Healthcare Reform



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The healthcare sector in the Middle East is undergoing rapid and profound changes. It may even be argued that the changes are too rapid and are leading to confusion rather than progress. Regardless, change is certainly needed – as the top down, central, all-paid-for healthcare model in most middle eastern countries is not sustainable. There are two reasons for that. First, the current rate of increasing costs is high, and second, the inherent inflexibility and inefficiency that results from the labyrinthine bureaucracy associated with a large centralised healthcare system cannot keep up with the rapidly changing landscape of modern medicine. As such, a different model is needed and some countries in the Middle East are opting for a mostly privatised healthcare model similar to the United States. Whether or not the United States’ model should be emulated, lock stock and barrel, is an expansive topic of discussion in and of itself, and is beyond the scope of this article. However, regardless of which model is adopted, middle eastern countries can certainly benefit from the vast experience in healthcare management that countries like the United States have accumulated. However, in order to benefit from such experience, a clear and well thought out strategy is necessary. Here, we will discuss how that strategy may be arrived at.

Strategy is not planning. Strategy is not a detailed plan or set of instructions: rather it is a unifying theme that gives coherence and direction to the actions and decisions of an individual, an organisation, or a country. Successful strategies usually demonstrate four common factors[1].

Goals need to be simple, consistent, and long term. In the development of healthcare in the GCC, for example, what is the goal? Is it to provide healthcare for all individuals in the country? Is it to make healthcare profitable? Is it to make healthcare part of a larger economic plan? Some of these goals may be mutually exclusive and thus it is important to determine what the goal really is.

Profound understanding of the environment. It is clearly important to define, and thoroughly understand, the external realities within which this goal is to be pursued. For example, if the goal is to make healthcare profitable, then does the government have the resources (both human and capital resources) to compete with the private sector? If, however, the goal is to provide healthcare for everyone, how will government hospitals interact with private sector hospitals? Clearly, private sector hospitals have only one goal – to make a profit. So, how would government hospitals then deal with private hospitals that may transfer complicated, long term, non-profitable patients to the government sector?

Objective appraisal of resources. A goal which cannot be supported by adequate human and capital resources is useless. For example, if the government decides that the goal of healthcare development is to provide healthcare for everyone in the country, then does it have the resources to provide such healthcare delivery? More importantly, if resources are deficient, how can these deficiencies be addressed?

Effective implementation. Once the above three components are identified, then sufficient and able human resources are needed to implement the plan. The best laid strategies will be useless if clever, dedicated, and hardworking leadership is not in place.

Philosophy


Let us begin by analysing some of the important questions that need to be answered for healthcare strategy development in the Middle East.

The first important, and perhaps more philosophical, issue to grapple with is a very basic one – is healthcare a right or a privilege? Should healthcare really be a ‘forprofit’ sector in any country – and especially in those countries that can afford to provide complete healthcare for its citizens? The fact that healthcare, even in the US, is barely a profitable sector supports the contention that fewer resources should be expended trying to make healthcare profitable and more spent making it efficient – thus rendering it less costly. In fact, it may be more profitable in the long run to provide free healthcare since it leads to indirect rewards – such as improvement in a nation’s wealth, well being, and Gross Domestic Product (GDP). For example, it is clearly established that countries with high Total Factor Productivity (TFP) are generally wealthy.

This TFP equation takes into account physical capital, human capital and hours worked to determine the wealth of a nation[2]. A key component of human capital is how the workers are served by the nation’s institutions – and, in turn, a key component of these institutions is healthcare. However, one does not need such complex macroeconomic equations to understand that if a worker is always worried about how to pay for healthcare if he breaks his leg or gets sick, or how to pay for his children’s healthcare if they get sick or break a bone , that he will be less focused on his work and thus be less productive. That may not be a problem if only one or two people had this problem but if the majority of a country’s population persistently worries about healthcare affordability then such concerns clearly affect total work productivity. More importantly, it negatively impacts loyalty and dedication to their work. Work becomes only a transactional relationship. Thus, just having good healthcare coverage for all residents of a country can vastly increase worker loyalty and productivity. However, to realise such intangible benefits takes a long time and most financial planning in this day and age, unfortunately, does not take the long term view. Thus, it is important for countries to decide their outlook towards healthcare and what role they might want it to play in their economic development. In other words, should healthcare be provided as a right or a privilege?

