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Management Matters in Healthcare. 1 Agenda Measuring management practices in healthcare 2 Describing management across hospitals 3 Drivers of management.

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Presentation on theme: "Management Matters in Healthcare. 1 Agenda Measuring management practices in healthcare 2 Describing management across hospitals 3 Drivers of management."— Presentation transcript:

1 Management Matters in Healthcare

2 1 Agenda Measuring management practices in healthcare 2 Describing management across hospitals 3 Drivers of management practices 4 Implications for policy makers and others 5 An overview 1

3 2 We are extremely grateful for the support received from our funders

4 3 Management and performance are tightly linked in our research on over 6,000 industrial firms globally 1 Sales per employee 2 Return on Capital Employed 3 Tobins Q assuming constant book value Sales growth % Market share growth Index Productivity 1 Indexed Management score Management score + 1 Management score Management score + 1 Capital market valuation 3 Index Management score Management score + 1 ROCE 2 %

5 44 Healthcare management practice findings 4 UK healthcare management practice: Good UK average score Vs others Large intra-country variation creates a real opportunity for improvement There is large variation 5 factors are associated with better management practice: Share of clinically trained managers Degree of competition Hospital size Managerial autonomy Hospital ownership Improvement is possible Management practice is strongly related to: Clinical outcomes Patient satisfaction Hospital financial performance Management really matters

6 5 Agenda Describing management across hospitals 3 Drivers of management practices 4 Implications for policy makers and others 5 An overview 1 Measuring management practices in healthcare 2

7 6 Our hypothesis was that management practices were key drivers of hospital performance Codify good management practices Select and train a team of interviewers Correlate management and performance Assess quality of management practices Select and target hospitals Based upon our Management Matters in Industrials work: Defined 20 scoring dimensions focusing on: – Lean hospital operations – Performance management – Effective talent management

8 7 Our hypothesis was that management practices were key drivers of hospital performance Codify good management practices Select and train a team of interviewers Correlate management and performance Assess quality of management practices Select and target hospitals Team of: – 24 MBA and post-graduate management students – Dedicated, highly skilled and trained interviewers

9 8 Our hypothesis was that management practices were key drivers of hospital performance Codify good management practices Select and train a team of interviewers Correlate management and performance Assess quality of management practices Select and target hospitals Randomly selected public and private hospitals across 7 countries Focused on assessments at the specialty level

10 9 Our hypothesis was that management practices were key drivers of hospital performance Codify good management practices Select and train a team of interviewers Correlate management and performance Assess quality of management practices Select and target hospitals Conducted almost 1,200 interviews that: – Were double blind – Targeted unit-level managers – Focused upon Cardiology and Orthopaedics

11 10 Our hypothesis was that management practices were key drivers of hospital performance Codify good management practices Select and train a team of interviewers Correlate management and performance Assess quality of management practices Select and target hospitals Examined management scores with data that is: – Publically available – Obtained from independent sources

12 11 We use a hospital speciality–level assessment tool to evaluate management practices Management practices Hospital Operations Management Performance and target management Talent and People management Example dimensions evaluated Performance dialogue and review Interconnection of targets Consequence measurement Target balance Performance tracking 3.Performance is continuously tracked and communicated, formally and informally, to all staff using a range of visual management tools 1.Measures tracked do not indicate directly if overall hospital objectives are being met. Tracking is ad hoc 2.Most key performance indicators are tracked formally. Tracking is overseen by senior staff Dimension Scoring criteria

13 12 Hospital operations Manage- ment The overall hospital management practice score is the average of assessments across 20 dimensions Performance manage- ment Talent manage- ment DimensionsScore 1.Lay out of patient flow 2.Rationale for introducing standardisation and/or pathway management 3.Standardisation and protocols 4.Continuous Improvement … 5.Good use of human resources Consequence management 8.Quality of targets 9.Target stretch 10.Clarity of goals and measurement 11. … Rewarding high performers 14.Promoting high performers 15.Making room for talent 16.… Overall management practice score, on scale of 1–5, is calculated from average across all 20 dimensions

14 13 We interviewed almost 1,200 hospitals across 7 countries Italy Sweden U.S. U.K. Canada Number of interviews Germany France

15 14 Agenda Drivers of management practices 4 Implications for policy makers and others 5 An overview 1 Measuring management practices in healthcare 2 Describing management across hospitals 3

16 15 There is a strong relationship between management practice and health outcomes 3 rd quartile 95 Bottom quartile 105 Management practice score Top quartile 90 2 nd quartile 95 UK heart attack mortality rates

17 16 Good management is correlated with better clinical and financial performance 7% reduction in risk adjusted 30 days AMI mortality rates 1 14% increase in EBITDA per bed 0.8 increase in the percentage of people that would recommend the hospital A one point increase in management practice is associated with: UK Hospitals US Hospitals 6.5% reduction in risk adjusted 30 days AMI mortality rates 33% increase in income per bed 20% increase in the probability that the hospital is above average in terms of patients satisfaction

18 17 There is a wide variation in average hospital management practice score by country France Italy Canada Germany Sweden UK US Average with controls Average Management practice score – by country

