1. Dr. Joan Burtner, CQE Associate Professor of Industrial Engineering and Industrial Management ISE 468 ETM 568 Healthcare Process Improvement

2. Chapter 1 Outline Overview of Healthcare Management Historical Background Nature of Healthcare Services Decision Making Process Model Healthcare Manager & Responsibilities Distinctive Characteristics of Healthcare Services Ozcan: Quantitative Methods... Ch1 part 22015 2

3. Nature of the Healthcare Industry 1 Combines medical technology and human touch, administers care around the clock from newborns to critically ill More than 580,000 establishments make up the health services industry Nearly 77 percent of all health services establishments are offices of physicians, dentists, or other health care practitioners. Hospitals constitute 1.3 percent of all health service establishments, but they employ 34.8 percent of all health workers. Ozcan: Quantitative Methods... Ch1 part 22015 3 Source: U.S. Department of Labor Bureau of Labor Statistics (2006), www.bls.gov/oco/cg/cgs035.htm#nature

4. Nature of the Healthcare Industry 2 The largest industry in 2006, health care provides 13.6 million jobs for wage and salary workers and about 438,000 jobs for the self-employed. 7 of the 20 fastest growing occupations are health care related. Health care will generate 3 million new wage and salary jobs between 2006 and 2016, more than any other industry. Most workers have jobs that require less than 4 years of college education, but health diagnosing and treating practitioners are among the most educated workers.. Ozcan: Quantitative Methods... Ch1 part 22015 4 Source: U.S. Department of Labor Bureau of Labor statistics (2006), www.bls.gov/oco/cg/cgs035.htm#nature

5. Ozcan: Quantitative Methods... Ch1 part 2 2015 5 Table 1.2 Distribution of Health Providers and Health Workers in Health Services: in 2006, and Expected Growth Provider type Percent of Providers Percent of Employment Employment (in 000) Percent change, 2006-2016 Hospitals, public and private 1.339.95,43813.0 Nursing and residential care facilities 11.521.32,90123.7 Offices of physicians 36.715.82,15424.8 Offices of dentists 20.75.878422.4 Home healthcare services 3.36.486755.4 Offices of other health practitioners 19.34.257128.3 Outpatient care centers 3.43.648924.3 Other ambulatory healthcare services 1.41.621632.3 Medical and diagnostic laboratories 2.31.520216.8 Source: U.S. Department of Labor (2006) www.bls.gov/oco/cg/cgs035.htm#nature.

6. Employment Potential for Healthcare Managers Ozcan: Quantitative Methods... Ch1 part 22015 6 Table 1.3. Health Services by Occupation in 2006, and Projected Growth. Health services occupationEmployment (in 000) Percent change, 2006-2016 Management, business, and financial occupations 57921.3 Top Executives 9811.6 Professional and Related Occupations 5,95521.3 Service Occupations 4,33427.1 Office and administrative support occupations 2,44614.4 All health service occupations 13,62121.7 Source: U.S. Department of Labor (2006) www.bls.gov/oco/cg/cgs035.htm#nature.

7. Ozcan: Quantitative Methods... Ch1 part 22015 7 Transformation of Poor Health to Good Health Look at the difference between the cost of inputs and the value of outputs Inputs Land Labor Capital Transformation/ Conversion process Outputs Services Control Feedback Value added The essence of healthcare operations is to add value. Sick patient Treated patient

8. Ozcan: Quantitative Methods... Ch1 part 22015 8 The Healthcare Process is: InputsProcessingOutputs Doctors, nursesExamination Healthy patients HospitalSurgery Medical SuppliesMonitoring EquipmentMedication LaboratoriesTherapy

9. Decision Making is the Key… There are two groups of decisions:  System Design-- capacity, location, departmental arrangements, product and service planning, acquisition and placement of equipment  System Operations-- personnel, inventory, scheduling, product management, and quality measurement and assurance Ozcan: Quantitative Methods... Ch1 part 22015 9

10. Ozcan: Quantitative Methods... Ch1 part 22015 10 Decision Hierarchy Strategic Tactical Operational Broad Scope: Product Selection New Construction Location Decisions Technology Choices Moderate Scope: Staffing Levels Supply Chain Equipment Selection Financial Resource Allocation Narrow Scope: Scheduling Controlling Quality Inventory Replenishment

11. Distinctive Characteristics of Healthcare Services - 1 Patient is a participant in the process (the patient’s condition is both the input and the output) Production and consumption occur simultaneously (poor care cannot be recalled) Intangible nature of healthcare outputs (patient opinions about service quality are formed over time) Ozcan: Quantitative Methods... Ch1 part 22015 11

12. Distinctive Characteristics of Healthcare Services -2 Perishable capacity  Site selection is dictated by patient location  Capacity is labor intensive  Example: operating rooms staffed but not used Heterogeneous nature of healthcare requires a high level of judgment Ozcan: Quantitative Methods... Ch1 part 22015 12