If a government decides that the ‘forprofit’ model is appropriate for their country then another problem arises – how to maximise the efficiency of this approach to healthcare. Since the ‘for-profit’ model is a novelty for some Middle Eastern countries, they have correctly sought the advice of hospital systems in North America and other European and Asian hospital systems that are experienced in the ‘for-profit’ model. Foreign hospital management, however, brings with it other complexities. For example, how can principles of healthcare management from these countries be usefully implemented in the GCC? The optimal solutions to such issues cannot be found in any textbook or classroom because the concept of foreign hospital management in the GCC is a relatively new phenomenon.

For profit

Here we will attempt to analyse the larger issues that need to be addressed and how they might impact healthcare strategy in countries that adopt that for-profit model[3].

There are three major strategic and tactical issues that need to be looked at when foreign management of any hospital in the Middle East is considered:

1. The relationship, responsibilities, deliverables, and degree of decision-making discretion between the sponsoring government and the foreign management need to be clearly spelled out.

2. Strategies of cost containment and increasing efficiency used in foreign hospitals need to be scrutinised and modified to be useful in GCC hospitals.

3. The major issue of human resources limitations and its rapid turnover, if present, needs to be comprehensively addressed and considered prior to formulating strategic goals.

The type of strategy used to approach these issues needs to be chosen judiciously. There are two schools of thought with respect to strategy. The first, and perhaps more common, one is strategy that is formulated in the C-suite and then given to managers and workers to implement. So for example, the new hospital management may come in and observe that the efficiency of the hospital is very low compared to that found in US hospitals – thus, they decide to eliminate X number of jobs to get to that same level of hospital efficiency as in their home country. The second is where strategy is conceived of with the input of the managers and workers and with a very clear idea of the limitations of the institution’s resources and human capital. For example, the same management might want to increase the efficiency of the hospital but it also may take into consideration the following input from workers and managers – the different quality, education, and training of healthcare personnel; the cultural work norms; worker loyalty and habits; total number of hours not worked per year (for example limited Ramadan hours; duration of employee vacations; high turnover of employees; and many more.) The management may then conclude that, to deliver the same level of healthcare as in their home country, it may be necessary to actually hire more people rather than eliminating X number of jobs. Whereas both approaches to overall strategy are appropriate in different circumstances, in general the former is considered better in stable, highly evolved, low-turnover institutions (General Electric is a good example), and the latter in rapidly changing environments or those environments in which management may not have decades of experience. The ability to tailor strategy to meet the specific circumstances of an institution’s environment, resources, and capabilities is known as strategic fit[1].

Another way of looking at this rather pivotal concept is to emphasise that strategy and its execution cannot be separated, especially in rapidly changing and unfamiliar environments. You often hear people saying that “the strategy was brilliant but its execution was flawed”. If a strategy is formulated that cannot be implemented because the financial and human resources are not available then the strategy is clearly flawed and cannot be considered brilliant[4]. Thus, drawing a line between strategy and execution almost guarantees failure and a strategic fit approach is more likely to succeed.

We will look at the above three major strategic and tactical issues in the context of strategic fit – because in the healthcare environment of the Middle East, this approach has the best chance of success.

1. The relationship, responsibilities, deliverables, and degree of decision-making discretion between the sponsoring government and the foreign management of the hospital need to be clearly spelled out.

General principles of contracts dictate that goals must be clearly stated. More importantly, goals must be aligned. The whole marriage between Middle Eastern governments and foreign healthcare management teams is bound to fail if the goals for each side are diametrically different. Additionally, what is left nebulous at times is the amount of discretion and the resources that the foreign management team has at its disposal to perform the task at hand. The increasingly difficult healthcare environment in the United States and other countries has led many hospitals to expand internationally to generate revenue. Middle Eastern countries, in turn, need the vast amount of expertise these countries have accumulated in management of for profit hospitals and also have the resources to pay for this expertise. It seems like a match made in heaven. However, there are some very basic issues on both sides. First, it needs to be clear to both sides what the goal of this ‘marriage’ is. Is it to create a system that provides high quality westerntype healthcare in the GCC country? Is it to cut costs? Is it to do both? Can both be done given the environment, resources, human capital, processes, work and cultural norms in the GCC countries? Clearly, and in the ideal world, the response would be “we want high quality healthcare and we want to cut costs.” However, whether both can be accomplished depends entirely on a realistic appraisal of the local environment and resources – both human and financial[5].

