Edited by

Healthcare Management Kieran Walshe and Judith Smith

Healthcare Management
his ambitious book provides a comprehensive, coherent and research-based
T introduction to healthcare management. It has been designed and written for
postgraduate students, healthcare professionals and practising managers and takes an
international perspective, drawing on and comparing ideas and developments from
many countries.
Healthcare Management is written by experts with knowledge of the healthcare
systems of the United States, Canada, New Zealand, Australia, the United Kingdom and
a range of other European countries. The book is structured into three main sections,
bracketed by an introductory chapter setting the policy context and providing an
overview of what follows, and a concluding chapter which draws together the key
themes and offers a view about future development and trends in healthcare
management.
The main sections of the book examine:
● The health policy and practice context for healthcare management
● The specific challenges of managing healthcare organizations
● Key managerial techniques and methods that managers need to be able to
use effectively in their practice
Chapters include self-test exercises, summary boxes, further reading and a list of
web-based resources.
This book is key reading for students, researchers, managers and healthcare policy
makers with a genuine interest in the links between the theory and practice of
healthcare management and how best practice might be achieved within healthcare
systems.

Contributors: Lawrence Benson, Ruth Boaden, Carol Brooks, Naomi Chambers,

Deborah Davidson, Jennifer Dixon, Dave Evans, Tim Freeman, Jon Glasby,
Neil Goodwin, Andrew Hine, Paula Hyde, Kim Jelphs, Justin Keen, Helen Lester,

Walshe and Smith

Anne McBride, Ruth McDonald, Shirley McIver, Ann Mahon, Steve Onyett,

Healthcare
Helen Parker, Edward Peck, Suzanne Robinson, Ann Shacklady-Smith, Judith Smith,
Anne Tofts, Tom Walley, Kieran Walshe, Juliet Woodin.

Kieran Walshe is Professor of Health Policy and Management and Co-Director of

Manchester Business School's Centre for Public Policy and Management and Research
Director of the NHS service delivery and organization research programme.
Judith Smith is Senior Lecturer and Director of Research at the Health Services
Management Centre at the University of Birmingham.
Management
Cover design Hybert Design • www.hybertdesign.com

www.openup.co.uk
HEALTHCARE
MANAGEMENT
HEALTHCARE
MANAGEMENT

Kieran Walshe and

Judith Smith (eds)

Open University Press

Open University Press
McGraw-Hill Education
McGraw-Hill House
Shoppenhangers Road
Maidenhead
Berkshire
SL6 2QL
England

email: [email protected]
world wide web: www.openup.co.uk

and Two Penn Plaza, New York, NY 10121–2289, USA

First published 2006

Copyright © Kieran Walshe and Judith Smith 2006

All rights reserved. Except for the quotation of short passages for the purposes
of criticism and review, no part of this publication may be reproduced, stored
in a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise, without the prior written
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obtained from the Copyright Licensing Agency Ltd of 90 Tottenham Court
Road, London, W1T 4LP.

A catalogue record of this book is available from the British Library

ISBN10: 0 335 22119 X (pb) 0 335 22120 3 (hb)

ISBN13: 978 0 335 22119 6 (pb) 978 0 335 22120 2 (hb)

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Printed in Poland EU by OZGraf S.A. www.polskabook.pl
This book is dedicated to the many writers and thinkers on health policy
and management whose ideas have influenced us, both as managers and
as academics: to people like Henry Mintzberg for his writings on the
nature of management and how managers learn; Rosemary Stewart for
her pioneering work on healthcare management; Rudolf Klein for his
insights into the politics of healthcare; Chris Ham for his skilful policy
analyses – and many others.
 Contents

List of figures xi
List of tables xiii
List of boxes xv
List of contributors xvii
Preface xxiii

1 Introduction: the current and future challenges of

healthcare management 1
Kieran Walshe and Judith Smith

Part I Setting the context 11

2 The politics of healthcare and the health policy

process: implications for healthcare management 13
Jennifer Dixon
3 Financing healthcare: funding systems and
healthcare costs 32
Suzanne Robinson
4 Healthcare systems: an overview of health service
provision and service delivery 53
Lawrence Benson
5 Managing healthcare technologies and innovation 73
Ruth McDonald and Tom Walley
6 Health and well-being: the wider context for
healthcare management 90
Ann Mahon
viii Contents

Part II Managing healthcare organisations 115

7 Managing in primary care 117

Judith Smith
8 Managing in acute care 134
Dave Evans
9 Managing in mental health 151
Steve Onyett and Helen Lester
10 Service and capital development 166
Andrew Hine
11 Healthcare system strategy and planning 183
Neil Goodwin
12 Healthcare commissioning and contracting 201
Juliet Woodin
13 Information technology and information systems:
so beguiling, so difficult 224
Justin Keen
14 Human resource management in healthcare 237
Anne McBride and Paula Hyde
15 Working with healthcare professionals 253
Carol Brooks
16 Governance and the work of health service boards 269
Naomi Chambers
17 Managing in partnership with other agencies 286
Jon Glasby
18 Performance measurement and improvement 300
Tim Freeman

Part III Management theories, models and techniques 321

19 Leadership and its development in healthcare 323

Edward Peck
20 Organisational development and organisational design 342
Deborah Davidson and Edward Peck
21 Personal effectiveness 364
Kim Jelphs
22 Appreciating the challenge of change 381
Ann Shacklady-Smith
Contents ix

23 Managing resources 399

Anne Tofts
24 Managing people: the dynamics of teamwork 418
Helen Parker
25 User perspectives and user involvement 435
Shirley McIver
26 Quality improvement in healthcare 454
Ruth Boaden
27 Research, evaluation and evidence-based management 479
Kieran Walshe
28 Conclusions: complexity, change and creativity in
healthcare management 497
Judith Smith and Kieran Walshe

Index 507
Figures

2.1 Public and private spending on health care as a percentage of

GDP: OECD countries (2001)
3.1 Healthcare triangle
3.2 Funding sources, contribution mechanisms and collection agents
3.3 Total health expenditure per capita (US$PPP, 2002)
4.1 Sectors of healthcare within a healthcare system
4.2 Relationships between healthcare expenditure and levels of care
4.3 Patterns of care for people with diabetes
4.4 Patient journey – diagnosis and treatment of ovarian cancer
4.5 Redesigned patient journey – diagnosis and treatment of ovarian
cancer
5.1 Implementing NICE guidance – recommended good financial
management model
8.1 Average length of stay for acute care, 1990 and 2002
8.2 Acute care hospital beds per 1000 population, 1990 and 2002
10.1 Three phases of planning a capital project
10.2 Seven-stage framework for developing a business case
12.1 The commissioning cycle
13.1 Four styles of public management organisation
15.1 Relationships between managers and doctors
15.2 Examples from a job description
16.1 Board tasks model
16.2 Framework for NHS board development
16.3 How does the board of your organisation meet the tests of the
Good Governance Standard?
17.1 Effective partnership working (in theory)
17.2 Theories of change
17.3 Depth v breadth
17.4 Different levels of partnership working
18.1 Modes of governance
18.2 Control locations and resultant action matrix
18.3 Populated control locations and resultant action matrix
19.1 Transformational leadership questionnaire
19.2 The NHS leadership qualities framework
xii Figures

20.1 Example of NHS organisational design

20.2 The OD cycle
21.1 Johari window
21.2 Adult learning
21.3 The time management matrix
22.1 The determinants of health
22.2 Ackerman’s three perspectives on change
22.3 Appreciative inquiry 4-D cycle
23.1 Framework for business planning
23.2 The public sector scorecard
23.3 The purpose of the UK healthcare industries task force
23.4 Risk assessment framework
24.1 The team as transformers
24.2 Tuckman’s stages of team development
Tables

2.1 NHS waiting times across four UK countries, 1997 and 2003
3.1 Total expenditure on health as a percentage of GDP in selected
OECD countries 1960–2002
4.1 Clinical services at a district general acute hospital
4.2 Strengths of primary and secondary care settings for diabetes care
6.1 Lay views of health: themes and associated statements
6.2 Basic indicators for a selection of WHO member states, 2002
6.3 Estimated deaths per 100,000 by cause of death and selected
WHO member states, 2002
6.4 Estimated deaths per 100,000 by communicable, maternal,
perinatal and nutritional causes for a selection of WHO
member states, 2002
6.5 Estimated deaths per 100,000 by non-communicable diseases for a
selection of WHO member states, 2002
6.6 Estimated deaths per 100,000 by injuries for a selection of WHO
member states, 2002
6.7 Millennium development goals: selected health indicators in
selected WHO member states, 2000
6.8 The social determinants of health
6.9 Expenditure on health for a selection of WHO member states
8.1 Integrated regional vascular service (IRVS)
9.1 Prevalence of mental disorders in men and women
9.2 The ten essential shared capabilities for mental health practice
10.1 Weighted benefit scores and estimated costs
14.1 Professionally qualified and support staff in the NHS, 2004
14.2 HR practices and NHS policies
15.1 The transition cycle
15.2 The cultural web
18.1 Unintended consequences of public sector performance indicator
systems
19.1 Summary of studies of leadership development in the NHS since
1997
22.1 Current and emerging paradigms
23.1 Advantages and disadvantages of approaches to budgeting
xiv Tables

24.1 Belbin team roles

25.1 Framework for examining public and patient involvement
26.2 Approaches to quality improvement
26.1 Definitions of healthcare quality
26.3 Principles of quality management
26.4 If only we had known then what we know now
26.5 Quality improvement tools
26.6 The ten high impact changes
27.1 The research-practice gap
27.2 The paradigm shift of evidence-based healthcare
27.3 The clinical and managerial domains compared.
27.4 Research findings: some key sources
27.5 Appraising research evidence: key questions to ask
Boxes

2.1 UK bodies with influence on the pathway of healthcare reform

5.1 Statins for the prevention of cardiovascular events
5.2 The NICE Citizens Council
5.3 Case study: prioritising new cancer drugs
7.1 Starfield’s four Cs as an organising framework
7.2 Factors facilitating effective primary care led commissioning
7.3 Aims of primary healthcare strategy, New Zealand
7.4 The main challenges for managing in primary care
9.1 Leadership issues
11.1 The pressures facing healthcare today
11.2 SWOT analysis of the UK NHS
11.3 The pitfalls of strategy and planning
12.1 Roles in the healthcare system – a conceptual framework
12.2 Definitions
12.3 Commissioning and contracting activities
12.4 Illustration of contents of a healthcare contract: the NHS model
contract
12.5 Types of contract
17.1 Partnership working: what helps and what hinders
17.2 The partnership readiness framework
18.1 Cultural theory
18.2 Control location and resulting action quadrants
18.3 Regulation
18.4 Accreditation – the US experience
18.5 Inspection – the Dutch experience of ‘Visitatie’
18.6 Performance management: New Zealand PHOs
18.7 Conceptual difficulties with performance indicators
18.8 Technical difficulties with performance indicator systems
20.1 Demands and new expectations on public services in the UK
20.2 Summary characteristics of a machine bureaucracy
20.3 Implications of postmodern and social constructionist thinking
for management practice
20.4 Summary of metaphorical analysis
20.5 Weick’s seven properties of sensemaking
xvi Boxes

20.6 Plsek’s simple rules for the twenty-first century US healthcare

system
22.1 Change example: devolving financial management decision to
service areas
22.2 Change example: reducing patient waiting times
22.3 Change example: valuing gender diversity
24.1 Common elements of team definitions
24.2 Key characteristics of effective teams
24.3 Implementing audit questionnaires: case study
25.1 Summary of findings of systematic review on user involvement in
planning and development of health services
25.2 Findings from an evaluation of citizens’ juries in healthcare in the
UK
26.1 Influences on quality in healthcare: the Institute for Health
Improvement (IHI)
26.2 Promoting quality improvement in England: the NHS
Modernisation Agency (MA)
27.1 About the Canadian Health Services Research Foundation
27.2 NHS service delivery and organisation research programme
themes
28.1 Major challenges for healthcare managers
28.2 Managing in the face of change
28.3 Managing in a creative manner
Contributors

Dr Lawrence Benson works at Manchester Business School’s (MBS),

Centre for Public Policy and Management as a Lecturer in Healthcare
and Public Sector Management. His main research interests to date are
workforce redesign, healthcare regulation, clinical and managerial
networks and partnership working in primary care.
Dr Ruth Boaden is Senior Lecturer in Operations Management at
Manchester Business School. Her research interests cover a wide range of
areas within health services management including electronic health
records, re-engineering, operating theatre management and scheduling,
patient safety, the management of emergency admissions, bed manage-
ment and chronic disease management. Her main areas of interest are in
quality and improvement and the use of industrial methods within the
NHS and she emphasises the application of research in practice in all she
does.
Carol Brooks is co-owner and director of a change management con-
sultancy working across the public sector. She holds a Visiting Fellow
position at Manchester Business School, where she is Course Director for
the suite of Doctors in Management programmes. Carol has a back-
ground in healthcare management, education, training and workforce
planning. She is also a non-executive director in a large acute hospital
trust. She has an academic background in organisational psychology.
Dr Naomi Chambers is a Senior Fellow in the Centre for Public
Policy and Management at Manchester Business School, and is cur-
rently Director of Executive Education for the school. Her research and
teaching interests include primary care, comparative health manage-
ment and board development. She was a non-executive director on a
health authority and subsequently a primary care trust for ten years
from 1996.
Deborah Davidson is a Senior Fellow at the Health Services Manage-
ment Centre, University of Birmingham where she leads the depart-
ment’s work in organisational development and leadership. Prior to
this she worked at King’s College London as Director of Educational
xviii Contributors

Programmes at the Institute for Applied Health and Social Policy and
from 1989 to 1998, as Executive Director of a leading edge mental health
charity in north London that focused on work with black and ethnic
minority communities.
Dr Jennifer Dixon is the Director of Policy at the King’s Fund. She has
researched and written widely on healthcare reform in the UK and
internationally. Her background is in clinical medicine and policy analy-
sis and she has a PhD in health services research. She was a Harkness
Fellow in New York in 1990, the policy advisor to the Chief Executive
of the National Health Service between 1998 and 2000, and is currently
a board member of the Audit Commission and the Healthcare
Commission.
Dave Evans is a nurse by profession and worked in the NHS for over 18
years in a number of senior management posts within the acute sector.
He was Project Director for the Kidderminster Treatment Centre follow-
ing which he was appointed as Hospital Director. In 2005 he joined
Durrow, a management consultancy specialising in strategic health plan-
ning and project management. In addition he established his own con-
sultancy, PSPC – people, space, process, change ([email protected]). Dave
regularly speaks at conferences both in the UK and overseas.
Dr Tim Freeman is Lecturer in Health Policy in the Health Services
Management Centre at the University of Birmingham, where he is
responsible for the department’s doctoral programme. Previously, he
worked as a researcher for Save the Children Fund and the Sainsbury
Centre for Mental Health, and has worked as a manager in the NHS.
He teaches and publishes widely on topics related to governance,
performance management and quality improvement.
Dr Jon Glasby is Head of Health and Social Care Partnerships and a
Senior Lecturer at the Health Services Management Centre, University
of Birmingham. A qualified social worker by background, he is also a
board member of the national Social Care Institute for Excellence and
programme director of what is believed to be the UK’s first MSc in
Managing Partnerships in Health and Social Care.
Dr Neil Goodwin is a UK NHS manager and leadership academic. He
has operated at chief executive level for over 20 years and is currently
chief executive of the Greater Manchester strategic health authority, the
largest strategic body in the English NHS. Neil is also visiting professor of
leadership studies at Manchester Business School and a fellow of Durham
University. He is a board member of the European Health Management
Association and the author of Leadership in Healthcare: A European
Perspective.
Andrew Hine joined KPMG at the end of 2004. During a 13-year NHS
career Andrew worked at all levels of the NHS and managed services
from specialist acute to community hospitals and including primary care,
mental health and learning disability services. He has also worked on
Contributors xix

secondment to the civil service within the Welsh Office Health

Department.
Dr Paula Hyde is a Senior Lecturer in Leadership and Experiential
Learning, Manchester Business School, The University of Manchester.
Paula’s main research interests are workforce modernisation in the NHS,
HR and performance and the effects of organisational structures and
systems on individual behaviours at work. Current projects study HRM
and performance in healthcare and skills mix changes in health systems.
Kim Jelphs currently works as a Senior Fellow at the Health Services
Management Centre, University of Birmingham. She has worked in the
NHS for 25 years and has held senior clinical posts in both the acute and
primary care sectors. Her role as a clinical director in an NHS trust saw
her leading clinical governance in an innovative way, with some processes
and tools receiving national recognition. She has a wide and varied
experience of working with individuals, teams and organisations across
many sectors.
Professor Justin Keen is Professor of Health Politics and Information
Management at the University of Leeds. He has also worked at Brunel
University, the National Audit Office and the King’s Fund, London. His
principal research interests are in the governance of health and social
care services and the effects of information technologies on clinical
practice.
Dr Helen Lester is a Reader in Primary Care in the Department of
Primary Care and General Practice at the University of Birmingham. She
has a particular interest in primary care mental health, health inequalities
and mental health policy. Helen is the expert lead for the national review
of the GP contract Quality and Outcomes Framework in England.
Dr Anne McBride is a Senior Lecturer in Employment Studies, Man-
chester Business School, The University of Manchester. Anne’s main
research interests are workforce modernisation in the NHS, gender rela-
tions at work and public sector industrial relations. Current projects study
local healthcare workforce developments in the context of national
government policies and initiatives, for example, skills mix changes in
health systems.
Dr Ruth McDonald is a Research Fellow at the National Primary Care
Research and Development Centre, University of Manchester. She is a
health economist by background and has published widely on matters
pertaining to the management and organisation of health services and
is the author of Using Health Economics in Health Services. Rationing
Rationally?
Dr Shirley McIver joined the Health Services Management Centre at
Birmingham University in 1993. She coordinates the Public and Patients
as Partners Programme which carries out research, consultancy and edu-
cation in the area of public and user involvement. She is also programme
xx Contributors

director for the MSc Managing Quality and Service Improvement in

Healthcare.
Ann Mahon is Senior Fellow and Director of Postgraduate Programmes
at the Centre for Public Policy and Management, Manchester Business
School (MBS). She directs and contributes to a range of postgraduate
and executive education programmes and directs the public health
and healthcare management course unit on the MSc Healthcare
Management at MBS.
Professor Steve Onyett is Senior Development Consultant for the
National Institute for Mental Health in England development centre for
the south west (NIMHE-SW) and Visiting Professor at the Faculty of
Health and Social Care at the University of the West of England. Steve is
a strong advocate of the application of clinical know-how to organisa-
tional change and partnership working, and has worked as practitioner,
service development consultant, manager, trainer and researcher. In his
current role he leads on issues concerning leadership and teamworking,
particularly with respect to the promotion of social inclusion.
Helen Parker is a Senior Fellow at the Health Services Management
Centre at the University of Birmingham. Prior to this she spent over 20
years working in the NHS in both clinical and senior management posts,
and for most of that period working in primary care. Helen is also a
director of a city centre hostel for the homeless.
Professor Edward Peck is Director of the Health Services Manage-
ment Centre at the University of Birmingham. He is interested in
organisational development and his edited volume entitled Organisational
Development in Healthcare was published by Radcliffe (2005). He also
researches policy implementation and his book Beyond Delivery: Policy
Implementation as Organisational Settlement and Sense-Making – co-
authored book with Perri 6 – was published by Palgrave Macmillan in
2006.
Suzanne Robinson is a Lecturer in Health Economics and Healthcare
Management at the Health Services Management Centre, University of
Birmingham. Her main research interests span the range of health eco-
nomics and healthcare policy, with special interests around funding
healthcare systems and methodological issues around approaches to valu-
ing health states for use in economic evaluation.
Dr Ann Shacklady-Smith is Director of the Masters in Public
Administration and Senior Fellow in Public Management within the
Centre for Public Policy and Management at Manchester Business
School. Ann has an extensive background in teaching, research and con-
sultancy in management development and change within education and
local government. Her research interests include critical reflection in
learning, and the use of action research and appreciative inquiry methods
for implementing whole-of-organisation change. She has worked in
business schools within the UK and New Zealand, with state sector
Contributors xxi

organisations in Malaysia, and as a consultant with government ministries,

local authorities and the voluntary sector.
Judith Smith is Senior Lecturer and Director of Research at the Health
Services Management Centre at the University of Birmingham. She has
been involved in health services research since the mid-1990s, before
which she worked as a senior manager in the NHS. Judith’s research
interests are concerned with the organisation and management of pri-
mary care, health commissioning, and international health policy. She is a
board member of the European Health Management Association and
holds visiting research fellowships at the Australian National University
and the Victoria University of Wellington.
Anne Tofts co-founded Healthskills in 1996 following 20 years as an
NHS operational manager, regional organisation development manager
and advisor at the Department of Health. Anne facilitates strategy and
leadership development with health and care organisations, working with
front-line clinicians and policymakers.
Professor Tom Walley is Professor of Clinical Pharmacology at the
University of Liverpool, a consultant physician in the NHS and director
of the NHS Health Technology Assessment Programme
Professor Kieran Walshe is Professor of Health Policy and Manage-
ment at Manchester Business School where he also co-directs the Centre
for Public Policy and Management. He is also research director of the
NHS service delivery and organisation research programme and deputy
editor of the International Journal for Quality in Health Care. His research
interests concern quality and performance in public services, regulation
and inspection, organisational failure and turnaround, and policy evalu-
ation and learning.
Dr Juliet Woodin is a Senior Fellow at the Health Services Manage-
ment Centre, University of Birmingham. Prior to joining HSMC she
worked as a senior manager in the NHS and was Chief Executive of
Nottingham Health Authority from 1995 to 2002. Her early career was
as a researcher and lecturer in public policy.
Preface

A good rule of thumb for authors is that you should write books that you
yourself really want or need to read. So it was for this book. Having run a
wide range of postgraduate programmes for healthcare managers in the
UK ourselves, and having worked with colleagues involved in this area in
other European countries, the USA, Canada, Australia and New Zealand,
we knew there simply wasn’t a comprehensive, research-based book
which provided a foundation for postgraduate study of health policy and
management. There were policy books, and management books, but
none that brought the two together – and certainly not in a way that was
appropriate for an international readership. Moreover, we also worked on
development programmes with many senior and middle managers who
had enormous experiential learning, but struggled to set that in a wider,
more theoretical context. We thought they needed a book like this too.
As with all good ideas, when we pointed out the need for a book like
this to other people, they suggested that we should get on and write it.
This seemed to make sense at first, but we quickly realised that we simply
didn’t have the breadth of knowledge and expertise that was demanded
by such an ambitious project. However, we were aware that between us
we knew people who could contribute the appropriately expert material
for the book we envisaged.
To our delight, when we approached those colleagues rather tenta-
tively to ask them to contribute to this book, they shared our enthusiasm
for the idea, and were prepared to invest their time and effort in writing
chapters to a demanding timescale. It is remarkable that it took just eight
months from us designing the book and approaching chapter authors to
delivering the final text to our publishers. This has allowed us to make the
content about as up to date as it could be in what is (as we emphasise in
the book) a complex and fast-changing world.
We owe a great deal to the contributors to this book and hope that
they are as pleased as we are with the overall result of our collective effort
(and that they will forgive us for rather assertive project management).
But we owe as much to Amy Bevell and Lyndsey Jackson who were really
in charge of making sure both that chapter authors and editors stuck to
the deadlines and delivered on time. Editing this book has truly been a
xxiv Preface

pleasure, and that is due in no small measure to Amy and Lyndsey’s work
in coordinating, advising, administering and sometimes harassing (in the
nicest possible way) all the contributors, including ourselves.
Kieran Walshe
Judith Smith
May 2006
 1 Introduction: the current and
future challenges of healthcare
management
Kieran Walshe and Judith Smith
Introduction

The purpose of this book is to support the learning and development of

practising managers in healthcare organisations and health systems, and
those undertaking postgraduate study on programmes concerned with
health policy, health management and related areas. Increasingly those
two groups overlap – more and more managers undertake a masters
degree as part of their intellectual and career development, and we
strongly believe in the power of the interaction between academic and
experiential learning that this brings. No one learns to be a manager in a
classroom, or from a book. Management is learnt by doing, by experi-
encing the challenges and opportunities of leadership (Mintzberg 2004).
But the best and most successful managers are reflective practitioners –
profoundly aware of their own behaviours, attitudes and actions and their
impact on others and on the organisation, and able to analyse and critic-
ally review their own practice and set it in a wider context, framed by
appropriate theories, models and concepts (Peck 2004). The future lead-
ers of our healthcare systems need to be able to integrate theory and
practice, and to have the adaptability and flexibility that comes from really
understanding the nature of management and leadership.
This chapter sets the context for the book, by first describing the
challenges of the political and social environment in which healthcare
systems and organisations exist, and how that environment is changing. It
then describes some of the particular challenges of those organisations –
some of the characteristics and dynamics which make healthcare organ-
isations both so interesting and so difficult to lead. Then the chapter sets
out the structure of the rest of the book and explains how we anticipate
that it might be used, both in support of formal programmes of study
and by managers who simply want to develop and expand their own
understanding and awareness.
2 Healthcare management

Healthcare systems, politics and society

In most developed countries, the healthcare sector is anything from 8% to

15% of the economy, making it one of the largest industries in any state –
bigger generally than education, agriculture, IT, tourism or telecom-
munications, and a crucial component of wider economic performance.
In most countries, around one worker in ten is employed in the health-
care sector – as doctors, nurses, scientists, therapists, cleaners, cooks,
engineers, administrators, clerks, finance controllers – and, of course, as
managers. This means that almost everyone has a relative or knows some-
one who works in healthcare, and the healthcare workforce can be a
politically powerful group with considerable influence over public opin-
ion. Almost everyone uses health services, or has members of their family
or friends who are significant healthcare users, and everyone has a view to
express about their local healthcare system.
In many countries, the history of the healthcare system is intertwined
with the development of communities and social structures. Religious
groups, charities, voluntary organisations, trade unions and local muni-
cipalities have all played important roles in building the healthcare
organisations and systems we have today, and people in those com-
munities often feel viscerally connected to ‘their’ hospitals, community
clinics, ambulance service, and other parts of the healthcare system.
They fundraise to support new facilities or equipment, and volunteer to
work in a wide range of roles which augment or support the employed
healthcare workforce. That connection with the community also comes
to the fore when anyone – especially government – suggests changing
or reconfiguring healthcare provision. Proposals to close much loved
community hospitals, or to reorganise district hospital services, or to
change maternity services are often professionally driven, by a laudable
policy imperative to make health services more effective, safe and effi-
cient. But when evidence of clinical effectiveness and technocratic
appraisals of service options collide with popular sentiment and public
opinion, what matters is usually not ‘what works’ but what people
want.
For many local and national politicians, health policy and the health-
care system offer not only opportunities to shine in the eyes of the
electorate when things are going well, but also threats to future electoral
success when there are problems with healthcare funding or service pro-
vision and people look for someone to hold to account. Many of the
problems that constituents bring to politicians in their local offices con-
cern healthcare services, and politicians are closely in touch with and
aware of the attitudes and beliefs of the public about their local health
service. While they will happily gain political benefit from the opening of
a new facility, or the expansion of clinical services, they will equally
happily secure benefit by criticising the plans of ‘faceless bureaucrats’ in
the local healthcare organisation for changes in healthcare services, argue
that there are too many managers and pen-pushers, and wax nostalgically
Introduction 3

about times past when hospitals were run by doctors and nurses and
matron was in charge.
Finally, for the press, TV and radio media, both locally and nationally,
the healthcare system is an endless source of news stories, debates and
current affairs topics. From patient safety to MRSA and bird flu, from
dangerous doctors to hospital closures, from waiting lists to celebrity
illnesses, the healthcare system is news. Big healthcare stories can com-
mand pages of news coverage in national dailies and repeated presen-
tation on TV news bulletins, while at a local level it would be rare to find
a local newspaper which did not have some content about local hospitals,
clinics or other healthcare services in every issue. Healthcare organisa-
tions can use the level of media interest to their advantage, to raise public
awareness of health issues and to communicate with the community, but
they can also find themselves on the receiving end of intense and hostile
media scrutiny when things go wrong.
In other words, healthcare organisations exist in a turbulent political
and social environment, in which their actions and behaviours are highly
visible and much scrutinised. Leadership and management take place in
this ‘goldfish bowl’, where their performance and process can be just as
important as their outcomes. But if that were not enough, in every
developed country the healthcare system is subject to four inexorable and
challenging social trends:
• the demographic shift;
• the pace of technological innovation;
• changing user and consumer expectations; and
• rising costs.
The only certainty is that if it is difficult to make the sums add up for the
healthcare system today, these pressures mean it will be even harder to do
so tomorrow.
The demographic challenge is that because people are living longer
the numbers of elderly and very elderly people are rising fast – and those
people make much heavier use of the healthcare system. People may live
longer, but they cost more to keep alive, they are more likely to have
complex, chronic health conditions, and their last few months of life tend
to be more expensive. A further dimension to this demographic chal-
lenge is the rising incidence of chronic disease in the wider population of
developed countries. The World Health Organisation suggests that this is
a direct result of risk factors such as tobacco use, physical inactivity and
unhealthy diets (WHO 2005).
The second challenge is related to the first in that it reflects an increas-
ing ability to control chronic disease and thus extend life – the pace of
technological innovation. Most obviously in pharmaceuticals, but also in
surgery, diagnostics and other areas, we keep finding new ways to cure or
manage disease. Sometimes that means new treatments which are more
effective than (and usually more expensive than) the existing ones. But it
also means new treatments for diseases or problems which we simply
could not treat before. Previously fatal conditions become treatable, and
4 Healthcare management

interventions to slow the progress of disease or manage its impact

become more available.
This in turn connects with and feeds the third challenge – changing
user and consumer expectations. People want more from the health ser-
vice than their parents did. They are not content to be passive recipients
of healthcare, prescribed and dispensed by healthcare providers at their
convenience. Accustomed to ever-widening choice and sovereignty in
decisions in other areas of life – banking, shopping, housing, education –
they expect to be consulted, informed and involved by healthcare pro-
viders in any decisions that affect their health. They are better informed,
more articulate and more likely to know about and demand new and
expensive treatments.
The first three challenges are in large measure responsible for the
fourth – rising costs. Each of them contributes to the constant pressure
for more healthcare funding. However much governments or others
increase their spending, it never seems to be enough. In almost every
other area of the economy, productivity is rising and costs are falling
through competition and innovation. We have better, faster, cheaper
computers, cars, consumer goods, food, banking and so on, yet in
healthcare costs are stubbornly high and continue to rise.
In short, the social, political and economic context in which healthcare
organisations have to exist is often a hostile, fast-changing and pressured
environment. Managers and leaders strive to balance competing, shifting
and irreconcilable demands from a wide range of stakeholders – and do
so while under close public scrutiny. The task of leadership in healthcare
organisations – defining the mission of the organisation, setting out a
clear and consistent vision, guiding and incentivising the organisation
towards its objectives, and ensuring safe and high quality care – is made
much more challenging by the social, economic and political context in
which they work.

Healthcare organisations and healthcare management

Organisations are the product of their environment and context, and

many of the distinctive characteristics and behaviours of healthcare
organisations result from some of the social, political and economic
factors outlined above. However, some also result from the nature of the
enterprise – healthcare itself. The uniquely personal and personalised
nature of health services, the special vulnerability and need for support
and advocacy of patients, the complexity of the care process, and the
advanced nature of the technologies used, all contribute to the special
challenges of management in healthcare organisations.
Of course, we should be cautious that this does not lead us to be
parochial or narrow-minded in our understanding of what we do, or of
what we can learn from other sectors and settings. We are all prone
to exceptionalism, believing that our job, organisation, profession or
Introduction 5

community is in some ways uniquely different. It gives us an excuse for

why we perform less well. Our patients are sicker, our facilities less mod-
ern, our community is disadvantaged, our clinicians are more difficult or
disengaged. It also provides the perfect reason for not adopting new ideas
from elsewhere – it would not work here, because here is different.
Healthcare systems and organisations have a strong tendency to excep-
tionalism, which needs to be challenged on a regular basis. Healthcare
organisations are large, complex, professionally dominated entities provid-
ing a very wide range of highly tailored and personalised services to large
numbers of often vulnerable users. But those characteristics are shared in
various degrees by local authorities, police and emergency services, uni-
versities, schools, advertising agencies, management consultancies, travel
agencies, law firms and other organisations. Healthcare is nevertheless
different, and three important areas of difference deserve some further
consideration: the place of professions, the role of patients, and the nature
of the healthcare process.
For managers entering healthcare organisations from other sectors –
whether from other public services, commercial for-profit companies or
the voluntary sector – one of the first striking differences they notice is
the absence of clear, hierarchical structures for command and control,
and the powerful nature of professional status, knowledge and control. Sir
Roy Griffiths, who in the 1980s led a management review of the NHS in
the UK, famously wrote in his report about walking through a hospital
looking vainly for ‘the person in charge’ (Griffiths 1983). But to do so
would be to miss the point, which is that healthcare organisations are
professional bureaucracies in which more or less all the intellectual, cre-
ative and social capital exists in the frontline workers – clinicians of all
professions, but particularly doctors. Like law firms and advertising agen-
cies, it makes no sense to try to manage these talented, highly intelligent
individuals in ways that are reductionist, or which run counter to their
highly professionalised self-image and culture. This does not mean that
they should be unmanaged – just that the processes and content of
management and leadership need to take account of and indeed embrace
the professional culture. Things get done not through instruction or
direction, but by negotiation, persuasion, peer influence and agreement.
Leaders make skilful use of the values, language and apparatus of the
profession to achieve their objectives, and learn to lead without needing
to be ‘in charge’.
The people who use healthcare services, whether you call them
patients, users, consumers or whatever, are ordinary people, but they are
not like the consumers of many other public or commercial services.
First, there is a huge asymmetry of power and information in the relation-
ship between a patient and a healthcare provider. Even the most middle-
class, well-informed, internet-surfing patient cannot acquire the detailed
knowledge and expertise which comes with clinical practice. Very few
patients are prepared to go against the explicit advice of senior clinicians,
and many patients actively seek to transfer responsibility for decision
making to those professionals. ‘Tell me what you think I should do,
6 Healthcare management

doctor.’ At some level, patients have to be able to trust that healthcare

providers are competent, and to take their advice on important decisions
about their health. No amount of performance measurement, league
tables, audit or regulation can substitute for this trust.
Secondly, when people become patients and use healthcare services
they are often at their most vulnerable and are much less able to act
independently and assertively than they would normally be. They may be
emotionally fragile following an unwelcome diagnosis of disease, and
physically weakened by the experience of illness or the effects of treat-
ment. When lying flat on a wheeled trolley, feeling nauseous and in pain,
surrounded by the unfamiliar noise and clatter of an emergency depart-
ment and frightened by sudden intimations of mortality, we are at our
most dependent. We are not well placed to exercise choice, or to assert
our right to self-determination. We want and need to be cared for – a
somewhat unfashionable and paternalistic notion which does not sit
comfortably with concepts of the patient as a sovereign consumer of
health services. This all means that healthcare organisations, and those
who lead them, have a special responsibility to compensate for the
unavoidable asymmetry of power and information in their relationships
with patients, by providing mechanisms and systems to protect and advo-
cate for patients, seek their views, understand their concerns, and make
services patient centred.
Despite all the high technology medicine, complicated equipment and
advanced pharmaceuticals available today, the healthcare process itself is
still organised very much as it was a hundred years ago. It is a craft model
of production in which individual health professionals ply their trade,
providing their distinctive contribution to any patient’s treatment when
called upon. This is not mass production. Healthcare organisations such as
hospitals are much more like marketplaces than they are like factories,
with the patients moving from stall to stall to get what they want, not
being whisked smoothly along on a conveyor belt from start to finish.
Fundamentally, it is an unmanaged and undocumented process. Usually
there is no written timetable or plan showing how the patient should
move through the system, and no one person acts as ‘process manager’,
steering and coordinating the care that the patient receives and assuring
quality and efficiency. This model has endured because of its flexibility.
The patient care process can be endlessly adapted or tailored to the needs
of individual patients, the circumstances of their disease, and their
response to treatment. But the complexity of modern healthcare pro-
cesses, with multiple handovers from one healthcare professional to
another, the ever-accelerating pace of care as lengths of stay get shorter
and shorter, and the risks and toxicity of many new healthcare interven-
tions (the flip side of their much greater effectiveness) all mean that the
traditional model is increasingly seen as unreliable, unsafe, and prone to
error and unexplained variation (Walshe and Boaden 2005). Increasingly,
healthcare organisations use care pathways, treatment plans and clinical
guidelines to bring some structure and explicitness to the healthcare
process. Techniques for process mapping and design, commonplace in
 Introduction 7

other sectors, are increasingly used not just to describe the healthcare
process but in so doing to identify ways in which it can be improved
(McNulty and Ferlie 2004). Like any area where custom, practice and
precedent have long reigned supreme, healthcare processes are often ripe
for challenge. Why does a patient need to come to hospital three times to
see different people and have tests before they get a diagnosis? Can’t we
organise the process so that all the interactions take place in a single visit?
Why are certain tasks only undertaken by doctors or nurses? Could they
be done just as well by other healthcare practitioners? Gradually, the
healthcare process is being made more explicit, exposed for discussion
debate and challenge, and standardised or routinised in ways that make
the delivery of healthcare more consistent, more efficient and safer.
In conclusion, there is one other important feature of healthcare
organisations. Whether they are government owned, independent not-
for-profits, or commercial healthcare providers, they all share to some
degree a sense of social mission or purpose concerned with the public
good (Drucker 2006). The professional values and culture of healthcare
are deeply embedded, and most people working in healthcare organisa-
tions have both an altruistic belief in the social value of the work they do
and a set of more self-interested motivations to do with reward, recogni-
tion and advancement. Similarly, healthcare organisations – even com-
mercial, for-profit entities – do some things which do not make sense in
business terms, but which reflect their social mission, while at the same
time they respond to financial incentives and behave entrepreneurially.
When exposed to strong competitive pressures, not-for-profit and
commercial for-profit healthcare providers behave fairly similarly, and
their social mission may take second place to organisational survival
and growth. The challenge, at both the individual and organisational
level, is to make proper use of both sets of motivations, but not to lose
sight of the powerful and pervasive beneficial effects that can result from
understanding and playing to the social mission.

About this book and how to use it

No book can contain everything on a particular subject, but in this case

we have made a valiant attempt to provide a general textbook on health-
care management which covers most of the territory needed both for
postgraduate study and for those interested in reading for their own
development. The 27 chapters of the book which follow this introduc-
tion and overview are split into three main parts as follows.

Part 1: Setting the context

Chapters 2 to 6 aim to set out the wider political, social and economic
context in which healthcare organisations exist. These chapters provide
8 Healthcare management

the ‘big picture’ which helps to explain the way that those organisations
behave and what they do, remembering that, as observed earlier, organisa-
tions are very much a product of their environment and context. This
section covers the politics of health and the health policy process (Chap-
ter 2); healthcare financing and funding (Chapter 3); healthcare systems,
provision and service delivery (Chapter 4); healthcare technologies and
innovation (Chapter 5); health and well-being and the wider public
health context (Chapter 6).

Part 2: Managing healthcare organisations

The middle section of the book aims to cover some of the specifics of
healthcare management – issues and topics which are particular to the
business of healthcare itself. It starts with three chapters about managing
in different healthcare sectors – primary care (Chapter 7), acute care
(Chapter 8) and mental health (Chapter 9). It then goes on to tackle a
range of other subjects including service and capital development (Chap-
ter 10); planning and strategic direction (Chapter 11); commissioning and
contracting (Chapter 12); healthcare information systems and technology
(Chapter 13); the healthcare workforce (Chapter 14); working with clini-
cians (Chapter 15); the governance of healthcare organisations (Chapter
16); partnership working with other agencies (Chapter 17); performance
management and improvement (Chapter 18).

Part 3: Management theories, models and techniques

The third section of the book moves on to tackle a range of subjects

where we feel theories, ideas, models, frameworks or techniques
developed in the field of business and management can and should be
brought to bear on the area of healthcare management. It starts with
chapters on leadership (Chapter 19); organisational development (Chap-
ter 20); and personal effectiveness (Chapter 21). It then continues with a
series of practically focused chapters on managing change (Chapter 22);
managing resources (Chapter 23); working in teams and managing
people (Chapter 24); understanding user perspectives (Chapter 25); qual-
ity improvement (Chapter 26); research, evaluation and evidence-based
management (Chapter 27).
Making sense of this substantial volume of materials and ideas is itself a
challenge, and so we conclude in Chapter 28 by mapping out what we
feel are some of the lessons about complexity, change and creativity in
healthcare leadership and management which we would draw from the
book as a whole.
While the content of each chapter has led its design, we have asked our
authors to follow a broadly consistent format in order to make the
materials in the book as useful and readable as possible. You will therefore
find each chapter is structured into around five or six sections, and we
 Introduction 9

make liberal use of figures, tables, charts and diagrams to illustrate the
content. Each chapter finishes with the following:
• Summary box containing key points drawing together the main
messages from the chapter.
• Self-test exercises designed to help you to apply the content of the
chapter and your learning to your own organisations. The exercises
generally consist of a number of questions which we suggest you use as
the basis either for personal reflection or for discussion with
colleagues.
• References and further reading with details of books, reports,
journal articles and other materials referenced in the chapter or
intended to provide background reading for you on the topic.
• Websites and resources where you might seek further information.
We have done our best to ensure these are as up to date as possible, but
bear in mind that content on the internet does change rapidly and so
some links could no longer be current.
Finally, we would welcome comments about and ideas for improve-
ment of this book. Whether you use it casually for your own develop-
ment or more intensively as part of a postgraduate programme of
study, we would like your feedback. Please email either one of us at
[email protected] or [email protected].

References and further reading

Drucker, P. (2006) Managing the Nonprofit Organisation. London: HarperCollins.

Griffiths, R. (1983) Report of the NHS Management Inquiry. London: Department
of Health and Social Security.
McNulty, T. and Ferlie, E. (2004) Reengineering Healthcare: The Complexities of
Organisational Transformation. Oxford: Oxford University Press.
Mintzberg, H. (2004) Managers not MBAs. London: Prentice Hall.
Peck, E. (2004) Organisational Development in Healthcare: Approaches, Innovations,
Achievements. Oxford: Radcliffe Medical Press.
Walshe, K. and Boaden, R. (eds) (2005) Patient Safety: Research into Practice.
Maidenhead: Open University Press/McGraw Hill.
World Health Organisation (WHO, 2005) Preventing Chronic Diseases: A Vital
Investment. Geneva: WHO
Part I
Setting the context
 2 The politics of healthcare and
the health policy process:
implications for healthcare
management
Jennifer Dixon

Introduction and overview

All governments in the developed world have a firm interest in shaping

the healthcare industry. There are several reasons for this. Healthcare
expenditures of a variety of payers, not least government, are significantly
large and pressures on these expenditures are high. Since governments are
major payers, they are accountable in a highly visible way for expend-
iture, not least at the ballot box. Every voter is a potential user of health-
care. Care and supplies are purchased from powerful corporate bodies or
professional groups. There is a large difference in knowledge between
providers (and their suppliers) and users (and often payers) of care, which
may result in excessive care and avoidable costs. The healthcare sector
employs a large number of people: for example, in the National Health
Service (NHS) in England 1.3 million people out of a population of 49.1
million. The nature of healthcare is such that it is highly emotive and
features frequently in the media, for there are distinct ideological and
moral issues on which political parties are likely to disagree, for example,
who pays for care (such as the individual, the employer, the govern-
ment) and the factors which improve performance in health systems
(for example, direct or indirect government intervention or market
incentives). For these reasons, healthcare is rarely out of the sights of
politicians.
It is no surprise then that governments and other payers regularly try
to reform the healthcare sector. Managers working in provider or com-
missioning bodies are often at the receiving end of what might seem to
be arbitrary and burdensome change. In doing their job it is important for
them to understand, and therefore possibly predict, the pattern of reform
that impinges on their work, partly to be able to plan better for change
and where appropriate to attempt to modify the type and level of specific
interventions.
14 Healthcare management

This chapter focuses on reform which is the direct result of govern-

ment action. It starts by examining how healthcare reforms come about
and the main factors which shape them. It goes on to examine briefly the
broad pattern of reforms in the healthcare sector across Europe. Then,
using the example of the NHS in England, it outlines the menu of
policies now being developed and implemented, and tries to weave a
narrative around these changes in order to predict future change, thus
attempting to assess the power of managers to shape reforms in future.

