CALIFORNIA MANAGEMENT REVIEW 45, 2, Winter 2003: 6-11 INTRODUCTION TO THE FORUM ON HOSPITAL MANAGEMENT

California Management Review published a Special issue on health care in Fall 2000. We now follow up with a Forum on hospitals. The 2000 Special issue addressed the business aspects of health care. These are surely critical, given that health care expenditures in the U.S. are over $1 trillion annually and the share of GDP devoted to healthcare is 14% and rising. The articles in this Forum, by contrast, focus more internally, on the organizational and managerial challenges of health care organizations, notably hospitals. These issues are no less critical. There are two reasons for a focus on hospital management. First, the stakes are huge. Hospital charges are the largest single component in the trillion-dollar price of health care, accounting for about half of all third-party health care payments by government agencies and private insurers. Moreover, somewhere between 44,000 to 98,000 people die each year as a result of medical errors in hospitals. Second, hospitals hold lessons applicable to a much broader array of organizations. Three factors make hospitals particularly interesting. Knowledge-intensive organizations Hospitals are unusual organizations in many respects. However, they may hold lessons for many “knowledge-intensive” organizations. Patients are not typical service-industry “customers.” Patients are simultaneously very demanding -since their health is at stake, and often their very life -and terribly ignorant -often resentfully so -in the face of medical science and technology. Many services, however, find themselves dealing with customers whose reactions increasingly resemble those of hospital patients. Many of us who have tried to install DSL service at home feel similarly passionate about our need for high service levels and similarly frustrated by our ignorance of their technological underpinnings. The hospital’s labor force is distinctive. In the U.S., physicians, whose decisions account for the bulk of a hospital’s costs, are not typically employees of the institution -they merely have “privileges” at the hospitals, and often at more than one. Nurses’ turnover rates are notoriously high. High mobility, however, is rather typical of contemporary “knowledge-workers.”