19 18 Management practice score US UK Sweden Italy Germany France Canada 18 The UK achieves high management practice scores relative to direct health expenditure Government health expenditure per capita, 2006 $

20 19 There is an even bigger variation of management practice scores within countries

21 20 Agenda Implications for policy makers and others 5 An overview 1 Measuring management practices in healthcare 2 Describing management across hospitals 3 Drivers of management practices 4

22 21 Hospitals with more clinicians as managers have better management Proportion of managers with a clinical degree Top quartile rd quartile2 nd quartileBottom quartile Management score relative to national mean

23 22 Increases in clinically trained managers is correlated with improved management practices Change in the proportion of managers with a clinical degree 1 Change in management practice score 1 Top quartile3 rd quartile2 nd quartileBottom quartile 1Percent

24 23 There is wide variation in the prevalence of clinically trained managers by country US Canada Sweden Germany France UK 1Italy excluded as it is a legal requirement that all general managers have clinical degrees Percentage of managers with a clinical degree 1

25 24 Tougher competition appears to be good for management 1 to None 2.59 Number of competitors 1 More than to As perceived by the manager. Management practice score

26 25 There is a strong relationship between hospital size and management practice Number of employees 1 >1, , < Directly employed by the hospital Management practice score

27 26 Managerial Autonomy is correlated with management practice Management practice score Managerial Autonomy Top quartile3 rd quartile 2 nd quartile Bottom quartile

28 27 Private hospitals tend to have higher management practice scores PublicPrivate 1 1Private includes both for profit and not for profit organization Hospital ownership Management practice

29 28 In manufacturing multinationals outperform domestic firms China Greece France Poland UK Germany Italy India Sweden US Portugal 1 Japan excluded due to low multinational sample size Multinationals Domestic firms Management practice score – by country 1

30 29 In manufacturing, ownership matters for management and productivity Management practice score Labour productivity 1 1 As measured by sales/employee 2 Government Scores: Mgmt practice 2.45, Productivity 4.3, not shown as off scale Correlation of Private individuals Managers Other Family CEO Founder CEO Family CEO, Primo Geniture Founder owned, external CEO US multinational Other multinational EU multinational Family owned, external CEO Dispersed shareholders Private equity/VC Government 2

31 30 Agenda An overview 1 Measuring management practices in healthcare 2 Describing management across hospitals 3 Drivers of management practices 4 Implications for policy makers and others 5

32 31 These findings pose some questions for UK policy makers How can greater competition be fostered ? How can the trend to more clinically qualified managers be accelerated to close the gap with other countries ? Which conditions need to be in place to give managers increased autonomy ? What role could diversity of provision play in raising the bar ? How could greater talent management flexibility be realistically introduced into the system ?

33 32 There are also questions for other stakeholders How do commissioners ensure access to top performing hospitals? What implications, if any, are there for GP Commissioners? Commissioners How can viable investment opportunities be unlocked? What would make UK healthcare a more attractive investment? Investors What are you going to need/demand to ensure you are best informed and able to execute choice? Patients What role can AHSCs play in developing more clinically trained and excellent managers? Are AHSCs fully capturing the potential export opportunity? Academic Health Science Centres

34 Management Matters in Healthcare

35 34 OUT

36 35 Individual performance-based pay increase2.9 Further control over budget and investment decisions (for the whole service line) 3.0 Ability for service line to access part of a surplus pool of funds proportional to achievement of agreed objectives 3.3 Autonomy is a strong incentive for managers 1 Based on 2007 McKinsey survey of 39 clinical directors and general managers across four National Health Service (NHS) foundation trusts The most attractive incentives Incentives for potential service-line leaders, average of responses, on a scale of 1–4, where 1 = not motivating and 4 = extremely motivating Increased opportunities for development (e.g., taking on more responsibilities or new projects 3.1 Further autonomy in decision making (for whole service line) 3.5 Operational performance-based awards, akin to clinical-excellence awards 2.8 Managers Top 3 non- financial incentives 1 For voice over only - Differences are too small to be useful

37 36 Background Healthcare spending has risen as a share of national income in all countries over the past decades Changing demographics, technology and wealth will continue to impact how countries deal with healthcare UKs recent Comprehensive Spending Review has implications: – NHS spending to rise by 0.1% pa in real terms through 2014/15. – This is slowest in a generation Pressing need to increase health sector productivity

38 37 Why care about management and healthcare quality and productivity? Large differences in productivity and quality across hospitals Despite the importance of quality and productivity our understanding of what causes differences across hospitals healthcare was poor Our approach: What is the role of management practices?

39 38 The management matters programme Over the last decade McKinsey and the CEP – with Stanford and Harvard - have measured and sought to explain the role of management practice in driving performance Initial focus on private sector, e.g. Manufacturing work covers over 6,000 firms in 19 countries which found – Large variation across countries and firms – Management is strongly linked with better firm performance New focus on the public sector – 2006 surveyed 104 NHS acute trusts & 22 private hospitals – 2009 surveyed 1,194 hospitals in 7 countries (Canada, France, Germany, Italy and Sweden, UK and US) For voice over only


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