The dynamics of reform in the health sector

Why change occurs

In a lucid and sophisticated account of health sector reform in the 1980s

and 1990s in the US, Canada and Britain, Carolyn Tuohy (1999), a Cana-
dian political scientist, reflected on why change occurred. She observed
that ‘particular windows of opportunity for change occur at certain times
and not others, a pattern of timing that derived from factors in the
broader political system not in the health care arena itself’. She argued
that significant features of health systems arising from major reform were
in fact accidents – byproducts of ideas in wider circulation at the time
that a window of opportunity opened – and that decisions taken between
the episodes of major reform were heavily influenced by the parameters
or ‘logic’ that such major reforms put in place. These parameters were
influenced by history, or the reforms that had gone before, the
sequencing of reforms and rational (evidence-based) choice, as well as
two other characteristics which she termed ‘institutional mix’ and ‘struc-
tural balance’. By institutional mix she meant the balance of power
between three main forms of social control: state hierarchy (‘authority-
based’ control); professional collegiate institutions (‘skill-based’ control);
and the market (‘wealth-based’ control). By structural balance she meant
the balance of power between three main stakeholders: the state, health-
care professionals and private financial interests. Tuohy’s argument was
that reform of healthcare in different countries would most likely be
incremental, and heavily bounded by the particular political system, social
values, past history (including of major reforms) and the power of institu-
tions and key groups. The resulting pathway of reform would be thus
different across countries.
Tuohy also noted that there were few instances of significant changes
in power between these stakeholders necessary to achieve episodes of
very major reform in health care. Evans (2005) described the period
when these episodes occur as ‘punctuated equilibrium’ and also noted
that the ‘punctuation marks may be wholly external to the system, even
random – war or economic crisis . . . and their effects are unpredictable’
as well as ‘decidedly unpleasant’. This was echoed by US economist
Victor Fuchs who ruefully noted in the 1990s that short of major change
The politics of healthcare 15

in the political climate that ‘often accompanies a war, a depression, or

large scale civil unrest’ national health insurance in the US was unlikely
(Fuchs 1991). However, between episodes of major reform Tuohy
thought that the success of change would depend upon ‘the “goodness of
fit” between the strategy of change proposed and the internal logic of the
system to which it is addressed’, itself influenced by the structural balance
and institutional mix. In turn she argued that these last two factors, in
particular the role of the state, are heavily influenced by the ability for the
prevailing political system in a country to exert authority over health
systems, either directly (where the state was payer and possibly also the
provider of care) – which is most effective – or less directly through
regulation or through mobilisation of other key stakeholders – which is
likely to be less effective, since it relies upon achieving consensus between
different and powerful parties.
The dynamics of healthcare reform and the theory underpinning it,
described by analysis of reform in three countries by Tuohy (1999), have
also been identified and developed by many other writers, often political
scientists (Hacker 2002; Hall and Taylor 1996). At present three theories
appear to be mainly in play: historical institutionalism; rational choice
institutionalism; and sociological institutionalism. Historical institutional-
ists believe that the power and mix of institutions is the main factor
influencing the outcome of reform (Tuohy’s institutional mix), and that
‘institutions push policy along particular paths, where early choices and
events play a crucial role in determining the subsequent development of
institutions or policies’, otherwise known as ‘path dependency’ (Oliver
and Mossialos 2005). Rational choice institutionalists seek a further
explanation as to the basis for the choices made by institutions, which is
often rooted in welfare economics where institutions act to maximise
benefits along the range of options they make available to key actors.
Sociological institutionalists believe that the actions of institutions are not
just informed by a welfare maximising logic, but also by culture or iden-
tity within institutions and that ‘policy and institutional reforms will
occur only if they are socially legitimate’ (Oliver and Mossialos 2005) or
chime in with a nation’s culture.
In truth, as theorists grope towards better conceptual models which
explain the dynamics of healthcare reform with more accuracy, in a
subject as complex as health reform any single theory is likely to be
inadequate. As Oliver and Mossialis (2005) put it with respect to health-
care reform in Europe, the answer to the question asked by Hollis (1994)
‘does structure determine action, or action define structure?’ is probably
a bit of both.

Healthcare reforms across Europe

Regardless of the preferred theories of change, Evans (2005) suggested

that the three most important questions driving health sector reform
were:
16 Healthcare management

• Who pays for care (and how much)?

• Who gets care (what kind, when, from whom)?
• Who gets paid how much, for doing what?
Evans suggested that conflict between major stakeholders revolves mainly
around differences in viewpoints as to how these questions should be
answered.
The extent to which government (or ‘politics’ as termed in the title of
this chapter) is involved in healthcare depends heavily not just upon the
extent to which political systems can consolidate authority, or upon the
appearance of a window of opportunity for change, but on the extent to
which government (national or local) is motivated to act. A primary factor
to induce motivation must be the extent to which government pays for
healthcare and thus seeks to control expenditure. Figure 2.1 shows that
across OECD countries the government is a major payer even in coun-
tries such as the US, and thus is constantly seeking to reform healthcare.
In the face of rising health expenditures and pressures to spend more
from providers, users and other supply-side stakeholders, all govern-
ments in Europe have been constantly active in attempting to reform
healthcare. Analysing recent reforms across 11 European countries
described in a special edition of the Journal of Health Policy Politics and
Law, Evans (2005) notes a surprisingly similar story over the past 50 years
– different reforms but ‘parallel development’ – in contrast to what might
have been expected given the unique set of conditions (such as insti-
tutional mix as highlighted by Tuohy) in each country. He describes two
distinct phases to reform. The first was the establishment of near universal
and comprehensive systems of collective payment for healthcare (through
taxation and/or compulsory social insurance) – major reform which in
many European countries was prompted by significant political events
in the case of northern and middle Europe linked to World War II, and in
southern European states such as Greece, Spain and Portugal linked to
the later overthrow of right-wing authoritarian regimes. The second
phase (from the mid-1970s onwards) was essentially one of containing
costs, which has been difficult since governments have been faced ‘by
highly intelligent and highly motivated opponents who are trying to
drive them up’ (Evans 2005: 287) such as the pharmaceutical industry
and doctors. Modifying physicians’ behaviour, Evans warns, has led to
‘head-on conflict over professional organisation and autonomy’ where
the public are unsurprisingly likely to side with the professionals arguing
for more funding rather than governments demanding parsimony. He
also notes that while each country has a unique history and institutional
mix, surprisingly reforms since the 1970s across European countries have
focused on similar objectives and the pathway of reform has not been
dissimilar.
Closer inspection of ongoing attempts at reform across Europe in the
last two decades reveal some broad patterns, at least across middle and
northern European countries (Journal of Health Policy 2005; Health Eco-
nomics 2005). First, the main goals of reform have been similar: to control
The politics of healthcare 17

costs, improve cost effectiveness and access to care while protecting key
social or collective objectives such as equity of access to care and public
satisfaction. Second, incremental rather than radical change has generally
been the norm – change bounded in part by the institutional mix and
power both within the political and healthcare arena. Progress has been
limited in particular by, as Tuohy (1999) described, governments in some
countries needing to achieve consensus with other political parties or key
corporate bodies, such as in Germany and the Netherlands. Third, there
has been an emphasis in some countries of devolution of health reforms
to regions or other geographical areas and central frustration (and result-
ing central intervention) with lack of progress. Fourth, there has been
an emphasis in many countries such as Germany (Wortz and Busse 2005),
18 Healthcare management

Holland (Schut and Van de Ven 2005) Austria (Stephan and

Sommersguter-Reichmann 2005) and England (Oliver 2005) on
reviewing the incentives operating on providers, with the tentative
development of market-style incentives, such as competition and greater
consumer choice underpinned by new methods of paying hospitals based
case-mix based tariffs derived using diagnostic-related groups.
Maynard (2005) observed that the weak evidence base to many of the
reforms in Europe had resulted in ‘a lack of clarity in defining public
policy goals, establishing trade-offs and aligning incentives with those
objectives’. He also observed that many governments, such as in France
and the US, had taken the ‘wrongheaded’ step of introducing reforms to
curb the demand for care by increasing co-payments for users, a policy
which tended to penalise those least well off and the needy as well as the
worried well, rather than the more important priority of tackling pro-
viders over the more significant problem of supplier-induced demand.
For example, he noted a failure across Europe of governments to act or be
effective in addressing specific problems of: variations in use of care aris-
ing from variations in medical practice; the lack of evidence on the cost
effectiveness of treatments; and specifically the management of people
with chronic medical conditions. This observation is perhaps is under-
standable. It is far easier for governments to introduce co-payments than
it is to tackle powerful suppliers about their behaviour.
The overall result in Europe over the past decade argues Evans (2005)
has been mixed and tentative – drops in inpatient utilisation, continued
escalation in the expenditure on pharmaceuticals, and the costs of phys-
icians’ services somewhere in the middle. He concludes by reflecting that
‘effective coping depends both upon the resources of the state . . . and
upon the degree of democratic responsiveness of the state itself to broader
public values’ (Evans 2005: 291), but warns that the obvious political dif-
ficulty of the phase two agenda may strengthen the hand of those who
seek to erode the phase one reforms in Europe. An additional warning
might be that attempts to increase efficiency and quality of care using
sharper market incentives might also lead to the undermining of social
objectives, unless there is effective monitoring and regulation to counter it.
To a manager, the discussion so far may not make comfortable reading.
If, on the one hand, major reforms are influenced heavily by factors in the
wider political and institutional arena and are heavily bounded by history,
then what hope is there to influence the shape of reform? On the other
hand, if episodes between major reforms are influenced by the shifts in
power between and probably within major stakeholders, among whom
are the professionals running institutions, then there may be hope. Such
high-level analysis might help those managing healthcare to understand
and predict the pathway of reform and identify the features that may or
may not be modifiable nationally or locally. In the next section the
influence of politics on healthcare in the UK National Health Service
(NHS) is focused upon. The objective is to help promote understanding
of the pathway of reform in a specific system and predict what might
happen in the short to medium term.
 The politics of healthcare 19

Reform in the UK NHS

The main objectives driving healthcare reform in Europe are also in play
in the UK NHS. But there are particular features about the political
system, and the healthcare system and the ideology of the government in
power over the last decade, which are distinctive and help to explain the
pathway of reform in the UK compared to Europe. These features are
discussed briefly below.

The political system

A distinctive feature of the UK political system is a parliamentary

system of government with a ‘first past the post’ method of electing
Members of Parliament. On occasion this has allowed governments
to be elected with sufficiently large majorities to create an ‘elected
autocracy’, with little need to achieve consensus over policy with either
other political parties or indeed key corporate and professional
stakeholders. The landslide victory of the Labour government in 1997
and subsequently two further victories (albeit with smaller majorities)
has allowed significant progress on reform in healthcare to be made
relative to other European states. Within the UK, the Labour government
in 1997 committed to greater devolution of political power. The
immediate result was the creation in 1998 of an elected Parliament in
Scotland, an elected Assembly in Wales and, until it was suspended
in 2002, an elected Assembly in Northern Ireland (NI). While the
specific powers of each political body are different, each has significant
freedoms with respect to public policy including healthcare. The speed
of public sector reform has been different across the UK, partly
dependent upon the need to achieve a consensus among political
parties in the devolved political bodies in different countries, the shape of
the reform programme and the tools designed by governments to
implement it. Up until the late 1990s, reforms to the NHS had been
applied similarly across the four countries of the UK, and while the
NHS was never exactly the same in each country, in practice the
policy differences between the countries were marginal in comparison
to the similarities.
This changed following devolution. In England, the emphasis has been
on national targets to improve performance (particularly reducing wait-
ing times), increasing capacity and more latterly sharper market-style
incentives, described further below. In Scotland the 1990s ‘quasi-market’
has been abolished and steps taken to build a professionally led, integrated
system based on concepts such as managed clinical networks. In Wales,
the focus has been on improving the public health through partnership
working between the local NHS, local government and communities. In
Northern Ireland, developments have been largely stalled by political
uncertainty.
20 Healthcare management

It is still too early to assess the overall impact of these different reforms
to healthcare across the UK. In an analysis of performance across a range
of high-level indicators, such as health status, patient satisfaction, waiting
times, activity rates and staffing levels, the main difference between the
four UK countries since 1997 was the significant reduction in the time
waited by NHS patients in England for treatment as shown in Table 2.1
(Alvarez-Rosete et al. 2005).
The reason for the improved relative performance in England has been
because reducing waiting has been the policy with highest priority.
Measurable and time-specific targets were set and monitored, investment
was focused on achieving the target, non-NHS providers were allowed to
supply capacity to help reduce waiting and strong performance manage-
ment and sanctions for failure were applied to managers (Bevan and
Hood in press). This approach, a combination of strong performance
management from the centre and stronger market-style incentives, was
not adopted in other UK countries – largely for political reasons. For
example, in Scotland, while some targets have been set centrally (such as
to reduce waiting times for elective care), there has been a strong move
against using financial incentives to improve performance. Instead, the
emphasis to NHS reform has been to merge commissioners and pro-
viders of care and develop professionally led integrated networks and
pathways of care.

The healthcare system

A distinctive feature in the UK is the extent to which government pays

the costs (compared to other countries in Europe) and the extent to
which health services are state owned and run. In 2005–6, 8.3% of gross
domestic product (GDP) was spent on healthcare in the UK, 7.1% of
GDP on the NHS funded largely through general taxation. Unlike the
case across most of Europe, in the UK the state not only funds most
healthcare but also owns all of the commissioners of state-funded care
(for example, all strategic health authorities and primary care trusts),
many of the providers (for example, all NHS trusts and community
health services), and contracts almost exclusively with independent pro-
viders of primary care (GPs) and semi-autonomous NHS bodies – NHS
foundation trusts. The NHS has some unusual features compared to
other enterprises; for example, its budget is cash limited and NHS organ-
isations must either break even each year or not breach their annual
funding limit; it provides comprehensive services which are (largely) free
at the point of use; individuals cannot buy NHS care directly but have
care bought on their behalf by commissioners (for example, primary care
trusts); there are enormous information discrepancies between indi-
viduals and service providers, which means that individuals rely heavily
on informed agents (for example, GPs) to help direct them to the most
appropriate care; and service providers are formally accountable directly
 The politics of healthcare 21

Table 2.1 NHS waiting times across four UK countries, 1997 and 2003
England England Scotland Scotland Wales Wales NI NI
1996–97 2002–03 1996–97 2002–03 1996–97 2002–03 1996–97 2002–03

Inpatient and day

case waiting list
Inpatient and day 2.3 1.9 N/A N/A 2.2 2.5 2.7 3.3
case waiting (%
waiting of total
population)
Percentage 74.9 80.6 N/A N/A N/A 63 62.2 60.1
waiting less
than 6 months
(% of the
waiting list)
Percentage 22.4 19.4 N/A N/A N/A 21 20.6 18.4
waiting more 6
months but less
than 12 months
(% of the
waiting list)
Percentage 2.7 0 N/A N/A 9.9 15.9 17.1 22
waiting 12
months or
longer (% of the
waiting list)
Outpatient waiting
list
Outpatient N/A N/A N/A N/A 3.5 7.4 3.7 8.4
waiting (%
waiting of total
population) at
March 2003
Percentage N/A 80 N/A N/A 72 45.7 64.8 42.1
waiting less
than 3 months
(% of the
waiting list)
Percentage N/A 100 N/A N/A 94.1 67.6 80.7 61.4
waiting less
than 6 months
(% of the
waiting list)
Percentage N/A 0 N/A N/A 5.9 32.4 19.3 38.6
waiting more
than 6 months
(% of the
waiting list)

Source: Alvarez-Rosete et al. (2005).

N/A = data not available or not recorded in a comparable format
22 Healthcare management

to the Secretary of State rather than to the patients treated or populations

served (with the exception of foundation trusts).
Historically, the government largely left it to the professionals to pro-
vide a good quality service. As Rudolf Klein has noted, there was an
implicit pact between the government and the profession whereby the
former set the overall budget for the NHS and the latter largely spent it,
provided each did not challenge the other (Klein 2000). By the 1980s this
had changed and the government, through the Department of Health
and local NHS bodies, took an increasingly direct role to improve the
performance of NHS institutions, particularly providers of care. This was
done through primary and secondary legislation, directives from the
centre, and performance management locally, regionally, or sometimes
nationally. Where the government was not able to act directly through
operational directives and performance management, in particular with
respect to GPs as independent contractors, it has attempted to shape the
activities of GPs through legislation and the financial incentives of the
national GP contract. The bulk of these efforts has been largely to
improve the performance of institutions with respect to politically
determined priorities, rather than the quality of care provided by pro-
fessionals, which has more often been the preserve of the professional
regulatory bodies such as the General Medical Council and the Royal
Colleges.
The prevailing environment in the UK NHS, then, is one in which
government has a very strong role in improving performance through
reform. Bevan and Robinson (2005) argued that ‘path dependency’ does
help us understand the path of reform in England and the under-
pinning political logics in the NHS are those of a ‘state hierarchical
system in which GPs and hospital doctors determine both demand and
supply’.

Ideology

In the UK, particularly in England, apart from the fact of relatively large
parliamentary majorities giving a significant democratic mandate for
change, perhaps the most important feature shaping recent healthcare
reform has been the ideology or ‘mission’ of successive New Labour
governments led by Tony Blair. Upon election in 1997 there was much
talk, as in Germany and the US, of finding a ‘third way’, a different
mission which took politics to a new place ‘beyond left and right’ –
beyond a spectrum with the free market at one end and nationalised state
bureaucracies at the other. A mantra used by government in healthcare
was ‘what counts is what works’; in other words, the government was to
implement reforms that were shown to achieve desired objectives regard-
less of the ideologically correct way of achieving them. Despite much
analysis by academics (Giddens 1998, 2000), the ‘third way’ was not
convincingly conceptualised or operationalised. Neither was ‘what
The politics of healthcare 23

works’ found, since that required significant investment in building an

evidence base to reform in the public sector which would also take up
much needed time when reform was pressing. Instead, what has seemed
to be the main lodestar to New Labour governments since 1997 was
the step taken in 1994 to scrap clause 4 – a clause in the constitution of
the Labour Party:
To secure for all the workers by hand or by brain the full fruits of
their industry and the most equitable distribution thereof that may
be possible upon the basis of the common ownership of the means of
production, distribution and exchange, and the best obtainable system of
popular administration and control of each industry of service. (My
emphasis; http://www.cool-stuff.co.uk/LabourWatch/c4.html)
In scrapping the clause, a rubicon had been crossed that had taken a 60-
year journey (since the big nationalisations of enterprise in the 1940s and
1950s). With respect to the UK’s biggest nationalised industry, the NHS,
the diagnosis made by core New Labourites was not dissimilar to that
made by Margaret Thatcher a decade earlier – that the NHS was in-
efficient, painfully slow to change, dominated by entrenched provider
interest and insufficiently responsive to users, and too big to be run
successfully from the centre. A stimulant needed was greater competition
between suppliers, both institutions and professionals, to improve per-
formance quality responsiveness and efficiency, while protecting equity
of access to care as far as possible. In England a radical reform programme
took shape, which because of devolution did not emerge in the three
other UK countries.
Three broad phases to NHS reform in England since 1997 have been
described: phase 1, central direction (national standards and directives);
phase 2, financial investment and support (for example, the work of the
Modernisation Agency); and, the most significant, phase 3, ‘constructive
discomfort’ (Stevens 2004) or ‘edgy instability’ – the introduction since
2000 of market-style incentives to improve the quality and efficiency of
care. This has been underpinned by policies such as patient choice (DH
2005a), encouraging private providers (secondary, community and pri-
mary) to compete for NHS business through the letting of contracts
(nationally by government as well as locally by commissioners) to non-
NHS providers (DH 2006a), introducing a new system of prospective
payment to hospitals payment by results (DH 2002), allowing NHS trusts
to achieve foundation status with much greater freedom to operate
independently of the state (for example, NHS foundation trusts are not
subject to directives by the Secretary of State or performance manage-
ment by the centre) (DH 2006b), and attempting to develop commission-
ing by primary care trusts (DH 2005b). It is intended that all NHS trusts
should achieve foundation status by 2008. These reforms are in the
early stages of implementation and the market for provision, such as it is,
is immature. There is no prospect of wholesale and overnight privatisa-
tion as was the case with the denationalised utilities, rather a gradual
development of market-style incentives, plurality of providers, a payment
24 Healthcare management

system for providers to support choice and competition underpinned by

effective regulation (Dixon 2005).
It is clearer where this broad direction of travel may lead in theory than
in practice. In theory it seems that the introduction of stronger market
forces into healthcare is here to stay. In England, market-style incentives
could well be extended beyond provision to commissioning bodies (all
NHS owned and run at present), which could compete, like US managed
care organisations, with each other for consumers. One aspect of reform
that Labour has been consistent on has been to rule out alternative pri-
vate sources of funding of healthcare, so that the bulk of care remains free
at the point of use – a fundamental founding principle of the NHS. On
this basis the national health service could indeed become national health
insurance, with a plurality of organisations, state owned, voluntary and
private, competing to provide services.
The introduction of market-style incentives in Scotland Wales and
Northern Ireland will depend upon their impact in England, in particular
on waiting times for elective care, and the contribution to progress of
other reforms in these countries. But the likelihood is that across the UK,
as elsewhere in Europe, there will be increasing recognition that a blend
of levers to improve performance is needed, and that blend will appropri-
ately include market-style incentives (such as competition between
institutions and consumer choice). As has been demonstrated across
Europe in the last two decades, how prominent these incentives will be in
that blend will depend on a number of factors, including the ideological
complexion of governments, the relative political power of other key
stakeholders (such as the professions) and the extent to which there is
convincing evidence that these incentives are helping to solve key local
problems.
Again as demonstrated across Europe, the pathway of reform is
unlikely to be linear and likely to be stalled by cautious implementation.
For example, in the Netherlands in the late 1980s the Dekker Plan pro-
moted radical reform – regulated competition to give more incentives to
providers and insurers to improve performance (Schut and Van de Ven
2005). While the theory of how this would work appeared convincing, in
practice implementation was very difficult, not so much because of polit-
ical conflict in this case but because a number of technical aspects of the
reforms had not been worked out or implemented to allow regulated
competition to occur. In particular the following had not been deter-
mined (Schut and Van de Ven 2005): risk adjustment to reduce adverse
selection by insurers; pricing and product classification for providers to
reduce the temptation to skimp on care provided; a better system of
outcome and quality measurement so that contract negotiations between
insurer and provider would focus on these areas not just price; better
information to promote choice among consumers; and an effective
regulatory framework. While progress has been made on these in the
intervening years, implementation is still in a very early stage.
In Sweden, the process of reform towards market-style reforms has
proceeded crabwise, delayed perhaps less by technical problems as
 The politics of healthcare 25

experienced in the Netherlands but more by the political process (Anell

2005). In Sweden healthcare is mostly funded and provided by the
county councils, whereas overall goals and policies are set by national
government. The county councils and national government may be of
different political complexion; for example, between 1991 and 1994
when a non-socialist coalition government was in power and in favour of
market-style incentives such as competition and consumer choice and
national governments have varied in their willingness to devolve decision
making locally. The lack of political stability between central and local
government has contributed to difficulties in developing and implement-
ing policies, resulting in delay.
In England, in practice though, the reform path is less clear in the
short to medium term. Whether or not permission to continue to
develop market-style incentives in the NHS is granted by parliamentar-
ians is likely to be partly contingent upon the successful implementation
of the current round of reforms, in particular the extent to which they
improve efficiency and quality and critically while protecting equity of
access – an objective which trumps all others according to many Labour
parliamentarians. With respect to the progress of implementation, the
signs so far are mixed. The most significant risks are financial manage-
ment of hospitals (in part related to the implementation of Payment
by Results (National Audit Office 2004) and managing the closures
that will be necessary. There is likely to be a change in leadership of
the Labour Party before the next election, and the extent to which the
new leader will support the expansion of market forces in health-
care is unclear. Indeed, the extent to which a new leader will prioritise
equity of access to care over and above efficiency and quality of care is
unknown.

Influencing the dynamics of reform in the UK

In the discussion above, readers can be forgiven for concluding that in the
UK, at least in England, government alone is responsible for influencing
the path of healthcare reform. There seems to be little to counter the
general current towards market-based reform in England. So much for
the ‘institutional mix’ and ‘structural balance’ outlined earlier, one might
think. In fact the government is overwhelmingly the most influential
body shaping healthcare, but other bodies (apart from other political
parties) do have influence, although perhaps less so than in other coun-
tries with more corporatist politics requiring consensus, such as in Ger-
many or Holland. Other bodies with influence on healthcare reform in
the UK include those shown in Box 2.1.
Across Europe, the bodies who have had the biggest effect in stalling
reform have included professional groups and trade unions. But in the
UK both groups in the last two decades have been weakened by a com-
bination of external events, suboptimal leadership and erosion of their
26 Healthcare management

Box 2.1 UK bodies with influence on the pathway of healthcare

reform

• Professional bodies (e.g. General Medical Council, Royal Colleges)

• Other trade representative groups (e.g. the NHS Confederation, British
Medical Association, Foundation Trust Network, Institute of Healthcare
Management, NHS Alliance, National Association of Primary Care)
• Trade unions
• Regulatory bodies (e.g. Healthcare Commission, Monitor, Audit
Commission, Commission for Social Care Inspection)
• NHS Ombudsman
• Research organisations (e.g. universities, think tanks)
• Private consultancy organisations
• Private industry (private providers and suppliers of goods and services, e.g.
pharmaceutical industry, private hospitals) and private payers e.g. private
insurance companies
• Legal system
• Media

powers by Parliament. The power of the medical profession in the UK

was severely assaulted by public outrage over two significant events in the
1990s – the poor quality of heart surgery in a children’s unit in Bristol
Royal Infirmary (2001) and the case of Dr Harold Shipman, a GP con-
victed of murdering dozens of his patients (2005). Each case in its own
way demonstrated the weakness of the medical profession in regulating
itself, and an arrogance towards responding to public concern about the
quality of care. The General Medical Council and to an extent the Royal
Colleges have been preoccupied since then in improving the quality of
care and regulation rather than developing a national stance over the
shape of healthcare reform. In the case of the unions, their powers had
been eroded in the 1980s by successive Conservative governments and
they have faced declining membership. Together with some of the trade
bodies (such as the British Medical Association) they have been active in
lobbying for, or more often against, recent reforms. But while they may
have strong links with the Labour government, in particular with back-
bench MPs, their lack of an alternative vision for the future of healthcare
(other than more of the past), which particularly promotes greater power
for patients over providers, has limited their success.
The NHS Confederation (2005), arguably at present the strongest
mouthpiece for managers in the UK, has largely been supportive of the
general direction of healthcare reform although critical over problems
with implementation. It is by this representative body, other than by
individual and personal contacts with key policymakers, that at present
managers working within the NHS can have their greatest impact on the
shape of reform. There is understandable pressure in the NHS for
managers not to be freely critical of current policy. In general, research
institutions have been insufficiently mobilised and motivated to mount a
 The politics of healthcare 27

comprehensive critique of policy based on evidence and follow it

through with effective lobbying – arguably it is not their role. In the last
decade a number of new independent regulators have been created by
government, and their influence in the NHS is a prominent feature. But
while having an ‘arm’s length’ relationship with government and exert-
ing a strong ‘behind the scenes’ influence on policy, the regulators must
choose very carefully the issues on which to go public. The pharma-
ceutical industry is highly influential, not least because of the strong
relationship it has with the Department of Health (DH) as its sponsor and
chief government negotiator with the industry as to the prices the indus-
try can charge for supplies to the NHS under the pharmaceutical price
regulation scheme (DH 2005c). The media have had a strong role, but
more in criticising policy and identifying perverse consequences locally
rather than developing a constructive alternative vision.
The institutional mix and structural balance in the UK has thus been
skewed heavily in the government’s favour in the last two decades and
resulted in a greater number and more radical healthcare reforms than
have been possible elsewhere in Europe. With greater plurality of pro-
viders, particularly with new powerful private suppliers entering the
healthcare market in England at least, corporate interests may be more
influential in future including the power to stall certain reforms. But for
as long as government remains the major payer of healthcare in the UK,
there is a workable majority in Parliament, and the professional bodies
and trade unions remain on the back foot, further major reforms are
likely. The door to greater market forces is likely to remain open, given
the apparent broad political consensus that these incentives have a role in
improving system performance. The conflicts in the UK and Europe will
revolve around how strong these incentives should be (ideologically and
in the light of evidence of their impact) and most fundamentally to what
extent social objectives can be traded off against the universally desired
objective of improving efficiency.

Conclusion

This chapter has outlined a few of the theories that might underpin the
dynamics of change in the health sector internationally. It has examined
briefly the broad pattern of reforms in the healthcare sector across
Europe, showing that reforms have been designed with similar objectives,
that reform has been incremental, and much focused on altering the
behaviour of patients rather than the suppliers of care. More radical
reform has been stalled chiefly though conflicts over fundamental ques-
tions relating to who pays, who gets care, and who gets paid; conflicts
which have been played out mainly between government, powerful pro-
fessional and private interests and unions. Then, using the example of the
National Health Service in England, it has described the direction of
travel of policies now being developed and how and why government has
28 Healthcare management

been able to design and begin to implement more radical reform relative
to other European countries. It suggests that the institutional mix in
England at least has broadly favoured the government’s agenda, and sug-
gests that the power of managers to shape reforms in the short to medium
term future will be limited. In other countries, that power may be greater
given the different structural balance and institutional mix, the political
processes in play and the more unpredictable windows of opportunity
often created by events external to the health arena.

Summary box

• Governments across the developed world are constantly active in reforming

healthcare, chiefly because of the extent to which governments pay
healthcare costs.
• Incremental reform has been the norm, radical change is usually influenced by
external political or economic events unrelated to healthcare. Incremental
reform is highly influenced by the balance of power of key professional and
corporate institutions present in each country and the system of government.
• Conflicts between key stakeholders tend to revolve around who pays, who
gets care, who gets paid, and how much.
• In Europe over the past decade, reforms have been designed with similar
objectives, but much has focused on ‘demand-side’ rather than ‘supply-side’
issues.
• In the English NHS, radical reform has been more possible because of the
Westminster system of Parliament, the significant democratic mandates given
to governments in power, and the relative weakness of other professional,
trade and corporate stakeholders.
• The reforms in England, as in many other countries in Europe, have introduced
market-style incentives into healthcare. This is likely to continue and a
prevailing conflict will be the extent to which social objectives such as equity
of access to care are traded off with efforts to improve efficiency using these
incentives.

Self-test exercises

1 What has been the broad thrust of healthcare reform in your country
over the last decade?
2 What are, and are intended to be, the main levers to improve perform-
ance in the health sector? For example:
• control from central government, regional or local government
• market-style incentives (such as competition between providers,
insurers/commissioners, consumer choice)
• the local democratic voice of the population (such as through local
councils, citizens’ juries)
 The politics of healthcare 29

• third-party regulation
• other.
3 What has delayed the progress of reform? For example:
• technical considerations (e.g. setting accurate prices, adequate risk
adjustment for insurers, information for consumers, information on
quality and outcomes for insurers/commissioners)
• political considerations (e.g. inability of coalition governments to
agree on a clear path, conflict between central and local govern-
ment, frequent change of government, conflict between major
stakeholders)
• economic considerations (e.g. lack of investment)
• other.
4 How might progress be accelerated?
5 How has the broad approach to health sector reform affected your
institution?
6 How could barriers to progress be best overcome locally?
7 How influential have you been in helping to shape health sector
reforms at local or a national level?
8 How might you be be more influential in future?

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Websites and resources

Organisation for Economic Co-operation and Development (OECD).

Contains an analysis of international health policies, and also key data on
health and healthcare for all OECD countries: http://www.oecd.org/home/
0,2987,en_2649_201185_1_1_1_1_1,00.html
World Health Organisation Regional Office for Europe. Contains infor-
mation about a range of health issues and health policies across Europe: http://
www.euro.who.int/programmesprojects
Commonwealth Fund. Contains an up-to-date analysis of the state of health-
care and reform in the USA and some international issues: http://
www.cmwf.org/
King’s Fund. Contains analysis of health sector reform in England:
www.kingsfund.org.uk
European Observatory on Health Systems and Policies. For up-to-date
description and analysis of health sector reform in Europe: http://
www.lse.ac.uk/collections/LSEHealthAndSocialCare/
europeanObservatoryOnHealthCareSystems.htm
Department of Health. Contains a full description of policies in the English
NHS and useful sources of data: http://www.dh.gov.uk/Home/fs/en
Scottish Office. Contains a description of policies in the Scottish NHS and
useful sources of data: http://www.scotland.gov.uk/Home
National Assembly for Wales. Contains information about healthcare policies
and relevant data: http://www.wales.gov.uk/subihealth/index.htm
Northern Ireland Executive. Contains information about health policy in
Northern Ireland: http://www.northernireland.gov.uk/az2.htm
Health Affairs. A journal covering health sector reform in the USA but also
some European countries: http://www.healthaffairs.org/
Journal of Health Policy Politics and Law. A journal covering the political
science aspects of health reform in the Americas and Europe: http://jhppl.
yale.edu/
 3 Financing healthcare: funding
systems and healthcare costs
Suzanne Robinson

Introduction

Healthcare funding in developed countries accounts for a large percent-

age of gross domestic product (GDP) and is usually the largest single
industry in most countries. Increased demand and technological advances
mean that healthcare expenditure continues to grow, whilst on the supply
side there is a constant pressure because resources are scarce. Policymakers
face tough decisions in this regard. Do they increase funding, contain
costs, or both? Whilst this debate continues in the literature (Mossialos et
al. 2002; Dixon et al. 2004), policymakers and managers alike need to
balance the books and thus find enough revenue to meet healthcare
expenditure. With public sector borrowing becoming a less attractive
economic policy option in developed countries, policymakers are
increasingly looking towards the structure and organisation of healthcare
systems – including revenue collection (demand side) and organisation of
service provision (supply side) – as a means to manage ever-increasing
pressures on health expenditure.
This chapter explores four areas relevant to the financing of healthcare
in developed countries:
• The first section draws on the work of Mossialos et al. (2002) and
Murray and Frenk (2000) to provide a framework by which to
facilitate understanding and analysis of healthcare funding.
• The second section draws on data from the Organisation for
Economic Co-operation and Development (OECD) and Office of
Health Economics (OHE) to explore the levels of healthcare expend-
iture in selected OECD countries.
• The third section looks at the examples of how money is distributed
through healthcare systems.
• The fourth section identifies some of the pressures on healthcare costs
and expenditure.
 Financing healthcare 33

Healthcare funding: an analytical framework

The financing and provision of healthcare is simply a transaction between

the providers who transfer resources to patients, and the patients or third
party who transfer resources to the providers (Mossialos and Dixon
2002). This has been described by Reinhardt (1990) as the healthcare
triangle, as set out in Figure 3.1.
Whilst countries have different funding systems in operation the
underlying logic is the same. The simplest transaction occurs when direct
payments are made between the patient and the provider of the health-
care service. The uncertainty which surrounds ill health and the need for
expensive healthcare means that most healthcare systems have a third
party element; that is a body that collects resource from individuals and
makes decisions as to how to allocate that resource to providers, this third
party being either public or private. This third party element offers finan-
cial protection against the risk of becoming ill and allows that risk to be
shared amongst the protected population. Third party provision may
cover part or all of a country’s population, for once the revenue has been
collected it can then be used to reimburse either the patient or provider
of the service. Therefore, the healthcare funding system is simply a way in
which funds are collected, either via primary (patient) or secondary (third
party) sources, and hence distributed to providers.

The functional components of healthcare financing

The functional components of healthcare financing can be subdivided

into the following three categories: revenue collection; fund pooling;
and purchasing (Murray and Frenk 2000). These functions often vary
between countries with many combinations being in operation. Figure

Figure 3.1 Healthcare triangle

Source: Mossialos et al. (2002)
34 Healthcare management

Figure 3.2 Funding sources, contribution mechanisms and collection

agents
Source: Mossialos et al. (2002)

3.2 illustrates the various funding sources, mechanisms and collection

agents that operate in healthcare systems.
Revenue collection refers to the way money is moved around the
system and is concerned with the source of funding (examples include
the individual or the employer), the mechanism of funding (examples
include direct or indirect taxes and voluntary insurance), and the collection
agent (examples include central or regional government). The main mech-
anisms of revenue collection are through taxation, social insurance contri-
butions, voluntary insurance premiums and out-of-pocket payments.
Taxes can be levied on individuals, households and businesses through
direct taxes, and they can also be applied to transactions and commodities
in the form of indirect taxes, such as taxes on fuel and alcohol. Direct
and indirect taxes can be collected nationally, regionally and locally,
with variation occurring between countries. Social insurance contribu-
tions are income related and generally shared between employees and
Financing healthcare 35

employers, with contributions usually collected by an independent pub-

lic body. Private insurance contributions are paid independently by the
individual, as part of an employment package, with the employer paying
all or part of the insurance. Patients may incur out-of-pocket payments
for some or all of their healthcare.
Murray and Frenk (2000) suggest that the strategic design of revenue
collection can affect the performance of a health system. A key aspect
cited is around the structural arrangements and the governance of per-
formance, this being largely concerned with issues of public and private
participation. Fund pooling is when a population’s healthcare revenues
are accumulated, with financial risk being shared between the population.
Fund pooling is distinct from revenue collection, for not all mechanisms
of collection, such as medical savings accounts (which currently operate
in the US and are a tax-free savings account for medical expenses) and
out-of-pocket payments enable risk pooling. Factors associated with this
approach that may affect performance include the separation of fund
pools for different population groups and subsidisation across different
risk groups (Murray and Frenk 2000).
Purchasing is the allocation of fund pools to healthcare providers.
There is a wide range of purchasing activities which may involve the
government acting as both the collection agent (raising revenue through
general taxation), and the purchaser of services, for example, specific
healthcare programmes. A number of countries have some form of activ-
ity that involves governments (local or regional) acting as both the collec-
tion agent and the purchaser of services. These include the UK, Finland
and Denmark (Ervik 1998; Hurst and Siciliani 2003).
There are also more complex systems which involve a separate agent
who allocates resources to purchasers. For example, in France revenue is
collected by local agencies who then transfer to a central agency which
allocates the money to the relevant social security departments who then
transfer funds to the relevant purchasing agents (Evans 2002). Strategic
issues include decisions around what is to be purchased, including the
selection criteria for interventions. Other aspects include how to make a
choice of providers and what mechanisms to use for purchasing. There is
further discussion of this in Chapter 12. A large number of purchasers
may lead to competition between purchasers and increased demands on
providers (Murray and Frenk 2000).
There are policy issues which relate to all of these categories. The
main policy decisions tend to focus on the equity and efficiency of
healthcare systems. Equity of financing will depend on both the level
and distribution of contributions, for example, how much money is
needed and who should contribute. Equity of access relates to the acces-
sibility of services and to issues around informal payments and user
charges (Dixon et al. 2004). Efficiency is largely concerned with the
management and distribution of resources and can be influenced by pool-
ing and purchasing mechanisms (see Dixon et al. 2004 for a more detailed
discussion).
36 Healthcare management

Funding healthcare

Figure 3.3 presents figures on the total health spending in 2002 for a
selection of OECD countries. The OECD median total spend for those
countries listed in Figure 3.3 was $2607 in 2002. The United States had
the highest healthcare spend per capita ($5287) of all the countries
assessed, with its per capita spend being 45% higher then Switzerland
($3649), which is the country with the next highest spend, with Spain
having the lowest OECD spend per head at $1728.
Table 3.1 presents the share of expenditure as a proportion of GDP for
a selection of OECD countries. The figures show a rise in healthcare

Figure 3.3 Total health expenditure per capita (US$ PPP, 2002)
Source: OECD Health Data (2005), copyright OECD (2005)
 Financing healthcare 37

Table 3.1 Total expenditure on health as a percentage of GDP in selected OECD

countries, 1960–2002
1960 1970 1980 1990 1995 1996 1997 1998 1999 2000 2001 2002

Australia 4.1 4.3 7.0 7.8 8.3 8.4 8.5 8.6 8.7 9.0 9.1 9.3
Austria 4.3 5.1 7.4 7.0 8.0 8.2 7.5 7.6 7.7 7.6 7.5 7.6
Belgium 3.4 4.0 6.4 7.4 8.4 8.5 8.4 8.5 8.6 8.7 8.8 9.1
Canada 5.4 7.0 7.1 9.0 9.2 9.0 8.9 9.2 9.0 8.9 9.4 9.6
Denmark 3.6 5.9 9.1 8.5 8.2 8.3 8.2 8.4 8.5 8.4 8.6 8.8
Finland 3.8 5.6 6.4 7.8 7.5 7.6 7.3 6.9 6.9 6.7 6.9 7.2
France 3.8 5.4 7.1 8.6 9.5 9.5 9.4 9.3 9.3 9.3 9.4 9.7
Germany 4.7 6.2 8.7 8.5 10.6 10.9 10.7 10.6 10.6 10.6 10.8 10.9
Greece 3.6 6.1 6.6 7.4 9.6 9.6 9.4 9.4 9.6 9.9 10.2 9.8
Iceland 3.0 4.7 6.2 8.0 8.4 8.4 8.3 8.7 9.4 9.3 9.3 10.0
Ireland 3.7 5.1 8.4 6.1 6.8 6.6 6.4 6.2 6.3 6.3 6.9 7.3
Italy 3.6 5.1 7.0 7.9 7.3 7.4 7.7 7.7 7.7 8.1 8.2 8.4
Japan 3.0 4.5 6.5 5.9 6.8 7.0 6.9 7.2 7.4 7.6 7.8 7.9
Luxembourg 0.0 3.6 5.9 6.1 6.4 6.4 5.9 5.8 6.2 5.5 5.9 6.1
Netherlands 5.7 7.5 8.0 8.4 8.3 8.2 8.2 8.4 8.3 8.7 9.3
New Zealand 4.3 5.1 5.9 6.9 7.2 7.2 7.4 7.8 7.7 7.8 7.9 8.2
Norway 2.9 4.4 7.0 7.7 7.9 7.9 7.8 8.5 8.5 7.7 8.9 9.9
Portugal 2.6 5.6 6.2 8.2 8.4 8.5 8.4 8.7 9.2 9.4 9.3
Spain 1.5 3.6 5.4 6.7 7.6 7.6 7.5 7.5 7.5 7.4 7.5 7.6
Sweden 4.4 6.9 9.1 8.4 8.1 8.4 8.2 8.3 8.4 8.4 8.8 9.2
Switzerland 4.9 5.5 7.4 8.3 9.7 10.1 10.2 10.3 10.5 10.4 10.9 11.1
United Kingdom 3.9 4.5 5.6 6.0 7.0 7.0 6.8 6.9 7.2 7.3 7.5 7.7
United States 5.0 6.9 8.7 11.9 13.3 13.2 13.0 13.0 13.0 13.1 13.8 14.6

Source: OECD Health Data (2005), copyright OECD (2005)

expenditure in all countries over the last 40 years. The greatest increases
have been in the United States, Netherlands and Portugal. Even in the
UK, where increases in healthcare spending have tended to be less than
most other OECD countries, there has been an increase in healthcare
expenditure. Allowing for inflation, the UK National Health Service
(NHS) in 2002 cost seven times more than in 1949, with the average cost
per person rising nearly six times above the 1949 level (Office of Health
Economics 2004).
The rise in healthcare expenditure across OECD countries is due to a
number of factors such as increased pay and price inflation, population
growth, expansion of services and increase in technological advances.
The fact that the healthcare sector is one of the major employers in
almost all economies means that the pay bill is the single largest compon-
ent of many healthcare budgets. In the UK NHS, 62% of total revenue
(i.e. non-capital) expenditure in 2001–02 was for wages and salaries
(Office of Health Economics 2004). Whitfield et al. (2005: 16) suggest
that nearly half of the recent increases in NHS funding in England (since
2003) have gone towards ‘increased pay, new terms and conditions for
GPs, consultants and other NHS staff ’.
38 Healthcare management

Various explanations are put forward to explain the differences in

healthcare expenditure between countries. Ginsburg and Nichols (2003)
suggest that prices are crucial drivers in cross-national differences in
health spending. For example, in the United States where health expend-
iture is high, salaries, medical equipment, pharmaceutical and other sup-
plies tend to be more costly than other OECD countries (OECD 2005).
The fact that markets, including labour markets, do not satisfy the condi-
tions necessary in the perfect competitive market (Donaldson and Gerard
2005; McPake et al. 2002), leads to varying degrees of monopoly power
on the supply side of the market and varying degrees of monopsony
power (that is when the product or service of a number of sellers is only
demanded by one buyer) on the demand side (Ginsburg and Nichols
2003). Thus, the functional components of healthcare financing do have
an effect on healthcare expenditure, with the bargaining power of both
providers and payers of services differing between countries. Further
discussion of the different methods of revenue collection and their effects
on healthcare costs is set out below.
Figure 2.1 (p. 17) presents the public and private healthcare expend-
iture as a percentage of total healthcare expenditure for a selection of
OECD countries. All countries have a mix of both public and private
health expenditure with Denmark, Japan, Luxemburg, Norway, Sweden
and the UK all having over 80% health expenditure incurred through
public funds. Public funds include state, regional and local government
bodies and social security schemes. Even in the United States, which has
the largest private expenditure on healthcare (55%), public healthcare
expenditure still accounts for 45% of total health expenditure.

Revenue generation

This section will provide detail about the various methods of revenue
generation used in Europe and other OECD countries such as the
United States, Canada, New Zealand and Australia, analysing the main
advantages and disadvantages of each method. The different forms of
revenue generation include:
1 private insurance
2 taxation
• different sources of taxation – direct or indirect
• different types – general or hypothecated
• different levels – national/local
3 social health insurance
4 charges and co-payments.
Most countries operate through a mixed funding system, which usually
includes some element of taxation. Ervik (1998: 5) describes taxation as
a ‘normative and political component that expresses what a society
 Financing healthcare 39

understands as a reasonable tax burden and an equitable distribution of

the tax burden’. Direct taxation is often seen as a progressive means of
raising revenue, with studies showing that poorer households pay a higher
percentage of gross income in direct taxes (see Glennerster 1997;
Manning et al. 1989). From a health perspective, it could be argued that
indirect taxes on things like cigarettes and alcohol are justifiable as they
can lead to a reduction in the consumption of these products. Nonethe-
less, the fact that in many OECD countries a higher number of low
income groups tend to consume such products means that indirect taxes
are regressive. Most countries have some form of indirect taxation on
certain goods and services. However, it is difficult to ascertain how much
of this revenue is used to fund healthcare.

General taxation

The UK is an example of a healthcare system that is funded predomin-

antly through general taxation (see Table 3.1). The UK Treasury sets out
what budget will be spent on healthcare, and once that is set the resource
is distributed to the purchasers or commissioners of care, with the major-
ity of services being free to users at the point of provision. Other coun-
tries that use general taxation as a mechanism to fund healthcare include
Denmark, Finland, New Zealand and Spain.
Funding healthcare through general (direct) taxation is seen as a pro-
gressive way of raising revenue. In most countries, tax is proportional to
income, with those on higher incomes paying more tax than those on
lower incomes, thus allowing for redistribution of resources from the
wealthy to the poor, from the healthy to the sick, and from those of
working age to the young and old. In addition, the financing of services is
divorced from the provision of services, which is important for equitable
access. Advocates of a universal tax-based model, such as the NHS in the
UK, suggest that the fact that income is not tied to an individual’s finan-
cial contribution means that provision is more likely to be based on
clinical need rather than ability to pay (Wagstaff et al. 1999). This claim is
however somewhat disputed with suggestions that the UK operates a
multi-tier service with access to care being affected by age, gender, educa-
tion, wealth and race (for further discussion see Health Policy Consensus
Group 2005). Further advantages of this form of revenue collection are
that it is relatively efficient to administer, this being due to the collection
of funds through the existing taxation system, and not incurring add-
itional costs for the health sector. The fact that government is the main
payer for and purchaser of healthcare in a tax-funded system allows gen-
eral taxation to act as a mechanism to control costs, with providers not
easily being able to increase revenue by raising prices or premiums, as in
private insurance and social insurance (Baggott 2004).
The major disadvantages of a system based on general taxation include
the fact that health services are closely tied to the economy and
40 Healthcare management

government taxation policies. In times of economic recession, reductions

in tax revenues can have major effects on the health budget. The fact that
all public services need to compete for limited tax revenues means there
will always be winners and losers. Health budgets may suffer if govern-
ment gives high priority to public services other than health and/or to
low taxation rather than public services. It can be difficult to raise revenue
because an increase in the health budget means that the budget to other
services may need to be cut, or tax increased, both of which can prove
unpopular with electorates. It is suggested that tax raises might be more
popular if the government were explicit about their spending intentions,
that is, with taxes earmarked for health (Wilkinson 1994; Jones and
Duncan 1995; Baggott 2004). The fact that taxes are not hypothecated in
countries such as the UK means that the population of these countries is
unable to judge the fiscal viability (i.e. affordability) of health services. A
general taxation system of funding healthcare also means that taxpayers
and patients have little or no notion of the cost of services and therefore
cannot make judgements about value for money of services received.
Furthermore, the rising demand for services in the UK since the estab-
lishment of the NHS in 1948 suggests that funding through general
taxation has been an inefficient way of balancing the expectations of
patients with the capacity of the system (Health Policy Consensus Group
2005). However, the rising demand for healthcare services is evident in all
countries regardless of the system of funding mechanism.

