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Kathleen D. Sanford

A hundred years ago, many believed an industrywide management change was necessary for hospitals to balance quality care with financial success. Back then, industry leaders thought a new type of executive could best deal with the issues faced by the superintendent nurses who managed America's community hospitals.

The nurse leaders were challenged by the need to pay for new technology while maintaining a positive margin. They needed to reverse the image of hospitals as unclean places where infections flourish, and create a new image of hospitals as providers of state-of-the-art care based on proven science. They also had to contend with rising personnel costs in an environment all too often fraught with discord between hospital managers and physicians.

Management professors Margarete Arndt and Barbara Bigelow have published several articles on the history of hospital administration. In an article in the January-February issue of the Journal of healthcare Management ("Hospital Administration in the Early 1900s: Visions for the Future and the Reality of Daily Practice"), they cite authors published in the journal Modern Hospital in the early 20th Century who advocated for business leaders to replace nurse leaders so they could concentrate more on day-to-day care of patients. Some argued that leaders focused on the business side of the organization, without the distraction of clinical responsibilities, would be in a better position to initiate internal control processes for a stronger bottom line. In short, the administrators would concentrate on business, and the nurses would devote their time to patient care. The field of hospital administration was born, with universities offering specialized business classes in health care.

Over the ensuing decades, hospitals began to initiate business practices similar to those in other sectors, including accounting, budgeting, cash control, investing, purchasing, inventory management, formal admission procedures, and billing. As a result, the field of hospital administration has produced numerous talented administrators with no clinical backgrounds. And medical and nursing education has likewise evolved, so that today it produces competent caregivers who are well educated on the clinical side but who all too often lack any business background.

Meanwhile, margins have waxed and waned, largely influenced by government and private payers' attempts to control costs through payment manipulations. Quality and patient safety has continued to be less than perfect-a situation that was brought dramatically into the spotlight in 2001 by the Institute of Medicine in its widely publicized and influential report Crossing the Quality Chasm: A New Health System for the 21st Century.  

Rcognizing that a better understanding of business and finance enhances a nursing leader's ability to lead a hospital's clinical enterprise, a growing number of nursing leaders have pursued a business education over the past three decades. Many nurses have master of business administration (MBA) degrees in addition to their advanced nursing degrees. Prestigious programs prepare cadres of nursing leaders to meld business and clinical knowledge-examples include the Johnson & Johnson/Wharton Fellows Program in Management for Nurse Executives and the Robert Wood Johnson Executive Nurse Fellows. The American Organization of Nurse Executives (AONE) includes a middle-management nursing fellowship program as well as the Aspiring Nurse Leader Institute for nurses preparing for management roles. In partnership with AONE, the American Association of Critical Care Nurses (AACN) has developed the "Essentials of Nurse Manager Orientation" (ENMO), an on-line course for nursing managers. Despite these opportunities to develop business acumen, a significant number of nursing leaders have not pursued formal management training or a business degree.

Yet today, the challenges faced by this new generation of healthcare leaders also continue unchanged. Balancing the cost of new technology with a positive margin remains daunting. Hospitals still have the reputation as places where patients are exposed to infection-causing germs and other hospital-acquired conditions. The adoption of evidence-based, or scientific, practices is still a slow process in some institutions. And strained relationships between physicians and hospital leaders persist.

And then there are the cost issues. The cost of American health care has jumped from 5 percent of the GDP in 1965 to 17.3 percent, by recent estimates (www.cbo.gov/ftpdocs/89xx/doc8948/01-31-healthtestimony.pdf and Truffer C., Keehan S., Smith S., et al, "Health Spending Projections through 2019: The Recession's Impact Continues," Health Affairs, March 2010). The federal government has continued its efforts to control these costs while improving quality and providing access to care for more Americans. The latest legislative attempt is the Affordable Care Act of 2010, commonly called the healthcare reform act. Many experts believe an industry-wide leadership change is necessary for healthcare systems to balance high-quality care with financial success while navigating the sweeping changes this legislation will bring. This time, though, the discussion is not about a new hierarchy to replace clinical leaders with professional business leaders or vice versa. It's about how to better combine the competencies and skills of business professionals and clinical professionals to transform the system. In nursing circles, it's largely about improving the value equation of health care (value equals quality over cost) with clinical leaders at all levels who are skilled in management, as well as knowledgeable about the business of health care.  

For more information, see Kathleen D. Sanford's "The Case for Nursing Leadership Development," hfm, March 2011.

Publication Date: Tuesday, March 01, 2011

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