managers must be adept at handling conflict fairly, reasonably, and objectively (Ofei et al., 2023).

Twyla Bradley has been an excellent inpatient nurse at a large medical center for 24 years. She has always received excellent evaluations and is valued and respected by patients, peers, and supervisors. A new chief nursing officer begins work at the hospital and plans to restructure. The chief nursing officer recognizes Twyla’s clinical expertise and promotes her to unit manager. When offered the position, Twyla was unsure whether she wanted to take on the leadership responsibility. Still, she believes she could have a broader impact on healthcare, improve her financial situation, have an 8:00 am-4:30 pm work schedule, and be off work on holidays and weekends. She knows her unit and has identified many areas where patient care could be improved.

Twyla is surprised and unprepared for several changes when she begins her new role. She now has to attend a weekly unit manager meeting and a monthly meeting with the divisional nursing leader; participate in two organizational committees (the ethics committee and the quality improvement committee); organize and lead monthly staff meetings; and meet with employees, physicians, families, and others on nearly a daily basis. She estimates that 30% of her time is spent in meetings.  Then, another 10% of her time is spent following up on responsibilities and activities generated by each meeting. Twyla spends part of every day dealing with staffing and personnel issues. She has never overseen a multi-million-dollar budget and does not understand the line items or how to read her budget. She has to learn two new computer programs that managers must use. Every day, she is required to write reports, and she is overwhelmed by e-mails, phone calls, and face-to-face interactions. Her previous colleagues contact her, attempting to continue existing relationships or jockey for favors and special treatment. She works 60 hours per week, feels overwhelmed, and cannot keep up with her responsibilities. Twyla misses patient care; she liked it and was good at it.

After two months, Twyla is exhausted, overwhelmed, and embarrassed, and she feels that she is not doing anything well. After a meeting, she asked an experienced unit manager if she could talk with him. The experienced unit manager listens to Twyla’s concerns, smiles, and says, “It was like that for me, too. People wanted me to succeed and helped me. After all these years, I love being a unit manager and think I am pretty good at it. People want you to succeed. The chief nursing officer who promoted you and the divisional nursing leader wants you to succeed. I want you to succeed. Let’s develop an action plan for you. You are a great nurse and can be a great leader.” Twyla feels relieved, understood, and supported.

The action plan aims to help Twyla effectively manage her responsibilities. The experienced unit manager offers to meet with her every two weeks for one hour and be available to help with problem-solving as needed. Twyla talks with the divisional nursing leader about her concerns. The divisional leader agrees to extend their monthly meeting by 30 minutes to help her develop managerial skills. She also signs Twyla up for an organizational program for new managers. Twyla is delighted with the help she is receiving and begins to tackle each of her responsibilities with confidence that if she does not know how to do something, someone in her organization can guide and help her. Over time, she becomes organized, adheres to a schedule, sets boundaries with employees, becomes poised and confident in her communication skills, is adept at effectively and efficiently managing physical and fiscal resources, and learns how her unit advances the medical center’s goals and initiatives.

She posts her mission statement on the office wall above her desk: “Every day, make patients, families, and employees' lives healthier. Be kind, respectful, and patient.” Part of her morning routine is to read her personal mission statement before her day starts. Every evening on her way home from work, Twyla reflects on how she met and could improve in meeting her mission. After several years, she is approached by a new unit manager who bursts into tears and says she is overwhelmed. Twyla thinks about how she felt when transitioning from patient care to healthcare management, listens to the new unit manager, volunteers to mentor her, and thinks, “I love nursing and patient care, and I love being a unit manager.”

Mike Benson was a focused and driven business student. He excelled in school and was encouraged to obtain his master of business administration degree. He thought he would graduate, make a lot of money, and become a well-respected community leader. However, after graduation, he applied to over 70 jobs before being offered a fast-food manager position. The hours were grueling, and the pay was low. However, he was happy to have the job and soon learned how to ensure that customers received a great meal and had a positive experience at his fast-food restaurant.

After two years, Mike’s is the most profitable of the 12 restaurants in his region. He feels confident in his business skills and begins looking for a new job. He finds a job overseeing a warehouse and develops effective and efficient supply chain skills. He adds value to his company, but eventually, Mike decides to take another job as a financial planner for an established national financial firm. His clients’ investment portfolios make money, and Mike becomes a top earner at his branch. He is well-liked and respected for his business expertise. By now, Mike is in his mid-30s and looking for a new opportunity.

A friend tells him about a job as a financial manager for a long-term care company with six centers. He will start out overseeing the finances of one of the centers. Mike is excited because he can increase the profitability of the center. He believes that long-term care services are a marketable commodity that should be provided based on market value. He reports to the company’s chief financial officer and meets the center’s chief executive officer (CEO), with whom he will work closely. The center CEO shows him around the site, and he meets the chief nursing officer, nurses, and nursing staff; the director of dietary services and dietary staff; the director of maintenance and maintenance staff; the director of cleaning services and cleaning staff; and activities, therapy, transportation, and clerical staff.

The center’s CEO arranges for Mike to meet with older patients and their families. As he asks them what services matter most, he hears about their physical, emotional, and social issues. He learns that without this center, many of them would be isolated and unable to independently meet their basic daily needs. He learns that family members are grateful for the center, but many feel guilty that they need help providing for their loved ones.

Mike views this job in the healthcare industry as his other business job. He sees his goal as maximizing profit. He soon learns that his ability to raise revenue is somewhat restricted, so he decides to institute cost-cutting measures. The chief nursing officer protests his decision to cut nursing positions and freeze salaries and says his decisions will jeopardize resident safety and promote increased staff turnover, which is costly and detrimental to resident care. Mike dismisses her concerns and comments that nursing personnel is the most expensive cost and should experience the biggest cuts. The director of dietetic services complained that the food quality would decline, decreasing residents’ health and quality of life. All of the other directors are angry about the cuts.

The center’s CEO is delighted that profits have increased dramatically since Mike arrived but is concerned about the quality of healthcare residents receive and the deteriorating staff morale. She talks with Mike about her concerns and explains that cutting costs across the board without collaborating with directors from the different divisions in the healthcare industry could adversely impact residents’ health outcomes and quality of life, which could result in malpractice and regulatory issues. She recommends that Mike attend a training program for long-term care fiscal managers and join their year-long mentorship program. Mike has been frustrated by the pushback and conflict resulting from his doing his job and ensuring profitability, so he agrees to go to the training program and engage in the mentorship plan.

He learns to examine himself and think about his values, drives, behaviors, and emotions in a way he has never previously done. He learns to collaborate with the chief nursing officer, directors, staff, and residents to understand and respect their perspectives. Mike realizes that their perspectives are not profit-focused but healthcare-focused. He has learned about significant healthcare, nursing, and long-term care regulations. By the end of the mentorship program, when talking with others, Mike says, “My job is to ensure that the center has reasonable profit, remains competitive, and enables you to provide quality services that promote residents’ health and quality of life.” Over a few years, Mike reflects on his job and says, “Helping residents and their families have the best experience we can provide is challenging, but is also very rewarding both personally and professionally.”

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