Hypothecated taxation

Hypothecation or earmarking tax revenues for healthcare purposes, is

suggested by some as a useful means of securing support for tax increases
(Jones and Duncan 1995; Le Grand and Bennett 2000). Australia has a
percentage of its healthcare funding financed by hypothecated tax – the
Medicare Levy (Health Policy Consensus Group 2005).
Those in favour of hypothecated taxes argue that it allows citizens to
make a more direct connection with the purpose of taxation and have
more understanding of the associated costs and benefits. There is some
evidence to suggest that people are more comfortable with rises in
taxation to pay for healthcare in comparison with increases targeted at
non-health services. There is however no evidence to suggest there
would be continued support for such an approach if a number of tax
increases were needed in relatively quick succession. Studies looking at
the potential effects of adapting a hypothecated tax approach for health
services in the UK suggest that a move to hypothecated taxes is unlikely
to provide any advantages over the current system (Wilkinson 1994;
Jones and Duncan 1995).
One of the disadvantages of hypothecated taxation is the negative
effect on the less popular but no less vital services which are important to
a welfare state (Le Grand and Bennet 2000; Baggott 2004). For example,
 Financing healthcare 41

other services such as education, housing and transport, which often have
important implications for health, could be disadvantaged by hypotheca-
tion of funding for health. Furthermore, hypothecation could lead to the
‘benefit’ principle of taxation; that is, people believing that they should
only pay taxes for services for which they are going to benefit (see Le
Grand and Bennett 2000). Hypothecating taxes for health could similarly
lead those with private insurance to argue that they should not pay all or
part of the health tax because they have no capacity to benefit.

Local taxation

Denmark’s healthcare is predominantly funded through taxation, but

unlike the UK its main source of funding is from local (county and
municipal) taxation, although these local taxes are supplemented by state
(national) taxes. Analysis has shown that local taxes are generally less
progressive than national taxes (i.e. local taxes often take a larger propor-
tion of tax from people whose income is low), as is demonstrated by the
experience of Denmark and other countries such as Finland, Sweden and
Switzerland, who also have a high proportion of revenue generated by
local taxation (see Wagstaff et al. 1999; Health Policy Consensus Group
2005). In the absence of a national system of redistribution, local taxation
could therefore create regional inequity. For example, if local tax rates
vary by region this could lead to horizontal inequities (i.e. equal treat-
ment for equal need, irrespective of any other characteristic such as
income, sex, race, etc., Mossialos et al. 2002). Variations in local tax
rates for both Denmark and Sweden suggest that horizontal inequities
are evident when such mechanisms of revenue collection are used
(Mossialos et al. 2002). There are suggestions that local taxations could
lead to inefficient resource allocation and priority setting (Mossialos et al.
2002).
The decentralisation of local tax funding is seen as a major advantage
over national taxation for the clear link between revenue raised and local
spending allows for potentially much greater transparency. There is also
greater direct political accountability for healthcare funding and expend-
iture, for local politicians are likely to be closer to the electorate than their
national counterparts. A further advantage is that healthcare is separated
from national priorities with this mechanism of decentralisation allowing
for local needs to be more easily met. The Health Policy Consensus
Group suggests that local taxation combined with local electoral
accountability of hospitals is a factor that adds to the high rate of patient
satisfaction reported in Denmark (Health Policy Consensus Group
2005).
42 Healthcare management

Social insurance

In France, all residents are covered by social insurance, with the popula-
tion having no choice to opt out of the national system. Under this
system resources are levied (as a social insurance contribution) from
employees and employers and, as with general taxation, these contribu-
tions are generally set as a proportion of income regardless of health need.
The main difference between social insurance and income tax is that the
revenue raised is earmarked for health, thus allowing, in theory, for
greater transparency. In some systems such as Germany individuals earn-
ing over a certain threshold have the option to opt out of the social
insurance scheme: ‘As a result in 1999 there were 7.4 million with com-
prehensive private health insurance’ (Dixon and Mossialos 2002: 48).
Collection bodies in a social insurance system are non-profit agencies,
separate from government. Health systems vary in the way they adminis-
ter a social insurance approach; for example, in France people usually pay
for ambulatory doctors’ bills at the point of use and then apply for and
receive reimbursement from the insurance agency at a later date. This
means that patients are more conscious of the cost of certain health
procedures. In Germany, however, patients receive services free at the
point of use, with physicians obtaining reimbursements from the social
insurance sickness funds (Dixon and Mossialos 2001).

Private insurance

Private healthcare insurance markets have tended to develop around pub-

lic health systems and in many countries private insurance plays a residual
role in terms of healthcare funding; for example, in systems such as UK
where private insurance provides supplementary coverage to the public
system and can enable faster access to certain services such as elective
hospital care or, as in the case of France, ‘provide reimbursement for co-
payments required by the public system’ (Buchmueller and Couffinhal
2004: 4). Even in the Unites States, where the level of expenditure on
private insurance is high (around 35% of total healthcare expenditure in
2000), public expenditure accounts for a higher share of health financing
(around 44% of total healthcare expenditure in 2000). In the United
States, the elderly (those over 65 years) and qualified disabled persons are
eligible for Medicare, and some of the poor are allowed Medicaid or state
Children’s Health Insurance Programme (Colombo and Tapay 2004).
Medicare and Medicaid are public insurance programmes which provide
coverage for the elderly (Medicare), the military, veterans, and for some
of the poor and disabled (Medicaid).
Private insurance can be classified into the following categories:
substitutive, supplementary or complementary (Mossialos et al. 2002). In
Germany, individuals earning higher incomes can opt out of the public
Financing healthcare 43

funding system and purchase private health insurance, thus substituting

for state funding of healthcare. This form of substitutive insurance
undermines the redistribution effect of taxation or social insurance and
leads to a regressive system of funding. Furthermore, as income is related
to risk of ill health (the poorer you are, the more likely you are to fall ill),
substitutive insurance means that those with the poorest health or at
greatest risk are left in the public system, which reduces the overall pool-
ing and risk-sharing mechanism in the health system, and those with the
lowest income could potentially end up paying the higher premiums.
There have been real concerns in both Germany and the Netherlands
about the effects and fairness of a having two-tiered system of health
insurance (Health Policy Consensus Group 2005). A study by Wagstaff et
al. (1999) showed that differences in access to care tend to be based on a
person’s insurance status, leading to a tendency towards pro-rich distribu-
tion of healthcare use in Ireland, France and the United States. Systems
that rely heavily on private insurance are often criticised due to their
inequitable nature; that is, these systems are based on a person’s ability to
pay for care rather than on clinical need (Wagstaff et al. 1999). The
National Coalition on Health Care (2004) suggests that around 16% of
Americans had no health insurance coverage in 2003, with the majority
of the uninsured being those on the lowest incomes.
In an attempt to reduce the effects of a two-tiered system, the Nether-
lands introduced a new Health Insurance Act (January 2006). The new
Act means a move to a mandatory universal healthcare insurance system.
The only parties who will be exempt are military personnel in active
service and conscientious objectors to insurance. Insurance will be pro-
vided through private providers and individuals are able to choose their
insurance provider. Insurers are legally bound to accept all applicants and
therefore cannot restrict or charge higher premiums for the elderly or
sick or exclude someone on the basis of wealth or health.
By law all residents in the Netherlands should have some basic health
insurance coverage (which may vary between insurance providers); sup-
plemental health insurance will also be available on an individual basis or
collectively via employers or similar group schemes. The idea of the
Health Insurance Act is to increase market forces through the expansion
of the private insurance sector, allowing for individual choice (in terms of
insurer and packages available). This in turn (it is hoped) will increase
efficiency and quality of care. The intention is that government interven-
tion through regulation of private insurers will allow for more equitable
coverage. The new system is seen as a ‘private health insurance system
with social conditions’ (Ministry of Health Welfare and Sport 2006).
In countries such as the UK, Australia, New Zealand and Spain, private
health insurance plays a supplementary role, with this being an additional
option to add to public insurance for those who desire and can afford it.
One of the advantages of supplementary insurance is that it can allow
quicker access to services for people holding private insurance, especially
in systems such as the UK and New Zealand which traditionally experi-
ence significant waiting times for diagnostic tests or elective treatments.
44 Healthcare management

Whilst private insurance may allow for quicker access to services, there is
no evidence to suggest this may lead to higher quality services (Baggott
2004) and it could also lead to inequity of access to care, with those who
are privately insured accessing services which for others are almost
impossible to acquire either via public insurance or paying direct. For
example, the lack of UK NHS dentists is limiting access for certain
people who cannot afford to pay direct payments or take out private
insurance (Kamel Boulos and Picton Phillipps 2004).
The function of private insurance in France is to act as a comple-
mentary insurance system which ‘tops up’ reimbursements made to
people by the public system. Some argue that the advantage of this form
of complementary insurance is its ability to free up capacity in the public
system by allowing those who can afford to pay to receive treatment in
the private sector. In contrast, those who oppose a system of supplemen-
tary private insurance claim that it encourages a two-tier system that
allows quicker access to services for those who can afford to pay and thus
should not be allowed on overall equity grounds.
Countries like the United States which have a relatively high percent-
age of private insurance have the greatest difficulty in controlling health-
care costs and tend to have the biggest healthcare spend per head of
population. Private insurance reduces the cost of treatment at the point of
consumption and makes ‘illness’ a less undesired state. However, there is
some evidence to suggest that supplier-induced demand is taking place in
countries that have private health insurance. For example, Savage and
Wright (2003) suggest that moral hazard (i.e. the influence of being
insured leading to over-provision or accessing of services), is taking place
in the Australian private health insurance system, with evidence of an
increase in the expected length of hospital stay of people who are pri-
vately insured. A study by Robertson and Richardson (2000) conducted
in Australia demonstrated that procedure rates after heart attack were
around two to three times higher for patients who were privately insured
than those who are publicly insured.
Private insurance systems tend to incur higher administrative costs per
insured person than public health coverage systems. In the United States
for example, the average administrative cost (12% in 1999) of private
insurers exceeded that of public programmes – Medicare (5%) and Med-
icaid (6.8%) (Woolhandler et al. 2003). The higher administrative costs
of private insurers tend to be ascribed to marketing, underwriting and
other costs such as billing, provision of care and product innovation
(Colombo and Tapay 2004).

Out-of-pocket payments and charges for healthcare

Out-of-pocket payments and charges make up a proportion of healthcare

spending in all health systems. This is the only mechanism that allows for
price consciousness; that is, for patients to have a true notion of the costs
Financing healthcare 45

of service and thus be able to make judgements around the price and
(possibly) value for money of care received. Charges are often seen as a
way of raising additional revenue, as indicated by this extract from
research conducted by the British Medical Association:
BMA calculated that £1.25 billion could be raised by a £40 fee for
food and accommodation in hospital, while a £10 fee to see a GP
could raise £3.3 billion (or £2 billion with exemptions for elderly
and children). (BMA 2002: 28–9)
Even in a publicly funded system such as the UK, charges have been
levied on things like prescriptions almost since the early days of the NHS.
Other countries that impose charges include Sweden, New Zealand and
Portugal which charge many people for visiting their family doctor, and
Germany, France and Belgium which charge for an element of hospital
stays (Baggott 2004). As patients demand better quality services, includ-
ing non-clinical services such as bedside computers, phones and
televisions, the question arises as to where charges should stop. Nutritious
food and pleasant surroundings are commonly considered to be essential
components of good quality care, but each system has to make a
judgement as to the point at which services are deemed to require an
additional payment from users, and if this payment is to be levied on all or
just some people according to their ability to pay. Charges and co-
payments are therefore criticised for being a regressive means of raising
revenue, limiting access to services and discriminating against those on
low incomes.
Patient fee-for-service payments is used in a number of countries
including New Zealand, Australia and the US. Studies have shown that
patients may be deterred from accessing services when they have to direct
payment at the point of use (Carrin and Hanvoravongchai 2003; Schoen
et al. 2004). A study by Schoen et al. (2004) demonstrates that in coun-
tries like New Zealand and the US where fees for general practioners’
services have historically been levied, cost-related access problems were
much higher than in the UK and Canada where services tend to be
free at the point of use (Schoen et al. 2004). Recent policy reforms in
New Zealand have tried to alleviate this problem by moving from
fee-for-service payments to GPs to capitation funding of primary health
organisations, although this only acts as a subsidy and fee-for-service
activity still forms part of the payment mechanism for many patients
(Malcolm 2004; Ashton 2005; McAvoy and Coster 2005).
Whilst patient charges are often seen as a method to curtail costs, there
is a suggestion that they actually provide incentives to increase healthcare
activity (see Greenfield et al. 1992; Feldstein 1999; Carrin and Hanvo-
ravongchai 2003). For example, ‘fee-for-service funding for general prac-
tice has a built-in “perverse incentive” that is the more you see and the
quicker you see them the more you earn’ (Bollen 1996: 214).
Patients are often reluctant to pay for elements of their care at the point
of delivery, and appropriate systems have to be developed to collect
charges. However, such systems can often be costly to administer and are
46 Healthcare management

not always cost effective, especially when charges are small (Carrin and
Hanvoravongchai 2003).

Ways of distributing funding

Structural, political and historical factors all affect the ways in which
money flows around healthcare systems. In all systems, there is some mix
of public and private provision. For example, since the development of
the UK NHS in 1948, the majority of funding and provision in the
system has been provided in the public sector, although some private
sector activity has occurred on both the demand and supply side. How-
ever, recent government policy has seen the development of a market
approach to reforming the health system in England, although this is not
the first attempt to have an internal market in the UK system (see Le
Grand et al. 1998 discussion on the internal market of the Thatcher
government). In 2002, the English Department of Health published
Reforming NHS Financial Flows: Introducing Payment by Results (DoH 2002),
the aim of this policy being to incentivise the NHS to behave more like a
private sector business organisation in how it accounts for funding and
activity. Payment by Results means that hospitals are moving away from
having block contracts as a way of funding activity. Block contracts have
been seen as a cause of considerable local variation in prices paid for
procedures that give little incentive for extra productivity since higher
activity means no change in revenue (Siciliani and Hurst 2003). The new
Payment by Results system is based on a national tariff for clinical pro-
cedures and hospitals will only be paid on a fee-for-service basis for
procedures that they have undertaken, thus providing incentives for
higher productivity, that is, the more you do, the more you get paid (see
Dixon 2005 for more discussion on Payment by Results).
A number of other countries such as Australia, Belgium, Denmark,
Norway and Sweden have moved towards a system that involves some
activity-based funding However, the extent of this activity varies between
countries (Rodrigues et al. 2002; Hurst and Siciliani 2003). An OECD
study comparing waiting times found that they are less of a problem in
countries which rely mainly on activity-based funding than those that
have mainly fixed budgets. Results from these countries suggest a rise in
activity that leads to shorter waiting times and shorter lengths of stay in
hospital (Hurst and Siciliani 2003; Siciliani and Hurst 2003). In this way,
patients, and indeed taxpayers, should have more transparency with
regard to how their money is being spent in the health system (Dixon
2005). Critics have warned that such methods reward volume, not qual-
ity, of service and that there is a real possibility of hospitals developing
cost-cutting strategies that could compromise the quality of services. For
example, in the United States there is evidence that activity-funding
incentives have led to an increase in patient mortality in the period
following hospital discharge (King’s Fund 2005).
 Financing healthcare 47

The NHS (in England not across the wider UK) is actively
encouraging more plurality of providers of healthcare, including the
independent sector (both for-profit and not-for-profit providers).
Examples include independent sector treatment centres to provide ser-
vices such as cataract removal and hip replacement for NHS patients
funded directly from the public purse. The idea of developing a stronger
market in healthcare is to increase competition and, it is hoped, to lead in
turn to greater efficiency and an increase in the quality of service provi-
sion (Timmins 2005). If these government policies prove to be effective
this could lead to a major change in the way the money flows around the
English system and lead to a fundamental shift that entails the divorcing
of funding from the provision of services. One thing for sure is that the
‘UK government believes that the use of private providers does not
undermine the principles of the NHS if care is provided free to patients’
(Timmins 2005: 1195). However, it is too early to speculate about the
effects of increased competition and changes to the financial flows
through payment by results in the English context.
In an effort to increase efficiency, equity and quality of healthcare
services, other countries as part of a wider health system reform are
attempting to alter the way resources are allocated around the system.
For example, New Zealand’s Primary Health Care Strategy is aimed at
reducing health disparities and improving health outcomes by ‘reducing
co-payments, moving from fee-for-service to capitation, promoting
population health management and developing a not-for-profit infra-
structure with community involvement to deliver primary care’ (Hefford
et al. 2005: 9). Howell (2005) questions the cost effectiveness of
the reforms and suggests that ‘limited competition and governance
requirements mean that current institutional arrangements are unlikely
to facilitate efficacy improvements’ (Howell 2005: 2).

Pressures on healthcare costs/spending

The following is a government health warning: just when you

thought your health spending was under control, the cost pressures
are likely to start rising again. (OECD 2003)
A common feature of all healthcare systems is the scarcity of resources
necessary to meet the continually growing demand. Health expenditure
continues to rise year on year in all OECD countries (Office of Health
Economics 2004). The two major factors often cited for these increases in
expenditure are the rise of new technology and the ageing population,
plus other factors such as the increase in incidence of chronic illness
(including cardiovascular disease, cancer and diabetes), rising levels of
obesity, the growth in consumerism and the impact of infectious diseases
such as the SARS outbreak in South East Asia in 2003.
The proportion of the world’s people classified as older (defined as
those over 65 years of age) is expected to rise from around 6.9% of the
48 Healthcare management

total population to 15.6% over the next 50 years (Mahal and Berman
2001). This demographic change results from a combination of increased
life expectancy, a decline in mortality rates and subsequent declines in
fertility rates. Projecting over the next decade, Cotis (2005: 1) suggests
that the ‘implications of these demographic developments mean that the
number of elderly will rise significantly relative to the number of work-
ing age. By the mid-century there will be only two people of working
age to support one person of 65 or more.’ This is a challenge for policy-
makers and the healthcare system, having implications for the cost and
provision of healthcare.

Conclusion

This chapter has explored the systems of funding used in the field of
healthcare. All healthcare systems have some mix of public and private
financing, and the former usually consists of some element of taxation.
Whilst the funding sources, mechanisms and collection agents vary
between countries, all countries feel the pressure of increasing expend-
iture, scarce resources and the need to provide both an efficient and
equitable healthcare service.
The last decade has seen the expanding use of expensive new
technology such as cardiovascular equipment, dialysis machines and
telemedicine. These advances, along with ongoing and more sophisti-
cated developments in pharmaceuticals, have all had an impact on the
range and quality of care provided to patients, yet are very costly to
administer and place increasing pressure on overall healthcare spending
(OECD 2003). The last 20 years have likewise seen a rise in consumerism
as societies gain greater access to health information extending across
regional and country borders, and users of healthcare systems increasingly
see themselves as ‘consumers’. Patients demand access to the latest tech-
nology that can assist in their care and expect to receive high quality
services that offer good access and a degree of choice (Cotis 2005).
The increase in demands and the limitation of resources mean that
governments are forced to look at the way in which the funding systems
operate. This can lead to changes in the way resources are collected
and distributed around the health system. As part of a wider health
system reform a number of countries are currently adopting activity-
based financing. The idea is that this more market-based approach will
allow for greater transparency in terms of funding and activity and
provide more market-like incentives (i.e. money follows activity),
which in turn will lead to the provision of more efficient and high
quality services.
 Financing healthcare 49

Summary box

• Healthcare funding in developed countries accounts for a large percentage of

gross domestic product (GDP).
• Country variations exist between the amounts of healthcare expenditure
both in terms of total healthcare spending and healthcare expenditure as a
percentage of GDP.
• The United States has the largest percentage of private health activity and the
highest healthcare expenditure in the world.
• All healthcare systems have some mix of public and private financing, and the
former usually consists of some element of taxation.
• The funding source, mechanism and collection agent vary greatly between
countries.
• Growing demands for healthcare place increasing pressures on expenditure,
with these increases being due to: technological advances; an ageing
population; an expansion in the incidence of chronic disease; and rises in
consumerism and patients’ expectations.
• Increased demands and limited resources are likely to lead policymakers to
look at the funding of healthcare structures as a mechanism to improve
efficiency and quality of services.

Self-test exercises

1 What are the main factors that have influenced the rise in healthcare
expenditure over the last 20 years? To what extent is this having an
impact within your own country’s healthcare system, and in what ways
can that impact be seen?
2 Thinking of your own country’s funding contribution mechanisms,
what are the major disadvantages evident in your system? How do
these relate to other OECD countries?
3 Again thinking of your own country’s funding contribution mechan-
isms of healthcare funding, what are the major advantages evident in
your system? How do these relate to the experience of other OECD
countries?

References and further reading

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Macmillan.
50 Healthcare management

Bollen, M.D. (1996) Recent changes in Australian general practice. Medical Jour-
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British Medical Association (BMA, 2002) Healthcare Funding Review. London:
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Buchmueller, T.C. and Couffinhal, A. (2004) Private Health Insurance in France.
OECD Working Paper 12. Paris: Organisation for Economic Co-operation
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charges as policy tools for cost-containment: How successful are they in
high-income countries? Human Resources for Health, 1(1): 6.
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Department of Health (DoH, 2002) Reforming NHS Financial Flows: Introducing
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Dixon, J. (2005) Payment by results – new financial flows in the NHS. British
Medical Journal, 328: 967–8.
Dixon, A. and Mossialos, E. (2001) Funding health care in Europe: Recent
experiences. In T. Harrison and J. Appleby Health Care UK. London: King’s
Fund, pp. 66–77.
Dixon, A. and Mossialos, E. (eds) (2002) Health Care Systems in Eight Countries:
Trends and Challenges. Geneva: World Health Organization. European Obser-
vatory on Health Care Systems.
Dixon, A., Langenbrunner, L. and Mossialos, E. (2004) Facing the challenges of
health care financing. In J. Figueras, M. McKee., J. Cain and S. Lessof Health
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Websites and resources

Australian Institute of Health and Welfare (AIHW). http://

www.aihw.gov.au/
Department of Health, England. Contains full description of policies and
useful data sources: http://www.dh.gov.uk/Home/fs/en
Department of Health and Social Services Northern Ireland. http://
www.dhsspsni.gov.uk/
European Observatory on Health Systems and Policies. Provides details of
funding and healthcare system information: http://www.euro.who.int/observatory
Health of Wales. http://www.wales.nhs.uk/
Ministry of Health Welfare and Sport. Provides details of the recent changes
to the Netherlands funding system: www.denieuwezorgverzekering.nl
New Zealand Ministry of Health. www.moh.govt.nz/moh.nsf
NHS Scotland. http://www.show.scot.nhs.uk/
Office of Health Economics. Provides detail on economic issues including
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Organisation for Economic Co-operation and Development (OECD).
Key source for healthcare funding data and relevant publication from 30
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1_ 1_1,00.html
World Health Organisation (WHO). Provides international information on
healthcare expenditure, including country data and publications: http://
www.who.int/en/

National and local government websites also provide information

relating to health funding and expenditure.
 4 Healthcare systems: an
overview of health service
provision and service delivery
Lawrence Benson

Introduction

This chapter is concerned with the organisation of healthcare systems,

healthcare provision and service delivery. In this context, it also explores
the different forms of ownership and control of healthcare organisations,
and the impact of ownership and control on system design and service
delivery.
Healthcare services are often delivered within systems and organisa-
tions comprised of three distinct but increasingly overlapping and fluid
subsystems – primary, secondary and tertiary care. In this chapter a model
of an overall healthcare system and these three components is introduced,
and an example of a healthcare organisation from each of these three
subsystems is described, though it is recognised that healthcare organisa-
tions increasingly cut across the boundaries of primary, secondary and
tertiary care and such vertical integration may provide opportunities for
improving overall system performance.
The chapter also outlines a range of different models of ownership and
control for healthcare organisations – ranging from for-profit com-
mercial companies, through independent not-for-profit entities, to
government-funded and controlled agencies. Examples from a range of
different healthcare systems are used to explore the effects of ownership
and control on healthcare system performance.

Healthcare systems: a typology

The provision of healthcare services within a regional or national health-

care system can be usefully categorised and analysed through the classifi-
cation of three main subsystems or sectors – primary, secondary and
tertiary care (see Figure 4.1). Each of these sectors can be modelled as a
subsystem of the whole healthcare system, though in many countries the
54 Healthcare management

Figure 4.1 Sectors of healthcare within a healthcare system

boundaries between these sectors are often ambiguous or blurred, and

frequently shift as health services provision moves from one sector to
another. The three sectors overlap and while a patient can be expected to
follow a linear journey across the three sectors, it is frequently true that an
individual patient may be in receipt of services provided within more
than one sector at the same time. A typical patient journey would start
with contact with primary care for an initial diagnostic consultation, and
might then involve the patient being referred to secondary care for more
specialised diagnosis and treatment. In some cases, with complex or
highly specialised diseases or treatments, the patient may then also need
to be referred on to tertiary services for more specialised or follow-up
care. The patient’s journey will often be cyclical, with a return to second-
ary care and then discharge back to primary care for longer term support
and monitoring.
Increasingly the boundaries between the three sectors and the sub-
systems they create have become blurred. For instance, it is common to
see services once delivered predominantly at local or regional hospitals
being now being delivered in primary care settings closer to where the
patient lives or within the patient’s home (a trend that is discussed in
more detail in Chapter 8). In part, this may be a result of technological
progress, like the provision of diagnostic testing equipment in primary
care settings or of the increasing capacity and expertise of primary care
practitioners. It means that conditions once managed in secondary care
(like diabetes, heart disease, or common mental health problems) are
increasingly dealt with in primary care. It may also be a result of deliber-
ate policy initiatives, motivated both by a belief that primary care based
services will be more cost effective than those based in secondary care,
Healthcare systems 55

and by a desire to see services located closer to patients and in

community settings which are more convenient and easier to access.
Definitions of primary care abound with considerable debate on this
issue in the literature (Lewis 1999; Summerton 1999; Peckham and
Exworthy 2003). However, for the purpose of this chapter the World
Health Organisation (WHO) definition is cited as ‘the first level of con-
tact of individuals, the family and the community with the national
health system bringing health care as close as possible to where people
live and work, and constitutes the first element of a continuing health
care process’ (WHO 1978).
Primary healthcare is delivered through a wide range of different
health professionals including family physicians, dentists, pharmacists,
opticians, nurses and therapists (Boerma 2006). These professionals are
either geographically based in the local community or provide an out-
reach service from a secondary or even tertiary centre. In some healthcare
systems (e.g. the UK) the general practitioner (also known as the family
physician) serves as the gatekeeper to other professionals within primary
care or refers patients on to secondary or tertiary services. In many other
healthcare systems, for example, France, Germany and the USA, the
patient has direct access to more specialist consultation and care by
obstetricians, paediatricians, cardiologists and others. In some countries,
primary care physicians are organised into medical groups or practices
which are often the focus for the provision of a range of other
community-based health services, and may also be involved in the provi-
sion of social care, diagnostic services, and in providing some semi-acute
care and even in commissioning secondary care services for their patient
population. In other countries, primary care physicians are more likely to
be in solo or small group practice, working independently from office
premises. In these cases, primary care services are likely to be rather more
fragmented, and less well connected to secondary care.
Secondary or acute care services (the terms are often used interchange-
ably though they are different) have been predominantly hospital based in
most developed countries, although this is now starting to change as there
is greater flexibility in where some services can be physically sited and
provided (McKee and Healy 2002). However, secondary care can be
described as episodic treatment provided for an illness or health problem
and generally seen as curative in nature and will typically consist of inpa-
tient, day case and outpatient services. Secondary care services receive the
great majority of their patient referrals from family physicians but will
also see patients admitted directly from their emergency departments.
Here one can see an overlap of primary and secondary care as the emer-
gency department may often be used as the primary care provider by
patients but be situated in the physical and organisational setting of a
general hospital providing secondary healthcare services.
The patient may then require more specialised care which cannot be
given at most secondary care providers and therefore be referred to a
tertiary care centre which serves the larger population of a region or
country.
56 Healthcare management

Across a healthcare system the number of patient contacts and episodes

decreases as one moves from primary care through to secondary and
tertiary care and needs are addressed in the first two sectors – most
patients are seen, diagnosed and treated in primary care. However, con-
versely there is an increase in costs as patients move through the
sectors, with the costs of secondary and tertiary care often being much
higher than those in primary care. This can be visualised (Peckham and
Exworthy 2003) in the model in Figure 4.2. It is not surprising therefore
that there is constant pressure to address increasing healthcare costs by
attempting to develop the capacity of primary care providers and indeed
to facilitate the ability of the patient to provide self-care.

Heathcare systems: examples of typical healthcare organisations

Making generalisations about the structure of healthcare services or

healthcare organisations across primary, secondary and tertiary care is
invidious, because there are many different ways of organising service
delivery and considerable variation is found both within national health-
care systems and internationally between countries. But understanding
the relationships between primary, secondary and tertiary care is made
easier if we use some practical examples. Below, we describe a ‘typical’
primary care organisation – a family practice with 9000 patients; a com-
mon secondary care organisation – an acute hospital serving a population
of around 200,000 people; and a tertiary service – a regional cancer
centre serving a region of 3.2 million.

Figure 4.2 Relationships between healthcare expenditure and levels

of care
Source: Adapted from Peckham and Exworthy (2003).
Healthcare systems 57

Primary care organisation – a group family practice with a

practice list of 9000+ patients

The practice has three full-time and four part-time general practitioners
who are the family physicians to their patients and also individually offer
areas of specialty to the patients registered with the practice such as
minor surgery, contraception, maternity and child health surveillance.
The practice is supported by a range of other healthcare professionals
either directly employed by the practice (for example, practice nurses and
healthcare assistants) or provided by another primary care organisation
and also secondary care providers (for example, community nurses, mid-
wives, school nurses, community psychiatric nurses, podiatrists, physio-
therapists, dieticians and psychologists). The services provided in addition
to a standard medical consultation with one of the doctors include:
• family planning
• maternity care
• child health surveillance
• immunisations against disease for adults and children
• screening for disease, e.g. cervical cancer, coronary heart disease, dia-
betes and hypertension – done through targeted programmes and
clinics, e.g. for people over 75, well women and well people clinics
• monitoring and management of chronic diseases, e.g. asthma, diabetes,
hypertension
• mental health services, e.g. counselling and therapies.

Secondary care organisation – a general acute hospital

serving a district of 200,000 people

The hospital employs 2500 staff. It has 420 inpatient beds and across a
year will receive 5000 elective admissions, 21,500 emergency admissions,
18,000 day cases, 63,000 visits to its emergency department and 230,000
outpatient visits from patients.
Its clinical services are organised within five directorates or divisions –
surgery and anaesthetics, children’s and women’s services, general medi-
cine and older people, diagnostics and therapeutics, and clinical therapy
and rehabilitation. The specific services within these five directorates are
detailed in Table 4.1

Tertiary care organisation – a specialist cancer services centre

serving a regional population of 3.2 million people

The tertiary hospital specialises in the treatment of cancer services and

serves a region of around 3.2 million people. The services provided
include specialist surgery, chemotherapy, radiotherapy, adult leukaemia,
palliative and supportive care services for young people with cancer, and
58 Healthcare management

Table 4.1 Clinical services at a district general acute hospital

Clinical directorate Services

Surgery and anaesthetics Accident and Emergency

General Surgery
Trauma and Orthopaedics
Ear, Nose and Throat
Oral Surgery
Intensive Care
Children’s and women Maternity
Gynaecology
Medicine and older people General Medicine
Dermatology
Diabetes
Haematology
Oncology
Neurology
Diagnostics and therapeutics Radiology
Pharmacy
Pathology
Clinical therapy and rehabilitation Community Rehabilitation
Physiotherapy
Dietetics
Occupational Therapy
Podiatry
Speech and Language Therapy

endocrinology. The centre has 250 inpatient beds and sees 11,000 new
patients each year, most as referrals from secondary care providers, though
some patients are referred directly to the tertiary hospital from primary
care. There are 14 secondary care providers in the region served by the
tertiary hospital and who refer to it, but it also receives some referrals
from other regions in the country. It employs nearly 2000 staff.
The service for diabetes in the UK is used as an example to demon-
strate how care is managed and delivered across the primary, secondary
and tertiary care sectors. Historically there has been a wide variety in the
pattern of care for the management of patients with diabetes, particularly
in respect to primary and secondary care. In some areas the local second-
ary care provider/hospital has taken the greater proportion of diabetic
patients for their routine monitoring and management of the disease and
yet in other localities the majority of patients are cared for in primary
care either by GP or other clinicians in this community setting (practice
nurses, community nurses, opticians, podiatrists). A review in 2000 across
England and Wales of diabetes highlighted these differing patterns of care
(Audit Commission 2000) and outlined existing patterns of care for
patients making routine demands on healthcare services (see Figure 4.3).
Examples of this ranged from large GP practices (with over 20,000
 Healthcare systems 59

Figure 4.3 Patterns of care for people with diabetes

Source: Adapted from Audit Commission (2000).

patients) in rural settings contracting with secondary providers for

monthly clinical sessions from a hospital consultant from a diabetes centre
to advise GPs, to a diabetes centre within a large hospital serving a large
population and having on site both secondary and specialist tertiary
services. A systematic review of the diabetes care delivered in primary or
secondary care settings concluded that there was little evidence to
support that the setting in itself was a determinant for the effectiveness
of the routine care to the patient (Griffin and Kinmonth 1997) as much
depended on individual clinicians, patients and locally available models
of care.
However, the increasing incidence in diabetes in the UK population
has been addressed by government policy (DOH 2001) requiring min-
imum standards of service to be followed which cover the routine care of
stable diabetes. This has concentrated the attention of primary and sec-
ondary care organisations in more effectively coordinating services for
diabetes across a locality. These services are increasingly delivered in
primary care settings through a more specialised workforce of GPs, prac-
tice and community nurses, podiatrists and opticians with particular
training in the management of diabetes. However, this has not meant a
detailed prescribed model of care insistent on a particular pattern of care
across sectors. There has also been a growth in services of hospital based
60 Healthcare management

diabetes centres advising primary care professionals on the management

of diabetes and the better coordination of services for patients with
complications from their condition. Typically in the UK there are a grow-
ing number of professionals who work regularly both in primary and
secondary care settings including diabetes specialist nurses, dietitians and
retinal screening staff (Watkins 2003).
If there is to be a greater shift in the pattern of care across secondary
and primary settings in a locality, then the respective strengths typically
exhibited by primary and secondary care together with patient prefer-
ences need to be recognised. The strengths often offered by each sector
are summarised (Audit Commission 2000) in Table 4.2.

Patient journeys and the healthcare system

It is helpful to illustrate the relationships between primary care, second-

ary care and tertiary care by using a patient’s journey through the health-
care system. In Figure 4.4 the patient journey of a woman diagnosed with
ovarian cancer is mapped across the healthcare system and illustrates how
the patient moves across primary, secondary and tertiary healthcare pro-
vision. This example shows that there are many opportunities to redesign
this care pathway to reduce the number of contacts to the different parts
of the system (GP practice, local general hospital and regional specialist
centre), to minimise the number of handovers or referrals and to make
appropriate use of each sector.

Table 4.2 Strengths of primary and secondary care settings for diabetes care
Strengths of primary care teams Strengths of hospital diabetes teams

Continuity of care to the patient Specialist care with complications or special groups
(such as children and pregnant women)
Knowledge of the patient, their family and Second-line treatment for patients with poor
comorbidities diabetes control
Expertise in managing chronic condition Expert support and training for all staff in the
locality caring for people with diabetes (including
practice nurses, GPs, community podiatrists and
dietitians)
Services often delivered to the home by the Specialist patient education for a critical mass of
patient patients including those with special needs (such as
ethnic minority groups) and providing input from a
range of disciplines
May be preferred by patients for routine care A focus for diabetes care in the hospital including
training, guidelines and links with specialist teams in
secondary and tertiary organisations including
ophthalmology, vascular surgery and nephrology

Source: Adapted from Audit Commission (2000).

 Healthcare systems 61

Figure 4.4 Patient journey – diagnosis and treatment of ovarian cancer

Source: Adapted from Modernisation Agency (2005).

A redesigned care pathway like this could be more efficient in its use
of resources, more effective in maximising the long-term health out-
comes for the patient, and more patient-centred in terms of reducing
patient contacts and visits to multiple healthcare providers. In this case
there are opportunities to place more of the diagnostic services into
primary care, to ensure that as many diagnostic tests are made at one
point on the patient’s journey as possible to speed and rationalise diag-
nosis, and more radically to move some services between sectors (see
Figure 4.5).

Figure 4.5 Redesigned patient journey – diagnosis and treatment of

ovarian cancer
Source: Adapted from Modernisation Agency (2005).
62 Healthcare management

Healthcare systems and models of ownership and control for healthcare

organisation

There is a wide range of models of ownership of healthcare organisations

seen in use across different healthcare systems, but they can usefully be
grouped into four main forms (Preker and Harding 2003):
• commercial, for-profit organisations – companies, etc.
• independent not-for-profit organisations – charities or public benefit
corporations
• publicly owned organisations independent of or at arms length from
government
• publicly owned and government controlled organisations – state
agencies.
These different types of healthcare organisations operate within health-
care systems that vary enormously in terms of the extent of government
involvement in both funding and provision, and it is difficult to make sense
of one or other model of ownership without understanding the wider
system or funding context. To explore these differences we will describe
the USA and UK (more specifically the English) healthcare systems and
draw from each of them some examples of each of these four models.

US healthcare system

The US healthcare system is funded through a complex mix of private

and governmental insurance and health services are provided by health-
care organisations based on all four models in our typology above (Flood
2000; Kovner and Knickman 2005). The US healthcare system is often
portrayed as being primarily private both in funding and provision – with
a reliance on employer-sponsored health insurance, a limited government
role in the direct funding and provision of healthcare services, and a
much greater reliance on the mechanisms of the market, including com-
petition and contracting, than would be found in other developed coun-
tries (Blank and Burau 2004). In reality, government at both the state and
federal level still plays a hugely important role in shaping health policy,
funding health services, and regulating healthcare provision (Woolhan-
dler and Himmelstein 2002; Sparer 2005).
The independent not-for-profit hospital is the most common model
of ownership for secondary care services in the USA with 60% of com-
munity hospitals being so owned contrasted to 23% owned by state and
local government and just 17% owned by for-profit entities (AHA 2005).
But there are large multi-hospital for-profit groups such as Tenet Health-
care Corporation (a commercial organisation) which owns 73 hospitals
and manages more on behalf of their owners across 13 states (Tenet
Healthcare Corporation 2005) and large not-for-profit integrated
healthcare systems such as Kaiser Permanente.
Healthcare systems 63

The UK and the NHS in England

The UK healthcare system is predominantly based upon a ‘national

health service’ model which essentially means that government plays a
dominant role in funding and providing health services (Deber 2002;
Blank and Burau 2004). Funding for the healthcare system comes largely
from general taxation and every UK citizen has universal coverage for
clinically needed health services. This healthcare system has parallels in
many other countries, including Finland, New Zealand and Sweden
(OECD 2004). The use made of private medical insurance is limited, and
private healthcare providers traditionally play a rather peripheral role
in service provision. Since the introduction of devolution to Northern
Ireland, Scotland and Wales in the late 1990s, health policy has been the
responsibility of the devolved administrations and this has resulted in
some divergence in arrangements for healthcare funding and delivery
(Baggott 2004; Ham 2004). In England, there are some significant moves
away from the dominant role of government in healthcare provision, with
the gradual introduction of more independent publicly owned providers
(foundation hospitals) and the greater use made of independent for-profit
healthcare organisations mainly to address demand for elective surgery at
independent treatment centres and diagnostic centres (Baggott 2004;
Lewis and Dixon 2005).

For-profit healthcare companies in the USA

US for-profit healthcare organisations were originally predominantly

physician owned and run (Williams 2005). This has now become increas-
ingly rare and they are often run by investor-owned commercial com-
panies. Companies can either be privately owned or registered as public
companies – for the latter, their shares are tradeable on stock exchanges
and they are accountable to their shareholders as their owners. For-profit
healthcare organisations have as their primary operating goal making a
profit for their shareholders and this may result in more direct pressure on
services to increase efficiency or reduce costs, and to focus on ‘profitable’
areas of business. This often raises concerns that an overconcentration on
profit can detract from these healthcare organisations’ focus on quality of
care, or make them less likely to serve wider community needs (Deber
2002; Woolhandler and Himmelstein 2004). However, the counter-
argument is that the provision of high quality care for patients will
increase satisfaction and may win these companies market share, and that
they can only grow and prosper by serving their communities efficiently
and effectively. There is much dispute within the US literature as regards
the relative merits of different forms of ownership and particularly
between for-profit and not-for-profit organisations (Cutler 2000;
Devereaux et al. 2004; Williams 2005).
64 Healthcare management

Not-for-profit healthcare organisations in the USA

Not-for-profit healthcare organisations are still trading entities and they

can still make an operating surplus or loss – but the crucial difference is
that when they make a surplus that income is reinvested in the healthcare
organisation and its services and is not distributed to shareholders (Deber
2002; Raffel et al. 2002).
The origins of not-for-profit healthcare organisations are often rooted
in philanthropic and charitable concerns. Church-affiliated hospitals are
probably still the most readily recognised not-for-profit healthcare organ-
isations in the USA (Raffel et al. 2002). They are largely community
based but also include many large university teaching hospitals, which are
often owned by academic institutions which are themselves not-for-
profit. Their not-for-profit status often means that they have some
exemptions from income and other taxes. They can raise capital through
borrowing against assets from commercial lenders (such as banks) and
also from donations and fundraising in their communities.
Kaiser Permanente is an example of a huge scale not-for-profit health-
care system that brings together (in a single integrated healthcare system)
prepaid insurance, physician group practice, preventive medicine and the
organised delivery of secondary and tertiary services. It tries to deliver as
many services as possible within its system and where patients can go to a
single medical centre for all their medical care so further blurring the
lines between primary, secondary and tertiary care. It was one of the first
health maintenance organisations in the USA (a type of managed care
organisation) and has 8.2 million members, with 136,511 non-physician
employees, 11,000 doctors, 30 hospitals, 431 medical office buildings and
operating revenues of $22.5 billion in 2002 (Kaiser Permanente 2005).

Publicly owned and government controlled healthcare

providers in England

NHS trusts were established in the UK from 1991 (DOH 1989; Merry
2003) and they are still the main form of secondary and tertiary health-
care provider. They are statutory bodies, owned and controlled by the
Department of Health and the Secretary of State for Health who has
extensive legal powers of direction over all aspects of their work. NHS
trusts have a statutory legal duty to remain solvent and also to deliver
quality services in line with national targets set by government and to act
in partnership with local agencies. Each NHS trust has a board consisting
of non-executive and executive directors charged with the governance of
the organisation. The non-executive directors are appointed through a
national appointments commission. NHS trusts are accountable to the
Secretary of State for Health and have a direct line of accountability to
central government. They are performance managed by their strategic
health authority (a regional body) and engage with their local purchasing
bodies – primary care trusts. NHS trusts are also regulated by the Health-
Healthcare systems 65

care Commission and required to work within nationally set targets and
standard (Dixon 2005).
When they were first established in the early 1990s, NHS trusts were
perceived by many as being an important attempt to depart from what
was then a healthcare system run largely by command and control from
central government. However, the promised freedom and autonomy of
NHS trusts did not materialise and in some ways they became more
closely controlled by government than other parts of the NHS (Ham
2003). Now, all NHS hospital trusts in England are to be given the
opportunity to become foundation trusts, which are described below.

Publicly owned healthcare providers independent of

government in England

Foundation hospital trusts were established in England from April 2004

(DOH 2002) as independent legal entities which, although still within
the NHS and publicly owned, are outside the general powers of direction
of the Secretary of State for Health. Formally, they are public benefit
corporations, controlled by a membership made up of local people and
members of staff, with an elected board of governors (Walshe 2003).
Initially, only high performing NHS trusts could apply for foundation
status but the intent is that all NHS trusts will be able to become founda-
tion organisations eventually. It seems that one intention of the founda-
tion model is to distance NHS providers further from national politicians
and government and to develop closer links with the local stakeholders of
patients, the local community (whether or not as service users) and
employees.
The model of governance adopted by foundation hospitals is based
upon a local membership drawn from patients, the wider community,
employees and representatives of local organisations (Lewis 2005). The
members of the foundation trust elect a board of governors whose role it
is to appoint and oversee the board of directors and represent the interests
of the local community in the management and stewardship of the local
community (DOH 2002). Governors who are public members can be
elected to become non-executive directors of the board of directors. The
board of governors appoints executive and non-executive directors who
then operationally run the organisation. Unlike NHS trusts, there is no
direct line of accountability between the foundation trust and the Sec-
retary of State for Health.
Local NHS commissioning bodies remain the main payers for services
provided by foundation trusts, as is the case for NHS trusts. The mechan-
isms to involve patients and the public are similar to those used by NHS
trusts. However, the model governance adopted by foundation trusts
presents a clear opportunity to involve these stakeholders even further.
Although foundation trusts have arguably a governance model based
on greater local ownership and control, they are regulated by the
independent regulator for foundation trusts (which is called Monitor).
66 Healthcare management

Monitor has wide-ranging powers over foundation trusts, including

approving their initial application for foundation trust status, issuing their
operating licence, and being able to step in and take control if they fail to
perform adequately. Foundation trusts are also required to work within
system-wide principles and targets and are subject to review of the qual-
ity of services they provide by the Healthcare Commission, the industry
regulator (Healthcare Commission 2005).