A second issue is that of trust between the hospital management team and the country’s healthcare regulators. The management team needs to clearly demonstrate that they understand the healthcare needs of that specific country and what resources are needed to provide for those needs. More importantly, and as mentioned above, strategic goals need to be clearly defined and the management team needs to determine, based on their vast experience in their home country, and keeping in mind the local variables mentioned above, whether or not they can actually accomplish those goals. This determination has to be very realistic and a reasonable margin of error needs to be accounted for in the business plans.

The management team needs to clearly demonstrate that they are committed to truly understanding and helping the host country with their healthcare needs and are not just there to transfer wealth to the hospital system in their native country.

Lastly, it is of paramount importance that management teams consist of the best the foreign hospital has to offer. No matter how difficult hospital management is in their home country, it will be orders of magnitude more complex in any middle eastern hospital. Thus, experienced, clever, and energetic top level managers are needed for this task. Often, however, such leaders do not wish to leave their home institutions since they are aspiring to higher positions there. This is a crucial issue that management teams need to address.

The host country, on the other hand, needs to give the hospital management team a large degree of discretion in making decisions about who to hire and fire, how to run the hospital, and how to structure the hospital. After all, the management team has the experience and expertise – which is why they were hired in the first place. It is not productive to hire someone for their expertise and then tell them what to do. Second, it is very important for host countries to understand that the changes they seek take time – a lot of time. For example, organisational citizenship – essentially the way employees behave towards each other in an institution – is a significant determinant of a successful institution. Yet it can take 5-10 years for an institution to change its culture. This is especially difficult in the middle east where a lot of the workers are temporary and the turnover rate is high[6].

In conclusion, hospital management teams and host countries in the GCC are well suited for a productive relationship as each has what the other wants. This relationship can create great results as long as the goals, financial and human resources, and decision-making discretion are discussed in detail, analysed, and clearly agreed upon. Most importantly though, there has to be a clear demonstration that both sides’ goals are aligned – to deliver the best patient care possible. These goals need to be clearly communicated in words and in deeds.

2. Strategies of cost containment and improving hospital efficiency used in foreign hospitals need to be scrutinised and a decision made whether they will work in GCC hospitals

Experience in the global market has clearly demonstrated that moving into a foreign country is not about implementing what you already know in your own country. Failures of such strategy are strewn across the corporate battlefield. Let’s take China for example, the most popular “place to be”. HR professionals rank China as one of the most challenging destinations. Underperformance and early departures of employees add up to a failure rate that is twice that for other countries[7]. A Harvard Business review article states that “…CEOs have modified accepted wisdom to tackle the biggest challenges they face in China. Though some of the…lessons may seem common sense to experienced China hands they are anything but to a freshman expat. As several CEOs told me, most of what they learn in China is neither written in books not taught in classrooms”[7]. If such experienced managers from large corporations such as Daimler, Lucent, and Siemens have problems adapting to foreign norms, it is a fait accompli that hospital management teams will have problems in the Middle East. Clearly, problems in adapting healthcare practices from one country to another are numerous. However, if these problems could be distilled down to one question it would be the following: Is it possible to provide the best quality healthcare within the allocated finances given the local environment and human resources?

The answer to this question is rather complex and the correct answer will depend on how the relevant issues and hurdles are incorporated into the strategy. As mentioned earlier, this phenomenon of foreign teams managing hospitals is relatively recent and no precise data is available that would answer this pivotal question. The variables to consider are myriad - the different quality education and training of healthcare personnel, the cultural work norms, worker loyalty and habits, total number of hours not worked per year (for example limited Ramadan hours, duration of employee vacations, etc), high turnover of employees, governmental regulations and how they slow down processes, in-hospital rivalries centred around ethnic origin, and many more – and this is not an exhaustive list. Thus, systematic and comprehensive studies will need to be performed to determine an index (let’s call it the Efficiency Conversion Index – ECI) which can convert the number of employees per bed in a given hospital in the US (or in another foreign country where operations are deemed to be optimised) to number of employees needed per bed in a middle eastern hospital to deliver the same level of care. In fact, it may not even be as simple as that. This index may need to be specific not only to individual countries within the Middle East but perhaps even to individual hospitals within each country.

Once this question is answered with some degree of reliability, it will be easier to determine how much time, cost, and human resource allocation is necessary to achieve a certain level of healthcare delivery.

