Options for Hospital Administrators

Published October 1, 2005

Defensiveness and rationalizations will make an administrator look guilty when the television cameras are rolling. Experience from the insurance wars of the early 1990s suggests a number of things hospital administrators should be doing right now to survive the coming battles.

1. Out-reform the reformers. People in the hospital industry cannot think everything is hunky-dory right now. Regulations add costs and inhibit innovation. Price pressure from payers makes it difficult to stay solvent. Management systems are obsolete and inefficient. Think about what an ideal system would be. Clear the slate and design it from scratch. Then think about how to get there from where we are today.

2. Put the consumer first. Hospitals are in business for one reason only: to take care of patients. Nothing else matters. Don’t worry about payers, suppliers, medical staff, politicians, or the media. Become the world’s strongest consumer advocate.

3. Prices matter. Prices are not a punishment for consumption, but a measure of value. The price of a service is a powerful signal that incorporates a lot of information into a simple number. It incorporates information about labor markets, scarcity of resources, the cost of transportation, the weather in Brazil, the regulatory environment, and an infinite number of other factors. How much money you accept for a service and how much people are willing to pay speaks volumes about the value of what you do.

4. Redistribution of wealth is not the business of a hospital. Cardiac and maternity patients should pay for the services they consume. They should not be forced to subsidize the trauma center. If the trauma center cannot pay for itself and the community values it, let the community pay for it.

— Greg Scandlen