Healthcare systems and organisations: does ownership and control matter?

Public sector healthcare organisations have often been viewed as inflex-

ible and less able to innovate and therefore meet the needs and wants of
their patients (Deber 2002). In systems where the public sector dominates,
these organisations have been accused of developing complacent atti-
tudes protected often by being in a monopolistic position and being
given few clear incentives to improve performance. The outcomes can be
poor access to healthcare and little choice available to the consumer.
They are also often judged as being poor at working in the interests of
patients across organisational boundaries in health and social care bound-
aries and thereby being accused of operating in silos (DOH 1997; Glen-
dinning and Rummery 1998). They are more bound by ‘red tape’ or
bureaucratic policy, rules and constraints within a command and control
environment at the behest of diktat from national/regional government
policymakers. There is therefore the danger of quashing any autonomy
felt by the organisation and the maintenance of highly centralised deci-
sion making. In some healthcare systems there may have been an under-
investment in such organisations resulting in antiquated technology.
Governance of these organisations has been criticised often as poor with
the disadvantage of having multiple, over-ambitious and sometimes con-
tradictory objectives set by government, weak supervisory structures
within the organisation and an information-poor environment (Harding
and Preker 2003).
In the defence of public sector healthcare, organisations that have
undergone reform and significant investment can be said to be more
committed and responsive to policy designed to improve the quality of
healthcare, for example, through the adoption of clinical governance
(Sheaff et al. 2006). In some healthcare systems, public sector organisa-
tions can be attributed as having lower costs, particularly administrative
costs, than in the private sector and particularly for-profit organisations.
The case for for-profit organisations is that they are nimble and quick
to meet a market demand and adopt innovation more readily as they are
not cluttered by many objectives but one primary driver, the maximisa-
tion of profit (Deber 2002). They may be less bound by red tape from
government although not escape the state in its role as regulator. They
can develop and exercise economies of scale as they grow and work across
jurisdictional boundaries (e.g. geographically across a country) far more
Healthcare systems 67

easily than a public sector organisation which might serve one locality.
They will invest in the latest technologies to gain market share and also
customers might be attracted by an integration of services through the
provision of primary, secondary and tertiary care and therefore assert a
competitive advantage over rivals.
However, the dominant driver of profit maximisation may result in
higher costs passed on to the consumer, and poor quality of clinical
outcome for both morbidity and mortality (Deber 2002). The for-profit
organisation may not burden itself with activities such as training of
clinicians, research and ties with the local community which may often
be key aims of public and not-for-profit organisations. The increasing
dominance of the for-profit healthcare organisation may also result in
‘cream skimming’ of patients where those with complex needs are not
sought as being of high risk and potentially costly to the organisation/
company and the public sector is then left as a safety net for these patients
(Deber 2002). The pursuit of societal goals such as the reduction of
health inequalities across a population is more easily coordinated where
there is less diversity in providers of healthcare and where there is not
a fundamental clash of values between the pursuit of profit and the
maximisation of health for all.
Many healthcare systems across the world are engaged in moving the
purchase and delivery of healthcare increasingly from the direct com-
mand and control of government and away from the centre or core of the
public sector (Preker and Harding 2003; Sheaff et al. 2006). This has
resulted in services being delivered by healthcare organisations which are
in the broader public sector (for example, NHS self-governing trusts
and perhaps more radically English NHS foundation hospital trusts) or
private sector (populated by not-for-profit and for-profit organisations).
Although services may be publicly funded, the accountability of these
organisations is increasingly exercised through public to private or public
to public contracts and regulatory systems (Harding and Preker 2003).
There is a trend in many systems towards a greater diversity of ownership
by government, shareholders, local residents and consumers of health
services.
The main argument for delivering healthcare further from the core of
the public sector is that more efficient production of healthcare across the
system will result (Harding and Preker 2003) prompted by greater con-
testability and competition within the system. However, this continues to
be an area of heated debate and contention and the arguments for
encouraging the growth of organisations either publicly owned
(although perhaps not under the direct control of government) or pri-
vately owned but having a not-for-profit model are perhaps most vocif-
erously voiced in the US when this system is analysed (Deber 2002;
Devereaux et al. 2004; Woolhandler and Himmelstein 2004). Here evi-
dence is presented supporting claims that for-profit healthcare organisa-
tions are not only more costly (and this includes hospitals and managed
care organisations) but provide poorer quality of care in respect to
morbidity and even mortality (Deber 2002; Himmelstein et al. 1999;
68 Healthcare management

Devereaux et al. 2002). In this system at least it could be said that the form
of ownership does matter in respect to access to effective healthcare.

Conclusion

It has been seen that healthcare systems have been traditionally modelled
or described in terms of three main subsystems – the primary, secondary
and tertiary sectors. This model is useful to a point when describing
healthcare systems but it remains under constant challenge as the bound-
aries between sectors become increasingly blurred and shifted. One
important driver for this is the redesign of the patient’s journey to ensure
services are delivered more effectively and in places of greater conveni-
ence to the patient. There are powerful arguments for the delivery of
more services within primary care, not only because it may be more
efficient and less costly than providing the same services in the secondary
or tertiary sectors.
The examples that have been given above of different forms of health-
care organisation ownership and control may mean that the approaches
taken to construct logical and well-coordinated patient journeys may be
different in different healthcare systems. For example, in government
owned or heavily influenced healthcare organisations a great deal may
be achieved through command and control, with government issuing
national standards or performance targets and monitoring healthcare
providers against them. However, in a more diverse, plural and decentral-
ised healthcare system, access to a well-integrated healthcare system may
represent a competitive advantage when attracting customers and build-
ing market share, and competition and contestability between providers
or systems may drive improvements in performance.
It is perhaps safest to conclude that simplistic assumptions about the
organisation and delivery of health services are likely to be wrong as often
as they are right. No ideal model for service delivery and organisation
emerges – rather, we identify a range of competing and sometimes para-
doxical drivers and constraints. For example, integrating primary and
secondary care services in a single organisation may avoid some of the
unhelpful boundaries and handovers in patient journeys, but could also
tend to draw resources into secondary care at the expense of primary care
services. Using a model of ownership which gives greater autonomy to
healthcare providers may promote innovation and competitive pressures
may drive improvements in performance, but it may also make system
wide planning and coordination much more difficult. Moving services
from secondary to primary care may reduce unit costs of provision, but
can also affect the quality of care and lower referral thresholds in ways
that would increase costs elsewhere in the healthcare system. Healthcare
systems are complex systems, and the likely effects of policy initiatives and
system reforms should be both examined prospectively and studied and
evaluated properly if we are to learn what works.
 Healthcare systems 69

Summary box

• Healthcare systems have been traditionally modelled on the basis of primary,

secondary and tertiary sectors.
• Family practitioners and particularly physicians often act as gatekeepers to the
secondary and tertiary healthcare systems.
• This traditional model is constantly being challenged and boundaries between
primary, secondary and tertiary sectors are becoming blurred.
• Healthcare expenditure per patient episode increases from primary, to
secondary and to tertiary care whilst levels of patient activity and numbers of
visits are greatest in primary care.
• Mapping the patient’s journey through a healthcare system identifies
opportunities for this journey to be more centred on the needs of the patient.
• A range of different models of ownership of healthcare organisations exists
within healthcare systems which have different mixes of private and public
funding and provision of healthcare.

Self-test exercises

1 Develop an existing patient journey that crosses the three sectors of

primary, secondary and tertiary care and involves your healthcare
organisation. How could this be improved and how could you ensure
that improvements are made? How could you involve the patient in
the redesign of this journey?
2 Identify the model of ownership for your healthcare organisation and
identify both the advantages and disadvantages that this model brings?
3 How does your healthcare organisation identify the views of its
patients/service users? What are the current concerns of your patients
and how do these match with patient concerns from across your
healthcare system?

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Audit Commission (2000) Testing Times – A Review of Diabetes Services in England
and Wales. London: Audit Commission.
Baggott, R. (2004) Health and Healthcare in Britain, 4th edn. Basingstoke: Palgrave
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Blank, R.H. and Burau, V. (2004) Comparative Health Policy. Basingstoke: Palgrave
Macmillan.
70 Healthcare management

Boerma, W.G.W. (2006) Coordination and integration in European primary

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Delivery in the United States, 8th edn. New York: Springer.
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London: King’s Fund.
Lewis, R. and Dixon, J. (2005) NHS Market Futures – Exploring the Impact of
Health Service Market Reforms. London: King’s Fund.
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McKee, M. and Healy, J. (2002) Hospitals in a Changing Europe. Maidenhead:

Open University Press.
Merry, P. (2003) The NHS in England 2003/04. London: NHS Confederation.
Modernisation Agency (2005) Process Mapping, Analysis and Redesign – Improve-
ment Leader’s Guide. London: Department of Health.
OECD (2004) Towards High-Performing Health Systems. Paris: Organisation for
Economic Co-operation and Development.
Peckham, S. and Exworthy, M. (2003) Primary Care in the UK. Basingstoke:
Palgrave Macmillan.
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Corporatization of Public Hospitals. Washington, DC: World Bank.
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System – Origins and Functions, 5th edn. New York: Delmar–Thomson
Learning.
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Practice, 49(438): 63–4.
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TenetHealth (accessed 13 December 2005).
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and not getting it: Taxes pay for a larger share of US health care than most
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Websites and resources

American Hospitals Association. National organization that represents and

serves many thousands and types of hospitals, health care networks in the US,
and their patients and communities: http://www.hospitalconnect.com/aha/about/
European Health Management Association. A network of health organisa-
tions throughout Europe with the aim of improving health through better
management: http://www.ehma.org
European Health Observatory. Provides a very useful outline and review of
European healthcare systems: http://www.euro.who.int/observatory
Foundation Trust Network. Represents all existing foundation trusts in
the English NHS as well as many of those aspiring to foundation trust
status: http://www.foundationtrustnetwork.org/
72 Healthcare management

Healthcare Commission. English healthcare regulator established in 2004:

http://www.healthcarecommission.org.uk/Homepage/fs/en
King’s Fund. An independent charitable institution which researches and
evaluates health and social care policy: http://www.kingsfund.org.uk/
NHS Confederation. The main membership body for UK NHS organisations:
http://www.nhsconfed.org/
Organisation for Economic Co-operation and Development (OECD).
Provides a review and analysis of healthcare systems from across the developed
world: http://www.oecd.org/home/
Picker Institute Europe. Promotes understanding of the patient’s perspective
at all levels of healthcare policy and practice. Captures patient satisfaction
feedback from European countries: http://www.pickereurope.org/
 5 Managing healthcare
technologies and innovation
Ruth McDonald and Tom Walley

Introduction and overview

In recent decades health technology assessment (HTA) has been of

increasing interest to health policymakers and researchers. Health tech-
nologies have the potential to prolong life or enhance quality of life for
patients. However, in modern health systems, which face a gap between
demand for care and available resources, such technologies also present
challenges. Governments have responded to these challenges by seeking
to ‘manage’ access to new and existing health technologies in a proactive
fashion, rather than merely reacting to their development. This means
that health services managers are increasingly expected to play a proactive
role in the process.
This chapter provides an introduction and overview to the subject of
HTA and explains why this is an important issue for those charged with
managing health services. The first section describes what is meant by
HTA before briefly examining its role in relationship to priority setting.
We then outline the various stakeholders involved in HTA processes and
consider the challenges posed by attempts to incorporate competing
stakeholder perspectives. Following this we discuss HTA in theory and
practice, drawing on examples from various countries to illustrate the
influence of contextual factors on the development of HTA and the
extent to which its outputs influence decision making. We then examine
the role of managers with regard to HTA and consider the challenges
faced by managers in the context of applying HTA findings. In the next
section we present other challenges which face the HTA process and
discuss ways in which HTA needs to adapt to the changing nature of
healthcare provision and demand in the twenty-first century. The
chapter concludes with a brief summary of key points.
74 Healthcare management

What is HTA?

Health technologies, assessment and appraisal

The International Network of Agencies of HTA (INAHTA) describes

the process as ‘a multi-disciplinary field of policy analysis, which studies
the medical, social, ethical and economic implications of development,
diffusion and use of health technology’. The term ‘health technology’
does not just refer to medical technology. It covers a wide range of
methods of intervening to promote health, including the prevention,
diagnosis or treatment of disease, the rehabilitation or long-term care of
patients, as well as drugs, devices, clinical procedures and healthcare set-
tings. However, in practice HTA tends to concentrate on a fairly narrow
range of technologies (i.e. drugs, devices and procedures) rather than
service delivery issues (where should care be provided and by whom?)
and public health interventions (Holland 2004). HTA processes seek to
assess existing technologies and to engage in horizon scanning to identify
emerging technologies which may be candidates for assessment.
Some commentators distinguish between technology assessment and
appraisal. HTA is described as an analytical process of gathering and sum-
marising information about health technologies. Appraisal is seen as a
political process of making a decision about health technologies taking
into account assessment information and values and other factors
(Stevens and Milne 2004). However, an alternative view is that HTA is
also value laden and a political process. HTA approaches vary between
countries, but in general much of the focus of HTA methods is con-
cerned with evaluating the costs and benefits of technologies. Decisions
about which technologies to evaluate and which costs and benefits to
include reflect value judgements. In this sense, the distinction between
HTA as a ‘neutral’ process and appraisal as a political one is open to
challenge (Ten Have 2004). This becomes increasingly important as
many countries are moving away from merely identifying health tech-
nologies of doubtful effectiveness towards assessment of cost effectiveness.
The implications of this are that HTA processes will be used to inform
the setting of healthcare priorities, ruling out some technologies and
ruling in others. Both the HTA process and the application of its outputs
might be seen as highly political processes therefore (Webster 2004).
Box 5.1 provides an example based on a recent appraisal undertaken by
the National Institute for Health and Clinical Excellence (NICE).

HTA processes and stakeholder interests

There are many stakeholders to be considered in relation to HTA pro-

cesses. Often these stakeholders encompass different views and compet-
ing interests. In addition to government, third party payers, clinicians,
organisations that provide and manufacture healthcare and health
Managing healthcare technologies and innovation 75

Box 5.1 Statins for the prevention of cardiovascular events

The technology – statins

Raised cholesterol is one of a numbers of risk factors associated with the
development of cardiovascular disease (CVD). Statins are drugs developed to
lower cholesterol levels and hence reduce the risk of coronary events.

NICE appraisal
In addition to receiving evidence from interested parties, NICE commissions an
independent academic centre (an ‘Assessment Group’) to review the published
evidence on the relevant technology when developing technology appraisals
guidance. In the case of statins a team at Sheffield University reviewed the
evidence from clinical trials and economic studies and also developed a model to
estimate the costs and health outcomes associated with a lifetime of statin
treatment using an NHS perspective (i.e. what would be the health benefits and
what would be the costs to the NHS?).*

Estimating costs and benefits

The Assessment Group used data from UK epidemiological studies to estimate
cardiovascular event rates. The effect of statins on the reduction of events was
based on the results of clinical trials. Health-related utility or quality of life was
based on data from a large UK population-based survey. The costs associated
with treating cardiovascular events were taken from published UK sources,
supplemented by expert opinion where data from published sources were
unavailable.

Findings
Secondary prevention (i.e. patients with disease)
The cost per quality adjusted life year (QALY) was estimated to vary between
£10,000 and £16,000 for patients between age 45 and 85, with little difference in
the results for men and women. For people with diabetes and a history of
cardiovascular disease, the cost per QALY was estimated to be below £9000 for
all age groups since they are at a relatively high risk of coronary events.

Primary prevention (people who do not have cardiovascular disease)

The estimated cost per QALY varied substantially according to risk level and age
of treatment initiation. It was lower at higher levels of risk and in younger age
cohorts. The lower costs per QALY associated with commencing treatment at a
younger age reflect the greater potential to prevent events, and thus the higher
benefits accrued from remaining in the event-free health state. At an annual risk
of a cardiovascular event ranging from 3% to 0.5%, the ranges of cost per QALY
gained were £10,000 to £31,000 at age 45 years to £37,000 to £111,000 at age 85
years. The costs per QALY were lower for people with diabetes. On the basis of
these findings, NICE defined a risk cut-off point which means that relatively low
risk patients should not receive statins.
NICE guidance published in November 2005 states:
‘Statin therapy is recommended for adults with clinical evidence of CVD.
76 Healthcare management

Statin therapy is recommended as part of the management strategy for the

primary prevention of CVD for adults who have a 20% or greater 10-year risk of
developing CVD.’
* NICE operates from an NHS perspective which means its focus with regard to costs, is
on costs to the NHS budget as opposed to any costs which may be incurred by individuals.
In general NICE aspires to extend its remit to other costs involving the public purse such as
social services expenditure, but finds this difficult.

technologies, the importance of patient and public views as contributing

to the process is widely recognised. However, the nature of HTA pro-
cesses, and in particular their emphasis on economic evaluation and
evidence-based medicine, has implications for the ways in which these
different groups can make their views heard in the HTA process.
Whilst the INAHTA definition of HTA describes it as a broad and
multi-faceted process, in practice the focus is on clinical effectiveness and
increasingly on economic evaluation. Furthermore, the major proportion
of HTA investment concerns pharmaceuticals, despite the fact that these
account for between 10% and 15% of total expenditure on health services
in most modern health systems (Lothgren and Ratcliffe 2004). These
factors contribute to a situation in which patient and public views, both
in terms of contributing to and using HTA processes are peripheral
(Coulter 2004). HTA processes draw on evidence from ‘scientific’ studies
and expert knowledge, using a hierarchy of evidence where the gold
standard is the randomised controlled trial and expert opinion is towards
the bottom of the hierarchy. Lay perspectives do not feature in the hier-
archy, which implies that these may not be seen as valid forms of know-
ledge. However, the framing of HTA in terms of clinical outcomes risks
ignoring other outcomes which are important to patients. Evidence sug-
gests that lay opinion may be at odds with the views of researchers or
clinicians with regard to the relative importance of outcomes (Ham and
Coulter 2001), but currently HTA processes tend to reflect the latter
rather than incorporating the former. A further problem is that HTA
processes tend to start with a technology or technologies and assess
whether or not these are cost effective. Patients may start with different
questions, such as ‘What are the characteristics of the diagnosis/disorder/
disease and what are the different ways in which it can be treated?’
(Coulter 2004). As Angela Coulter (2004: 95) writes:
What is needed is a better synthesis between the different ways of
deciding on priorities, with explicit principles publicly debated and
agreed at the macro-level, greater transparency and more public
involvement at the meso- or organizational level, and sufficient
flexibility at the micro-level to avoid the rigidities of the ‘one-size-
fits-all’ approach to treatment decision-making, which tends to
downplay the importance of clinicians’ experience and patients’
values and preferences.
Managing healthcare technologies and innovation 77

Box 5.2 The NICE Citizens’ Council

The Citizens’ Council was established in 2002 to help provide advice about the
broad social values that NICE should take into account when preparing its
guidance. The 30 members of the Council reflect the age range, gender, socio-
economic status, disability, geographical location and ethnicity of adults in England
and Wales. The Council’s first report discussed clinical need and was concerned
with identifying areas where the Council’s views would be most useful and
relevant to NICE and its advisory committees. Subsequent reports have included
the subjects of age discrimination and treatments for very rare diseases.
Are there circumstances when age should be taken into account when NICE is
making a decision about how treatments should be used in the NHS? The
Council concluded that:
• health should not be valued more highly in some age groups than others
• social roles at different ages should not influence considerations of cost
effectiveness (i.e. people with children or with special professional
responsibilities should not be given priority)
• where age is an indicator of benefit or risk, discrimination is appropriate.
Should the NHS be prepared to pay premium prices for drugs to treat very rare
(so-called ‘ultra orphan’) diseases? The majority of the Citizens’ Council
concluded that the NHS should be prepared to pay premium prices but that:
• the disease should be severe or life threatening
• the treatment should produce real and demonstrable improvements in health
• some limit has to be placed on the amount that the health service should be
asked to pay for these treatments in the future.

The NICE Citizens’ Council established in England and Wales is an

attempt to incorporate public views into the HTA process. Box 5.2
provides more information about this process.
The pharmaceutical industry is also an important stakeholder in the
HTA process. Whilst governments want to obtain new medicines at as
low a cost as possible, they are also keen to maintain a viable and competi-
tive pharmaceutical industry. Denying new drugs to patients on grounds
of cost is likely to result in an unfavourable response from the public and
the pharmaceutical industry. In the UK, for example, when NICE
refused to sanction the use of the anti-influenza drug Relenza, the
chairman of Glaxo Wellcome, the drug’s manufacturer, warned that lead-
ing drugs companies would consider pulling out of Britain if the gov-
ernment adopted an ‘antagonistic’ attitude towards the pharmaceutical
industry. In Australia, HTA findings have been used in drug pricing and
reimbursement decisions since 1993. Whilst Australia’s domestic
pharmaceutical industry is much smaller than its UK counterpart, gov-
ernment policy attempts to strike a balance between the desire to obtain
drugs at the lowest possible cost and the aim of encouraging the growth
of a domestic pharmaceutical industry with its associated benefits (i.e.
research capacity development, export earnings, employment, and so on).
Maintaining this balance is not always easy. Once governments become
78 Healthcare management

involved in regulating the pharmaceutical industry in terms of the safety,

efficacy and more recently cost effectiveness of its products, the industry
becomes a political actor, eager to shape the process by which it is to be
regulated (Abraham 2002). The phrase ‘regulatory capture’ describes a
regulatory regime in which the regulator acts to protect the regulated and
not the general public interest. There are a number of ways in which ‘cap-
ture’ can be facilitated including the so-called revolving door. This involves
regulatory staff moving from industry and then moving back there, with
the result that regulatory agencies are much friendlier to the industry and
its lobbying mechanisms than may be good for the nation’s health.

HTA and priority-setting processes

Theory and practice

The extent to which HTA processes feed directly into policy varies
between countries. HTA processes may have been created to respond to a
perceived policy gap, but they were not created in a vacuum. Rather they
reflect the context of the countries in which they were developed. In
France the main HTA agency, the National Agency for Accreditation
and Evaluation in Health (ANAES), provides reports to a variety of
different customers. These include national health insurance funds,
academic societies, healthcare institutions and professionals. However,
ANAES acts in a purely advisory capacity and its reports have no formal
status (Orvain et al. 2004).
In contrast, in England, the National Institute for Health and Clinical
Excellence (NICE) issues guidance in the form of technology appraisals
and NHS bodies must make funding available for implementation within
three months of an appraisal’s publication (DH 2002). One of NICE’s
key objectives is to promote equitable access to treatments of proven
clinical and cost effectiveness. However, in less centralised systems local
decision making means that achieving equity at a national level is less of a
priority.
In Sweden, for example, which has a well-established government
body and local organisations for HTA, county councils are free to take
decisions regardless of HTA reports. Rather than collaborating, councils
have tended to compete to offer new prestigious technologies. HTA in
Dutch healthcare dates from the 1980s and its development was linked to
the notion that HTA could be of major importance in government prior-
ity setting. The intention was that new technologies should be subject to
HTA before coverage in the health benefits package could be considered.
However, there is no formal requirement for this to take place. Further-
more, unlike, for example, the centralised English model, the Dutch
system is characterised by a plurality of stakeholders and a concept of
‘self-governance’, which means that whatever can be undertaken by the
private sector should not be undertaken by government. A situation of
Managing healthcare technologies and innovation 79

mutual dependence between key stakeholders (government, providers

and insurers) means that HTA outputs cannot be imposed from above.
Instead, whilst at the national (macro) level government is supportive of
the HTA process, the focus of policy is on the meso and micro levels of
the system with healthcare insurers, providers and health professionals
being encouraged to promote the appropriate use of scarce healthcare
resources. In practice, however, it is not clear that these HTA processes are
working in the ways intended.
Whilst HTA systems reflect the particular context of the countries in
which they have developed, there are a number of common themes
which can be observed with regard to many of these systems. These
include an increasing tendency towards a narrow definition of HTA as
economic evaluation and, with a small number of exceptions, the lack of
any direct mechanism for ensuring that HTA outputs feed into policy.
These factors may explain why HTA outputs have often been ignored in
many countries despite the development of elaborate processes for assess-
ing the costs and benefits of healthcare technologies (Oliver et al. 2004).
Some commentators highlight the lack of expertise amongst health
services managers in interpreting and using HTA information as present-
ing barriers to the adoption and use of HTA outputs. Here the suggestion
is that a greater involvement in the HTA cycle of those responsible for
making resource allocation decisions will lead to increased use of HTA
outputs and enhanced efficiency in healthcare systems (Rutten 2004).
However, even in the English context, where NHS institutions are
required to implement NICE guidance, recent evidence suggests that
implementation ‘has not always been timely or comprehensive’ (Audit
Commission 2005: 23). Much of the problem regarding implementation,
it is suggested, is due to deficient management practices. In the next
section we examine why HTA is such an important issue for managers
and then consider the challenges which the ‘management’ of health
technologies and innovation poses for managers.

HTA – what role for management?

As discussed in the introduction to this chapter, in modern health systems,

which face a gap between demand for care and available resources, health
technologies have come to be regarded as a challenge to be proactively
managed. As we noted above, inadequate knowledge, a lack of involve-
ment in HTA processes and deficient management practices have all been
cited as barriers to the effective management of health technologies.
However, it is not clear that managers share this analysis of the prob-
lem. In a recent survey of NHS senior managers in England, affordability
was identified as the major barrier, with 85% of survey respondents stat-
ing that the funds available to implement NICE guidance were insuffi-
cient (Audit Commission 2005). Other barriers to implementation
included lack of access to necessary resources (e.g. staff, equipment,
space), managerial overload (a high volume of work generally and many
80 Healthcare management

other changes requiring managerial capacity happening simultaneously),

resistance to change and a lack of knowledge about the existence of
NICE guidance. The report identified that where robust implementation
systems were in place, however, funding was not the biggest barrier and
clinician resistance tended to be more significant (on this point see also
Sheldon et al. 2004). Clear weaknesses in the financial management
arrangements underpinning the implementation of NICE guidance were
identified and the report presents recommendations for strengthening
these in order to improve guidance implementation.
Figure 5.1 illustrates the steps that should be followed by NHS bodies.
Insofar as these components represent a proactive process for the man-
agement of health technologies, they might be conceived as having
broader application beyond NHS settings. This model, which con-
ceptualises implementation as a management problem to be resolved by
technical fixes, is in keeping with the view of HTA as a technical,
‘rational’ process. The focus on better planning, the preparation of busi-
ness cases and improved costing arrangements ignores issues such as clin-
ician resistance and affordability. If managers choose not to implement
NICE guidance due to lack of resources, they are required to record
this in the organisation’s risk register and to ‘manage’ this risk.
However, failure to implement NICE guidance is likely to attract criti-
cism since implementation forms part of core standards against which the
organisational (and in particular management) performance is assessed.
Alternatively, managers may be placed in the position of having to
divert resources from other services in order to fund the implementation
of NICE guidance. Only a small percentage of health technologies are
subject to formal HTA processes and managers are often faced with
having to make difficult decisions about the allocation of scarce resources.
Where proposed health service developments have not been subjected to
formal HTA processes, denying requests for additional resources is likely
to be easier. This may not be the best decision for patients in the long run,
but where the costs and benefits of developments are vague or uncertain,
the pressure to allocate resources can be more easily resisted.
Our research amongst local health managers responsible for managing
the entry of new drugs in the local health economy suggests that the
absence of information on costs and benefits may help managers refuse
requests for funding (McDonald et al. 2001). We found that since the
licensing of new drugs placed managers in a difficult position, the
managers we interviewed conceptualised new health technologies as
problems whose diffusion (and hence cost) was to be contained. Their
energies were expended on limiting the spread of costly drugs, with
success being defined in terms of cost containment. At the same time,
managers described their aims as ensuring that cost-effective medicines
were available for local populations. This reflects, in part, the fact that
managers may have certain aims and values to which they aspire, but
these are often compromised by the harsh realities of life in a cash-
strapped system. In addition, managers often face multiple and competing
objectives and may resort to informal resource allocation mechanisms.
 Managing healthcare technologies and innovation 81

Figure 5.1 Implementing NICE guidance – recommended good financial management

model
Source: Audit Commission (2005) © Audit Commission Managing the Financial Implications of NICE Guidance.
(2005).
Notes: Payment by Results refers to a tariff-based payment system for health services provided in England. PCT
refers to primary care trust, the local NHS funding & commissioning agency in England.
82 Healthcare management

These provide a means by which resources can be rationed, thereby

achieving some compromise with regard to these competing objectives.
These informal priority-setting processes may avoid drawing attention to
the fact that access to health technologies is being restricted. However,
such processes tend to result in inequalities in access to care and a blur-
ring of accountability to the public who fund the system.
Managers lack legitimacy with regard to informal rationing decisions.
In the public’s eyes rationing by health service managers may be viewed
as inappropriate with clinicians much better qualified to make such
choices (Dolan et al. 1999). This explains why managers have difficulty in
persuading clinicians to comply with NICE guidance. It also explains
why various attempts have been made at formal priority-setting processes
which are designed to take account of the evidence on costs and benefits
and provide a more transparent and equitable means of allocating
resources. Attempts to adopt a more ‘rational’ approach to priority set-
ting are not unproblematic, however. In particular, where resources are
limited and managers have little or no legitimacy for engaging in explicit
rationing, attempts to introduce ‘rational’ processes may flounder due to
affordability issues (see Box 5.3 case study, for example).
Alternatively, in a Canadian context, others have reported how agree-
ment has been reached when faced with difficult choices on new cancer
drugs (Martin et al. 2001). In this example a committee was established in
Ontario that included managers, clinicians and members of the public.
Whilst formal HTA processes emphasise the importance of deciding in
advance the criteria by which evidence is to be judged (e.g. only good
quality randomised control trials will be included), these decision makers
were uncertain about the criteria and started to make decisions anyway.
In this way, they ‘discovered’ clusters of factors implicit in their priority-
setting rationales. These factors included benefit, harm, evidence, need,
cost, availability of alternatives, precedent, convenience, budget con-
straint, total patient population affected, total cost to the system, access
to treatment, pressure from physician and patient groups and historical
precedent. Rationales also changed as costs increased. For example, the
decision makers agreed to fund an expensive drug for myeloma patients
but not for patients with breast cancer. The evidence of benefit of the
drug in the two diseases was very similar, but the larger number of breast
cancer patients meant that total costs were higher for this group.
The fact that this committee achieved some success may be partly
because it included members of the public, but it was also due to add-
itional resources being made available by the Ministry of Health to fund
new drugs, which dramatically reduced the need to deny cancer patients
access to these drugs. This example also lends support to the notion that
such decisions reflect political judgements rather than an ‘objective’
assessment of costs and benefits. Such instances of formal priority setting
are the exception rather than the rule, with resource allocation much
more likely to be the result of less transparent processes. This state of
affairs reflects irreconcilable tensions faced by managers in a system
which promotes ‘rational’ priority setting and at the same time frowns
Managing healthcare technologies and innovation 83

Box 5.3 Case study: Prioritising new cancer drugs

Context and setting

The North West of England. A specialist cancer hospital collaborated with a
consortium of six health authorities to appraise drug developments and draw up
priorities for 1997–8.

Key points
• Providers and commissioners of healthcare were under pressure to introduce
new and expensive cancer drugs within limited budgets.
• Evidence of benefits and cost estimates were presented for various new drugs
in accordance with the original aim of prioritising drugs according to formal
criteria and processes.
• In the context of insufficient funds, commissioning managers sought to contain
expenditure and to raise the threshold for funding new drugs. In contrast,
doctors sought to move the threshold down to reflect their special interests
and the expectations of their patients.
• Stakeholders disagreed on the value to be placed on trial outcomes
(for example, although studies reported tumour response rates, which suggest
clinical progress, they do not necessarily correlate with better survival or
quality of life.)
• The variation in available resources and other service priorities between the
six commissioning organisations (health authorities) made it impossible to
agree a common approach to funding for these drugs.

Authors’ conclusions
Commissioning managers face ‘a dichotomy of political rhetoric on setting
priorities. They are expected to divorce competing budgetary pressures from the
objective assessment of new interventions and set priorities by assessing
needs. . . . Ideally, commissioning decisions would be made with sound
knowledge of the effectiveness of interventions. However, in practice, evidence
based commissioning is hindered by a limited evidence base and influenced by
political and financial pressures’ (Foy et al. 1999).
The authors subsequently reported repeating the exercise in the 1998–99 and
1999–2000 contracting rounds: ‘However, most available growth monies have
been absorbed by large increases in activity and pay awards. Little money has
been left for new expensive cancer drugs, despite strong evidence of their cost
effectiveness’ (So et al. 2000).

on explicit rationing processes which are likely to be politically

unpopular.
Presenting a set of rules for what managers should do about HTA is
difficult, since the role depends on the system in which managers are
operating. Where formal processes exist, the role of managers may be
outlined in detail (as in the Audit Commission document set out in
Figure 5.1). Alternatively, where decisions are made informally and
largely by clinicians, managers may have little or no role with regard to
84 Healthcare management

the implementation of HTA outputs. In the Netherlands, for example,

insurers’ payouts are based on established clinical practice rather than
evidence of clinical or cost effectiveness (Berg et al. 2004). Whilst there is
a trend towards attempts to use guidelines to influence clinical decision
making, managers have no control over clinical decision making. Fur-
thermore, HTA outputs, which typically start with a clear diagnosis as
opposed to a collection of symptoms, do not reflect the sorts of questions
that doctors encounter in everyday practice. Providing managers with
more training to enable them to understand HTA processes is unlikely to
improve their ability to influence decisions in such contexts.

Challenges for the future

If HTA findings are to be incorporated into decision making more

widely, there are a number of challenges to be addressed. There are some
difficult technical issues to do with the design and methodologies used in
HTA. There is a need to adapt HTA to the demands of a changing
healthcare system in which chronic and complex care needs are increas-
ingly the norm. There is also a need to broaden the range of stakeholders
and perspectives represented in HTA.

Technical issues

These relate to issues such as speeding up the process, reaching agreement

on a common approach to the choice of comparator (e.g. placebo or
other) and further exploring the potential for pooling of resources across
international boundaries to conduct HTAs (Sampietro-Colom et al.
2002). Classifying these issues as ‘technical’, however, does not mean that
they can be resolved easily. For example, a review of 326 submissions
made to the Australian Pharmaceutical Benefits Scheme found signifi-
cant problems with 67% of these, with the vast majority of problems
concerning uncertainty about comparative clinical efficacy (Schubert
2002). Whilst pharmaceutical industry estimates of efficacy are usually
derived from placebo-controlled clinical trials, HTA agencies prefer
comparisons with existing treatments. This means that drug manufactur-
ers construct models estimating the likely costs and benefits of their drug
when compared with other treatments, even though they do not have
any trial data on direct comparisons on which to base these comparisons.

Demographic and system changes

The redesign of health systems to reflect the needs of an ageing popula-

tion and a change to the traditional ways of providing care is high on the
agenda of health policymakers in the developed world. Health systems of
 Managing healthcare technologies and innovation 85

the future are likely to reflect moves away from services geared to acute
episodes of care and towards self-care and the co-production of health.
Staff costs represent the majority of healthcare expenditures and in a
context where health professionals are an increasingly scarce resource the
roles and responsibilities of health professionals are already undergoing
changes in most healthcare systems. Health systems of the future are likely
to be characterised by a redistribution of work and the creation of new
types of healthcare workers. This means that HTA processes in the future
will need to be able to produce outputs which relate to these new models
of care, rather than the rather narrow definitions of ‘technology’ on
which almost all HTA programmes are currently focused.

Incorporating other perspectives – broadening out HTA

As we have outlined, there is often a tension between ‘lay’ and scientific

knowledge, with HTA processes tending to privilege the latter. A major
challenge for HTA concerns the incorporation of societal values into
what is, for the most part, a process of economic evaluation. Broadening
out HTA beyond economic evaluation in terms of other non-economic
(e.g. ethical) dimensions and other spheres of activity (e.g. public health
related interventions) and perspectives (e.g. starting with disease which
may be of interest to patients and clinicians, as opposed to HTA being
skewed to high-cost technologies) represents a significant challenge.
Whilst it may be possible, at least in theory, to devote additional resources
to HTA processes in order to examine additional spheres of activity and
clinical perspectives, incorporating ethical dimensions may be more dif-
ficult. As the example from Ontario illustrates, priority setting often
involves making decisions first and then ‘discovering’ rationales after-
wards. These rationales also change according to the context. This sug-
gests that the tensions inherent in attempting to combine competing
rationales (e.g. economics versus ethics) or forms of knowledge (lay ver-
sus ‘scientific’) are unlikely to be resolved by providing additional HTA
resources or attempting to make management processes more efficient.

Conclusion

In this chapter we have presented an introduction to HTA and described

why it is an important issue for managers to understand what HTA
involves. We do not provide any simple advice or words of help to outline
the appropriate course of action for managers to take with regard to HTA
processes and outputs. Certainly managers should be aware of such pro-
cesses, but the role of managers will largely depend on the organisational
and health system context in which they are operating. In many coun-
tries, there are no formal requirements for managers to make use of HTA
outputs. Even in the English NHS where managers face clear guidelines
86 Healthcare management

concerning appropriate action, the existence of competing objectives,

resource scarcity and limited legitimacy make it difficult to comply with
these guidelines. This reflects the fact that HTA and priority setting are
complex political processes whose problems are not amenable to reso-
lution by technical fixes or the application of more systematised ways of
working.

Summary box

• Health technologies present opportunities for health gain, but they are now
seen as processes to be carefully managed since they also present potential
threats.
• Health technology assessment (HTA) is an analytical process of gathering and
summarising information about health technologies
• HTA is also a highly politicised process involving multiple groups of
stakeholders and often competing interests.
• There are tensions between decontextualised HTA assessments dealing with
statistical lives and the real world context, which involves named patients and
mitigating factors.
• The HTA process is evolving – key challenges include the incorporation of
societal values into what are largely economic calculations and the broadening
out of HTA beyond its current narrow focus.
• In resource-constrained and highly politicised healthcare systems, applying
HTA outputs in practice will always be a challenge.

Self-test exercises

1 What knowledge do you have about the HTA processes which relate
to the health system you work in? Do you agree with the way in
which these processes are undertaken? Would more knowledge in this
area improve your ability to apply HTA outputs?
2 How much input should members of the public have in HTA pro-
cesses? If public opinion suggests a new and expensive drug should be
funded, where should the money come from to fund this? Is this left to
managers to resolve?
3 Have you been involved in making decisions about resource alloca-
tion? If so, how have these been taken? If not, who takes these decisions
and on what basis? What part do managers’ own values play in the
process and can they put them to one side? How accountable and
transparent are these processes?
 Managing healthcare technologies and innovation 87

References and further reading

Abraham, J. (2002) The pharmaceutical industry as a political player. The Lancet,

360: 1498–1502.
Audit Commission (2005) Managing the Financial Implications of NICE Guidance.
London: Audit Commission.
Berg, M., van der Grinten, T. and Klazinga, N. (2004) Technology assessment,
priority setting, and appropriate care in Dutch health care. International Journal
of Technology Assessment in Health Care, 20(1): 35–43.
Burls, A., Austin, D. and Moore, D. (2005) Commissioning for rare diseases: View
from the frontline. British Medical Journal, 331(7523): 1019–21.
Coulter, A. (2004) Perspectives on health technology assessment: Response from
the patient’s perspective. International Journal of Technology Assessment in Health
Care, 20(1): 92–6.
Department of Health (DH, 2002) Directions to Primary Care Trusts and NHS
Trusts in England Concerning Arrangements for the Funding of Technology Appraisal
Guidance from NICE. London: Department of Health.
Dolan, P., Cookson, R. and Ferguson, B. (1999) Effect of group discussion and
deliberation on the public’s views of priority setting in health care: focus
group study. British Medical Journal, 318: 916–19.
Foy, R., So, J., Rous, E. and Scarffe, J. H. (1999) Perspectives of commissioners
and cancer specialists in prioritising new cancer drugs: impact of the evidence
threshold. British Medical Journal, 318: 456–9.
Ham, C. and Coulter, A. (2001) Explicit and implicit rationing: Taking responsi-
bility and avoiding blame for health care choices. Journal of Health Services
Research and Policy 6: 163–9.
Hill, S., Garrattini, S., van Loenhout, J., O’Brien, B. and de Joncheere, K. (2003)
Technology appraisal programme of the National Institute for Clinical Excel-
lence. A review by WHO. World Health Organization Europe. Available at
http://www.nice.org.uk/pdf/boardmeeting/brdsep03itemtabled.pdf
Holland, W.W. (2004) Health technology assessment and public health: A
commentary. International Journal of Technology Assessment in Health Care, 20:
77–80.
Lothgren, M. and Ratcliffe, M. (2004) Pharmaceutical industry’s perspective on
health technology assessment. International Journal of Technology Assessment in
Health Care 20: 97–101.
McCabe, C., Claxton, K. and Tsuchiya, A. (2005) Orphan drugs and the NHS:
Should we value rarity? British Medical Journal, 331(7523): 1016–19.
McDonald, R. (2002) Using Health Economics in Health Services, Rationing Ration-
ally? Maidenhead: Open University Press.
McDonald, R., Burrill, P. and Walley, T. (2001) Managing the entry of new
medicines in the National Health Service: Health authority experiences and
prospects for primary care groups and trusts. Health and Social Care in the
Community, 9(6): 341–47.
Martin, D., Pater, J. and Singer, P. (2001). Priority setting decisions for new cancer
drugs: A qualitative case study. Lancet, 358: 1676–81.
Mayor, S. (2005) NICE to issue faster guidance on use of drugs by NHS. British
Medical Journal, 331: 1101.
Oliver, A., Mossialos, E. and Robinson, R. (2004) Health technology assessment
and its influence on health-care priority setting. International Journal of Technol-
ogy Assessment in Health Care, 20(1): 1–10.
88 Healthcare management

Orvain, J., Xerri, B. and Matillon, Y. (2004) Overview of health technology

assessment in France. International Journal of Technology Assessment in Health
Care, 20(1): 25–34.
Rutten, F. (2004) Health technology assessment and policy from the economic
perspective. International Journal of Technology Assessment in Health Care, 20(1):
71–6.
Sampietro-Colom, L., Semberg, V., Estrada, D., Asplund, K., Barrington, R.,
Faisst, K. et al. (2002) European joint assessments and coordination of findings
and resources. International Journal of Technology Assessment in Health Care,
18(2): 321–60.
Schubert, F. (2002) Health technology assessment – the pharmaceutical industry
perspective. International Journal of Technology Assessment in Health Care, 18(2):
184–91.
Sheldon, T.A., Cullum, N., Dawson, D., Lankshear, A., Lowson, K., Watt, I., West,
P., Wright, D. and Wright, J. (2004) What’s the evidence that NICE guidance
has been implemented? Results from a national evaluation using time series
analysis, audit of patients’ notes, and interviews. British Medical Journal,
329(7473): 999–1003.
So, J., Scarffe, J. H., Rous, E. and Foy, R. (2000) Lack of funding will inhibit
evidence-based commissioning of cancer treatments. British Medical Journal,
320: 54.
Stevens, A. and Milne, R. (2004) Health technology assessment in England
and Wales. International Journal of Technology Assessment in Health Care, 20(1):
11–24.
Ten Have, (2004) Ethical perspectives on health technology assessment. Inter-
national Journal of Technology Assessment in Health Care, 20(1): 71–6.
Webster, A. (2004) Health technology assessment: A sociological commentary
on reflexive innovation. International Journal of Technology Assessment in Health
Care, 20(1): 1–6.

Websites and resources

Canadian Coordinating Office for Health Technology Assessment

(CCOHTA). A primary source for unbiased, evidence-based information on
drugs, devices, healthcare systems and best practices. CCOHTA is funded by
Canadian federal, provincial and territorial governments. Provides access to
free HTA reports and provides a history of CCOHTA as well as information
on its processes. Sites from many other countries can be easily found by
visiting the INAHTA website: https://www.ccohta.ca/entry_e.html
National Institute for Health and Clinical Excellence (NICE). The
independent organisation responsible for providing national guidance on the
promotion of good health and the prevention and treatment of ill health:
Provides details of technology appraisals, clinical guidance, the NICE
Citizens’ Council and minutes of NICE committee and board meetings
amongst other things: http://www.nice.org.uk/
NHS Health Technology Assessment Programme. Aims to ensure that
high quality research information on the costs, effectiveness and broader
impact of health technologies is produced in the most effective way for those
who use, manage and provide care in the NHS. HTA reports can be
downloaded free from its website: http://www.ncchta.org/
Managing healthcare technologies and innovation 89

International Network of Agencies for Health Technology Assessment

(INAHTA). Its mission is to provide a forum for the identification and
pursuit of interests common to health technology assessment agencies. Mem-
bership since 1993 has grown to 41 member agencies from 21 countries. The
network stretches from North and Latin America to Europe, Australia, and
New Zealand and its website provides links to member websites around the
world: http://www.inahta.org/inahta_web/index.asp
 6 Health and well-being: the
wider context for healthcare
management
Ann Mahon

Introduction

This chapter looks at the social and cultural context within which health
and illness are defined and experienced by people in different cultures
and countries around the world. It also considers what strategies to
improve health and prevent or treat illness and disease have been
developed and implemented. It begins with an exploration of how
health, illness and disease are defined and how such definitions influence
health and illness behaviours. Patterns of health and illness across differ-
ent countries and between different socio-economic groups are
described and explanations for the existence of inequalities in health are
also explored. The contribution of formalised systems of healthcare is
thus set in context and the implications of this for public policy now and
in the future are discussed. The final section of this chapter summarises
some of the implications of the issues raised for the role of healthcare
managers.