3. The major issue of human resources and its rapid turnover in the GCC needs to be comprehensively addressed.

Attracting appropriately qualified employees to developing countries or middle eastern countries has been, and will continue to be for a while, a difficult prospect at best. As mentioned above, it is difficult for hospital management teams to attract their best top level managers because a lot of them see the assignment as a ‘peripheral opportunity’ that takes them off the fast track for advancement in their home institutions[3]. Analogous problems exist with middle level managers as well. Additionally, the work force in many parts of the Middle East (and in the GCC) is inherently transient and thus is not as vested to produce results or go beyond the call of duty to be innovative or creative. These circumstance lead to a significant ‘bare-minimum’ work environment where people do only what is necessary to get through the day. Since GCC countries do not offer any hope of citizenship, this is perhaps an expected attitude, as all workers know they will be returning home soon. Thus, organisational citizenship suffers and so does institutional performance. All these combine to create a high turnover of employees making it very difficult to acquire a workforce that is consistently of good quality and that creates a positive organisational culture. This very crucial limitation must be taken in to consideration when formulating strategy at the national and hospital level. Ways to mitigate such HR challenges in healthcare systems have been described in detail previously[6].

Recommendations

The marriage between middle eastern and GCC countries needing healthcare management expertise and foreign hospital management teams who can provide such expertise is potentially a very productive one. The following points should be kept in mind when entering into such contracts and creating the strategy with which hospitals should be managed.

■ It is important that both sides use their strengths to develop a healthcare system that is viable in the long run under the umbrella of a clear strategy. For example, one strategic goal could be to deliver the best healthcare regardless of cost. Since financial resources in many GCC countries are substantial this might be a useful, long term strategy. So, for example, it might be more useful to focus on acquiring management teams and a work force that will create a work culture that will sustain good healthcare delivery. This will cost more money up front, but will reap significant rewards in the long run. Once a hospital is deemed to be providing the best healthcare possible, then it would be reasonable to start focusing on making it more efficient and reducing costs. This whole process can take up to 10 years. Details on how positive organisational cultures can be developed in GCC hospitals is discussed in a previous article[6]. Another strategy could be to focus on making healthcare a profitable industry by privatising it. Regardless of which strategy is used, it needs to be clearly spelled out and should direct all subsequent sub-strategies and tactical manoeuvres.

■ Before entering into an agreement, both sides (GCC countries and foreign management teams) should precisely, honestly, and sincerely put forth their respective goals and decide if they can be aligned. Alignment of these goals is of paramount importance. These goals will then help clarify important aspects of management such as resources needed, decision-making discretion, milestones to be measured, etc. It may even be necessary for the management team to create an entirely novel method of managing the hospital to facilitate the goals of the GCC country. Ideally, both sides should help each other create the goals as such a process will result in buy in from both sides.

■ It should be clear whether the goal is to provide the best healthcare, make the hospital profitable, or some other goal. In a rapidly changing healthcare environment, and in the short term, both will not be possible. These two goals will have to be done sequentially. Clear Efficiency Conversion Indices (ECIs) need to be created to serve as a ‘translator’ between the GCC Hospital environment and the foreign hospital environment from where the management team hails.

■ The strongest department in the hospital needs to be the HR department as the challenge of maintaining an appropriate work force is formidable.

There is great potential in the GCC for very productive collaboration. A clear strategy that contains the four necessary components will, in due time, lead to positive results.

REFERENCES
1 Grant, R.M., Current Trends in Strategic Management, in Contemporary Strategy Analysis, R.M. Grant, Editor. 2008, Blackwell Publishing Ltd: Oxford, UK.
2. Miles, D. and A. Scott, Total Factor Productivity, Human Capital, and Technology, in Macroeconomics - understanding the wealth of nations. 2005, John Wiley and Sone, Ltd: West Sussex, England.
3. Khan, A., Personal communication. 2010: Abu Dhabi.
4. Martin, R.L., The Execution Trap. Harvard Business Review, 2010. July-August.
5. Grant, R.M., Global Strategies and the Multinational Corporation, in Contemporary Strategy Analysis, R.M. Grant, Editor. 2008, Blackwell Publishing Ltd: Oxford, UK.
6. Khan, A., New Thinking - HR in a transient work force. Middle East Health, 2010.
7. Paine, L.S., The China Rules. Harvard Business Review, 2010. June. 


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ate of upload: 25th Apr 2011

 

                                  
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