Definitions of health and illness

Health is an elusive concept. There is no single, definitive and objective

definition of health and well-being. In recent decades there has been
increasing recognition that definitions of health, illness and disease are
constructed and experienced within the social, cultural, political and
economic contexts within which people live their daily lives. Dubos, for
example, argues:
Health and disease cannot be defined merely in terms of anatomical,
physiological or mental attributes. Their real measure is the ability
of the individual to function in a manner acceptable to himself and
to the group of which he is part. (Dubos 1987: 261)
Health and well-being 91

This social or ‘holistic’ perspective contrasts with what has come to be

known as the ‘medical model’, whereby medical knowledge is seen as
based on a universal and generalisable science. This is in contrast to lay
knowledge derived from ‘unscientific’ folk knowledge or individual
experience. Mildred Blaxter argues that this dichotomy, set between
biomedical, scientific models of healthcare and looser more holistic
models – sometimes referred to as ‘medical’ and ‘non-medical’ perspec-
tives – does not reflect reality and in practice an intermixing is inevitable.
First, lay people have been taught to think in biomedical terms and
second ‘holistic’ concepts are also a part of medical philosophy (Blaxter
1990). Cecil Helman (2001), an anthropologist and a general practitioner
in the UK, looked at the relationship between medical and lay or folk
beliefs surrounding health and illness. His focus was on the impact of
health education, television programmes and increased access to health-
care on folk beliefs. His findings suggested that folk beliefs about illness
and healthcare not only survive the impact of scientific medicine but in
some cases may even be perpetuated by this contact. He argues that
doctors do not or cannot differentiate between bacteria and viruses and
so neither do their patients. The distinction is reinforced through, for
example, overprescribing of antibiotics in general and particularly for
viral illnesses. It strengthens the lay view that all germs are bad and similar
in nature. Helman concludes that in the UK free access to health and
medicine does not seem to have altered some of the traditional folk
beliefs about health and illness – medical concepts like the germ theory
of disease whilst being widely known to the lay public may be under-
stood in an entirely different way and often in terms of a much older folk
view of illness (Helman 2001).
Kleinman (1985) identified three sectors found in any modern health-
care system. These are the professional sector, the folk sector and the
popular sector. The professional sector consists of professional scientific
‘western’ medicine and also professionalised indigenous healing tradi-
tions such as chiropractic and acupuncture. The folk sector represents
non-professionalised healing specialists. The popular or lay sector com-
prises wellness activities performed in the family and community con-
text. Given that most illness in all countries and cultures is managed (at
least in the early stages) outside of formalised systems of healthcare
(Kleinman’s professional sector), conceptions of health and illness and
how people manage their health and illnesses are of particular signifi-
cance. For decades numerous epidemiological enquiries have estimated
the proportion of symptoms presented to the professional sector
(Wadsworth et al. 1971; Dunnell and Cartwright 1972). More recently
Hughner and Kleine cite evidence that suggests between 70% and 90% of
sickness is managed solely within in the lay domain in western society
(Hughner and Kleine 2004).
Blaxter’s (1990) work describes how the way in which health is con-
ceived differs over the life course. Young men tend to speak of health in
terms of physical strength and fitness. Young women think in terms of
energy, vitality and the ability to cope. In middle age concepts of health
92 Healthcare management

become more complex with older people thinking in terms of function

as well as ideas about contentment and happiness.
It is common for the terms ‘illness’ and ‘disease’ to be used inter-
changeably and for health to be viewed in simple terms as the absence of
illness or disease. By looking more closely at how terms are defined we
gain greater understanding of the social context of health and illness. The
way lay people think about health and wellness influences their health
and wellness-related behaviours – in other words what we do or do not
do to become or remain healthy and how we interpret and respond to
symptoms of illness. There has been a lot of research into lay people’s
understanding of health – most of it in the 1970s and 1980s and much of
it based in the UK and USA. Typically these studies have looked at how
health and illness are defined according to age, gender, specific disease
categories, social class and ethnicity. Hughner and Kleine (2004)
attempted to integrate and synthesise this research and identified 18
themes (set out in Table 6.1) that fall into four categories. The four
categories are definitions of health (themes 1–5), explanations for health
(themes 6–13), external and/or uncontrollable factors impinging on
health (themes 14–16) and the place health occupies in people’s lives
(themes 17–18). Hughner and Kleine (2004: 397) conclude that popular
worldviews about health and wellness are ‘complex interweavings of
information drawn from different sources including lay knowledge, folk
beliefs, experiences, religious and spiritual practices and philosophy’.
More recently, particularly in those countries with indigenous popula-
tions such as New Zealand, Australia, Canada, India and others, there has
been an increased recognition and acceptance of how indigenous peoples
define health. For example, the 1999 Declaration on the Health and
Survival of Indigenous Peoples proposed the following definition of
indigenous health:
Indigenous peoples’ concept of health and survival is both a collect-
ive and an individual inter-generational continuum encompassing a
holistic perspective incorporating four distinct shared dimensions of
life. These dimensions are the spiritual, the intellectual, physical and
emotional. Linking these four fundamental dimensions, health and
survival manifests itself on multiple levels where the past, present
and future co-exists simultaneously. (Durie 2003a: 510)
Healthcare changes and develops at an increasingly fast pace. The rise in
‘alternative’ therapies, changes in technological interventions and access
to information about health and health-related issues, particularly
through the internet, are inter alia likely to be having an impact on health
and illness beliefs and behaviours. How these and other changes are influ-
encing definitions and experiences of health and illness provide a fertile
area for future research.
It is outside the scope of this chapter to give a comprehensive and
critical account of studies conducted in different countries and cultures.
Nevertheless it can be argued from this perspective that the ‘medical
model’ is severely limited. Health is more than the absence of disease. Our
 Health and well-being 93

Table 6.1 Lay views of health: themes and associated statements

Theme Example statement

Definitions of health
1 Health is the absence of illness ‘If I am not sick (for example, running a fever). I generally
consider myself healthy.’
2 Health is functional ability ‘As long as I am able to carry out my daily functions (e.g.
going to work, taking care of the household) I consider myself
healthy.’
3 Health is equilibrium ‘The mind, body and spirit are all connected; all need to be in
sync for good health.’
4 Health is freedom ‘Good health is freedom; with it comes the ability to do what
I want to do, to live how I want to live.’
5 Health is constraining ‘Good health is constraining; with it individuals have to
conform to the demands of society.’
Explanations for health
6 Health through meditation or ‘Health and wellness can be maintained through meditation
prayer or prayer.’
7 Health is dependent upon mental ‘The power of a positive outlook or attitude can prevent
attitude sickness.’
8 Health through working ‘As long as I keep going, I tend not to get sick – keeping busy
doesn’t allow one to have the time to get sick.’
9 Religious and supernatural ‘God works in mysterious ways; health and sickness is part of
explanations the divine plan.’
10 Health maintained through rituals ‘The use of certain rituals is helpful in the maintenance of
health (for example, reciting a prayer or psalm).’
11 Health is a moral responsibility ‘I have a responsibility to my family to maintain my health.’
12 Health is maintained through ‘I believe visiting a medical doctor for regular check-ups is
internal monitoring important to maintain good health.’
13 Self-blame ‘Many people suffer illnesses caused by their own bad habits.’
External uncontrollable factors
14 Health as policy and institutions ‘I believe good health is in part the product of governmental
institutions that ensure the health of citizens.’
15 Modern way of life ‘Many diseases of modern life result from the stressful and
polluted environment in which we live.’
16 Health is genetics ‘Often getting sick just happens and little can be done about
it.’
Place of health in life
17 The value and priority placed on ‘I have more important goals in my life than the pursuit of
health optimal health.’
18 Disparity between health beliefs ‘I know a lot about how to keep healthy (e.g. which type of
and behaviours eating and activity behaviours are considered healthy);
however I often do not practice this health knowledge.’

Source: Hughner and Kleine (2004: 419).

94 Healthcare management

beliefs about what causes our health influence our beliefs about how to
behave when ill. Health beliefs interact with health behaviours, which has
major implications for the relationship between health and healthcare
organisations. The implications of the findings from studies of health and
illness behaviour suggest that we need to rethink aspects of healthcare
delivery, health education and health promotion and the role of not-for-
profit organisations and communities.

Patterns of health and illness

There are both similarities and differences in the patterns of health, illness
and disease across different countries and between different socio-
economic and cultural groups within countries. Typically, health and
illness are measured by three main indicators: those that measure life
expectancy, mortality and morbidity. Tables 6.2 to 6.7 present a range of
health and illness indicators for 15 World Health Organisation (WHO)
member states. Life expectancy and the probability of dying under the
age of 5 and between the ages of 15 and 60 are presented in Table 6.2.
Death rates for all causes of death and then broken down to three major
causal categories – communicable diseases, non-communicable diseases
and injuries – are given in Table 6.3. A more detailed breakdown of death
rates relating to each major causal category is given in Tables 6.4, 6.5 and
6.6. Finally, Table 6.7 presents data on performance relating to the
achievement of WHO millennium development goals for each of the 15
selected countries.
The data shown in the tables illustrate the following:
1 Health inequalities between countries exist for all measures and disease
categories.
2 There are considerable differences between countries in life expect-
ancy at birth ranging from 50.7 years for South Africans to 80.4 years
for Australians. A child born in a western European country or the
USA is ten times less likely to die before the age of 5 years than a child
born in India.
3 Across all countries women live longer than men, although the gap
between men and women is smaller for some countries than for others.
4 The stage of economic, social and political development in countries is
reflected in their patterns of health and illness. The populations of poor
countries and those in political conflict have lower life expectancy and
greater probability of dying prematurely.
5 The relative burden of the three major diseases categories varies con-
siderably between different countries. Poorer developing countries
continue to suffer high death rates from infectious diseases whilst
richer countries have experienced the epidemiological transition from
infectious diseases to the non-communicable chronic diseases.
Whilst these data illustrate the patterns of health and illness between
Table 6.2 Basic indicators for a selection of WHO member states, 2002
Probability of Probability of Probability of Probability of
Member state Life expectancy at dying (per 1000) dying (per 1000) dying (per 1000) dying (per 1000)
and population birth (years, both Life expectancy at Life expectancy at under 5 years of under 5 years of 15–60 years of 15–60 years of
(000) sexes) birth (males) birth (females) age (males) age (females) age (males) age (females)

Australia 80.4 77.9 83 6 5 91 52

(19,544)
China 71.1 69.6 72.7 31 41 165 104
(1,302,307)
Cuba 77.1 75 79.3 8 7 138 89
(11,271)
France 79.8 76 83.6 6 4 135 60
(59,850)
Germany 78.7 75.6 81.6 5 4 118 60
(82,414)
Guatemala 65.9 63.1 69 57 50 283 162
(12,036)
India 61 60.1 62 87 95 291 220
(1,049,549)
Indonesia 66.4 64.9 67.9 45 36 244 208
(217,131)
Netherlands 78.6 76 81.1 6 5 94 65
(16,067)
New Zealand 78.9 76.6 81.2 7 6 98 63
(3,846)
Papua New 59.8 58.4 61.5 98 92 311 249
Guinea
(5,586)
South Africa 50.7 48.8 52.6 86 81 598 482
(44,759)
Sweden 80.4 78 82.6 4 3 83 53
(8,867)
UK (59,068) 78.2 75.8 80.5 7 6 107 67
USA 77.3 74.6 79.8 9 7 140 83
(291,038)

Source: Data drawn from www.who.int/ healthcare info/ World Health Organisation health statistics and health information systems: death and DALY estimates
for 2002 by cause for WHO member states.
96 Healthcare management

Table 6.3 Estimated deaths per 100,000 by cause of death for selected WHO member
states, 2002
Member state
and population Communicable Non-communicable
(000) All causes of death diseases1 diseases2 Injuries3

Australia 647.6 28.1 578.7 40.7

(19,544)
China 701.5 83.7 541.4 76.3
(1,302,307)
Cuba 680.5 71.9 546.3 62.3
(11,271)
France 833.8 52.9 712.2 68.7
(59,850)
Germany 989.4 42.5 907.7 39.1
(82,414)
Guatemala 680.7 338.8 271.0 71
(12,036)
India 988.8 401.9 486.9 100
(1,049,549)
Indonesia 748.9 219.5 453.9 75.4
(217,131)
Netherlands 867.5 66.5 770.3 30.6
(16,067)
New Zealand 710.7 23.5 647.4 39.9
(3,846)
Papua New 836.5 435.9 321.4 79.1
Guinea
(5,586)
South Africa 1518.8 987.9 424.2 106.7
(44,759)
Sweden 1027.2 51.2 929.4 46.5
(8,867)
UK 1014.7 123.3 858.4 33
(59,068)
USA 831.7 50.9 728.3 52.5
(291,038)
1
See Table 6.4 for a more detailed breakdown of disease categories/death rates within the communicable diseases
category.
2
See Table 6.5 for a more detailed breakdown of disease categories/death rates within the non-communicable
diseases category.
3
See Table 6.6 for a more detailed breakdown of disease categories/death rates within the injuries category.
Source: Data drawn from www.who.int/ healthcare info/ World Health Organisation health statistics and health
information systems: death and DALY estimates for 2002 by cause for WHO member states.

different countries, they conceal the considerable inequalities between

different socio-economic, cultural and ethnic groups within countries.
This is well documented in the UK and other European countries in
terms of social class or social status where it has become common to talk
about the ‘social gradient’ present in health and illness data where the
 Health and well-being 97

Table 6.4 Estimated deaths per 100,000 by communicable, maternal, perinatal and
nutritional causes for a selection of WHO member states, 2002
All communicable,
maternal, peri-
Member state natal and
and population Infectious and Respiratory Maternal Peri-natal Nutritional nutritional
(000) parasitic diseases infections conditions condition deficiencies conditions

Australia 9.2 14.3 0.1 3.4 1.2 28.1

(19,544)
China 39 22.4 0.8 20.9 0.6 83.7
(1,302,307)
Cuba 7.9 59.2 0.5 3.6 0.7 71.9
(11,271)
France 13 32.5 0.1 2.8 4.5 52.9
(59,850)
Germany 14.3 25.4 0.1 2.0 0.9 42.5
(82,414)
Guatemala 230.8 48.9 7.3 34.8 16.9 338.8
(12,036)
India 197.3 107.0 12.7 72.6 12.3 401.9
(1,049,549)
Indonesia 122 49 4.8 33.7 10.1 219.5
(217,131)
Netherlands 11.8 50.2 0.1 2.7 1.8 66.5
(16,067)
New Zealand 4.2 15.3 0.1 3.3 0.6 23.5
(3,846)
Papua New 248.7 64.5 8.6 84.6 29.6 435.9
Guinea
(5,586)
South Africa 898.51 53.5 5.6 18.2 12.6 987.9
(44,759)
Sweden 12.4 35.4 0.0 1.2 2.1 51.2
(8,867)
UK 8.2 110.8 0.1 3.4 0.8 123.3
(59,068)
USA 22.1 20.6 0.2 5.5 2.5 50.9
(291,038)
1
HIV/AIDS accounts for 794 of the 898.5 deaths in this category in South Africa.
Source: Data drawn from www.who.int/ healthcare info/ World Health Organisation health statistics and health
information systems: death and DALY estimates for 2002 by cause for WHO member states.

poorest and most deprived groups experience the poorest health while
the more affluent members of society experience both better social and
environmental conditions and better health status on a range of
indicators.
In New Zealand, Australia, India, Canada and other countries with
indigenous populations, national data conceal the poorer health status of
Table 6.5 Estimated deaths per 100,000 by non-communicable diseases for a selection of WHO member states, 2002
Member state Diabetes mellitus All non-
and population Malignant and and endocrine Neuro-psychiatric Cardiovascular communicable
(000) other neoplasms disorders Disorder Sense organ disease and respiratory Other diseases

Australia 190.6 23.6 38.1 0.0 281.3 45 578.7

(19,544)
China 134.7 12 8.0 0 340.5 46.2 541.4
(1,302,307)
Cuba 159.9 16 24.9 0.1 304.7 40.9 546.3
(11,271)
France 247.5 32.9 62.1 0.1 300 69.5 712.2
(59,850)
Germany 271 29.7 29.9 0.0 508.9 68.1 907.7
(82,414)
Guatemala 44.1 21.9 17.0 0.2 141.7 46 271.0
(12,036)
India 72.2 16.4 17.4 0.1 325.8 55.1 486.9
(1,049,549)
Indonesia 87.7 26.2 16.3 0.1 266.4 57.2 453.9
(217,131)
Netherlands 255.5 29.6 53.9 0.0 365.1 66.2 770.3
(16,067)
New Zealand 198.4 30.5 41.2 0.0 338.4 38.8 647.4
(3,846)
Papua New 50.9 15.4 9.9 0.1 188.8 56.4 321.4
Guinea
(5,586)
South Africa 87.1 32 15.3 0 243.8 45.9 424.2
(44,759)
Sweden 248 27.6 77.9 0 514.4 61.7 929.4
(8,867)
UK 260.6 17.6 45.2 0 459.7 75.4 858.4
(59,068)
USA 197.1 37 53 0 379.7 61.3 728.3
(291,038)

Source: Data drawn from www.who.int/ healthcare info/World Health Organisation health statistics and health information systems: death and DALY estimates
for 2002 by cause for WHO member states.
 Health and well-being 99

Table 6.6 Estimated deaths per 100,000 by injuries for a selection of WHO member states,
2002
Member state Other non-
and population Road traffic intentional Self-inflicted All causes of
(000) accidents injuries injuries Violence War injuries

Australia 8.6 19.3 11.3 1.5 0 40.7

(19,544)
China 19.2 33.1 20.9 3.0 0 76.3
(1,302,307)
Cuba 13.1 28.7 15.2 5.3 0 62.3
(11,271)
France 13.9 38.2 15.9 0.7 0 68.7
(59,850)
Germany 8.6 15.9 13.9 0.7 0 39.1
(82,414)
Guatemala 6.5 24.9 2.3 37.1 0 71.0
(12,036)
India 18 58.2 17.4 5.5 0.5 100
(1,049,549)
Indonesia 23.9 26.7 11.3 9.4 3.8 75.4
(217,131)
Netherlands 6.4 14.2 8.9 1.1 0 30.6
(16,067)
New Zealand 12.7 13.8 12.2 1.2 0 39.9
(3,846)
Papua New 15.3 37.8 10 15.6 0 79.1
Guinea
(5,586)
South Africa 30.3 22.7 10.5 43.2 0 106.7
(44,759)
Sweden 6.3 26.4 12.8 1.0 0 46.5
(8,867)
UK 6.5 17 8.5 1.1 0 33.0
(59,068)
USA 15.5 21.1 10.3 5.4 0 52.5
(291,038)

Source: Data drawn from www.who.int/ healthcare info/ World Health Organisation health statistics and health
information systems: death and DALY estimates for 2002 by cause for WHO member states.

their indigenous people. There are 350 million indigenous people repre-
senting over 5000 cultures in 70 countries on every continent (Smith
2003). The gap in life expectancy between indigenous and non-
indigenous populations is estimated to be a staggering 19 to 21 years in
Australia, 8 years in New Zealand, 5 to 7 years in Canada and 4 to 5 years
in the United States (Ring and Brown 2003). Although indigenous
peoples tend to have higher mortality right across the disease spectrum,
much of the excess arises from non-communicable chronic diseases. In all
four countries cited above cardiovascular and respiratory diseases and
100 Healthcare management

Table 6.7 Millennium development goals: selected health indicators for selected WHO
member states, 2000
Children Population
under 5 HIV with
years of age One-year-olds prevalence sustainable
Member state under- immunised Maternal among 15– Tuberculosis access to an
and population weight for against mortality 49-year- mortality improved
(000) age measles ratio olds rates water source

(per 100
000 live (per 100 %
% % births) % 000) Urban Rural

Australia 0 93 6 0.1 0 100 100

(19,544)
China 10 79 56 <0.1 21 93.7 66.1
(1,302,307)
Cuba 3.9 99 33 <0.1 1 99 95
(11,271)
France N/A 84 17 0.3 2 N/A N/A
(59,850)
Germany N/A 89 9 0.1 1 N/A N/A
(82,414)
Guatemala 24.2 91 240 1.0 13 98 88
(12,036)
India 46.7 56 540 0.8 41 95 79
(1,049,549)
Indonesia 27.3 76 230 <0.1 67 90 69
(217,131)
Netherlands 0.7 96 16 0.2 1 100 100
(16,067)
New Zealand N/A 85 7 0.1 1 100 N/A
(3,846)
Papua New 29.9 58 300 0.3 57 88 32
Guinea
(5,586)
South Africa 9.2 72 230 19.6 46 99 73
(44,759)
Sweden N/A 94 8 <0.1 1 100 100
(8,867)
UK 1.3 85 11 0.1 1 100 100
(59,068)
USA 1.4 91 14 0.6 0 100 100
(291,038)

Source: Data drawn from www.who.int/ healthcare info/ World Health Organisation health statistics and health
information systems: death and DALY estimates for 2002 by cause for WHO member states.
 Health and well-being 101

endocrine illnesses (mainly diabetes) and neoplasm account for most of

the excess deaths among indigenous people. These conditions collect-
ively account for 70% or more of excess mortality in indigenous people.
This is significant because of the avoidable nature of much chronic dis-
ease (Ring and Brown 2003). Indigenous populations generally have a
lower life expectancy than non-indigenous populations, a higher inci-
dence of most diseases including diabetes, mental disorders and cancers
and experience third world diseases like TB and rheumatic fever in
developed countries (Durie 2003a). Although the standards of health of
indigenous peoples show differences, similarities exist in worldviews,
patterns of disease, health determinants and healthcare strategies (Durie
2003a). It is nevertheless important to recognise that there has been a
substantial narrowing of the gap in health between indigenous and non-
indigenous people although the evidence suggests that in Australia the
gap is widening (Ring and Brown 2003).
How can these patterns of health and illness be explained? How can
the relationship between where we live, how long we live for and the
quality of our lives be explained? The next section looks at the factors
that determine health.

The determinants of health

A number of different perspectives can be employed to explain inequal-

ities in health. Historical and cultural analyses will shed light on the
history surrounding the health status of a population or a social group.
See, for example, Friedrich Engels on the social and economic conditions
of Victorian England and Mason Durie on the experiences of Maori
in New Zealand (Engels 1999; Durie 1994, 2003a, 2003b). Political,
sociological, biological and genetics explanations will yield different
explanations.
Compared to many other countries the UK has a strong tradition of
producing robust data over time to describe patterns of inequalities and
these data have been compiled in a number of high-profile sources over
many decades. However, the evidence in relation to why these patterns
exist is less robust and raises political questions about the relative roles and
responsibilities of individuals, families, the community and society and
the state (Baggott 2000). The authors of the UK Black Report describe
four theoretical explanations of the relationship between health and
inequality. These are artefact explanations, theories of natural/social
selection, materialist/structuralist explanations and cultural/behavioural
explanations. They conclude that the most significant causes are those
relating to materialist/structuralist explanations and base their recom-
mendations for action on this perspective (Townsend and Davidson
1982). Durie argues that explanations for current indigenous health status
can be grouped into four main propositions: genetic vulnerability, socio-
economic disadvantage, resource alienation and political oppression. All
102 Healthcare management

four propositions can be conceptualised as a causal continuum. Short-

distance factors at one end (such as the impact of abnormal cellular
processes) and at the other end long-distance factors such as government
polices. Midway factors include values and lifestyles (Durie 2003a).
Wilkinson and Marmot (2003) focus upon the social determinants of
health that affect populations and distinguish this perspective from the
role that individual factors such as genetic susceptibility play in health and
illness. The key social factors, a brief summary of the evidence base and
the implications of this for public policy, based on Wilkinson and Mar-
mot, is presented in Table 6.8. The research evidence for the summaries
of ‘what is known’ and the ‘policy implications’ are fully sourced in the
original publication, which is available on the European Public Health
Alliance (EPHA) website (see useful websites at the end of this chapter).
The relative influence of these factors is influenced by economic and
political factors:
Economic growth and improvements in housing brought with
them the epidemiological transition from infectious to chronic dis-
eases – including heart disease, stroke and cancer. With it came a
nutritional transition when diets, particularly in Western Europe
change to over consumption of energy dense fats and sugars pro-
ducing more obesity. (Wilkinson and Marmot 2003: 26)
Given the evidence for the important role of social factors in determin-
ing health, what role should or could formalised healthcare systems play?

The contribution of healthcare to health status: healthcare in perspective

Until the 1970s it was commonly assumed that the improvements in

health experienced in many countries during the last century had
occurred as a consequence of advances in medical care. Marmot and
Wilkinson’s work summarises the evidence demonstrating that the
health of people, patients and populations is influenced by many factors
that exist outside of formalised systems of healthcare (Wilkinson and
Marmot 2003). The amount of money spent on healthcare, measured by
the proportion of GDP spent on health (see Table 6.9) within a system is
not in itself a direct and causal contributor to the health profile of the
nation.
During the 1970s there was a fundamental change in western societies’
attitudes to medicine and the ‘self-evident’ efficacy of medicine. The
validity of medical knowledge has also been increasingly challenged.
These challenges came from a number of sources both within and out-
side of medicine (Cochrane 1972; Illich 1977a, 1977b; Kennedy 1983,
McKeown 1979). However, some recent publications have suggested the
need for a reappraisal of the role of medical and heathcare (Bunker 2001
and Nolte and McKee 2004; Craig et al. 2006). As Craig (2006: 1) states:
‘The idea that successfully changing society and the environment will
 Health and well-being 103

Table 6.8 The social determinants of health

What is known: key points Policy implications

Health inequalities
• Poor social and economic circumstances affect • Policy should address social and economic
health status from birth to old age. circumstances in policy areas such as housing
• Differences between social and economic and minimum wages.
groups exist for most disease categories and • Critical transitions in life – for example, starting
causes of death. school and moving from primary to secondary
• The effects upon health accumulate during the school – can affect health and should be the
life cycle. focus of policy interventions.

Stress
• Poor social and psychological circumstances • As well as managing the biological changes
can cause long-term stress. associated with stress attention should be
• Anxiety, insecurity, low self-esteem and social focused ‘upstream’, i.e. on the causes and not
isolation affect health status due to the just on the effects.
physiological effects of stress on the immune • The quality of the social environment and
and cardiovascular system. material security in schools, workplaces and the
wider community are important.

Early life
• Infant experience is important to later health • Improved preventive healthcare before the
for biological, social and psychological reasons. first pregnancy and for mothers and babies in
• Insecure emotional attachment and poor pre- and postnatal services and through
stimulation can lead to low educational improvements in the educational levels of
attainment and problem behaviour. parents and children.
• Slow or retarded physical growth in infancy is • Policies for improving health in early life should
associated with reduced cardiovascular, aim to increase the general level of education,
respiratory, pancreatic and kidney development provide good nutrition, health education and
and function, which increase the risk of illness health and preventive care facilities and
in adulthood. adequate social and economic resources before
and during pregnancy and in infancy and
support parent–child relationships.

Social exclusion
• Poverty, relative deprivation and social • All citizens should be protected by minimum
exclusion have a major impact on health and incomes guarantees, minimum wages
premature death. legislation and access to services.
• The unemployed, many ethnic minority • Interventions to reduce poverty and social
groups, guest workers, disabled people, refugees exclusion at both the individual and the
and homeless people are at particular risk of neighbourhood levels.
both absolute poverty (a lack of the basic • Legislation can help protect minority
material necessities of life) and relative poverty vulnerable groups from discrimination and
(being much poorer than most people in social exclusion.
society). • Public health policies should remove barriers to
health and social care, social services and
affordable housing.
• Labour market, education and family welfare
policies should aim to reduce social
stratification.
104 Healthcare management

Table 6.8 continued

What is known: key points Policy implications

Work
• In general having a job is better for health than • Improved conditions at work will lead to a
having no job. healthier workforce, which will lead to greater
• Stress at work plays an important role in productivity.
contributing to inequalities in health, sickness • Appropriate involvement in decision making is
absence and premature death. likely to benefit employees at all levels of an
• Health also suffers if people have little organisations.
opportunity to use their skills and low • Good management involves ensuring
decision-making authority. appropriate rewards (money, status and self-
• The psychosocial environment at work is an esteem).
important determinant of health and • Workplace protection includes legal controls
contributor to the social gradient in ill health. and workplace healthcare.
Unemployment
• High rates of unemployment cause more illness • Policy should aim to prevent unemployment
and premature death. Unemployed people and and job insecurity; to reduce the hardship
their families suffer a substantially increased risk suffered by the unemployed and to restore
of premature death. people to secure jobs.
• The health effects of unemployment are linked
to psychological and financial consequences.
• Job insecurity has been shown to increase
effects on mental health, self-reported ill health
and heart disease.
Social support
• Social support provides people with emotional • Good social relations can reduce the
and practical resources. physiological response to stress.
• Supportive relationships may also encourage • Reducing socio-economic inequalities can lead
healthier behaviour patterns. to greater social cohesiveness and better
• Social isolation and exclusion are associated standards of health.
with increased rate of premature death and • Improving the social environment in schools, at
poorer chances of survival after a heart attack. work and in the community will help people
• The amount of emotional and practical social feel valued and supported.
support people get varies by social and • Designing facilities to encourage meeting and
economic status. social interaction in communities could
• Social cohesion (quality of social relationships, improve mental health.
trust and respect in wider society) helps to • Practices that treat some groups as socially
protect people and their health. inferior or less valuable should be avoided, as
they are socially divisive.
Addiction
• Drug use is both a response to social breakdown • Support and treatment of addictions.
and an important factor in worsening the • Address underlying social deprivation.
resulting inequalities in health. • Regulate availability of drugs.
• Alcohol dependence, illicit drug use and • Health education about less harmful forms of
cigarette smoking are all closely associated with administration.
social and economic disadvantage. • The broad framework of social and economic
policy must support effective drug policy.
 Health and well-being 105

Table 6.8 continued

What is known: key points Policy implications

Food
• A good diet and adequate food supply are • Local, national and international government
central for promoting health and well-being. agencies, non-governmental organisations and
• A shortage of food and lack of variety cause the food industry should ensure:
malnutrition and deficiency diseases. • The integration of public health perspectives
• Excessive intake of food is also a form of into the food system to provide affordable and
malnutrition – obesity contributes to a number nutritious fresh food, especially for the most
of diseases including cardiovascular disease, vulnerable.
diabetes, and cancer. • Democratic, transparent decisionmaking and
• More deprived people are more likely to be accountability in all food regulation matters.
obese. In many countries the poor substitute • Support for sustainable agriculture.
cheaper processed foods for fresh foods. Dietary • A stronger food culture for health, for example,
goals to prevent chronic diseases emphasise through school education.
eating more fresh vegetables, fruits and pulses
and more minimally processed starchy foods but
less animal fat, refined sugars and salt.

Transport
• Healthy transport means less driving and more • Improve public transport and change incentives
walking and cycling supported by better public to encourage use of public transport.
transport systems. • Encourage cycling.
• Cycling, walking and using public transport
provide exercise, reduce fatal accidents, increase
social contact and reduce air pollution.

Source: Wilkinson and Marmot (2003).

result in improved health is uncontentious. However, it does not follow

that healthcare has little role to play.’
Access to appropriate, acceptable and good quality healthcare is an
important contributor to health and this is the case across all social and
ethnic groups. Even where this is demonstrated, there is not a direct
relationship between the availability of effective healthcare and health
because of inequalities in access where those in greatest need of health-
care have least access (Tudor-Hart 1971). Wilkinson and Marmot
suggest:
Health policy was once thought to be about little more than the
provision and funding of medical care: the social determinants of
health were discussed only amongst academics. This is now chan-
ging. While medical care can prolong survival and improve prog-
nosis after some serious diseases, more important for the health of
the population as a whole are the social and economic conditions
that make people ill and in need of medical care in the first place.
Nevertheless, universal access to medical care is clearly one of the
social determinants of health. (Wilkinson and Marmot 2003: 7)
106 Healthcare management

Table 6.9 Expenditure on health for a selection of WHO member states

Member state Total expenditure on health as a proportion of GDP
and population
(000)
1997 1998 1999 2000 2001

Australia 8.5 8.6 8.7 8.9 9.2

(19,544)
China 4.6 4.8 5.1 5.3 5.5
(1,302,307)
Cuba 6.6 6.6 7.1 7.1 7.2
(11,271)
France 9.4 9.3 9.3 9.4 9.6
(59,850)
Germany 10.7 10.6 10.7 10.6 10.8
(82,414)
Guatemala 3.8 4.4 4.7 4.7 4.8
(12,036)
India 5.3 5 5.2 5.1 5.1
(1,049,549)
Indonesia 2.4 2.5 2.6 2.7 2.4
(217,131)
Netherlands 8.2 8.6 8.7 8.6 8.9
(16,067)
New Zealand 7.5 7.9 8 8 8.3
(3,846)
Papua New 3.1 3.8 4.2 4.3 4.4
Guinea
(5,586)
South Africa 9 8.7 8.8 8.7 8.6
(44,759)
Sweden 8.2 8.3 8.4 8.4 8.7
(8,867)
UK 6.8 6.9 7.2 7.3 7.6
(59,068)
USA 13 13 13 13.1 13.9
(291,038)

Many healthcare systems across the world have made fundamental

changes to the management and delivery of healthcare in attempts to
reduce inequalities in both health status and access to health services.
Space prohibits a systematic or comprehensive review here. However, to
illustrate a range of strategies in different settings, examples from selected
countries in Europe and from countries addressing the health status of
indigenous people will be given.
 Health and well-being 107

Addressing health inequalities: examples of European experiences

In an analysis of policy developments on health inequalities in different

European countries, Mackenbach and Bakker (2003) found that coun-
tries are in widely different phases of awareness of and willingness to take
action on inequalities in health. Their international comparisons suggest
that the UK is ahead of continental Europe in developing and imple-
menting policies to reduce socio-economic inequalities in health and is
‘on the brink of entering a stage of comprehensive, coordinated policy’.
They identified factors that supported or inhibited action on inequalities,
including the availability of descriptive data, the presence or absence of
political will and the role of international agencies such as WHO. Inno-
vative approaches were identified in five main areas: policy steering
mechanisms, labour market and working conditions, consumption and
health-related behaviour, healthcare and territorial approaches:
1 Policy steering mechanisms such as quantitative policy targets and health
inequalities impact assessment. In the Netherlands, for example, quan-
titative policy targets were set for the reduction of inequalities in 11
intermediate outcomes including poverty, smoking and working
conditions.
2 Labour market and working conditions can be addressed universally or in a
targeted approach. An example of a universal approach comes from
France where occupational health services offer annual check-ups and
preventive interventions to all employees. An example of a targeted
approach is job rotation among dustmen in the Netherlands.
3 Consumption and health-related behaviour. Again universal and targeted
approaches are identified. In the UK women on low income are tar-
geted using multi-method interventions to reduce smoking. In Fin-
land a universal approach is adopted by serving low-fat food products
through mass catering in schools and workplaces.
4 Healthcare. Examples of innovative practices here include working with
other agencies. In the UK, for example, there are community strategies
led by local government agencies but integrating care across all the
local public sector services.
5 Territorial approaches include comprehensive strategies for deprived
areas such as the health action zones in the UK (Mackenbach and
Bakker 2003).
Although there were some similarities, for example, the UK, Netherlands
and Sweden have comprehensive strategies to reduce inequalities
informed by national advisory committees, their analysis found consider-
able variations in approaches which they suggest is a symptom of intuitive
as opposed to rigorous evidence-based approaches to policymaking.
They conclude: ‘Further international exchanges of experiences with
development, implementation and evaluation of policies and interven-
tions to reduce health inequalities can help to enhance learning speed’
(Mackenbach and Bakker 2003: 1409).
108 Healthcare management

Addressing the health status of indigenous peoples

Mason Durie identifies two broad directions for improving health ser-
vices for indigenous health in New Zealand – increasing the responsive-
ness of conventional services and establishing dedicated indigenous
programmes. In New Zealand both these approaches are endorsed in
legislation and government health policy. Section 8 of the New Zealand
Public Health and Disability Act (2000) requires health services to
recognise the principles of the Treaty of Waitangi – the 1840 agreement
that saw sovereignty exchanged for Crown protection (Durie 2003b).
The New Zealand strategy is broad in its approach, seeking to influence
macro policies such as labour market policies, public health population
approaches to health and personal health services. In this respect it is
consistent with the Maori holistic approach to health and intersectoral
determinants of health.
Indigenous health services provide a range of healing methods, includ-
ing conventional professional services and traditional healing. Durie
argues that their most significant contribution is improved access to
health services for indigenous people, enabling earlier intervention, ener-
getic outreach, higher levels of compliance and a greater sense of com-
munity participation and ownership. Indigenous services tend to be built
around indigenous philosophies, aspirations, social networks and eco-
nomic realities (Durie 2003b). For Durie coexistence of conventional
and indigenous healthcare is not problematic:
While there is some debate about which approach is likely to pro-
duce the best results, in practice conventional services and indigen-
ous services can exist comfortably together. More pertinent is the
type of service that is going to be most beneficial to meet a particu-
lar need. In general indigenous health services are more convincing
at the level of primary health care. Higher rates of childhood
immunisation, for example seem to be possible with services that are
closely linked to indigenous networks, and early intervention is
embraced with greater enthusiasm when offered by indigenous pro-
viders. (Durie 2003b: 409)
The importance of partnership and collaborative working is identified as
a crucial component for success:
Conventional health services and indigenous services need, however
to work together within a collaborative framework. Clinical acu-
men will be sharpened by cultural knowledge and community
endeavours will be strengthened by access to professional expertise.
It makes sense to build health networks that encourage synergies
between agencies, even when philosophies differ. (Durie 2003b:
409)
Devadasan et al. (2003) describe an initiative working with tribes in
India where a health system specifically targeted at tribal people had a
 Health and well-being 109

remarkable impact on infant and maternal mortality. Over 10 to 15 years

immunisation coverage increased from 2% to over 75%. Use of hospital
services was three times the national average in a population that initially
refused to go to hospital because ‘only dead spirits circulate there’. They
identified the main features that characterised the success of this initiative:
• It was nested within larger development services, such as agriculture,
education and housing.
• It was owned by the people. From the beginning tribal communities
participated in planning and implementing the scheme. Most of the
staff were from the tribal community.
The health system was developed with the worldview of the tribal com-
munity in mind. For example, initially the hospital did not have beds as
patients found it more comfortable to sleep on mats on the floor
(Devadasan et al. 2003).

The role of healthcare managers

The strategies increasingly being adopted by many countries are broad

public policies in recognition that progress in health depends on a wide
range of social determinants, in addition to individual susceptibility to
specific illnesses. Strategies are therefore broad and the proximity of
interventions to specific illness in individuals may not be apparent. Man-
agers and professionals must recognise the importance of partnership
working and collaborative working and communicate the relevance of
these strategies to health. The emphasis placed on the importance of
intersectoral gains and partnership working highlights the need for
effective, evidence-based mechanisms for achieving this. The evidence
supporting the effectiveness of health service interventions needs to be
better understood by managers, healthcare professionals, the public health
community and individual users of services. At the same time the rele-
vance of interventions outside the health service such as welfare reforms,
agricultural polices and pollution control needs to be understood by the
same key stakeholders. Change requires cultural changes within the
healthcare workforce and organisation but also a recognition and accept-
ance of the significance of culture to definitions and experiences of
health and illness.
To meet the challenge of implementing broad-based public policies,
the development of an appropriate and effective workforce is essential. A
number of developments are apparent here ranging from joint appoint-
ments between local government and healthcare organisations for the
public health workforce in the UK (Fotaki et al. 2004) to New Zealand
where the development of the workforce is a common theme in the
development of indigenous health. The similarities and contrasts
between different countries suggest the value to be had from sharing
good practice and developing research through international links.
110 Healthcare management

Conclusion

This chapter has argued that health is much more than the absence of
disease by providing evidence in support of the WHO’s (1946) definition
of health: ‘Health is a state of complete physical, mental and social well-
being and not merely the absence of disease or infirmity.’ The responsi-
bility for health and healthcare extends beyond formalised systems of
healthcare. Nevertheless the role of healthcare and healthcare managers is
crucial in ensuring access to healthcare interventions that improve the
health of their populations alongside wider public policies that address
the social determinants of health:
The evidence that health is determined by social, environmental
and economic influences throughout a person’s life is not at issue.
What is lacking is secure evidence that many broad public health
interventions are effective. Priority must be given to addressing this
lack of evidence. In the meantime, instead of polarized positions, an
appropriate balance needs to be struck between the contrasting
strategies of developing health services and intervening outside the
health system. (Craig et al. 2006: 1)

Summary box

• Definitions of health and illness are the product of the complex interaction of
the individual with cultural, social and political factors within their
environment.
• The relative burden of the three major disease categories varies considerably
between different countries. Poorer developing countries continue to suffer
high death rates from infectious diseases whilst richer countries have
experienced the epidemiological transition from infectious diseases to the
non-communicable chronic diseases.
• Routine data conceal considerable inequalities between different socio-
economic, cultural and ethnic groups within countries.
• The key social factors determining health are inequalities in health, stress, early
life, social exclusion, work, unemployment, social support, addiction, food and
transport.
• Access to appropriate, acceptable and good quality healthcare is also an
important determinant of health.
• The evidence supporting the effect of health services interventions needs to
be better understood by managers, healthcare professionals, the public health
community and individual users of services.
• Change requires cultural changes not only within the healthcare workforce
and organisation but also a recognition and acceptance of the significance of
culture to definitions and experiences of health and illness.
 Health and well-being 111

Self-test exercises

Describing and explaining inequalities in health

1 Using the data presented in Table 6.2, describe the relationship between
sex and life expectancy for each country. What are the similarities and
differences in this data for the 15 countries listed?
2 Why do women live longer than men? Using Wilkinson and Mar-
mot’s list of the ten social determinants of health, develop hypotheses
about why women live longer than men.
3 Can (and if so how) the healthcare systems that you use or work in
influence these facts?

Identifying innovative practice

1 Reflect on the public health policies being developed and imple-

mented in your country. Can you identify innovative approaches in
any of the five main areas identified by Mackenbach and Bakker
(2003):
• policy steering mechanisms
• labour market and working conditions
• consumption and health-related behaviour
• healthcare
• territorial approaches?
2 Do you think that these policies have been developed through the
application of rigorous evidence or are they a symptom of intuitive
policymaking?

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Blaxter, M. (1990) Health and Lifestyles. London: Tavistock-Routledge.
Bunker, J.P. (2001) Medicine Matters After All: Measuring the Benefits of Primary
Care, a Healthy Lifestyle and a just Social Environment. London: Nuffield Trust
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Cochrane, A.L. (1972) Effectiveness and Efficiency: Random Reflections on Health
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Illich, I. (1977a) Disabling Professions. London: Boyars.
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McDermott, R. et al. (2003) Sustaining better diabetes care in remote indigen-
ous Australian communities. British Medical Journal, 327: 428–30.
Mackenbach, J.P. and Bakker, M.J. (2003) Tackling socio-economic inequalities
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McKeown, T. (1979) The Role of Medicine: Dream, Mirage or Nemesis? Princeton:
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Revisited. London: Nuffield Trust.
Ring, I. and Brown, N. (2003) The health status of indigenous peoples and
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Smith, R. (2003) Learning from indigenous people. British Medical Journal, 327.
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Wadsworth, M., Butterfield, W.J.H. and Blaney, R. (1971) Health and Sickness:
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 Health and well-being 113

www.who.int/ healthcare info/World Health Organisation Health statistics and

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Websites and resources

Association of Public Health Observatories (APHO). Facilitates collabora-

tive working of the Public Health Observatories (PHOs) and their equiva-
lents in England, Wales, Scotland and Ireland. It provides a forum for
disseminating good practice, sharing methodologies, co-ordinating action and
providing a focus for links with national organisations: www.apho.org.uk
Department of Health. Provides detailed summaries of policies and good
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www.dh.gov.uk/PolicyAndGuidance/HealthAndSocialCareTopics/HealthInequali-
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European Public Health Alliance (EPHA). Represents over 100 non-
governmental and other not-for-profit organisations working in public health
in Europe: www.epha.org
Part II
Managing healthcare
organisations
 7 Managing in primary care
Judith Smith

Introduction and overview

The defining moment in contemporary history of primary healthcare is

generally considered to have been the declaration, at a World Health
Organisation conference in 1978, of what primary healthcare should
provide to people within communities and nations. This declaration,
known as Alma Ata after the name of the town in the Russian Federation
where the conference took place, sets out the following statements about
the nature of primary healthcare:
[Primary healthcare] . . . forms an integral part of both the country’s
health system of which it is the central function and the main focus
of the overall social and economic development of the community.
(WHO 1978: Section VI)

Primary health care addresses the main health problems, providing

preventive, curative, and rehabilitative services accordingly . . . but
will include at least: promotion of proper nutrition and an adequate
supply of safe water; basic sanitation; maternal and child care, includ-
ing family planning; immunization against the major infectious dis-
eases; education concerning basic health problems and the methods
of preventing and controlling them; and appropriate treatment of
common diseases and injuries. (WHO 1978: Section VII)
These definitions are striking in their holistic assessment of primary
healthcare as being what Tarimo (1997) has termed an ‘approach to
health development’, namely all those elements of care and community
development that together enable people to lead healthy and meaningful
lives. A view of primary healthcare as an approach to health development
holds that it is central and foremost within a healthcare system, compris-
ing all those activities and conditions that go towards ensuring the public
health. ‘Primary’ therefore implies that this area of care is fundamental,
essential and closest to people’s everyday lives and experiences. The Alma
Ata declaration goes on to call for countries of the world to address the
118 Healthcare management

structural causes of ill health and in this way the WHO declaration
defines primary healthcare as a central part of a strategy for social action.
The Alma Ata conception of primary care as an approach to health
development is striking in its difference from what is traditionally con-
sidered to be ‘primary care’ within many health systems, and particularly
within countries in the more developed world where hospitals and more
technical forms of care tend to dominate people’s understanding of a
health system. In these countries, primary care tends to be viewed as one
part of the biomedical spectrum of health services provided to people
who are ill, with primary care being the point of ‘first contact’ with the
health system. Thus primary care is often viewed as what Tarimo has
termed ‘a level of care’, in contrast to the broader understanding of
primary healthcare as an approach to overall health development.
The work of Barbara Starfield draws together these two main concep-
tions of primary care, viewing primary care as a level in a healthcare
system, but at the same time considering it to be crucial and central to
that system and to the health of populations:
. . . [Primary care is] that level of a health service system that pro-
vides entry into the system for all new needs and problems, provides
person-focused (not disease-orientated) care over time, provides for
all but very uncommon or unusual conditions, and co-ordinates or
integrates care provided elsewhere by others. (Starfield 1998: 8–9)
Starfield sets out what she considers to be the four central features of
effective primary care:
1 The point of first contact for all new needs.
2 Person-focused rather than disease-focused continuous care over time.
3 Providing comprehensive care for all needs that are common in the
population.
4 Coordinating care for both those needs and for needs that are
sufficiently uncommon to require special services.
These ‘four Cs’ are held by many commentators to define what is essen-
tial about primary care, and Starfield uses these dimensions as a way of
assessing the degree of effectiveness of a country’s primary care system.
Indeed, Starfield’s extensive research into the quality and nature of pri-
mary care in the international context has revealed a clear link between
the strength of a country’s primary care system (as measured against the
four Cs) and the degree of cost effectiveness of that system, and more
importantly, the level of health outcomes achieved for the population
(Starfield 1998). Having ranked the primary care systems of twelve indus-
trialised nations, Starfield (1998) noted that ‘countries with a better pri-
mary care orientation tend to have better rankings on health indicators
than countries with a poor primary care orientation’ (p. 355).
 Managing in primary care 119

Managing in primary care

Given the acknowledged importance of having a strong primary

healthcare orientation to a health system, it is striking that relatively
little has been written about the management (as opposed to the deliv-
ery) of primary care, particularly in comparison with the amount of
analysis accorded to the management of hospital services. However, the
management of primary care has in recent years been given greater
prominence in both academic and practitioner communities, as people
have increasingly come to view primary care as the main locus for
seeking to improve health and control health system costs (e.g.Tarimo
1997; WHO Europe 1998; WHO 2002; Peckham and Exworthy 2003;
Shi et al. 2003; Starfield et al. 2005). For example, in 1998, the WHO
asserted:
A more integrated health sector is needed, with a much stronger
emphasis on primary care . . . Secondary and tertiary care, which are
largely provided in hospital, should be clearly supportive to primary
care, concentrating only on those diagnostic and therapeutic func-
tions that cannot be performed well in primary care settings. (WHO
Europe 1998, Target 15: 25).
The rationale for placing such a strong emphasis on primary care as the
central function within a health system is that primary healthcare can
play a particular role in improving people’s health, and thus in preventing
illness and the need for hospital and other medical care (see Chapter 6).
In order to bring about this stronger health improvement element within
a health system, it is acknowledged that primary care itself needs to be
strengthened and developed, including the provision of a wider range of
services in community settings outside hospitals and extending access to
primary care for disadvantaged communities (Starfield 1998; Hefford et
al. 2005; Starfield et al. 2005). A further role ascribed to primary care in
some health systems, and one seen as being a lever to enable health
improvement and primary care development, is that of primary care-led
commissioning. This function, whereby primary care practitioners and
organisations assume a role in the funding, planning and purchasing of
healthcare on behalf of populations registered with local general
practices, has been used most enthusiastically by state policymakers in
England and by managed care insurers in the United States, and also in
more limited ways in experiments with primary care budget holding
in Sweden and New Zealand. Taken together, the use of primary care as a
locus for health improvement, primary care development and service
commissioning points to a general policy intention on the part of many
governments to bring about a more primary care based health system.
Such a system embodies the principles of Alma Ata and more recent
interpretations of WHO and other international health policy, namely
that health managers should seek to develop strong primary care as a way
of bringing about improved public health and community well-being.
120 Healthcare management

Thus we can identify the following four functions for the management of
primary care:
• managing for health improvement
• managing for primary care service development
• managing for primary care led commissioning
• managing for a primary care based health system.
These functions reflect an increasing international trend towards viewing
primary care as a part of the health system that can be used to manage and
influence change in health and health services, one that has been coined
‘managed primary care’ (Smith and Goodwin 2006). These functions
associated with the management of primary care are used here as the basis
for exploring what is distinctive and important about managing in
primary care.

Managing for health improvement

As noted above, a robust primary care system has been demonstrated as

important to the delivery of good and equitable health outcomes (Star-
field 1998). Shi et al. (2003) similarly assert that managing and improving
primary care is a key strategy for policymakers seeking to reduce health
inequalities but lacking the political power or mandate to influence fac-
tors outside the health sector. These authors point to evidence that an
improvement in people’s primary healthcare can, to some extent, act as a
counterweight to health-damaging environmental conditions. Thus the
point is made that the management and development of primary care is
crucial to improving people’s health, and in turn to the amelioration of
some of the inequalities in health status that exist in most of not all
countries. In order to identify the key areas for action by primary care
managers seeking to manage for health improvement, Starfield’s ‘four Cs’
provide a useful organising framework. These functions are set out in Box
7.1.

Box 7.1 Starfield’s four Cs as an organising framework

1 Point of first contact – system of primary care gatekeeping, a single point of

access to most services provided by the health system.
2 Person-focused continuous care over time – registration of patients with a
single primary care practitioner or practice.
3 Comprehensive care for all common needs – multidisciplinary primary care
and community health services that can assess, diagnose and treat common
conditions.
4 Co-ordination of care provided elsewhere – role as the individual’s advocate
within and guide through the wider health system, including the guardian of
overall patient information.
Source: Adapted from Starfield (1998).
Managing in primary care 121

Primary care ‘gatekeeping’ is considered by many researchers and ana-

lysts (Fry and Horder 1994; Starfield 1998; Peckham and Exworthy 2003;
Wilson et al. 2006) as being crucial to the management of an effective
health system, both in relation to cost and clinical effectiveness. What
gatekeeping entails is the identification of a single point of access to the
health system for most of the health needs that people experience and
traditionally this has been a general practice staffed by family doctors and
their teams. Within a system of primary care gatekeeping, patients cannot
access hospital specialists or associated diagnostic services unless they have
first consulted their family doctor. The strength of such a system is seen as
being the ability of the family doctor to take a holistic view of a person’s
care, assuring only appropriate referrals to more specialist services, and
thus avoiding unnecessary expensive and possibly invasive tests and care
in hospital settings. Gatekeeping is a function typically associated with
tax-funded health systems such as those in the UK, New Zealand,
Denmark, Italy and Sweden. Critics of gatekeeping assert that it limits
patients’ rights and choices within a health system. Countries that have a
strong libertarian tradition such as France, Israel and the United States
typically baulk at the concept of limiting people’s choice of point of
access to care in this way, although for reasons of medical cost inflation all
three of these countries have been experimenting with pilot projects of
gatekeeping.
The registration of patients with a single practice or practitioner is
viewed by public health practitioners and policymakers as being vital in
relation to both individual and population health. For individuals, it is
considered to enable the development of a long-term and continuous
relationship between patient and family doctor (or doctors’ practice),
meaning that the doctor can have an overview of a person’s medical
history, firmly located within a knowledge and understanding of their
broader social context, including family situation, employment status,
housing provision, and education. For populations, a system of registra-
tion provides managers in a health system with a register of people that
sets out key health data (e.g. age, sex, any chronic ill-health problems,
family situation) and thus represents the basis for carrying out
population-focused health interventions such as calls for health screening,
immunisation campaigns, child health surveillance and health monitor-
ing associated with specific age categories. The importance of a system of
registration has been powerfully demonstrated by the recent experience
of New Zealand, where the government has explicitly developed a Pri-
mary Health Care Strategy (Minister of Health 2001) that seeks, among
other things, to develop a system of patient registration, and where, just a
few years later, there is evidence that levels of access to care and health
promotion services have shown a significant improvement from their
previously low base in comparison with other developed countries
(Hefford et al. 2005).
The provision of comprehensive and multidisciplinary primary and com-
munity services is a goal that is clearly set out in Alma Ata as being a key
element in enabling effective primary healthcare. This underlines the
122 Healthcare management

WHO vision of primary care as being the centre of a health system, and
not the bottom of a pyramid of care as is often implied or asserted in
management and clinical circles. The specific nature of comprehensive
primary care differs both within and between countries, but typically
entails a locally based practice or health centre that offers (or can easily
refer to) community-based services such as:
• general practice (family medicine)
• primary care nursing
• public health nursing
• child health surveillance
• chronic disease management
• community mental health
• physiotherapy
• speech and language therapy
• community dietetics
• dentistry
• pharmacy.
Together with the role of gatekeeping and patient registration, com-
prehensive provision of services in a community setting is seen as a key
element in supporting people in maintaining good health and managing
much of their ill health and longer term conditions. Despite the common
perception among the populations of many countries that a health system
is synonymous with hospitals, the majority of people’s healthcare takes
place within primary care, at least in those countries where there is
effective gatekeeping of the wider health system.
The role of coordinating a person’s care within the health system is per-
haps the most problematic function that is ascribed to ‘ideal’ primary
care, given the ever more complex nature of healthcare interventions. For
example, many approaches to chronic disease management are founded
on the principle of a clinical professional taking responsibility for the
coordination of care for an individual, this role encompassing needs
assessment, monitoring of health, organisation of care and advocacy for
the individual if admitted to hospital care. There is a body of research
evidence that points to the difficulties in achieving effective coordination
of care for people with complex needs (whether in community or hos-
pital settings), and an analysis of the associated issues is set out in Chapter
17. Nevertheless, analysis of primary healthcare in the international con-
text highlights primary care as the most appropriate location for the
coordination of care for individuals, especially when combined with
effective gatekeeping and patient registration (Starfield 1998).
When managing for health improvement, policymakers and managers
face a dilemma in relation to how far they focus on the concerns and
priorities of individual patients or citizens, and how far they address the
health needs of the wider population. For example, a system of primary
care gatekeeping enables cost-effective use of a nation’s health resources,
but compromises an individual’s ability to choose their care provider.
Similarly, the development of a system of individual care managers for
Managing in primary care 123

people with long-term conditions may enable personal choice in care

management, but could lead to fragmentation of overall care, unless there
is careful integration of the activity of care managers within an overall
local health plan. This patient/population tension is a further manifest-
ation of Tarimo’s two alternative approaches to understanding primary
healthcare – as a level in the health system (that provides care to patients)
or as an approach to health development (that seeks to improve public
health). Others see this tension as an expression of the fact that two
medical disciplines, general practice and public health, seek to own and
manage what is typically understood as primary care. On the one hand,
general practice traditionally sees its role as providing medical care for
individual patients, whereas public health seeks to improve the health of
whole populations.
One management and organisational solution to this patient/popula-
tion tension in recent years has been the development of ‘primary care
organisations’; bodies that are set up to manage and develop primary care
services in order to both improve population health and enable effective
and high quality general practice provision (Ham 1996; Malcolm et al.
1999; Mays et al. 2001; Dowling and Glendinning 2003; Smith and
Goodwin 2006). Primary care organisations are a specific manifestation
of the move towards more managed primary care in a number of health
systems, and represent a managerial solution to the dilemma of how to
draw together often diverse and autonomous general practices and other
community services into a coherent local plan for improving health.
Further analysis of the role of primary care organisations is set out below.

Managing for primary care service development

The management of primary care service delivery and development

continues to be, in many health systems, the most pressing and time-
consuming challenge for primary care managers. This typically takes the
form of planning, funding and managing two main areas of service deliv-
ery: general practice (family medicine) and associated services such as
practice nursing and chronic disease care; and community health services
including public health nursing, child health surveillance, continuing care
of older people and health promotion. The relative importance of these
two areas of primary care service provision varies between countries. For
example, in Australia, general medical practice continues to represent the
primary form of care provision outside of hospitals, albeit that there are
moves towards greater use of community health teams incorporating
nursing, physiotherapy and other allied health professions. In the UK,
although general medical practice continues to feature in most people’s
mind as the first point of entry to the health system, in reality more and
more primary care services are delivered directly by community nurses,
public health nurses, community pharmacists and social care staff, even if
these services are nominally or actually managed by a general practice.
At the other end of the spectrum, in some developing countries such
124 Healthcare management

as Tanzania community health workers or nurses form the backbone of

the primary care system, acting as public health and health promotion
advisers to local communities, signposting people towards medical and
nursing services as and when they need them. In the context of the Alma
Ata definition of primary healthcare, it can be argued that a community
health approach to the provision of primary care, and based on strong
public health nursing, is more appropriate to developing overall com-
munity health than a system based on medical practice. However, general
medical practice has dominated the provision of primary care in many
industrialised countries and the challenge for managers is how they can
make a system of general practice work in such a way that it achieves
wider public and community health goals.
General medical practice is often organised on the basis of independ-
ent self-employed doctors working in small groups (or singly), and con-
tracting with local health authorities to provide services to a registered
local population. This system operates in the UK, Netherlands, Denmark
and Canada. In other countries, doctors similarly work in independent
practices but levy fees directly from patients who can in some cases seek
reimbursement of fees from their state or private health insurance.
General practitioners levy fees from patients in countries such as New
Zealand, France and the USA. The practice-based system of primary
care is not confined to general medical practice, but is also commonly
found in community dentistry, optometry and pharmacy.
A system of independent practice in primary care poses a range of
challenges to those seeking to manage primary care service delivery and
development. There is a fundamental decision for a health system to
make in respect of how it will structure its relationship with general
practice and thus seek to bring about change with that part of the health
sector. Options available for managing the relationship between the
health system and general practice include the following:

• Managing through a system of contracts between the health system and

individual general practices or practitioners, thus using financial incen-
tives and/or quality indicators as a way of bringing about desired
changes to services (e.g. UK, Danish and Australian general practice).
• Letting a market develop whereby fee-paying patients (or their
insurers) choose their practice or practitioner, and services are
developed in response to patient (or insurer) demand, and prices
regulated largely by the market (e.g. traditional New Zealand general
practice, French general practice, US family medicine).
• Providing centrally run (by the state or by insurance organisations)
primary care centres with salaried doctors and associated staff, with stand-
ards and services defined by the state or insurer (e.g. Swedish health
centres, US managed care organisations, Netherlands sickness fund
health centres).
• Developing primary care organisations as intermediary bodies that seek
to influence primary care provision using options such as letting con-
tracts with providers of services; making specific payments to practices
Managing in primary care 125

or others develop or extend services; establishing specialised services;

shifting resource from other parts of the health system in order to
facilitate service development in primary care (e.g. English primary
care trusts, New Zealand primary health organisations, Australian
divisions of general practice, Welsh local health boards).
• Establishing other non-governmental organisational forms such as
community or social enterprises as a vehicle for developing and providing
care in innovative ways that are appropriate to specific population
groups, in particular those traditionally excluded from general practice
(e.g. New Zealand by Maori for Maori, or Pasifika healthcare organisa-
tions; community health enterprise organisations in the UK; US care
organisations for people with long-term conditions).
The choice as to how to structure the relationship between the health
system and primary care providers is likely to involve multiple and
‘blended’ solutions as a means of influencing the behaviour of practi-
tioners (Gosden et al. 2001). In health systems that are increasingly com-
plex, and with more and more patients living to an older age and with
long-term conditions, managers need to find solutions that not only
assure the development of primary care services for different groups of
the population, but also ensure the achievement of wider health system
goals. In addition to the structuring of the relationship with primary care
as set out above, they may also seek to use other tools in developing
primary care services including: the establishment of new community
health centres that provide a wide range of health and social care for local
communities; walk-in assessment centres for emergency primary care;
telephone or internet based advice services; and out-of-hours care
centres that involve paramedic, nursing, general practice and perhaps
hospital emergency room practitioners.
What is clear is that health systems are increasingly seeking to coordin-
ate and manage a diverse range of providers of primary care, trying at
once to develop and improve primary care services whilst improving the
public health. This poses specific management challenges, including
assuring the quality of services provided to patients and the public,
delivering value for money for taxpayers and insurers, enabling continu-
ity and coordination of care for individuals and their carers, and finding
ways of developing a workforce for current and future community health
services. These management challenges are now finding their way into
the health strategies of many countries, with primary care being seen as a
key element in wider health plans. Examples of countries that are taking a
more primary health care focused approach to strategy development
include New Zealand with its Primary Health Care Strategy, Wales and
Northern Ireland with their clearly public-health oriented plans for
national health, and Australia with its investment in developing primary
care organisations. At an international level, the WHO continues to press
for a stronger primary healthcare orientation to health systems, and for
the development of primary care to be seen as the heart and not
periphery of a healthy care system.
126 Healthcare management

Managing for primary care led commissioning

Primary care led commissioning (or purchasing as it is often known) is a

key management function at the disposal of primary care managers and
has been defined as follows:
Commissioning led by primary health care clinicians, particularly
GPs, using their accumulated knowledge of their patients’ needs and
of the performance of services, together with their experience as
agents for their patients and control over resources, to direct the
health needs assessment, service specification and quality standard
setting stages in the commissioning process in order to improve the
quality and efficiency of health services used by their patients.
(Smith et al. 2004: 5)
In other words, it concerns the use of primary care practices or organisa-
tions for the planning and funding (or purchasing through the placing of
contracts) of health services for a defined population (e.g. a practice or
locality population). Primary care led commissioning typically takes the
form of a total or partial delegated budget that is managed by GPs, nurses
and primary care managers, with the intention of using this resource as a
means of buying services that will support the achievement of local (and
often national) primary care development and health improvement goals.
In this way, it offers a further tool for primary care managers seeking to
both develop primary care and improve health. Its particular potential is
considered to be the ability for primary care budget holders to redesign
health services in such a way that they are refocused on community and
primary care, with less of a reliance on hospital care.
Primary care led commissioning is an area of primary care manage-
ment that is regarded as a key feature of some health systems, whilst being
eschewed or not even considered in others. The English NHS is the
system that has most consistently held faith with primary care led com-
missioning, seeking to use primary care practices and organisations as the
main location for the planning and purchasing of health services. Other
countries that continue to pursue or have experimented with primary
care purchasing or budget holding include New Zealand (independent
practitioner associations and community-governed organisations); Aus-
tralia (divisions of general practice); United States (independent practice
associations, health maintenance organisations); Sweden and Estonia (GP
budget holding); Scotland, Wales and Northern Ireland (GP fundholding
in the 1990s).
There is a significant base of research evidence concerning the man-
agement challenge primary care led commissioning, particularly in rela-
tion to the process of implementing and developing such approaches. An
analysis of this evidence base points to the following factors known to
facilitate effective primary care led commissioning, as set out in Box 7.2.
Where some or all of the above conditions are met, research evidence
suggests that a health system is likely to experience: demonstrable
improvements in the delivery of primary and intermediate care services;
Managing in primary care 127

Box 7.2 Factors facilitating effective primary care led commissioning

• Stability in the organisation of healthcare, especially the structure of

commissioning bodies.
• Sufficient time to enable clinicians to become engaged, and strategies for
commissioning to be developed and implemented.
• Policy that supports offering patients and commissioners a choice of providers.
• Policy that enables resources to be shifted between providers and services.
• A local service configuration that enables commissioners to choose between
providers.
• A local primary care system that is sufficiently developed to provide additional
services.
• Incentives that engage general practitioners and practices in seeking to
develop new forms of care across the primary–secondary care interface.
• Effective management and information support for practice-based
commissioners.
• Appropriate regulation to minimise conflicts of interest arising from general
practitioners being both commissioners and providers.
Source: Smith et al. (2005: 1398).

some marginal changes to the quality and responsiveness of secondary

care; greater engagement of doctors, nurses and other professionals in the
planning and funding of care; and a stronger overall primary care orienta-
tion in the health system (Smith et al. 2004). There will, however, remain
some apparently intractable problems for managers of primary care
including: trying to make a significant or strategic impact on the delivery
of secondary and tertiary (i.e. hospital) services; shifting resource from
hospital to community settings; and reshaping the pattern of delivery of
emergency and unscheduled care (Smith et al. 2004). These challenges (as
witnessed in Chapter 12) are not unique to primary care led approaches
to commissioning, and are faced by planners and funders of care in almost
all health systems. They are, however, significant for managers of primary
care who, in their attempts to improve the quality and range of primary
care services as part of an overall attempt to develop the public health,
might consider primary care led commissioning as a tool in their
armoury. What is clear is that primary care led commissioning has real
and evidence-based potential as a means of developing primary care (and
thus, over time, in enabling improvements to health as envisaged by Star-
field and others), but that it remains to be proven as to whether it can play
a significant role in more widescale redesign of health services across
health systems.
128 Healthcare management

Managing for a primary care based health system: what are

the main challenges?
In line with WHO policy, many countries seek to develop less of a
sickness and more of a health focused system, based on strong primary
healthcare. In so doing, they espouse the research of Starfield, Shi and
others that advocates strong primary care as a vital prerequisite for
improved health outcomes that are achieved in a manner that is cost
effective for overall health systems. Whilst the WHO’s assertion of pri-
mary care as the centre of a health system, with secondary care playing an
important (but essentially secondary in both senses of the word) role, can
seem somewhat idealistic, there is international evidence of countries
seeking to redress the balance of health funding, activity and management
effort away from hospital care in favour of primary care. For example, the
New Zealand Ministry of Health is embarked on the implementation of
an ambitious primary healthcare strategy that is the main focus of current
financial investment in health in that country and that has the aims set
out in Box 7.3.

Box 7.3 Aims of primary healthcare strategy, New Zealand

• To work with local communities and enrolled populations.

• To identify and remove health inequalities.
• To offer access to comprehensive services to improve, maintain and restore
people’s health.
• To co-ordinate care across service areas.
• To develop the primary healthcare workforce.
• Continuously to improve quality using good information.
Source: Minister of Health (2001: vii).

Similarly, the Welsh Assembly has specified the strengthening and

development of family health services as a key health priority, including
improvements to community health services and the extension of avail-
ability of free eye care and prescriptions along with other public health
measures (Welsh Assembly Government 2005). The policy being pur-
sued in Wales is strikingly more primary care focused than that of its
neighbour England where improvements in access to secondary care
services have been the main focus of policy and management attention in
recent years (DH 2000). These examples indicate the possibility of coun-
tries adopting a specific policy focus on primary healthcare (in its widest
Alma Ata sense) as the guiding framework for health policy. As can be
seen in both cases, the management response to such a policy direction
requires a range of tools and approaches including: the use of health
improvement goals and activities that aim to reduce health inequalities;
the development of policies directed at improving primary care services
(use of incentives for practices and practitioners, establishing contracts for
 Managing in primary care 129

services, establishment of new forms of service); and a commitment to

shift resource from elsewhere in the system to support improvements to
primary care. Primary care led commissioning is not being used to any
significant extent in New Zealand and Wales, but research evidence
would suggest that it has the potential to further incentivise improve-
ments to and extensions in the range of services provided outside of
hospitals, as is believed by English policymakers who are introducing a
policy of ‘practice-based commissioning’ (DH 2004) as a way of
engaging GPs in wider health system goals and in the hope that this
will result in improved management of the demand for secondary care
services (Smith et al. 2005).
The major challenges faced by those seeking to manage primary care
are therefore those related to the two dimensions of primary care that
were considered at the start of this chapter – namely trying to improve
the relative strength and power of primary care within the health system
and thus realise its potential as an approach to health development (Tar-
imo 1997). Primary care, although being targeted as an area for specific
policy and management attention in many health systems, typically
remains the poor relation in respect of attracting significant investment,
particularly in comparison with the power of large hospitals that attract
political and public visibility and support. There are many reasons for this
disparity, including the somewhat diffuse and networked nature of pri-
mary care providers in comparison with the institutional power and sta-
tus of hospitals. Likewise, GPs have traditionally been perceived to wield
less power within health systems compared with hospital specialists,
mainly on account of their commonly held status as self-employed busi-
ness people working in small groups or as individuals, whilst specialists
operate in larger clinical teams. There are, however, significant potential
health and cost effectiveness gains to be made if health systems can
become more primary care focused. This is even more the case in the
context of rising incidence of chronic disease in developed countries, and
infectious diseases such as HIV/AIDS and malaria in developing coun-
tries (see Chapter 6), for these public health trends are particularly amen-
able to primary healthcare solutions. However, if the potential of primary
care based approaches to health policy and management are to be realised
by those with the power to influence resource allocation and future
policy development, managers need to have in place robust measures that
can demonstrate the degree to which more managed primary care can
deliver improvements to both primary care itself and to the wider public
health (Box 7.4).

Conclusion

For managers in primary care, as has been demonstrated, the main chal-
lenges relate to how they can act in order to improve health, develop
primary and community care, enable primary care led commissioning,
130 Healthcare management

Box 7.4 The main challenges for managing in primary care

• Putting in place an effective system of primary care gatekeeping.

• Ensuring the registration of the public for primary care and public health
purposes.
• Developing primary care provision that is comprehensive and multidisciplinary
in nature.
• Having a clear primary care based co-ordination function for individual
patients being cared for elsewhere in the health and social care system.
• Developing an appropriate balance between the provision of family medicine
(general practice) and community health services.
• Working out the appropriate blend of approaches and techniques for
managing the relationship between general practice and the wider health
system.
• Determining the degree to which primary care led commissioning or budget
holding is relevant to the wider achievement of primary care and public health
goals.
• Working to ensure that system-wide strategy is primary care focused.
• Seeking to strengthen the overall position and power of primary care within
the health system.
• Having measures in place that can demonstrate progress towards the
achievement of primary care and public health goals.

and thus have a more clearly primary care based health system. In so
doing, they need to find ways of meeting the main challenges of
managing in primary care.

Summary box

• Primary healthcare is concerned with enabling and improving healthy

communities and societies.
• In many countries, however, primary healthcare has been seen as synonymous
with first contact care in the healthcare system and with general practice in
particular.
• Primary healthcare is fundamental to both healthcare and health improvement,
and the existence of a strong primary care orientation in a health system has
been shown to improve health outcomes and cost effectiveness.
• The management of primary care is increasingly receiving policy and research
attention, in particular with reference to improving health, developing primary
care services and as a basis for commissioning services elsewhere in the health
system.
• In managing primary care for health improvement, key functions include the
development of effective gatekeeping, patient registration and care
coordination.
• In managing primary care for the development of primary and community
services, there is a balance to be struck between the emphasis on family
medicine and community health services.
 Managing in primary care 131

• The management of the relationship between a health system and family

medicine is crucial for primary care managers and can be achieved through
various means including the use of contracts, financial incentives, and the
development of primary care organisations.
• Primary care led commissioning is a management function used by some
primary care managers as a means of developing primary care and increasing
overall primary care influence within a health system.
• Ultimately, the main challenge for the management of primary care is to
increase its influence in a health system in relation to the power and resources
of hospital services.
• If this shift in influence can be achieved, primary healthcare can become a
route to improving health and developing stronger and more sustainable
communities.

Self-test exercises

1 Make an assessment of your own country’s health system in relation to

its degree of primary care orientation according to Starfield’s ‘four Cs’.
In so doing, assess on a scale of 1–10 (where 1 = not at all, and 10 =
completely) your health system’s
• degree of gatekeeping in primary care
• extent of primary care and public health registration
• provision of comprehensive primary care and community health
services
• ability to provide primary care focused coordination of care for
individuals.
2 Make the same assessment for the health system of another country
with which you are familiar through personal experience or your
studies. How do the two countries’ health systems compare in respect
of primary care orientation?
3 Find out how these same two countries compare in relation to health
outcomes data and cost effectiveness of the overall health system. Is
there any relationship between what you have observed in relation to
primary care orientation and system health and cost outcomes?

References and further reading

Department of Health (DH, 2000) The NHS Plan. A Plan for Investment, A Plan
for Reform. London: The Stationery Office.
Department of Health (DH, 2004) Practice Based Commissioning: Promoting Clin-
ical Engagement. London: Department of Health.
Dowling, B. and Glendinning, C. (eds) (2003) The New Primary Care, Modern,
Dependable, Successful. Maidenhead: Open University Press.
132 Healthcare management

Fry, J. and Horder, J. (1994) Primary Health Care in an International Context.

London: Nuffield Provincial Hospitals Trust.
Gosden, T., Forland, F., Kristiansen, I., Sutton, M., Leese, B., Giuffrida, A., Sergi-
son, M. and Pedersen, L. (2001) Impact of payment method on behaviour of
primary care physicians: A systematic review. Journal of Health Services Research
and Policy, 6(1): 44–55.
Ham, C. (1996) Population centred and patient focused purchasing: The UK
experience. Milbank Quarterly, 74(2): 191–214.
Hefford, M., Crampton, P. and Macinko, J. (2005) Reducing health disparities
through primary care reform: The New Zealand experiment. Health Policy,
72: 9–23.
Malcolm, L., Wright, L. and Barnett, P. (1999) The Development of Primary Care
Organizations in New Zealand: A Review Undertaken for Treasury and the Ministry
of Health. Lyttelton: Aotearoa Health.
Mays, N., Wyke, S., Malbon, G. and Goodwin, N. (eds) (2001) The Purchasing of
Health Care by Primary Care Organisations. An Evaluation and Guide to Future
Policy. Buckingham: Open University Press.
Minister of Health (2001) The New Zealand Primary Health Care Strategy.
Wellington: Ministry of Health. http://www.moh.govt.nz/
Peckham, S. and Exworthy, M. (2003) Primary Care in the UK – Policy, Organisa-
tion and Management. Basingstoke: Palgrave Macmillan.
Shi, L., Macinko, J., Starfield, B., Wulu, J., Regan, J. and Politzer, R. (2003) The
relationship between primary care, income inequality and mortality in US
states, 1980–1995. Journal of the American Board of Family Practice, 16(5): 412–22.
Smith, J.A. and Goodwin, N. (2006) Towards Managed Primary Care: The Role and
Experience of Primary Care Organizations. Aldershot: Ashgate.
Smith, J.A., Mays, N., Dixon, J., Goodwin, N., Lewis, R., McLelland, S., McLeod,
H. and Wyke, S. (2004) A Review of the Effectiveness of Primary Care-Led Com-
missioning and its Place in the NHS. London: Health Foundation.
Smith, J.A., Dixon, J., Mays, N., Goodwin, N., Lewis, R., McClelland, S.,
McLeod, H. and Wyke, S. (2005) Practice-based commissioning: Applying the
evidence. British Medical Journal, 331: 1397–9.
Starfield, B. (1998) Primary Care: Balancing Health Needs, Services and Technology.
Oxford: Oxford University Press
Starfield, B., Shi, L. and Macinko, J. (2005) Contribution of primary care to
health systems and health. Milbank Quarterly, 83: 457–502.
Tarimo, E. (1997) Primary Health Care Concepts and Challenges in a Changing World
– Alma-Ata Revisited. Geneva: World Health Organisation.
Welsh Assembly Government (2005) Designed for Life: Creating World Class
Health and Social Care for Wales in the 21st Century. Cardiff: Welsh Assembly
Government.
Wilson, T., Roland, M. and Ham, C. (2006) The contribution of general practice
and the general practitioner to NHS patients. Journal of the Royal Society of
Medicine, 99: 24–8.
World Health Organisation (WHO, 1978) Declaration of Alma Ata. Geneva:
WHO.
World Health Organisation (WHO, 2002) Innovative Care for Chronic Conditions:
Building Blocks for Action. Geneva: WHO.
World Health Organisation Regional Office for Europe (1998) Health 21 – An
Introduction to the Health for All Policy Framework for the WHO European Region.
Copenhagen: WHO.
 Managing in primary care 133

Websites and resources

World Health Organization. www.who.int/about/en

World Health Organization European Regional Office. www.euro.who.int/.
Australian Primary Health Care Research Institute. www.anu.edu.au/aphcri
New Zealand Ministry of Health (see primary health care and PHOs pages).
www.moh.govt.nz
Canadian Health Services Research Foundation (see primary healthcare
policy pages). www.chsrf.ca
World Association of Family Doctors. www.globalfamilydoctor.com/
National Primary Care Research and Development Centre, Manchester.
www.npcrdc.man.ac.uk/
King’s Fund (see primary care policy pages). www.kingsfund.org.uk
Health Services Management Centre, Birmingham (see primary care
pages). www.bham.ac.uk/hsmc
 8 Managing in acute care
Dave Evans

Introduction

Managing in acute care can be complex and challenging. Perhaps the

biggest test facing policymakers, clinicians and managers in modern acute
care is to focus on providing just that part of the healthcare process which
genuinely constitutes acute care, and to do so in an integrated way that
connects effectively with primary care services and is focused on the
needs of the individual patient.
This chapter first outlines the development of acute care, the issues and
challenges of managing acute care provision and current developments
within the acute care sector and the impact these will have for patients. It
then reviews the development of acute care in three countries with very
different systems for financing and providing healthcare: the United
States, with its highly diverse and market-based healthcare system in
which many innovations in acute care have been pioneered; the United
Kingdom, with its state-financed and provided National Health Service
in which acute services are rapidly changing; and the Czech Republic,
which has transitioned from a state-run healthcare system to one based
on the European model of social insurance, but still has a largely
traditional acute care sector. The chapter concludes by exploring how
the future development of acute care will shape healthcare systems and
provision for patients.

Acute care services – the traditional approach, new forms and alternative
models

Acute care usually means treatment for a short-term or episodic illness or

health problem which a patient may often receive in hospital. Acute care
embraces both emergency and elective or planned treatment for health
problems that may arise through accident or trauma, or through the
occurrence of disease. The defining characteristic of acute care has often
Managing in acute care 135

been the place of delivery – in an acute hospital, with all the diagnostic
facilities, inpatient accommodation and therapeutic paraphernalia that
might be needed available in one place. But much of what such hospitals
do is not necessarily acute care and much acute care can be delivered
outside the hospital setting.
According to the World Health Organisation (WHO 2000), the con-
ventional model of acute care based in hospitals has been in existence for
a little over a century. Prior to this life expectancy was shorter, the cura-
tive capacity of medicine was more limited, and in a low technology
society the majority of people would never have visited a hospital. As
modern medicine developed during the twentieth century the hospital
increasingly became the setting for the delivery of a growing proportion
of healthcare services. Some services (for example, maternity care) moved
into hospitals even though birth had been widely regarded as a normal
process and had previously had been carried out at home with care
provided by midwives. It could be argued that from a sociological per-
spective the rise of the secondary care sector, and of medically dominated
hospitals especially, came about as a result of the increased organisation
and political power and influence of the medical profession. It was cer-
tainly not the result of a deliberate process of strategic planning of the
development of services provided in individual acute hospitals.
In most countries, the acute care sector now accounts for a majority of
overall healthcare spending – for example, in the UK hospitals consume
55% of the NHS budget (DH 2005) – although most patients are cared
for by primary care services and do not need or use hospital services. The
cost pressures on acute care, through technological, demographic and
other changes, are considerable, and the financial problems of many
national healthcare systems are often rooted in the performance of the
acute care sector.
Traditionally, the secondary care sector – hospitals – has been the
foundation of acute care delivery, with hospitals serving local populations
with a wide range of emergency and elective care across most medical
and surgical specialities, on both an inpatient and outpatient basis. In the
UK this model has its roots in the Dawson Report (1920) and it is a
model used in most developed countries. The package of facilities at an
acute hospital has included a wide range of diagnostic services, including
radiology and pathology services, together with a range of interventional
facilities including operating rooms, intervention/treatment rooms and
associated inpatient beds being used for investigations. In effect the
hospital-based acute care model has therefore been a mixture of acute
care, routine investigations and chronic disease management
In the UK, since Enoch Powell’s Hospital Plan of the early 1960s, the
secondary care sector has been based around the concept of the district
general hospital (DGH) – a hospital serving a local population of around
250,000 people, though in fact for reasons of geography and history the
population actually served has ranged from 150,000 to 500,000 (West
1998). Whilst the DGH may not be a model that has been universally
adopted, in most countries acute care is also provided in hospitals that
136 Healthcare management

serve the needs of a geographic local population. The typical hospital

facility in most health systems provides a wide range of medical services
including:
• emergency department
• general medicine
• care of older people (geriatric medicine)
• obstetrics
• gynaecology
• paediatrics
• general surgery
• critical care (including intensive care)
• trauma and orthopaedics.
These services are, of course, interdependent in many ways, with the
ability of a DGH to maintain its emergency department, for example,
dependent on the availability of services like general surgery, paediatrics
and trauma and orthopaedics. This means that the withdrawal of one or
two services in any DGH may threaten a cumulative disintegration of
other services on which they were codependent. In addition, the second-
ary care sector has also provided many specialist services in areas like
cancer care and cardiology. Some specialist services (such as neuro-
surgery, organ transplantation, specialist paediatric services, and so on) are
often delivered through tertiary hospitals on a subregional, regional or
even national basis. As the growing subspecialisation of medicine has
created more and more specialties, each with distinctive staffing, skill and
expertise requirements, the ability of DGHs to provide a full range of
services has come under considerable pressure and the ‘critical mass’ of
staff, beds, facilities and specialties deemed necessary for a DGH has
expanded. In many areas, reconfigurations of acute care services and hos-
pital mergers have been driven by these pressures to sustain the viability
of acute care.
It can be argued that much of what has been seen as acute care, or
more accurately much of what has traditionally been delivered by the
secondary care sector, is not necessarily acute care and could be more
appropriately delivered in other sectors, particularly in primary care,
closer to the communities they serve (Black 2006). Additionally, it can be
argued that by structuring the healthcare system into primary, secondary
and tertiary care (as described in Chapter 3), policymakers, clinicians and
managers have created artificial organisational and financial barriers that
by their nature obstruct cross-sector and joint sector working, reduce the
ability of the healthcare system to deliver seamless care for patients, make
it more difficult for patients and the public to navigate and understand,
and make it more difficult to innovate in the way acute services are
delivered.
There has been a fundamental shift in many countries’ economies over
the past decade from central state control to more market based mechan-
isms, with a concomitant reduction in state intervention and control.
That trend – evident in a wide range of public services – has resulted in
Managing in acute care 137

the introduction and development of markets in healthcare in many

countries. In place of direct state ownership of healthcare provision, and
to sustain government’s capacity to set health policy and to influence and
shape the healthcare system, many countries have increasingly introduced
regulatory and governance frameworks in their emerging healthcare
markets. These changes present some new challenges for acute services
operating in a competitive market regardless of how that market is
configured and regulated. The market may be in commissioning (for
example, the European social insurance model in the Netherlands,
Germany and Switzerland) or in healthcare provision (for example, the
UK NHS) or in both (as in the USA).
In recent years a number of developments have resulted in changes and
challenges to the traditional secondary care hospital model, including:

• an increasing range and number of procedures being carried out on an

ambulatory or daycase basis, and so no longer requiring the use of
inpatient beds
• reductions in length of stay across all specialities in acute hospitals,
meaning both that fewer inpatient beds are required and that the
overall acuity of the inpatient mix has become more complex as
convalescing patients are discharged earlier and earlier
• separation of emergency and elective care delivery so that elective
services are not disrupted by emergency needs and can be run more
efficiently
• increasing focus of commissioners (and users) on quality outcomes as
information about the quality of care provided by hospitals has
become more widely available
• a recognition that much of the demand for healthcare is predictable
and that flow and process analysis tools used widely in other industries
can be brought to bear in understanding patient flow in acute care and
redesigning care processes
• a move away from the remuneration of acute care providers on a block
or cost and volume contract basis, in which their funding is inflexible
but secure, to payment systems based on actual levels of delivered
activity, which give great incentives to increase activity and productiv-
ity and are both more flexible and less secure
• a rise in consumerism on the part of the public and patients, resulting
in pressures on acute care providers to be more responsive to patient
expectations about the way care is delivered
• developments in care models that do not require acute care beds or
require fewer such beds, including intermediate care, rehabilitation
services, chronic disease management, etc.
• recognition that care packages should be designed across the whole of
the health system, not just around the acute care episode, resulting
in the development of integrated delivery systems and disease
management in some markets
• shortages of staff and skills in some professional groups, particularly
doctors and nurses, which have resulted in changes to the way such
138 Healthcare management

professionals are used in acute care and pressures to find new ways of
working which make optimal use of scarce skilled staff
• an increasing regulatory framework focusing on clinical quality, in
which acute care providers are held much more to account for the
quality of care they deliver
• the move away from a health delivery system based on planning and
assessed need to one that is more driven by markets, competition, and
consumer demand.
The impact of these changes can be clearly seen in trends in the acute
care sector over the last decade. For example, there have been marked
increases in day case rates for elective care, reductions in numbers of acute
beds, and a drop in the average length of stay in almost every OCED
country. While acute care facilities and usage still vary very widely
between countries, the trend almost everywhere is the same. For the
OECD countries there has been an average reduction in length of stay
of 2.1 days in the period 1992 to 2001 (see Figure 8.1) and a similar
reduction in bed numbers (see Figure 8.2).

Acute care in the USA: pioneering change

The USA spends more per capita and as a proportion of GDP than any
other OECD country on healthcare. This is despite a significant propor-
tion of the population (around 17%) having no health insurance and so
having at best very limited access to healthcare. The continually rising
costs of healthcare in the USA over the last two decades have been one of
the most important drivers of change in acute care provision – the most
expensive part of the US healthcare system. Many of the acute care
innovations now being adopted by healthcare systems in other OECD
countries originated in the USA, and were a fruit of its constant search
for ways to control healthcare costs.
The development of separate elective and emergency care facilities
started in the USA in the early 1970s with the creation of the first
Surgicentre to deliver routine elective care outside the traditional hos-
pital. The underlying principle was that by separating elective care out of
the acute hospital there would be increased efficiency. Over time this has
coincided with the gradual increase in the number and range of pro-
cedures that can safely be carried out on a daycase basis due to changes in
anaesthetics and the development of laparoscopic surgical techniques.
There has been a significant growth in Surgicentres in the USA over the
past 30 years and they now account for over 8 million operations a year,
with over 4000 Surgicentres across the USA (FASA 2005). Surgicentres
can be either single speciality or multi-speciality and are attractive to
doctors and insurers. Doctors like them (and many are part or wholly
owned by doctors), as they enable them to plan their workload
and operate unencumbered by the potential delays in surgery due to
Figure 8.1 Average length of stay for acute care, 1990 and 2002
Source: Health at a glance, OECD Indicators (2005) Copyright OECD (2005).
Figure 8.2 Acute care hospital beds per 1000 population, 1990 and 2002
Source: Health at a glance OECD Indicators (2005) Copyright OECD (2005).
Managing in acute care 141

emergencies. Insurance companies have favoured this approach as it

means that high degrees of throughput and efficiency can be achieved
and thus from a cost perspective care is cheaper than in a conventional
acute hospital. According to FASA (2005) the average cost of an oper-
ation in a Surgicentre is 47% less than the cost at a traditional hospital.
This is also an attractive option for self-paying patients.
Another development pioneered in the USA has been the creation of
integrated care delivery systems across primary and secondary care,
through managed care models used by health maintenance organisations
(HMOs). The fundamental aims of these systems include reducing,
as far as possible, admission to hospital. This can take a number of forms,
including patient education and homecare programmes, particularly in
relation to management of chronic disease. Increasingly these integrated
systems are enabling greater numbers of patients to be treated away from
the conventional hospital, which is more convenient for patients and
reduces infrastructure costs over the long term in acute care facilities.
Kaiser Permanente is a not-for-profit health maintenance organisation
based in California (but operating in a number of states). It is a very large
organisation with over 8 million members (the majority of them in
California) and both commissions and provides care (albeit as separate
arms of the business) and directly employs all of the medical staff in Kaiser
facilities. Both in terms of size and function therefore, Kaiser, it has been
suggested, is not dissimilar to the NHS (Feachem et al. 2002). When
direct comparisons are made, particularly in relation to acute care costs,
performance and bed utilisation, Kaiser appears to perform significantly
better than the NHS. Feachem et al. (2002) have argued that when a
number of adjustments are made for different demographics, socio-
economic factors, etc. there is little difference in costs (on a per capita
basis) between the two systems. They found, however, that there were
significant differences in a number of other areas, including length of stay
within the acute hospital environment. Ham et al. (2003) have demon-
strated that the NHS uses a significantly greater number of bed days than
Kaiser, particularly for patients in the over-65 age group. Dixon et al.
(2004) believe that in general terms there are lessons for the UK in how
HMOs like Kaiser Permanente in the USA manage care and use a range
of operational techniques to minimise hospital admissions. They also
suggest that in HMOs clinicians are more involved managerially and that
there is greater coherence between managers and clinicians in the way
the organisation is run. In addition, there are often strong financial incen-
tives to provide care in accordance with agreed guidelines or pathways.
Whilst there has been some small-scale experimentation with fee for
service models in the UK, it would appear from the US and elsewhere
that giving clinicians financial incentives, either through ownership or
other methods, helps to secure clinical engagement and change. The
integrated delivery model that Kaiser Permanente and other HMOs use
offers a number of advantages, both for patients and commissioners of
services. With a shift in service away from the acute sector there has
also been a shift in the provision of diagnostic services, particularly
142 Healthcare management

radiological investigations. Patients who are seen in a primary care setting

will receive the majority of their diagnostic investigations outside an
acute hospital, either in a primary care clinic setting or a freestanding
imaging centre which offers a range of radiological investigations includ-
ing magnetic resonance imaging, with some larger centres now offering
PET scans. With increasing use of technology it is no longer necessary for
radiologists to be on site to interpret images as this can be carried out at
distance by telecommunication links. Similarly, if as a result of investiga-
tions patients require hospitalisation, the care they receive is very focused,
ensuring that there are no delays in discharge to an alternative care setting
as soon as practicable.

Acute care in the UK: the politics of change

The first point to note in reviewing acute care provision in the UK is that
since the introduction of devolved administrations in Scotland, Wales and
Northern Ireland, each of the four countries now essentially operate as
four separate National Health Services, with different priorities and pol-
icies set by politicians and policymakers. Whilst this may mean that the
approaches adopted may be different in each country, nevertheless the
fundamental challenges are the same. There has been a year-on-year
increase in numbers of emergency admissions – in England and Wales
there has been a 10% increase in the two-year period 2002–3 to 2004–5
alone. In England, the traditional approach to rising numbers of emer-
gency admissions (and in particular when a peak or surge of such admis-
sions occurs) has been to cancel routine elective surgery, with emergency
admissions taking priority when beds are short. This inevitably has led to
delays in treatment for patients waiting for elective surgery and has
impacted on waiting times for treatment. Increasingly, such delays for
elective acute care have been seen as politically unacceptable.
As a result, policymakers in England (and to a lesser extent in Scotland)
have started to separate significant elements of routine elective care into
separate facilities, which are protected from emergency admissions. In
England, this has taken the form of the Treatment Centre programme,
the main driver of which initially was to create additional elective cap-
acity in the NHS to cut waiting times for routine surgical procedures.
This was usually for the procedures that traditionally had the longest
waiting times and were most at risk of cancellation due to a lack of beds
resulting from high numbers of emergency admissions. Borrowing heav-
ily on the US Surgicentre model (although there are also influences from
the central European polyclinic model), it was anticipated that the cre-
ation of a network of freestanding Treatment Centres would both help to
reduce waiting times and encourage NHS acute care providers to learn to
alter their processes for care delivery and to adopt the US ambulatory
model, in which care is closely managed and changes in anaesthesia and
pain management in particular enable a wide range of surgery to be
Managing in acute care 143

carried out on a daycase basis. Subsequently, there has been a significant

expansion of the Treatment Centre programme with significant invest-
ment in building and running treatment centres by the private sector in
England. Ostensibly the rationale for this was expansion of elective cap-
acity, of which there was a clear shortfall (NHS Plan 2000), but it has also
served a wider policy purpose for the Labour government of creating
plurality and contestability in acute services and opening up the NHS to
a new market in elective care. Indeed, the government has made it clear
that at least 15% of elective activity will be delivered by non-traditional
providers in future.
However, the Treatment Centre programme is not the only element of
reconfiguration that has been taking place in England. In the UK gener-
ally the debate on reconfiguring services has been advanced by the med-
ical profession in the shape of the Royal College of Physicians, the Royal
College of Surgeons and the British Medical Association which argued
in 1998 that ‘comprehensive medical and surgical care of the highest
quality requires the concentration of resources and skills into larger
organisational units’ (BMA et al. 1998). Black (2002) states that the
Department of Health estimated that three-quarters of English hospitals
are involved in some form of debate regarding the reconfiguration of
services. Proposals by both Royal Colleges have indicated that the popu-
lation size served by DGHs would need to be in the region of 500,000 –
or twice the typical population served by a DGH only a decade or so ago.
That poses a significant challenge to the way that acute services are
organised in the UK, particularly in those parts of the four countries with
large rural populations, and creates some challenging equity of access
dilemmas for healthcare managers and policy makers.
It is clear that any wholesale change resulting in the closure (perceived
or otherwise) of local acute hospitals is deeply unattractive to local popu-
lations and therefore politicians. The events in the West Midlands town
of Kidderminster are a potent reminder of what can happen when pro-
posed alterations to acute services are forced on a community (Raftery
and Harris 2005). In Kidderminster, as part of a countywide restructur-
ing, it was proposed that the accident and emergency department and
inpatient medical and surgical beds would be moved to two other hos-
pitals approximately 20 miles away. This was greeted with such concern
and hostility by the local population that, following various stages of
protest, a political party, Health Concern, was formed with the single
campaign issue of saving the Kidderminster hospital. A Health Concern
candidate was elected as MP in 2001, unseating a Labour government
minister and the party also won the local council elections and took
control of the local authority. In response to this and some other conten-
tious reconfiguration debates in other parts of England, the Department
of Health re-examined the whole issue of acute care reconfiguration,
looking at examples from other areas of the UK and overseas of how
services have been reconfigured as well as how technological changes, for
example, telemedicine could be used. This work formed the basis of a
Department of Health report Keeping the NHS Local (DH 2003) which
144 Healthcare management

highlighted some of the projects being supported by the Department of

Health to enable services to be delivered in smaller local hospitals.
There are a number of approaches being taken to ensure that there
continues to be local delivery of acute services, which at the same time
begin to reshape and redefine healthcare delivery for patients. In the UK
this has taken the form of the development of managed clinical networks.
These are multidisciplinary clinical teams working to predefined clinical
pathways (either speciality or disease specific) that map the total patient
journey through the healthcare system. In so doing they identify what
should be happening to patients in terms of care management at any
given moment and also involving patients and their carers in both care
delivery as well as involvement in the decision-making process. There are
similarities therefore with the integrated delivery systems in the USA.
Managed clinical networks were first established in Scotland in the late
1990s as one of the outputs of an acute services review (Scottish Office
1998). The aim is to enable patients to be seen locally wherever and
whenever possible, in part through investment in IT and technology in
areas such as telemedicine either in terms of remote consultation with
other members of the clinical team or in the transmission of infor-
mation for interpretation at a specialist centre. There is clear evidence to
support the use of telemedicine for clinical care, with benefits including
reduced length of stay and improved data analysis (Rendina et al. 1998;
Loane et al. 2000). The Scottish Acute Services review (Scottish Office
1998) identified a number of advantages of the model including:
• optimal use of resources
• improved equity of access
• reduction in waiting times for diagnosis or treatment
• improved quality of patient care
• improved multidisciplinary team working
• improved communications
• lead clinician taking responsibility for care delivery.
The concept of the managed clinical network has also been introduced
into other parts of the UK, most notably in England with the establish-
ment of a series of geographically based cancer networks which have
focused on specific cancer types, bringing together the whole of the
multidisciplinary team involved in the patient’s care. The National Audit
Office (2005) has concluded that the development of the cancer net-
works has made improvements in the delivery of cancer services. An
example of how a regional clinical network can operate across the total
health spectrum is outlined in Table 8.1.
Finally, there is a growing recognition that the largely hospital-based
provision of diagnostic services in English acute care can both delay
access to acute care services and impose costs on patients and on primary
care services. Around half of the hospital-based diagnostic services activ-
ity in areas like radiology and pathology laboratories is actually provided
to primary care providers and their patients. The rationale for siting such
services in hospitals has been that doing so makes best use of their capital
 Managing in acute care 145

Table 8.1 Integrated regional vascular service (IRVS)

Service level Service offered Development needs

Living at home, not using Advice Community pharmacists trained

GP services and able to give advice
Local GP surgery GP consultation, screening for Joint protocols for managing
vascular conditions (e.g. aneurysm), vascular disease, defined referral
onward referral criteria agreed with network
consultant(s)
Specialist GP surgery GP specialist undertake some forms Training in equipment use, agreed
of circulatory testing, nurse-led referral criteria, vascular nurse
clinics held by visiting vascular experts, expertise from vascular
specialist nurse or leg ulcer nurse centre (e.g. technical developments)
links to specialist pharmacists
Community hospital Outreach clinics, local rehabilitation Minimal equipment needs, links to
following surgery, community leg rehabilitation services with support
ulcer clinic from Allied Health Professionals
(AHPs) and limb-fitting services
Local acute hospital Day case and inpatient operating (up Agreed operating procedures,
to intermediate level), emergency managed emergency rotas (running
receiving operates across area in with consultants from network
conjunction with other DGH(s), hospitals), consultant with major
limited imaging/vascular laboratory interest in vascular surgery, general
service (perhaps on outreach basis) nursing staff (core with specialist
vascular interest and skills)
Ambulatory care/ Day case varicose vein surgery Efficient day case service
treatment centre
Specialist centre in Major surgery, invasive vascular Specialist vascular physicians,
integrated regional radiology requiring specialist surgeons and radiologists, wards
vascular service (IRVS) radiological interest and equipment, staffed by nurses with specialist
centre for limb fitting services and interest, vascular laboratory staffed
beginning rehabilitation in ward by specialist technicians,
prior to discharge to local area rehabilitation skills (nursing and
AHPs), good communication
networks with transfer of patients to
local services for continuation of
care.

Source: Joint Working Party (1998). Acute Service Review. (Reproduced under the terms of the click use Licence)

assets (laboratory equipment, MRI scanners and so on), and achieves

economies of scale, but technological changes mean that it may now be
both more economic and more appropriate to locate many diagnostic
services in primary care settings. For example, significant investments are
now being made in the provision of routine radiology in primary care
organisations in areas such as ultrasound and plain film X-ray facilities,
which will result in large numbers of patients having investigations
carried out away from the hospital setting. This has the dual benefits of
cutting down on unnecessary visits by patients and reducing expenditure.
146 Healthcare management

In addition there has been widespread concern from politicians and the
public over waiting times for high end diagnostics such as MRI scans, and
in response it is clear that the current Treatment Centre programme
will be expanded into diagnostics, with the creation of freestanding
diagnostics centres operated on similar principles.

Acute care in the Czech Republic: the need for change

Healthcare provision in the Czech Republic has seen a significant

increase in public spending since the end of the communist era, with a
rise in the share of GDP spent on healthcare from 5% in 1989 to 7.4% in
2003. At the same time, there has been a shift away from a state-controlled
healthcare system towards one based more on a European model of social
insurance. In comparison with many western European countries or the
USA, the Czech healthcare system has a much higher level of acute care
provision based in hospitals and makes more use of those acute care
services. It is clear from OECD figures that the Czech Republic has more
acute beds than almost any other country in the European Union, with a
lower bed occupancy rate than the UK and a longer length of stay.
Currently there are approximately 200 hospitals in the Czech Republic
serving a population of 10.3 million. Although outpatient and primary
care services have been largely privatised, most hospital services are still
owned and operated by the government or municipalities. Despite the
general overprovision of hospital services, those services are not evenly
distributed and there are inequities in acute care delivery with wide
regional variations in both the distribution of diagnostic equipment and
in the quality of care delivered.
Arguing for radical reform of the Czech healthcare system, Hrobon et
al. (2005) suggest that its current problems result partially from having too
many hospitals, a lack of integration between hospitals, outpatients and
primary care services, and a poorly defined health planning and regula-
tory framework. They note that many of the changes to acute care seen in
other countries and described earlier in this chapter have yet to be taken
up in the Czech Republic, and argue that there are substantial opportun-
ities for reconfiguration. This is also borne out by the European Observa-
tory on Health Care Systems (2005) report on the Czech Republic,
which highlights the cautious and incremental approach taken so far to
acute care reform, and the high level of acute care provision, though it
notes there is some growth in homecare and day surgery provision as
alternatives to hospital-based acute care. It seems likely that there will
need to be a substantial shift in acute care delivery in the Czech Republic
towards a more modern integrated model of care. Hrobon et al. (2005)
believe that such changes are likely to be driven by the introduction of
market-based healthcare reforms with increased competition both in
health insurance and in healthcare provision.
 Managing in acute care 147

Conclusion

In many countries, the acute care sector is changing. The circumstances

which led to the rise of the large acute hospital over several decades, with
hundreds (or even thousands) of acute care beds and a concentration of
diagnostic and therapeutic activity all delivered from a single site, and
patients coming to the hospital for a wide range of acute, specialist and
diagnostic services, have changed. The totemic significance of hospitals to
their communities should not be underestimated, but the rationale
for their existence in their current form has been gradually undermined.
In their place, commentators like Black (2006) set out a vision of a much
smaller, more focused and more specialised acute care sector, better inte-
grated into stronger and better resourced primary care services.
In the future, significant areas of what has traditionally been seen as
acute care will be delivered outside the setting of a hospital, with benefits
for patients (in being more patient centred and convenient) as well as for
health systems (in being more cost effective and efficient at a time of
increasing cost pressures). These include outpatient consultations, moni-
toring, routine investigations and elective surgery, rehabilitation and
chronic disease management, as part of the managed care process. These
changes will be accelerated by the move to market-based healthcare
systems in many countries, and they pose important challenges for acute
care clinicians and managers. They need to find new ways to deliver
sustainable acute services that are locally based, and which are not reliant
on the traditional organisational architecture of the acute hospital.

Summary box

• Acute care usually means treatment for a short-term or episodic illness or

health problem which a patient may often receive in hospital. Acute care
embraces both emergency and elective or planned treatment for health
problems which may arise through accident or trauma, or through the
occurrence of disease.
• The defining characteristic of acute care has often been the place of delivery –
in an acute hospital. But much of what such hospitals do is not necessarily
acute care – and much acute care can be delivered outside the hospital setting.
• The twentieth century saw the progressive expansion and development of the
hospital sector, and a focus on providing acute care from large hospital sites
with a concentration of facilities and expertise.
• A range of technological, financial and social pressures are driving radical
changes in the nature of acute care provision, towards a model which is less
hospital based and better integrated into primary care services. Important
developments include the provision of freestanding treatment centres for
elective surgery; diagnostics centres based in the community; and clinical
networks aimed at managing whole patient pathways and keeping patient
admissions to hospital to a minimum.
148 Healthcare management

• In the future, significant areas of what has traditionally been seen as acute care
will be delivered outside the setting of a hospital, with benefits for patients (in
being more patient centred and convenient) as well as for health systems (in
being more cost effective and efficient at a time of increasing cost pressures).
These include outpatient consultations, monitoring, routine investigations and
elective surgery, rehabilitation and chronic disease management as part of the
managed care process.

Self-test exercises

1 Choose a disease or patient group or a major service area with which

you are familiar (such as diabetes, childbirth, stroke, cardiac disease,
obesity or dermatology) and map out typical current provision using
the levels of service framework in Figure 8.1. Now identify areas in
which future changes to service provision are likely and consider their
impact on acute services provision.
2 Identify an example of changes or reconfiguration in acute care with
which you are familiar. Consider what were the drivers for change –
professional, technical and economic. How was the case for change
made by local healthcare organisations and others and how was it
received by the community being served? How were community con-
cerns about the changes addressed and reconciled with the drivers for
change?

References and further reading

Black, A. (2002) Reconfiguring health systems. British Medical Journal, 325(7375):

1290–93.
Black, A. (2006) The Future of Acute Care. London: NHS Confederation.
Department of Health (DH, 2000) The NHS Plan: A Plan for Investment, A Plan
for Reform. London: Department of Health (available from http://
www.dh.gov.uk).
Department of Health (DH, 2003) Keeping the NHS Local – A New Direction of
Travel London: Department of Health. Available at http://www.dh.gov.uk
Department of Health (DH, 2005) Departmental Report (Summary Report) The
Health and Personal Social Services Programmes. London: Department of Health.
Available at http://www.dh.gov.uk
Dixon, J., Lewis, R., Rosen, R., Finlayson, F. and Gray, D. (2004) Can the NHS
learn from US managed care organisations? British Medical Journal, 328(7433):
223–5.
European Observatory on Health Care Systems (2000) Health Care Systems in
Transition Czech Republic. Brussels: European Observatory on Health Care
Systems.
 Managing in acute care 149

FASA (2005) The History of ASCs. Alexandria, VA: FASA (available from http://
www.fasa.org).
Feachem, R.G.A., Sekhri, N.K. and White, K.L. (2002) Getting more for their
dollar: A comparison of the NHS with California’s Kaiser Permanente. British
Medical Journal, 324(7330): 135–43.
Ham, C., York, N., Sutch, S. and Shaw, R. (2003) Hospital bed utilisation in the
NHS, Kaiser Permanente, and the US Medicare programme: analysis of rou-
tine data. British Medical Journal, 327(7426): 1257.
Hrobon, P., Machachek, T. and Julinek, T. (2005) Health Care Reform for the Czech
Republic in the 21st Century Europe. Prague: Health Reform.cz. Available at
http://www.healthreform.cz
Joint Working Party of British Medical Association, Royal College of Physicians
of London, Royal College of Surgeons of England (1998) Provision of Acute
General Hospital Services. London: Royal College of Surgeons.
Kennedy, I. (2001) Learning from Bristol – The Report of the Public Inquiry into
Children’s Heart Surgery at the Bristol Royal Infirmary 1984–1995. Bristol:
Bristol Royal Infirmary Inquiry. Available at http://www.bristol-inquiry.org.uk
Loane, M., Bloomer, S., Corbett, R., Eedy, D., Hicks, N., Lotery, H., Mathews,
C., Paisley, J., Steele, K. and Wootten, R. (2000) A randomized controlled trial
to assess the clinical effectiveness of both realtime and store-and-forward
teledermatology compared with conventional care. Journal of Telemedicine and
Telecare, 6: S1–S3.
Lord Dawson of Penn (1920) Interim Report on the Future Provisions of Medical and
Allied Services. United Kingdom Ministry of Health. Consultative Council on
Medical and Allied Services. London: HMSO.
National Audit Office (2005) The NHS Cancer Plan: A Progress Report. London:
The Stationery Office.
OECD (2005). Health at a Glance. OECD Indicators 2005. Paris: OECD
Publications.
Raftery, J.P. and Harris, M. (2005) Kidderminster Health: Monitoring and Evaluating
the Reconfiguration of the NHS in Worcestershire. Birmingham: HSMC,
University of Birmingham.
Rendina, M.C., Downs, S.M., Carasco, N., Loonsk, J. and Bose, C.L. (1998)
Effects of telemedicine on health outcomes in 87 infants requiring neonatal
intensive care. Telemedicine Journal, 4(4): 345–51.
Scottish Office Department of Health (1998) Acute Services Review Report. Edin-
burgh: Scottish Office. Available at http://www.scotland.gov.uk/library/docu-
ments5/acute-00.htm
West, P. (1998) Future Hospital Services in the NHS: One Size Fits All? London:
Nuffield Trust.
World Health Organisation (WHO, 2000). The World Heath Report, Health Sys-
tems: Improving Performance. Geneva: World Health Organisation. Available at
http://www.who.int

Websites and resources

Nation’s Healthcare. Independent UK treatment centre operator – wide

variety of information for patients: www.nationshealthcare.co.uk
Kaiser Permanente. HMO in the US. Site provides information about
150 Healthcare management

the company and also a wide variety of information for patients:

www.kaiserpermanente.org
Federated Ambulatory Surgery Association. Provides a variety of informa-
tion on ambulatory surgery. One of the main accreditation bodies for Surgi-
centres and publishes data on outcomes from its members: www.fasa.org
European Observatory on Health Systems and Policies. Details of acute
care provision in HiT reports on individual countries: http://www.euro.
who.int/observatory
Department of Health. Policies, guidance and supporting information on
acute care services and reconfiguration: http://www.dh.gov.uk/PolicyAndGuid-
ance/OrganisationPolicy/SecondaryCare/ConfiguringHospitals/fs/en
Scottish Office. Resources on acute services: http://www.healthmanagement
online. co.uk/toolkit/toolkit.asp?p=da
 9 Managing in mental health
Steve Onyett and Helen Lester

Introduction

Managing in mental health is a complex task, carried out at times in a

climate of uncertainty. Mental health managers are moving from an
environment focused on secondary care services with limited partnership
working towards a future focused on integrated working practices across
multiple care sectors. What is also increasingly clear from both a policy
and practice perspective is that the task of working to achieve better
outcomes for service users goes beyond ‘care’ to include a range of
activities encompassing mental health promotion, social inclusion and
the promotion of self-management. It also increasingly requires managers
to have in mind more than just service structures, as we might tradition-
ally understand them, and include the wider range of social supports
available to all citizens.
This chapter will outline some of the key challenges that currently face
those managing mental health services, focus on specific issues in man-
aging new mental health teams, describe strategies for engaging key
stakeholders across the wider system and suggest ways to address some of
these challenges through effective leadership and management.

Defining mental health

The World Health Organisation (WHO) describes mental health as ‘a

state of well-being in which the individual realises his or her abilities, can
cope with the normal stresses of life, can work productively and fruitfully,
and is able to make a contribution to his or her community’ (WHO
2001). This definition introduces the theme of building on strengths and
stresses the role of the individual as a contributor to the life of their local
communities. It also underlines the aspiration that each individual should
be socially included and able to participate effectively in community life.
Mental ‘ill health’ includes mental health problems and strain, impaired
152 Healthcare management

functioning associated with distress, symptoms and diagnosable mental

disorders such as schizophrenia and depression.
Mental health problems are increasingly common (see Table 9.1). The
WHO has projected that depression will soon become the second great-
est disease burden facing developed economies (WHO 2003). The health
ministers of all 52 countries in the European Region have recently
signed up to a declaration embodying 12 action points in the pursuit of
the promotion of mental well-being, reduction of stigma and discrimin-
ation, prevention of mental ill health and suicide, access to good primary
healthcare and incorporation of mental health as a vital part of public
health policy (WHO Europe 2005). The latter has been reflected in the
United Kingdom (UK) public health policy agenda (DH 2004a) which
advocates equality between mental health and physical health, recognis-
ing that mental well-being is ‘fundamental to the quality of life and
productivity of individuals, families, communities and nations, enabling
people to experience life as meaningful and to be creative and active
citizens’ (WHO Europe 2005).

The challenge of delivery: fiscal issues

In spite of the recognition that the consequences of mental ill health

account for at least a third of all healthcare costs, many countries in the
European Region spend less than 3% of their health budgets on mental
healthcare (WHO 2003). In England, mental health remains one of the
top three health priorities along with heart disease and cancer (DH
2000), yet according to estimates prepared by the Department of Health
for the Wanless Review of health spending (Wanless 2002), expenditure
on adult mental health services will need to double in real terms over the
next ten years to meet the identified needs. There has been a reported
increase in National Health Service (NHS) and local authority combined
expenditure on mental health of over 19% in the period 1999–2000 to

Table 9.1 Prevalence of mental disorders in men and women (rates per 1000)
Men Women Total

All neurosis 135 194 164

Mixed anxiety and depression 68 108 88
Generalised anxiety 43 46 44
Depression 23 28 26
Phobias 13 22 18
Obsessive-compulsive disorder 9 13 11
Panic 7 7 7
Personality disorder 54 34 44
Probable psychosis 6 5 5

Source: Singleton et al. (2001)

 Managing in mental health 153

2002–03 (Appleby 2004). However, the trend in expenditure is towards

spending on mental health falling increasingly behind total NHS expend-
iture. The NHS financial climate is additionally complicated by current
concerns over debts of at least £200 million, with estimates that the ‘real’
figure may be closer to £800 million. A similar pattern is seen in the
United States (US) where statistics from the Surgeon General Report
(1999) suggest that the US spends about $170 billion, that is 8% of its
total healthcare expenditure on mental healthcare. This, however, repre-
sents a slower rate of growth in spending compared to expenditure on the
rest of healthcare.
Insufficient funding is compounded by difficulty tracking mental
health resources, a growing distance between strategic planning, the
operational processes of managing financial resources and of agreeing and
monitoring service level agreements (SCMH 2003). Complex resource
allocation decision-making structures, inadequate financial data and the
poor status of mental health services in comparison to acute trust needs
also contribute to the complexity (Mahoney et al. 2004). However, even
reports highlighting the financial difficulties concede that more could be
done by provider trusts to improve the efficiency of existing expenditure
and to accelerate the transfer of resources to new services (SCMH 2003).

The challenge of delivery: the policy context

The NHS in England is currently subject to a policy waterfall, both

within and beyond the arena of mental health services. Many of the
policy imperatives encourage a more integrated approach to delivering
services, often within a primary care context. This direction of travel can
also be found in some small-scale programmes in the US and Canada
(Kate et al. 1997; Druss et al. 2001). It is, however, difficult to implement
and manage new working practices within a system that is in a constant
state of change. As Means et al. (2003: 214) have suggested, there is ‘the
impression of a modernisation muddle in which managers and field level
staff are struggling to keep pace with the demand for policy change and
the ever increasing flood of directives, guidelines and indicators’.
More positively, the policy context for mental health service develop-
ment and delivery has perhaps never been better aligned with user and
carer aspirations. Policy initiatives and the supporting performance man-
agement frameworks continue to stress the importance of mental health
promotion, social inclusion and choice. Overcoming stigma and dis-
crimination, race equality, problems associated with dual diagnosis and
with people who have both a learning disability and mental health prob-
lems, access to psychological therapies, prison mental health, early inter-
vention and user and carer participation are also issues that currently
command attention in policy circles. These issues need to be addressed
across the whole age range and underpinned by effective joint working
between agencies across transitions.
154 Healthcare management

The challenge of delivery: the rhetoric/reality gap

Whilst it is important to recognise the complexities of the policy

environment for mental health service development, the day-to-day
reality for many managers and service providers continues to be one of
massive underprovision (WHO 2003; Layard 2004), discrimination (DH
2005b) and failure to meet basic standards for those who manage to get
services. The Commission for Healthcare Audit and Inspection (2005)
survey of 26,555 users found that less than half of those responding felt
that they definitely had enough say in decisions about their care and
treatment. The proportions of people who would have liked help with
aspects of their care but did not receive any were 50% with respect to
accommodation needs, 52% for help with finding work, 73% for help
with getting benefits and 57% for information about local support
groups. Since this was based upon a response rate of 41%, we can only
speculate what those who did not reply might have felt about their care.
Stakeholder consultations by the Healthcare Commission and Commis-
sion for Social Care Inspection also highlighted the need to empower
service users and carers to get involved both in their own care and the
strategic delivery of mental health services. This picture is reflected, to
some extent, in a recent national survey in the US to determine the
extent of consumer empowerment in the public mental health system.
The survey found that although the concept gained considerable
momentum in the late 1990s, it was by no means universal across states
(Geller et al. 1998).

The immediate management challenges

Mahoney et al. (2004) described the most frequently cited challenges for
mental health communities in one English region over the previous five
to eight years as follows:
• Underdeveloped community and primary care services and the need
to shift away from an over-reliance on inpatient services.
• Determining the correct number of inpatient beds. Formulaic
approaches to determining bed numbers fail to take account of the
potential for new ways of working to decrease pressure on beds. The
introduction, for example, of the gatekeeping of beds by adequately
resourced crisis resolution teams offering home treatment provides a
viable alternative to more inpatient stays. Early indications from a
national survey of crisis resolution teams suggest that disputes
with local consultant psychiatrists remain one of the most significant
obstacles to effective implementation of these new ways of working.
• Poor social care resources. This was framed as a problem both in
terms of a lack of access to resources (e.g. to a range of appropriate
 Managing in mental health 155

accommodation to reduce occupied bed days) and difficulty in

keeping a social care perspective privileging outcomes concerned with
recovery, social inclusion and quality of life on the agenda.
• Too much money going out of area because of weaknesses in local
provision which further compounded the lack of local investment.
• A tendency to prioritise resources initially for new developments due
to the pressure to implement targets within the National Service
Framework for Mental Health (DH 1999) while existing core services
remain inappropriate or poorly developed.
• The constant neglect of hard-to-reach or marginalised groups such as
black and minority ethnic communities, travelling and homeless
people, people diagnosed with personality disorder and other people
with complex and multiple needs. Serving the prison population
through mainstream mental health services and now primary care
trusts (PCTs) provides a further challenge in this area.
• Inequities in investment between areas, stemming from problems
achieving informed commissioning. Good commissioning strategies
are underpinned by effective needs assessment, good information and
benchmarking, strong public health support, commissioning expertise
and effective leadership and management, not all of which are readily
available (see chapter 12 for further discussion).
• The need to promote a ‘whole person’ perspective that tackles social
exclusion and overcomes discrimination.
Many of these issues are encapsulated by the challenges of managing new
mental health teams in a way that makes sense to team members, service
users and their supports.

Managing new mental health teams

In the UK, since the early 1980s, multidisciplinary community mental

health teams (CMHTs) have been the main vehicle for delivering
coordinated comprehensive community-based mental health services.
More recently, the notion of generic CMHTs responsible for all aspects
of care for people with mental health problems has been reassessed.
CMHTs now provide the core around which newer functionalised
teams, for example, early intervention, assertive outreach and home
treatment teams, have been developed. Policy guidance is not prescriptive
about the relationships between CMHTs and the newer functionalised
teams, although it suggests that ‘mutually agreed and documented
responsibilities, liaison procedures and in particular transfer procedures
need to be in place when crisis resolution, home treatment teams, assert-
ive outreach teams and early intervention teams are being established’
(DH 2002: 17). However, in practice there is evidence of difficulties
as teams compete for funding within a finite budget allocation and of
functionalised teams perceived as ‘elites’ compared to generic teams
(Lester and Glasby 2006). Mental health managers need to be aware of
156 Healthcare management

the potential for mistrust and misunderstanding, working with new and
established teams to create clear channels of communication and an
appreciation of respective strengths and weaknesses.
The concept of what it means to be part of a ‘team’ is of itself conten-
tious. Nine out of ten people in the last NHS Staff Survey (Dawson et al.
2005) reported that they worked in teams. However, this collapsed to
only 43% when a definition of effective team working was supplied that
included clear objectives, close working with other team members to
achieve these objectives, regular meetings to discuss effectiveness and no
more than 15 members. The situation is further complicated in mental
health in that practitioners and team developers have to consider what
makes a team effective and also how their team complies with a range of
organisational features for the new team configurations required by the
Department of Health.
Since 1999, there have been annual autumn reviews of the extent to
which new team configurations comply with the Mental Health Policy
Implementation Guides. Latterly, there has been a noticeable maturing of
the debate, with greater flexibility allowed to respond to local circum-
stances provided that the proposed model meets the functions specified
in the relevant guidance. Variations also need to be supported by local
implementation teams (particularly users and carers) and not simply pro-
posed because they are cheaper (NIMHE 2003). The means by which
these issues of team organisation are resolved are central to both local
management concerns, and in particular the balance of provision across
both different types of teams and between community and inpatient
provision. Resolving these issues locally requires a shared understanding
across agencies about the strengths and weaknesses of the current system
of care and the needs of the client group.
Unfortunately, such collaborative and informed governance processes
are still not universal. Mahoney et al.’s (2004) commentary gives a flavour
of the lack of consensus about ways forward. Feelings about the merits of
the requirements of the post-NSF world vary hugely even among clini-
cians, and there is often an absence of consensus about team structures
and functions. A generic problem appears to have been a paucity of good
information to drive local development, not least in the area of how
services are experienced by service users and carers.
As mental health managers, the application of improvement methods
that can then inform more systematic evaluation of demand and capacity
in different parts of the local system are critical tools to help unlock some
of these issues. Process mapping, as a means of effectively incorporating a
user view of the current situation and involving them from the outset in
thinking about improvement, seems to be the most evidence based of the
improvement methodologies (McNulty and Ferlie 2002; McLeod 2005).
Within the mental health field, the Creating Capable Teams Toolkit has
been designed to help teams integrate the new roles of the consultant
psychiatrist with other mental health professionals. It is being piloted by
the Sainsbury Centre for Mental Health (SCMH) and NIMHE and
should be widely available by the end of 2006.
 Managing in mental health 157

Engaging senior stakeholders across the wider system

Reinertsen et al. (2004: 3) suggest: ‘The most common reason for failure of
large systems to change is the failure of the senior leadership team to func-
tion as an effective team with the right balance of skills, healthy relation-
ships, and deep personal commitment to the achievement of the goals.’ In
the new commissioning environment heralded by Commissioning a Patient-
Led NHS (DH 2005a), the task of creating this effective team may increas-
ingly fall to commissioners concerned with creating a more pluralistic
range of providers, with a stronger role for the voluntary and independent
sector. It suggested, for example, that greater coordination is expected
between primary care trusts and local authority social service boundaries,
with a greater emphasis on contestability in healthcare provision in primary
as well as secondary care. This followed in the wake of the formal national
Compact to govern relations between the voluntary and community
sector (VCS) and the state (1998) and the first Strategic Agreement
between the Department of Health,the NHS and the VCS which proposed
making the VCS part of mainstream health service provision (DH 2004b).
Mental health managers will have to consider what type of cross-
community leadership team they will need to achieve choice, social
inclusion and race equality for users and their supports. Processes will be
needed that achieve the required integration of vision and activity both
horizontally across organisations and vertically across hierarchical strata.
There is useful guidance available on how to use joint mechanisms for
coordinated planning across localities in pursuit of performance manage-
ment targets, for example, local strategic planning mechanisms and
the use of local area agreements. However, clarifying shared objectives,
prioritising actions and finding a shared language for collaboration
remains a significant challenge (see also Cameron et al. 2003; NIMHE
2005). The following case study illustrates some of these issues.

Case study 1: mental health provision in North Tyneside

Papworth and Crosland (2005) describe the implementation of a large

whole systems intervention across organisations concerned with mental
health provision in North Tyneside. It consisted of a large whole systems
event (Weisbord and Janoff 1995) and subsequent phased service map-
ping and project work running over three years. The main reported
benefit of the intervention was that it was seen as providing a catalyst for
deeper systemic change through challenging existing values and assump-
tions about mental health services. Its primary care orientation also raised
the profile of mental health beyond the usual boundaries of specialist
services. As one interviewee described: ‘It [the project] has actually made
people sit up and say “how can we do this better?” and “what can we
do?” It has got the whole system seriously looking now at how they can
contribute to a more co-ordinated approach’ (p. 525). However, the
158 Healthcare management

authors also highlighted the following problems in achieving concrete

actions as a result of the approach:
• Creating a widely shared understanding of what a whole systems
approach really means can be difficult.
• The process can become identified with a particular agenda to the extent
that certain stakeholder groups may become alienated from the process.
• Stakeholders can be suspicious of the motives of the approach, believ-
ing there to be ‘hidden agendas’.
• Action plans can be difficult to achieve as the planning was often
devolved back to existing task groups rather than creating new
structures to undertake novel initiatives.
• Developing an appropriately inclusive approach can be challenging.
One key organisation, for example, was excluded because it had not
contributed to the funding of the intervention.
• There may be difficulty in engaging the people who should be
involved in implementation (in this case the therapists).
• Employing an internal facilitator meant that this individual was often
seen as taking responsibility for actions where an external facilitator
may have been better placed to ensure wider ownership of agreed
action plans.
• The long timescale meant that organisations changed over the period
of the programme and became more engaged with external demands
rather than the aims of the intervention.
Overall, the evaluation concluded that there is merit in short-term, large
whole-systems events to orientate people towards shared objectives,
articulate values and challenge assumptions about the nature of mental
health services and the roles of the respective stakeholders. However, this
case study suggests that a more embedded approach is needed to sustain
action over the longer term.

Embedding change in the system

Bolden’s (2004: 23) review of the impact of leadership concluded: ‘At an

organisational level, management and leadership appear to have an effect
on a range of outcomes, but only as part of a more general set of [human
resource management] practices. It is the leader’s influence on
employee motivation and commitment that appears to have the greatest
impact, rather than any specific characteristic or behaviour of the leader
per se.’ This chimes with research on leadership that highlights the much
greater concern that staff have with their immediate managers rather than
leaders at the top of their organisations (Shamir 1995; Alimo-Metcalfe
and Alban-Metcalfe 2004). Leadership is an enabler of optimal staff per-
formance, building from the best values they bring to their work, and
shaped by the needs of the prevailing circumstances. West and Markie-
wicz (2004) described the challenge of improving the morale and
 Managing in mental health 159

effectiveness of the workforce as helping staff achieve clarity about what

they should be doing and creating environments in which they felt
valued, supported and respected. As a values-based framework, the mental
health field benefits from having a formulation of ‘Ten Essential Shared
Capabilities’ developed through focus groups with service users, carers,
managers, academics and practitioners (Hope 2004; see Table 9.2) The
shared capabilities can also form the basis of a framework for appraisal and
personal development plans for both professional and non-professionally
affiliated mental health staff. Some of these leadership issues are illustrated
in the overleaf case study.

Table 9.2 The ten essential shared capabilities for mental health practice
1 Working in partnership. Developing and maintaining constructive working relationships with
service users, carers, families, colleagues, lay people and wider community networks. Working
positively with any tensions created by conflicts of interest or aspiration that may arise between the
partners in care.
2 Respecting diversity. Working in partnership with service users, carers, families and colleagues to
provide care and interventions that not only make a positive difference but also do so in ways that
respect and value diversity including age, race, culture, disability, gender, spirituality and sexuality.
3 Practising ethically. Recognising the rights and aspirations of service users and their families,
acknowledging power differentials and minimising them whenever possible. Providing treatment and
care that is accountable to service users and carers within the boundaries prescribed by national
(professional), legal and local codes of ethical practice.
4 Challenging inequality. Addressing the causes and consequences of stigma, discrimination, social
inequality and exclusion on service users, carers and mental health services. Creating, developing or
maintaining valued social roles for people in the communities they come from.
5 Promoting recovery. Working in partnership to provide care and treatment that enables service
users and carers to tackle mental health problems with hope and optimism and to work towards a
valued lifestyle within and beyond the limits of any mental health problem.
6 Identifying people’s needs and strengths. Working in partnership to gather information to
agree health and social care needs in the context of the preferred lifestyle and aspirations of service
users, their families, carers and friends.
7 Providing service user centred care. Negotiating achievable and meaningful goals, primarily
from the perspective of service users and their families. Influencing and seeking the means to achieve
these goals and clarifying the responsibilities of the people who will provide any help that is needed,
including systematically evaluating outcomes and achievements.
8 Making a difference. Facilitating access to and delivering the best quality, evidence-based, values-
based health and social care interventions to meet the needs and aspirations of service users and their
families and carers.
9 Promoting safety and positive risk taking. Empowering the person to decide the level of risk
they are prepared to take with their health and safety. This includes working with the tension between
promoting safety and positive risk taking, including assessing and dealing with possible risks for service
users, carers, family members, and the wider public.
10 Personal development and learning. Keeping up to date with changes in practice and
participating in lifelong learning, personal and professional development for oneself and colleagues
through supervision, appraisal and reflective practice.

Source: Department of Health (2004).

160 Healthcare management

Case study 2: Worcester Mental Health Partnership

The Worcester Mental Health Partnership Trust achieved the worst

possible NHS performance star rating in 2004. A critical report from the
Commission for Healthcare Improvement suggested it needed to
improve its governance structures, risk management and clinical audit
mechanisms (Box 9.1). In its journey from the worst to the best perform-
ance rating, some key lessons were learned (see Forrest 2005 for a fuller
account).

Box 9.1 Leadership issues

• An initial focus on getting the right people into the right jobs with attention to
basic good human resource practice was key.
• Recognition, particularly by the chair and non-executive directors of the
board, that a schism existed between the trust board and the staff, was
instrumental in turning the trust around. There was a need to promote
ownership of organisational performance, so the chair and chief executive
devoted considerable attention to ‘earthing’ themselves in the grassroots of
the organisation by getting out to places where care was delivered.
• The team realised they needed high calibre leadership throughout the
organisation, including new board membership and middle management
changes.
• New ways of working were encouraged, for example, by giving permission for
the consultant to not see every user.
• A 15-member project board was established to develop a detailed service
development plan. This included clear protocols, each with an identified
director responsible for implementation, a service lead, the desired outcome
and a target date for completion.
• A forum was created where new ways of working could be discussed.
• A positive culture of risk taking, with risk management an integral part of the
organisation’s service development plan, was created.
• The Care Programme Approach was remodelled to reflect new ways of
working.
• Strong medical leadership was achieved with generic leadership skills
developed in the medical workforce.

Source: Forrest (2005)

Conclusion

There is a series of future challenges for individuals managing in mental

health. The increasing presentation and recognition of mental health
problems means there are considerable pressures to increase the current
mental health workforce (Appleby 2004; Layard 2004). The demands of
the new policy agenda and the aspirations of users and their supports
require that managers in mental health create new partnerships and work
 Managing in mental health 161

within the new mechanisms for planning and delivery. Strong leadership
will be needed to establish and manage mental health teams within this
challenging environment.
In essence, mental health managers will need to be able to help profes-
sionals from different backgrounds communicate effectively both within
and between teams. Leadership and improvement work will need to
be better integrated and conducted in contexts where there is effective
vertical (across hierarchies) and horizontal (across teams, organisations,
sectors) integration. At local levels, different leaders and management
initiatives will need to be better coordinated to achieve a multiplier
effect. Leadership development itself needs to be well led to avoid per-
petuating the ‘silo mentality’ that characterises much health and social
care (Edmonstone and Western 2002). Whilst the new commissioning
environment provides an opportunity to achieve many of these aspir-
ations, leaders will need to work cooperatively to develop new govern-
ance arrangements that increase the role of users and their supports in
commissioner-led, continuous quality improvement. Perhaps, above all,
managers of mental health services will need to model values concerned
with recovery, choice, equality and social inclusion.

Summary box

• Mental health managers are working in an environment of policy change and

fiscal constraints.
• Good management is ultimately demonstrated through improvement in
provision for services users and their supports.
• Engaging the hearts and minds of the right breadth of stakeholders is a
longstanding challenge. Working appreciatively and respectfully at the level of
people’s own beliefs about the current situation and their aspirations may
offer a way forward.
• Management and leadership are enacted through relationships and for much of
health and social care this means relationships within teams. Good team
design and support is therefore critical.
• Managers of mental health services need to model values concerned with
recovery, choice, equality and social inclusion.

Self-test exercises

1 As manager of an early intervention team, the health purchasing/

insurance organisation informs you that the funding stream for next
year is less than predicted and you need to think how to best reshape
your service. What issues does this raise in terms of service delivery,
team morale, future service development and relationships between
your team and other mental health teams in your locality? What tools
could you use to help you in your decision making process?
162 Healthcare management

2 In your capacity as a mental health manager, describe how you could

use the Ten Essential Shared Capabilities for Mental Health Practice
(see table 9.2) to help you reflect on team development, recruitment
policies and procedures, your organisation’s annual appraisal processes
and outcomes for people who use services.
3 As a senior manager in a mental health provider organisation you
receive a letter from a local service users’ group asking for greater
involvement in decisions about the development of community men-
tal health services in your locality. Think about how you would
respond to this request, who you might involve, how you might man-
age opposition from other stakeholders to this request and strategies
you would need to put in place to ensure the process was positive and
productive.

References and further reading

Alimo-Metcalfe, B. and Alban-Metcalfe, J. (2004) Leadership in public sector

organisations. In J. Storey (ed.) Leadership in Organisations: Current Issues and
Key Trends. Abingdon: Routledge.
Appleby, L. (2004) The National Service Framework for Mental Health – Five Years
On. London: Department of Health.
Bolden, R. (2004) What is Leadership? Leadership South West Research Report.
South West Development Agency. www.leadershipsouthwest.com
Cameron, M., Edmans, T., Greatley, A. and Morris, D. (2003) Community Renewal
And Mental Health: Strengthening the Links. London: King’s Fund.
Commission for Healthcare Audit and Inspection (2005) Survey of Users 2005.
Mental Health Services. London: Healthcare Commission.
Dawson, J., West, M. and Beinart, S. (2005) NHS National Staff Survey 2004.
Summary of Key Findings. London: Commission for Healthcare Audit and
Inspection.
Department of Health (DH, 1999) National Service Framework for Mental Health:
Modern Standards and Service Models. London: Department of Health.
Department of Health (DH, 2000) The NHS Plan. London: Department of
Health.
Department of Health (DH, 2002) Mental Health Policy Implementation Guidance:
Community Mental Health Teams. London: Department of Health.
Department of Health (DH, 2004) The Ten Essential Shared Capabilities: A Frame-
work for the whole of the Mental Health Workforce. Department of Health,
London.
Department of Health (DH, 2004a) Choosing Health: Making Healthy Choices
Easier. London: The Stationery Office.
Department of Health (DH, 2004b) Making Partnership Work for Patients,
Carers and Service Users. A Strategic Agreement between the Department of Health,
the NHS and the Voluntary and Community Sector. London: Department of
Health.
Department of Health (DH, 2005a) Commissioning a Patient-Led NHS. London:
Department of Health.
Department of Health (DH, 2005b) Delivering Race Equality in Mental Health
Managing in mental health 163

Care: An Action Plan for Reform Inside and Outside Services and the Government’s
Response to the Independent Inquiry into the Death of David Bennett. London:
Department of Health.
Druss, B., Rohrbaugh, R., Levinson, C. and Rosenheck, R. (2001) Integrated
medical care for patients with serious psychiatric illness. A randomised trial.
Archives of General Psychiatry, 58: 861–8.
Edmonstone, J. and Western, J. (2002) Leadership development in healthcare –
what do we know? Journal of Management in Medicine, 16(1): 343–7.
Forrest, E. (2005) Stars in their eyes. Health Service Journal, 20 October:
22–4.
Geller, J.L., Brown, J.M., Fisher, W.H., Grudzinskas, A.J. and Manning,
T.D (1998) A national survey of ‘consumer empowerment’ at the state level.
Psychiatric Services, 49: 498–503.
Healthcare Commission and Commission for Social Care Inspection (2005)
Partnership Review of Community Mental Health and Social Care Services for Adults
aged between 18 and 65. Report on Consultation and Engagement Events. London:
Healthcare Commission.
Hope, R. (2004) The Ten Essential Shared Capabilities. A Framework for the Whole of
the Mental Health Workforce. London: NIMHE.
Kate, N., Craven, M., Crustolo, A.M., Nikolaou, L. and Allen, C. (1997) Integrat-
ing mental health services within primary care. A Canadian programme.
General Hospital Psychiatry, 19: 324–32.
Layard, R. (2004) Mental Health: Britain’s Biggest Social Problem? Paper prepared
for No. 10 Downing Street Strategy Unit. www.strategy.gov.uk/downloads/files/
mh_layard.pdf
Lester, H.E. and Glasby, J. (2006) Mental Health Policy and Practice. Basingstoke:
Palgrave Macmillan.
McLeod, H. (2005) A review of the evidence on organisational development in
healthcare. In E. Peck (ed.) Organisational Development in Healthcare. Oxford:
Radcliffe.
McNulty, T. and Ferlie, E. (2002) Re-engineering Healthcare: The Complexities of
Organisational Transformation. Oxford: Oxford University Press.
Mahoney, C., Nixon, D. and Aubery, R. (2004) Strengthening the Capacity and
Capability of Mental Health Commissioning Systems in Cheshire and Merseyside to
Deliver the Modernisation Programme. North West Development Centre, Hyde:
NIMHE.
Means, R., Richards, S. and Smith, R. (2003) Community Care: Policy and Practice,
3rd edn. Basingstoke: Palgrave Macmillan.
NIMHE (2003) Counting Community Teams: Issues In Fidelity And Flexibility.
London: NIMHE.
NIMHE (2005) Making it Possible: Improving Mental Health and Wellbeing in
England. London: NIMHE.
Papworth, M. A. and Crosland, A. (2005) Health service use of whole system
interventions. Journal of Management Development, 24(6): 519–29.
Reinertsen, J. R., Pugh, M., Bisognano, M., Pearce, J. and Beasley, C. (2004) What
Will It Take to Move the Big Dots? Briefing Paper. Institute of Healthcare
Improvement. www.ihi.org
SCMH (2003) Money for Mental Health; A Review of Public Spending on Mental
Health Care. London: Sainsbury Centre for Mental Health.
Shamir, B. (1995) Social distance and charisma: Theoretical notes and an explora-
tory study. Leadership Quarterly, 6: 19–47.
Singleton, N., Bumpstead, R., O’Brien, M., Lee, A. and Meltzer, H. (2001)
164 Healthcare management

Psychiatric Morbidity Among Adults Living in Private Households, 2000. London:

The Stationery Office.
US Department of Health and Human Services (1999) Mental Health: A Report of
the Surgeon General–Executive Summary. Rockville, MD: National Institutes of
Health, National Institute of Mental Health.
Wanless, D. (2002) Securing Our Future Health: Taking a Long-Term View. London:
HM Treasury.
Weisbord, M.A. and Janoff, S. (1995) Future Search. San Francisco: Berrett-
Koehler.
West, M. A. and Markiewicz, L. (2004) Building Team-based Working. Oxford:
Blackwell.
WHO (2001) Strengthening Mental Health Promotion. Fact sheet no. 220. Geneva:
World Health Organisation.
WHO (2003) Mental Health in the WHO. European Region Fact sheet EURO/
03/03. Geneva: World Health Organisation.
WHO Europe (2005) Mental Health Declaration for Europe. Copenhagen: World
Health Organisation.

Websites and resources

Auseinet. Australian network for promotion, prevention and early intervention

for mental health, and suicide prevention (Auseinet): www.auseinet.com/
Canadian Mental Health Association. Nationwide charitable organisation
that promotes the mental health of the whole population and supports a
recovery focus within mental health services: www.cmha.ca/bins/index.asp
Care Services Improvement Partnership. Launched in 2005 and aims to
support positive changes in services and in the well-being of people with
mental health problems, learning disabilities, people with physical disabilities,
older people with health and social care needs, children and families with
health and social care needs and people with health and social care needs
within the criminal justice system: www.csip.org.uk
Health management online. Scottish-based generic health management web-
site with a good library and a range of updated policy documents and useful
links: www.healthmanagementonline.co.uk/index.asp
Improvement leader’s guides. Provide practical advice on key improvement
tools that will enhance local decision making such as process mapping,
involving users and carers effectively, and mapping demand and capacity:
www.wise.nhs.uk
International Initiative for Mental Health Leadership. Joint endeavour of
the UK National Institute for Mental Health in England, US Substance
Abuse and Mental Health Service Administration (www.samhsa.gov/ ) and
the Mental Health Director of the Ministry of Health New Zealand
(www.moh.govt.nz/mentalhealth.). It is intended to facilitate the sharing of best
practices and to provide needed support and collaboration for leaders of
mental health services to develop robust managerial and operational practices:
www.iimhl.com
NHS-based Health Management Specialist Library. Aims is to provide
timely and efficient access to high quality information resources for health
managers, clinical managers and leaders and those involved in commissioning
health services: http://libraries.nelh.nhs.uk/healthManagement
Managing in mental health 165

NHS Networks. Means of promoting and connecting the many networks

which exist throughout the NHS and encouraging the formation of new
ones: www.networks.nhs.uk
Sainsbury Centre for Mental Health. Works to improve the quality of life for
people with mental health problems, carries out research, analysis, training and
development to improve practice and influence policy in public services;
ranges from national research into the key issues in mental health to local
development projects that tackle some of the most difficult issues services
face: www.scmh.org.uk
US National Institiute of Mental Health. Lead Federal agency for research
on mental health problems, including basic science and clinical studies and a
programme to educate the public about mental health issues:
www.nimh.nih.gov/
 10 Service and capital development
Andrew Hine

Introduction

This chapter looks at how to develop a business case for a new healthcare
service or capital development. It considers first the broader environment
facing healthcare providers, taking into account expected patient
demand, competition and available resources. It then moves on to exam-
ine a seven-step approach to developing a business plan for capital
investment, including the use of sophisticated evaluation and financial
modelling techniques to help make more objective choices. The various
sources of funding for capital development are discussed, with an
emphasis upon the use of private finance initiatives (PFIs) and other new
schemes.
The increasing focus in some health systems on the creation of a
market for customers in public healthcare fundamentally alters the way
that planners assess the viability of a new service. In the past, funding
would often have been in the form of guaranteed block payments
whereas now the income in most cases has to be earned on an ongoing
basis. As with any private business, revenues are not guaranteed, with
customers (patients) having the choice to go elsewhere for their treat-
ment. This introduces a much greater level of uncertainty and risk, with
planners having to be more rigorous in drawing up a business case, taking
into account the expected level of demand for the service, the alternatives
available to patients, the options for delivering the service and the
expected lifespan of the service. Ultimately, any new service would only
be developed if projected income could cover its costs. Moving towards
such a market-based approach requires a big change in mindset for plan-
ners, and not all will find it easy to adapt to this new commercial reality.
Building up a comprehensive business case brings a new level of rigour to
the planning process with the use of modelling techniques and sensitivity
analysis, all designed to minimise the risk of launching a service. One
important development is the need to engage stakeholders such as clini-
cians, service managers, commissioners and patients at an early stage to
get buy-in.
 Service and capital development 167

An example of a more rigorous private sector approach to healthcare

capital development is that of the private finance initiative (PFI) in the
NHS. Within PFI, the onus on meeting deadlines and budgets is placed
firmly in the hands of the private sector, with penalties applied to those
failing to meet targets. The consortia backing these schemes are in turn
attracted by predictable revenue streams as the payment terms tend to be
25 to 30 years. With customer choice becoming more widespread and
the emergence of private sector providers of core services, public–private
partnerships have become a permanent feature of healthcare provision in
the UK and many other health systems.

Section 1: Developing a business plan

Planning new medical services in the acute or primary care sector needs
to follow a similar approach to new product development in a com-
mercial organisation, taking into account patient demand and competi-
tion for services, and effective use of resources. Rather than putting
forward a single proposal, planners must evaluate a number of options
in a rigorous fashion and we set out here a process for such an appraisal.

Assessing demand – is there a need for the new service among

the catchment population?

The first step is to research the level of need for the proposed service,
taking into account age profiles, income levels, ethnicity and access to
transport. The planner should also consider epidemiological needs
within the local health economy, major health issues facing the popula-
tion, mortality rates, hospitalisation rates by key disease areas and the
health profile of the population by disease area. For those elective ser-
vices where the patient can choose his or her provider, this research
should also extend to surrounding localities. At the end of this process,
the planner should have a good idea of the number and type of potential
patients per year.

Competitive analysis – what level of competition will you face

in providing the service?

In an open market, where the patient can choose from a number of

providers, it is important for a provider to be able to assess how competi-
tive their new proposed offering will be. This entails an analysis of the
strengths and weaknesses of existing providers, and the threats and
opportunities in the overall market place. Michael Porter’s model of the
competitive environment (2004) represents an effective analytical tool in
this context. Two key questions for a provider to ask are:
168 Healthcare management

• If there are no existing competitors, how easily could a new provider

emerge?
• Are there barriers to entry such as high capacity costs, scarce resources
and lack of access to appropriate technology?
These factors can clearly affect the attractiveness to a provider of entering
a particular market for a service.

Political, social and technological forces

The competitive environment within which a healthcare provider is
located could also be affected by changes in the political, social and
technological landscape, all of which have an impact on the potential
success of the new service.

Political factors
Despite the move towards a more open market in healthcare services in
some countries, healthcare markets are usually still tightly regulated and
controlled through government policy. Any service provision develop-
ments must therefore take into account foreseeable changes in policy and
attempt to mitigate such risks.

Social factors
Demand for particular services could be adversely affected by broader
societal trends such as an improved health consciousness and a move
towards more localised provision of healthcare.

Technological factors
Are there new technologies – such as superior equipment – in the pipe-
line that could supersede the proposed service and reduce future
demand?

Service design options – how can the service best be

delivered?

An acute hospital provider has a number of options available when

designing a new service and needs to weigh up the pros and cons of
various delivery models including:
• service redesign
• refurbishing existing capacity
• privately financed, self-financed or publicly financed new build
(depending on the national policy context)
• buying capacity in other facilities and providing the service from these
sites
• contracting with another public or private sector provider
(outsourcing)
Service and capital development 169

• redesigning existing services to accommodate the new service

• some blend of the above.

Resources
The planner needs to consider where the services would be based and
whether any additional technical capacity is needed. Human resource
requirements such as availability of consultants, GPs, nurses and allied
health professionals must also be assessed, including any relevant training
needs.

Guidelines
At the very least, any proposition must meet appropriate national guide-
lines, for example, in the English NHS this would include those outlined
in national service frameworks (NSFs) and in National Institute for
Health and Clinical Excellence (NICE) policies (DH 1998). If any of the
options do not meet these basic standards they should be eliminated from
further consideration.

Risks
When presenting the various options, it is important to use a series of
standardised headings, highlighting the differences between the options.
In particular there should be a clear indication of how the patient path-
way is affected; that is, how the patient would move through the system
from first contact with the service through to discharge. For each option
there is also a need to assess the level of risk; for example, is there suf-
ficient workforce capacity available to deliver the new service? What are
the clinical risks within an option? What are the financial risks? What are
the political, social and technology risks?

Engaging stakeholders

Given that the success of any service will ultimately be determined by its
acceptability to users and those who deliver the service, it is vital to get
the views of key stakeholders such as clinicians, service managers, com-
missioners and patients. This helps with testing of the attractiveness of a
new idea as well as gaining valuable buy-in from those likely to use the
new service.

Evaluation criteria – narrowing down the options

Faced with multiple options about how to develop a service, the planner
needs to have a robust way of reducing these to a more manageable
number. A formal evaluation should take into account criteria such as
170 Healthcare management

financing, income, clinical viability, human resource implications and

access to services and organisational capacity. By giving each of these a
weighting, the various options can be ranked according to their overall
attractiveness. If this process is carried out at the option development
stage, any low-scoring service concepts can be eliminated early on and
planners may decide upon some absolute thresholds that all options have
to meet in order to be viable.

Costing options – will projected revenue cover your cost base?

At the service design stage it is reasonable to include cost and income

assumptions at a general rather than a detailed level. The following stage
of development, the outline business case (OBC), will go into more
depth and this is explored in the next section of this chapter. The object-
ive at this point is to get a sufficiently broad view of the costs and
revenues to be able to draw up a shortlist of two to three preferred
alternatives.
In estimating costs, planners should call on experts with experience
within their own organisation as well as with relevant service providers.
When making income projections, the cost of service delivery needs to
be compared with any current national schedule of tariffs for that particu-
lar service. To provide an accurate reflection of costs for the service, the
cost models should incorporate human resources costs for service deliv-
ery, including all medical professional staff, management costs, cost of
supplies and infrastructure maintenance costs. These overall costs should
be matched against anticipated activity to calculate the cost per full con-
sultant episode (or whatever the standard unit of activity used for health
services) that can then be compared to the tariff. By carrying out a
sensitivity analysis, the planner can assess how increases or decreases in
activity would affect the tariff and therefore the overall income of the
healthcare providers.

Partnering in service development and delivery – adding a new dimension to

service delivery

Of the various options available to develop better services, the area that is
significantly underexploited in some health systems is the use of partner-
ships. In the English NHS, the creation of a more plural market in
healthcare provision has expanded the number of choices available to
commissioners and patients and this trend seems set to continue. At the
primary care level there has been an international move towards greater
integration of social and primary care for older people’s services and
long-term condition management (see Chapter 7). However, for acute
service planners and commissioners there is an opportunity to make
radical alterations to service delivery through the development of
 Service and capital development 171

partnerships with the private and voluntary sectors. Within this new
environment, hospital providers can explore partnering with GPs,
independent sector providers and technology companies to deliver
innovative models of care and this offers the organisation the potential of
gaining a true competitive advantage.

Section 2: Developing a business case for capital investment

Many new services require significant investment in buildings and

equipment. An outline business case (OBC) brings a high degree of
analytical rigour to the selection and evaluation of different capital
options. This will ensure that any decision is cost effective and in line
with the provider’s and commissioner’s broader strategic objectives. The
process inevitably combines quantitative analysis with professional
judgement and the general principles outlined earlier in this chapter can
be applied in a seven-step framework that represents commercial best
practice for developing a business case, involving the carrying out of a full
cost–benefit analysis and the use of financial modelling techniques. The
NHS Capital Investment Manual recommends using three phases for plan-
ning a capital project (DH 1994), as set out in Figure 10.1. Although the
overall degree of analysis carried out should reflect the size and complex-
ity of the project, all investments should, however, receive a rigorous and
systematic appraisal.

Figure 10.1 Three phases of planning a capital project

Setting the strategic context – making sure the service is consistent with the
broader strategy of the organisation

In the course of its strategic planning process, a provider will develop

service proposals that require capital investment. Any new service should
therefore be sustainable and fit clearly into the wider vision. Setting the
strategic context will normally include an initial appraisal of the various
delivery options and in all cases an assessment of the potential funds that
could be raised, to ensure that the project is at the very least affordable.
This will prevent time and money being spent on business cases that
could never come to fruition. The strategic plan should take into con-
sideration the broader objectives of the organisation and the competitive
environment including:
172 Healthcare management

• commissioner requirements and the service delivery objectives of the

provider
• forecast changes in service demand
• prospective changes in care models and methods of service delivery
• the financial position of the organisation
• the estate, its condition and contribution to achieving the business
objectives of the organisation
• the local/regional healthcare market and likely future developments.
The strategic context will also outline the framework within which
investment decisions are to be evaluated. The overall seven-step frame-
work for developing a business case is set out in Figure 10.2.

Figure 10.2 Seven-stage framework for developing a business case

Stage 1: Objectives and benefits criteria – setting clear goals

for the project

Having identified a need for a new service, a set of clear achievable

objectives must be agreed and these will be the foundation for the
business case. Any options that are developed should meet these key
objectives as well as providing clinical and economic benefits such as:
• improved service access
• improved clinical standards
• earlier interventions
• improved cost efficiency.
Such benefits criteria must be clearly defined for each option and will be
a benchmark for judging the overall attractiveness of the investment.
Service and capital development 173

Stage 2: Generating options – seeking creative solutions

By encouraging free and open thinking from a wide range of stake-

holders, planners will give themselves the best chance of drawing up a
strong list of options. Contributions should be sought from service users
(patients), service professionals and external advisers, whilst brainstorm-
ing sessions could be used to generate a range of ideas. It may also be
helpful to look at how other healthcare organisations approach similar
challenges. However, the process must be rigorous and objective in
developing a number of options, avoiding the situation where a preferred
option is steamrollered through without duly considering alternatives.
A shortlist would typically include four to six options including a
‘do-nothing’ scenario.

Stage 3: Measuring the benefits – enabling meaningful

comparisons of options

To carry out a full economic analysis, there is a need to measure the

extent to which each investment option meets the agreed benefit criteria.
In some cases it may also be possible to place a cost on each benefit to
allow a true cost–benefit analysis. Likewise, there will be a need to assess
the level and type of benefit. For this, a ranking matrix should be used as
follows:
1 Agreeing a weighting for each benefit criterion according to its level
of importance.
2 Scoring each option against each benefit criterion using an agreed
ranking scale (e.g. 1 = least satisfactory, 5 = most satisfactory).
3 Calculating a weighted benefit score for each option by combining the
individual scores and the weightings attached to each benefit criterion.
The ranking process is inevitably to some extent subjective and it
is therefore helpful to include as wide a range of stakeholders as possible
to even out any bias. In addition to healthcare managers, both health
professionals and service users (patients) should be involved.

Stage 4: Calculating the costs – creating a flexible model

There are two types of cost associated with each option:

• financial costs: capital and revenue
• economic costs: the opportunity costs of using resources already
owned and the additional costs that would be borne by others.
Different projects have different lifespans, so the net present value (NPV)
should be calculated for each option to allow a fair comparison, using an
agreed discount rate. Whilst the cost estimates should be as accurate as
possible, one should avoid spending an excessive amount of time pulling
174 Healthcare management

together highly detailed numbers. Ideally, one should put together a fairly
sophisticated financial model that will assess the impact of changes to
specifications for each option. This will let planners refine the design of
each option and will be useful for the sensitivity analysis.

Stage 5: Assessing sensitivity

Any assumptions about costs and benefits for each option are subject to
changes in the environment. These changes can alter the assessment and
ranking positions and therefore the model needs to be flexible enough to
cope, allowing a sensitivity analysis to be carried out on the following:
• the weighting applied to each of the benefits criteria
• the scores attributed to each option against each benefit criterion
• the resource assumptions (e.g. buildings specification, staffing levels) of
each option.
By testing the sensitivity of various types of changes one can identify
those variables that have the greatest impact upon the overall scores. The
probability of such changes should be taken into consideration when
carrying out the assessment and rankings.

Stage 6: Identifying the preferred option – towards objective

decision making

All the information should now be brought together in one table

incorporating the weighted benefits scores and the estimated total costs
for each option. These may show that one option clearly outperforms the
rest, but equally the results may be inconclusive, as illustrated in Table
10.1.

Table 10.1 Weighted benefits scores and estimated costs

Option 2 Option 3

Scenario 1
Weighted benefits score 13.7 14.6
Total costs (NPV) £2.4 m £2.3 m
Scenario 2
Weighted benefits score 13.7 14.6
Total costs (NPV) £2.4 m £2.4 m
Scenario 3
Weighted benefits score 13.7 14.6
Total costs (NPV) £2.4 m £2.56 m
Scenario 4
Weighted benefits score 13.7 14.6
Total costs (NPV) £2.4 m £2.7 m
 Service and capital development 175

In scenario 1 in Table 10.1, the decision is straightforward with option

2 having both the highest weighted benefits score and lowest cost and the
same is true of scenario 2, where option 2 has equal costs to option 1 but
a higher benefits score. Scenario 3 is more difficult to interpret. Option 2
has a higher weighted benefits score and total costs which are both mar-
ginally higher than for option. With scenario 4, the benefits score of
option 2 is still a little higher but its total costs are 12.5% higher and may
lead you to favour option 1. These examples show up the limitations of
this approach, and where there is no clear winner a degree of subjective
judgement will have to be employed. These tables do not take into
account the sensitivity of the various options to changes, which could
affect the rankings – and the cost estimates – still further.

Stage 7: Developing and presenting the outline business case

(OBC) – letting key decision makers reach an informed
judgement

The OBC must be presented in a report that summarises the results of

the strategic review and the investment appraisal. This document must be
concise and easy to digest, with consistency between the qualitative and
quantitative findings. The level of detail for cost and benefits assessments
should be tailored to meet the particular requirements of the decision
makers and be proportionate to the nature and scale of the proposed
project.

Full business case (FBC) – developing a project blueprint

This includes the findings of the outline business case plus plans for
managing and monitoring the project, post-project evaluation and guid-
ance on how to manage any risks that might impact its success. However,
the FBC will vary according to the type of financing adopted. If private
funding is the chosen route within the NHS, then the planners will have
to go through the various stages of the Private Finance Initiative (NHS
Executive 1999) procedures before completing the full case. This is in
contrast to more conventional capital finance appraisal, and the NHS
Capital Investment Manual (DH 1994) has a separate section offering guid-
ance for PFI projects.
The physical design of the proposed building is an important considera-
tion when presenting the FBC, as this has significant implications for
both the delivery of services and the overall project costs. Those involved
in design should seek advice and help from health professionals delivering
the services and service users (patients), and also refer to government
guidelines and general best practice. Where possible it will be beneficial if
they could incorporate innovative features into the design.
176 Healthcare management

Section 3: Capital schemes – from option appraisal to commissioning

Public sector capital projects have traditionally been considered by poli-

cymakers to be relatively poorly managed, often coming in late and over
budget. The move towards public–private partnerships in the NHS was
designed to introduce greater efficiency into the process. The health
service has been in the vanguard of the private finance initiative in public
sector in England, with both the infrastructure and the associated services
being funded privately and paid for over time by the NHS. This concept
is now also being applied in other countries in Europe, notably Portugal,
Spain, France and more recently Greece. PFI schemes are based around
long-term partnerships between the public and private sectors, and in the
case of the NHS it is the health service that continues to be responsible
for the provision of clinical care to patients. The private sector partner
will generally take the form of a consortium made up of a construction
company, a facilities management company and a financier providing
equity and will typically assume responsibility for the management of
facilities and support services within the new hospital, as part of the
overall PFI contract.

The PFI in the NHS – progress to date

At the time of writing there have been around 680 completed PFI deals
worth some £40 billion across all sectors in the UK. In the acute hospital
sector alone there are over £5 billion of schemes that have reached
financial close and over £2 billion across 24 schemes are operational. A
further £6 billion is currently at the procurement stage, including the
scheme at Barts and the London NHS Trust, which has a total capital
value well in excess of £1 billion. A further £4 billion of schemes were
approved in July 2004 and have yet to start procurement, although in
early 2006 there were signs that the government was starting to challenge
the financial framework of some PFI schemes (O’Dowd 2006).
A recent survey into the effectiveness of PFI has been carried out by
KPMG in cooperation with the Business Services Association. This con-
cluded that PFI contracts are operationally effective and that their com-
pliance with service level agreements is high, with 98% of respondents
reporting that they were meeting their service level agreements. This
supported the overwhelmingly positive views that respondents held
about the performance of their projects.
However, there has been considerable criticism and questioning of PFI
policy in the academic literature (Pollock et al. 1997; Gaffney et al. 1999;
Pollock et al. 1999, 2002), with much of this focused on assertions that
PFI ultimately costs more than public financing (due to the require-
ment to make a return for private sector investors) and hence incurs a
long-term debt to be serviced by taxpayers and NHS funders over
the long-term. Indeed, Allyson Pollock, the best-known critic of PFI, has
Service and capital development 177

asserted that PFI more than doubles the cost of capital as a percentage of
NHS trusts’ operating income (Pollock et al. 2002). Others such as Sussex
(2001) have developed a critique of PFI that asserts that whilst there are
acknowledged potential benefits from the policy (e.g. lower construction
costs, quicker delivery of projects and better maintained hospitals) there
are also some clear (and increasingly recognised) limitations in relation to
higher costs of borrowing and how far risk is really transferred to the PFI
provider.

Guidance for PFI projects

Developing a common approach

The Capital Prioritisation Advisory Group (CPAG) was established in
the NHS in 1997 to advise ministers on how to prioritise capital schemes
on the basis of health needs. The CPAG also assesses whether individual
schemes are affordable and has ultimate responsibility for deciding
whether projects go ahead or not. In 1999 the NHS Executive (as it then
was) published the guidance document: Public Private Partnerships in the
National Health Service: The Private Finance Initiative (1999) which provides
practical advice to NHS bodies considering a PFI scheme. Part 2 of the
Guidance set outs the PFI procurement process. This was followed by the
publication of the NHS Standard Form Project Agreement and
Schedules.
In the NHS, many PFI schemes have been completed since the publi-
cation of guidance in the 1990s. The Private Finance Unit (PFU) has
published a substantial body of standard documents including procure-
ment documentation, output specifications and good practice guides. A
strategic outline case (SOC) is required for all capital schemes with an
expected value of £25 million or more with strategic health authorities
approving all trust and primary care trust schemes up to £25 million.
The Department of Health’s delegated limit for PFI and IT schemes is
£100 million and HM Treasury approval is required for all cases over
£100 million.

The procurement process – achieving a competitive and

comprehensive bid

Within a PFI process such as that in the NHS, after a scheme has been
initially prioritised at a national level, an outline business case will be
developed and carefully assessed. The Department of Health then
requires a draft ‘Invitation to Negotiate’ as well as outline planning con-
sent before procurement can start, with projects typically being adver-
tised in the European Journal. The tender proposal request should have
clear objectives and guidelines to ensure that all bids can be compared on
an equal basis. Having made a choice, a preferred bidder letter should be
178 Healthcare management

produced, for this is now a mandatory Private Finance Unit requirement

in the NHS and confirms the status of the preferred partner, the prin-
cipal contract terms, the timetable to close and most significantly the
(unitary) payment for the entire tenure of the contract term. The bid-
ders’ financiers are also required to confirm their support and agreement
by countersigning the letter.

Local Improvement Finance Trusts (LIFT) – helping fund

smaller developments

Capital schemes are needed for small as well as large-scale capital devel-
opments and a solution adopted by the English NHS in 2001 has been
the development of a PFI hybrid. This alternative funding route – Local
Improvement Finance Trust (LIFT) – was so named as it was designed to
provide a ‘lift’ to primary and community care in areas of high health
need. Traditional PFI for single one-off acute hospital developments has
not been considered appropriate when building a number of relatively
small, new, community-based healthcare facilities. Although LIFT is
broadly similar to PFI and subject to the same European Union pro-
curement process, it has two main differences. First, the public sector
entities (Partnerships for Health, a joint venture entity between the
Department of Health and Partnerships UK, and the local primary care
trusts) have a 40% stake in ‘Liftco’ (the principal LIFT entity). Second,
each scheme anticipates a number of smaller developments over time as
part of the local Strategic Service Development Plan. Forty-two LIFT
projects were announced in the first three waves of schemes and at the
time of writing 41 of these have reached financial close and a number
have signed second and third tranche schemes in their areas. The initia-
tive has been recognised by the National Audit Office as being effective,
providing good value for money and offering ‘an attractive way of secur-
ing improvements in primary and social care’ (National Audit Office
2005).

Why choose a PFI?

Although NHS trusts are required to consider the PFI option when
making a capital investment decision, there are still a large number of
conventional schemes funded purely by public money, although these
tend to be smaller in scale. As NHS foundation trusts get more freedom
over borrowing limits (Walshe 2003), a wider range of funding schemes
emerge. However, the accounting treatment of capital schemes in the
NHS continues to favour PFI, for some people assert that traditional
funding offers poor value for money (a claim challenged by the work of
Pollock and others), and crucially PFI expenses add to the nation’s public
sector borrowing figure, meaning that the cost of the asset is capitalised
and charged against a trust’s external financing limits.
 Service and capital development 179

The way in which capital schemes are accounted will affect the level of
risk and therefore their overall attractiveness and the main risk indicators
commonly applied are:
• design risk
• performance risk
• pricing risk
• demand risk
• operating cost risk
• residual value risk.
There is extensive guidance on this aspect that is available on Department
of Health and Treasury websites. A summary of the main alleged benefits
and challenges (risks) of a PFI approach to capital development to be
considered by healthcare providers when reviewing the potential options
open to them is as follows.

Principal benefits of PFI

• Brings private sector skills and expertise.
• Brings private sector finance and capital.
• Delivers budgetary certainty.
• Delivers quality of service over life of contract.
• Organisations only pay when service is delivered.
• Transactions can be accounted off the balance sheet.

Principal challenges or risks

• Market appetite and capacity may not be sufficient.
• PFI or public-private partnership procurement can be a lengthy and
costly process.
• Relatively inflexible contracts and structures over the long term.
• Private sector cost of finance is relatively higher than its public sector
equivalent.
• There is no absolute transfer of risk from the health system to the
private provider.

Financing: a review of the options available

The type of finance package chosen for a healthcare capital development

will affect the level of risk for the funding. Larger PFI schemes are gener-
ally funded by either bank financing, bonds or (in the case of larger
projects) a combination of both, with the European Investment Bank also
providing backing that usually comes with a bank guarantee. Some pro-
jects have been funded by the private sector without any need for third
party finance and refinancing is often also considered once the new
facilities have been completed and there is no further construction risk.
180 Healthcare management

This allows a PFI consortium to lower the cost of capital and therefore
reduce the revenue payments charged to the healthcare organisation.
Whatever type of funding is used, equity will also be required from the
project sponsors or third party specialist equity providers. This is the most
expensive type of funding as it carries the highest risk should any prob-
lems arise. Bank financing consists of debt that is issued by commercial
banks. This usually comprises the bulk of the funding requirement and is
the first form of funding to be repaid during the contract period. NHS
trusts and their commissioners (funders) are not prepared to accept the
risk of variable payments and therefore have to make fixed, index-linked
payments agreed in the long-term contract.

Conclusion

This chapter has demonstrated that healthcare capital developments,

being concerned with high-value and complex schemes, require the
same rigour and detail of planning and analysis as parallel developments
in other sectors. Whatever the overall funding of a healthcare system, the
processes by which capital schemes are proposed, planned, evaluated and
funded need to be stringent and in accordance with best business prac-
tice. Schemes also need to be able to demonstrate value for money,
whether the funder is the taxpayer, a health insurer, or individuals paying
for their care. In many countries, public–private partnerships are being
used as a way of managing the investment and risk associated with capital
development. Whilst such an approach has some clear benefits in terms of
responsiveness, it also brings potential problems in relation to the cost of
borrowing and the extent of transfer of risk. What is clear is that capital
development requires significant management expertise and acumen, and
as healthcare provision continues to develop (see Chapter 4), so the need
for flexible and responsive approaches to developing new buildings,
equipment and services will be heightened.

Summary box

1 Private finance is now an accepted way of funding health service projects in

many health systems.
2 Any new service must show that it satisfies latent demand in the market and is
consistent with the broader strategy of the acute trust.
3 The development of a business case should adopt the same approach as that
used in a commercial organisation.
4 A range of options for delivering the service should be developed and
rigorously assessed using objective criteria.
5 Financial modelling and cost–benefit analysis will help in selecting an option
that is affordable and meets the needs of patients and other stakeholders.
 Service and capital development 181

6 A private sector partner will generally be a consortium made up of a

construction company, a facilities management company and a financier.
7 With PFI, the risk of late completion and overspend is firmly in the hands of
the private sector.
8 However, PFI also entails significant risks to the health system, particularly in
relation to the long-term nature of the financial commitment in a context
where service provision is changing rapidly.
9 The procurement process for capital development should be transparent and
competitive.
10 New types of PFI solutions are being developed to help fund smaller
healthcare facilities and offer significant potential as patterns of care shift
towards more community-based models.

Self-test exercises

1 What do you consider to be the biggest factors influencing the success

or failure of a new service? How can you counter these risks when
developing a service development proposal?
2 In your experience, are business cases developed in a thorough and
objective manner, taking into account a range of options? If not, then
how could you implement a more professional approach?
3 How could you get a clear enough understanding of costs to build a
NPV and sensitivity analysis?
4 What are the pros and cons of a PFI approach as opposed to more
traditional capital funding methods?

References and further reading

Department of Health (DH, 1994) Capital Investment Manual. London: Depart-

ment of Health.
Department of Health (DH, 1998) A First Class Service. London: Department of
Health.
Gaffney, D., Pollock, A.M., Price, D. and Shaoul, J. (1999) The private finance
initiative: NHS capital expenditure and the private finance initiative – expan-
sion or contraction? British Medical Journal, 319: 48–51.
National Audit Office (2005) Innovation in the NHS: Local Improvement Finance
Trusts. London: The Stationery Office.
NHS Executive (1999) Public Private Partnerships in the National Health Service –
The Private Finance Initiative. London, NHS Executive.
O’Dowd, A. (2006) Three hospital PFI schemes are delayed while government
looks at their cost. British Medical Journal, 332: 196.
Pollock, A.M., Dunnigan, M., Gaffney, D., Macfarlane, A. and Majeed, F.A.
(1997) What happens when the private sector plans hospital services for the
NHS: Three case studies under the private finance initiative. British Medical
Journal, 314: 1266.
182 Healthcare management

Pollock, A.M., Dunnigan, M., Gaffney, D., Price, D. and Shaoul, J. (1999) The
private finance initiative: Planning the ‘new’ NHS: downsizing for the 21st
century. British Medical Journal, 319: 179–84.
Pollock, A.M., Shaoul, J. and Vickers, N. (2002) Private finance and ‘value for
money’ in NHS hospitals: A policy in search of a rationale? British Medical
Journal, 324: 1205–9.
Porter, M. E. (2004) Competitive Strategy: Techniques for Analyzing Industries and
Competitors. New York: Free Press.
Sussex, J. (2001) The Economics of the Private Finance Initiative in the NHS. London:
Office of Health Economics.
Walshe, K. (2003) Foundation trusts: A new direction for NHS reform? Journal of
the Royal Society of Medicine, 96: 106–10.

Websites and resources

Department of Health. Public–private partnerships site (England): http://

www.dh.gov.uk/ProcurementAndProposals/PublicPrivatePartnership/fs/en
HM Treasury Private Finance Initiative. Key documents: http://www.hm-
treasury.gov.uk./documents/public_private_partnerships/key_documents/
ppp_guidance_index.cfm
National Audit Office. PFI and PPP recommendations: http://www.nao.org.uk/
recommendation/
Office of Health Economics. Independent research and advisory service that
has published reports on capital development and PFI: http://www.ohe.org/
Partnerships UK. A joint venture that links public and private sector interests
in relation to public–private partnerships: http://www.partnershipsuk.org.uk
Scottish Executive. Financial Partnerships Unit: http://www.scotland.gov.uk/
topics/government/finance/18232/12255
World Bank. Infrastructure development resources and reports, including links
to ‘private participation’ resources: http://web.worldbank.org/WBSITE/
EXTERNAL/EXTABOUTUS/ORGANIZATION/EXTINFNET-
WORK/0,,menuPK:489896∼pagePK:64158571∼piPK:64158630∼
theSitePK:489890,00.html
 11 Healthcare system strategy
and planning
Neil Goodwin

Introduction

This chapter explores health service planning and strategy in the context
of future healthcare policy and organisation. The term ‘strategy’ is from
the Greek strategos, which means ‘general’. In the Greek city-states, the
military general was responsible for formulating and implementing a plan
for bringing the legislature’s policy decisions to fruition. The terms
‘strategy’ and ‘planning’ are often used interchangeably, and grand plans
can be viewed as strategies and vice versa. But the terms ‘policy’,
‘strategy’ and ‘resources’ have quite different meanings. Policy is the goals
and objectives of a government, or of an organisation or of services
provided by an organisation. Strategy and plans determine how those
goals and objectives are to be implemented using resources such as
capital, revenue, leadership capacity, organisational structures and the
workforce. Resources are sometimes confused with tactics but both are
related to how strategy is achieved. Tactics refers to the ‘know-how’ of
implementation, meaning the decisions and actions needed for success-
ful implementation; whereas resources are the strategy’s ‘with-what’ of
implementation (Davies 2000).
Strategies and plans can be formulated at different levels – government,
interorganisational partnership or network, organisation, service and
department. Organisations will often refer to their ‘corporate strategy’
meaning strategy that is used to achieve corporate-level policy goals and
objectives. Although, at a simple level, strategy is a design or plan for how
policy is to be achieved, ‘almost no consensus exists about what corporate
strategy is, much less how a company should formulate it’ (Porter 1987).
It is therefore not surprising that the concept of strategy can be viewed in
a number of different ways. Having said that strategy and planning are
interchangeable terms, defining strategy solely as a plan is rarely sufficient
because the implementation of strategy is equally important as its con-
tent. In that sense, strategy becomes a pattern in a stream of actions,
meaning strategy is consistency of behaviour by the organisation and its
leaders. Strategy can also be a position, specifically a means of locating an
184 Healthcare management

organisation or service in its environment or context. Strategy may also

be a ploy, meaning a specific manoeuvre intended to outwit another
organisation such as a competitor. Finally, strategy is also a perspective. If
strategic position looks outwards, seeking to locate the organisation or
service in the external environment, then strategic perspective looks
internally. In that context, strategy becomes the ingrained way of
perceiving the world.
What is most important to remember about strategy and planning is
that healthcare organisations and the services they provide do not stand
still. In common with other public service organisations and those in the
commercial and charitable sectors, organisations providing healthcare are
dynamic entities constantly evolving because their external world is con-
stantly changing and developing. Consequentially, strategies rarely get
finished and fully implemented before an organisation’s external operat-
ing context forces further change if the organisation or service is to
survive. For these reasons understanding the policy context and the cur-
rent and future operating environments of healthcare provision is crucial
to strategic planning success.

The healthcare context: change and reform

Along with technological or clinical developments in patient treatment,

the economic and operating contexts for governments and healthcare
organisations will drive the development of their strategies and plans. The
major challenges facing hospitals and other providers of healthcare across
the world stem from international macro-economic and demographic
health changes. For example, countries across Europe are facing a set of
four pressures that will challenge not only the European Union and
national politicians but also the local leaders of healthcare organisations
and clinical professionals across every country (Goodwin 2005, see Box
11.1). Healthcare in the United States is not immune from these pressures
and challenges. The US system, which is subject to more competition

Box 11.1 The pressures facing healthcare today

• The drive for greater efficiency, productivity and cost control.

• The growing demand for healthcare as a result of ageing populations and
improvements in medical technology and pharmaceuticals.
• The need to devise effective and sustainable responses to increasing consumer
demands for greater patient choice, better and faster access to services and
the growing number of patients’ rights movements.
• The need to manage long-term or chronic diseases such as diabetes, heart
disease and obesity, precipitated by increasing longevity, lifestyle and
environmental changes.
Healthcare system strategy and planning 185

than virtually anywhere else in the world, has registered unsatisfactory cost
and quality performance over many years (Porter and Teisberg 2004).
The pressures facing healthcare systems today apply whether organisa-
tions are in competition with each other within a regulated market or
quasi-market system or are hierarchically directly managed by national or
regional government. Also, although improving efficiency in the health-
care sector is a requirement for national governments, it is also relevant to
the wider economic performance of developed countries and to com-
mercial organisations because of their business interest in having a
healthy, productive and cost-efficient workforce; for example General
Motors spends over $2 billion per year on healthcare (Wigdahl and
Tomqvist 2004).
In the late 1980s many European governments began to re-examine
the structure of governance in their healthcare systems (Saltman and
Figueras 1997; WHO 1996). In particular, the role of the state as being
the central player in healthcare is being reassessed and national policy-
makers of many countries have felt compelled by a combination of eco-
nomic, social, demographic, managerial, technical and ideological forces
to review existing authority relationships and structures. Europe seems to
have experienced widespread disillusionment with large, centralised and
bureaucratic institutions and in almost every country, whether eco-
nomically developed or not, the same drawbacks of centralised systems
are being identified: low levels of efficiency, slow pace of change and
innovation, and the lack of essential environmental and socio-economic
changes to improve population health. The result is that some state func-
tions have been devolved to regional and municipal authorities. At the
same time as accelerating the decentralisation of administrative responsi-
bility, most countries are in the process of establishing or strengthening
national bodies separate from government to oversee or regulate profes-
sional training, quality assurance and the economic performance of
healthcare organisations.
Many governments are responding to increasing consumer demand by
pursuing national strategies to reduce access times for diagnostic testing
and patient treatment, and demanding that providers of healthcare ser-
vices offer high-quality services in line with international standards. Also,
governments are struggling to respond to the lack of incentives for
patients, healthcare providers and commissioners of services (the payers)
to restrain what they see as excessive utilisation of healthcare services,
particularly hospitals. As a consequence, the structural reform themes that
now link countries across Europe are decentralisation and devolution of
power. Decentralisation and devolvement of authority place greater pres-
sure on the managerial and clinical leaders of healthcare organisations to
develop effective and sustainable strategies and implementation plans to
respond to the changing context and operating pressures by, among other
things:

• stimulating improvements in service delivery by motivating clinical

professionals
186 Healthcare management

• securing the better use of resources according to needs

• reducing inequalities in health
• involving citizens in decisions about priorities and the future structure
and accessibility of local healthcare services.

It is not surprising that there has been a global epidemic of healthcare

reform because of the increasing general discontent with current
methods of financing and delivering healthcare. Since the 1980s the
organisation of healthcare across large parts of Europe has undergone
major change from a professionally driven service to a managerially
driven one. Initially, reforms were underpinned by a quasi-market
approach, especially in the Netherlands, UK and Scandinavia, but during
the 1990s this was succeeded by the new public management approach.
This saw governments applying private sector management practices to
public sector organisations through the development of quasi-markets,
and the introduction of competition and performance management.
Some critics, however, have argued that this has resulted in a proliferation
of managers and eroded the so-called public service ethos (Dawson and
Dargie 2002), whilst in the US competition is seen to be the root of the
problem with healthcare performance (Porter and Teisberg 2004).
The UK NHS provides a prime example of repeated structural reform:
in the words of the official historian of the UK’s health service, ‘the time
intervals between episodes of major structural reform have progressively
diminished to the point that the NHS risks becoming caught up in a
vortex of permanent upheaval’ (Webster 1998). Competitive market
elements and the separation of functions between providers and pur-
chasers of healthcare were formally introduced into the health systems of
the UK in the late 1980s. The aim was to enhance the responsiveness of
health services by bringing them closer to users’ needs and wants, and
also to increase efficiency (Glennerster and Le Grand 1995).
The structure of health services across the UK’s four countries typifies
the different structural approaches to healthcare provision to meet the
above pressures and challenges. In common with developments in Spain,
health is now a devolved responsibility across the UK with degrees of
local autonomy and growing divergence a core feature of health policy.
However, the overriding aim of each of the UK’s four countries is to
create a health service that delivers equitable access to care for patients
according to their clinical needs, without regard for their ability to pay
and as efficiently as possible. The Welsh Assembly restructured the NHS
in Wales in 2003 to strengthen accountability and create a stronger
democratic approach. Local health boards commission services and man-
age and plan primary care provision, whilst public health, tertiary care
and ambulance services are now strategically planned, managed and
delivered on a national basis.
In Northern Ireland health and social services are integrated and
delivered jointly under a single governmental Northern Ireland structure,
although it has recently been decided to restructure health and social
services to improve service delivery (Secretary of State 2005). A new
Healthcare system strategy and planning 187

statutory strategic health and social services authority, to replace four

existing organisations, will be established with responsibility for ensuring
strong, systemwide performance management and the effective alloca-
tion of resources. Hospital and community-based services, currently
delivered through 18 provider trusts, will in future be delivered by five
organisations. Finally, to bring decision making closer to communities
there will be seven local commissioning groups, each coterminous with
local (municipal) government.
The NHS in Scotland has undergone a series of structural changes
since 1997, each bringing it nearer to the removal of the UK internal
market of the 1990s: closer partnership working and, uniquely in the UK,
the establishment of an integrated, whole-system approach encompasses
both planning and delivery (Scottish Office 1997). This signalled a new
relationship between health boards and NHS trusts, resulting in NHS
trusts being dissolved as separate statutory organisations to become
operating divisions of their local health board (Scottish Executive 2000).
Scotland has also introduced community health partnerships, which are
new organisations intended to deliver services in partnership with local
(municipal) government, the voluntary sector and other agencies. They
will seek to bridge the divide between primary and secondary care and
between health and social care, replacing service delivery mechanisms
that currently are not naturally integrated (Scottish Executive 2003). Fur-
ther, the role and number of managed clinical networks will be expanded
to strengthen clinical leadership and to bridge the boundaries between
primary, secondary and social care.
In England, unprecedented extra funding for the NHS (Wanless 2002),
additional central targets and a national framework of regulation, princi-
pally to improve quality, have brought about significant improvements in
recent years. However, the English NHS is being restructured again in
2006 following the last restructuring in 2002 (DH 2005). There is now a
belief that further more fundamental changes are needed, including more
powerful incentives to drive performance. Hence the introduction of
market-style mechanisms, the plan to move away from state monopolies
delivering local services to a diverse range of providers including the
private sector, and the aim of devolving power and decision making to a
local level by creating foundation trusts, which are non-NHS bodies
accountable to their local citizens rather than hierarchically to national
government.
Although governments see structural change as a solution to many of
the ills facing their country’s health service, it is by no means certain that
such reforms deliver the intended results. For example, ten years after
decentralising its health service, the impact on the organisational and
managerial modernisation of the Spanish system is not evident (Saltman
and Figueras 1997) Equally importantly, attempts by governments to
introduce diversity and plurality of provision by separating out elective
surgery from general healthcare raise a number of important questions
about future policy, strategy development and planning for healthcare
organisations. For example, will the majority of services be subject to
188 Healthcare management

contestability and market-based competition or is the intention for mar-

kets to be developed in some sectors, such as elective care, whilst col-
laborative planning is the norm in others, for example, in the provision of
emergency care or very specialist services?

The healthcare context and strategic responses

The contextual challenges facing health and healthcare are so complex

that they defy simple solutions. Understanding the nature of the health-
care environment, the relationship of the organisation to its environment,
and the often conflicting interests of internal functional departments and
services requires a broad conceptual paradigm. Many of the strategic
planning and management methods adopted by healthcare organisations,
both public and private, were developed in the business sector. In many
respects, healthcare has become a complex business using many of the
same processes and much of the same language as the most sophisticated
business corporations.
Across much of Europe a consumerist emphasis on competition and
choice lies at the centre of national government policy and healthcare
strategy. Having stimulated a consumerist approach to healthcare, gov-
ernments are now likely to be powerless to remove the notion of choice
from the public policy debate (Oliver 2005). This can only raise the
expectations of citizens on health systems already under considerable
pressure. It is possible that government strategies such as choice and
competition may well improve some aspects of healthcare by driving out
poor professionalism and service delivery. However, choice is likely to be
more appropriate in some segments of healthcare, such as elective surgery
and diagnostic services, than in other segments, for example, emergency
care. Unfortunately, offering greater choice may also often undermine
other core goals assuming that primary care practitioners and their
patients embrace the choices that are offered to them. For example, it is
possible that choice will raise expectations and meeting expectations is
costly but the intention of governments is clear: they want to make
healthcare more accessible, more efficient and more responsive. The aim
is to create services that meet the rising expectations of patients and
public, and yet remain affordable within the constraints of government or
insurance funded systems. The only way that these laudable aims can be
met without significantly increasing costs is to restructure healthcare
provision, which requires the formulation of more imaginative strategies
and implementation plans that are acceptable to citizens, politicians and
healthcare professionals.
Within healthcare, strategy development and service planning is cur-
rently undertaken at a number of levels. Although policy is a legislative
function and strategy is an executive function, many governments
develop strategies for implementing their own policies, often linking
future resource availability for health and healthcare to priorities for
 Healthcare system strategy and planning 189

action. For example, in England, the government has introduced national

service frameworks (NSFs), which are long-term national strategies for
improving specific areas of care such as heart disease, cancer, child health,
mental health and long-term conditions. The NSFs address whole systems
of care and set measurable goals within set time frames. Specifically NSFs:
• set national standards and identify key interventions for a defined
service or care group
• put in place strategies and plans to support implementation
• establish ways to secure progress within an agreed time scale
• form one of a range of measures to raise quality and decrease variations
in service.
Each NSF is developed with the assistance of an external reference group
of stakeholders, which brings together healthcare professionals, service
users and carers, managers and non-healthcare agencies. The government
is responsible, through national clinical directors appointed by them, for
managing the development of NSFs and performance managing their
implementation across the NHS.
Regional strategic planning is also common for health, healthcare and
related services such as social care. For example, by collaborating with
other government agencies and socio-economic regeneration businesses,
healthcare organisations can play an important role in the regeneration of
cities, towns and regions. The strategic planning of specialist healthcare
services tends to be undertaken on a regional basis because fewer people
consume these services and so larger populations are often required for
cost-effective planning and service provision. Examples include cardiac,
cancer, vascular, neuroscience and renal services. Finally, local planning
will be undertaken for smaller populations to ensure efficient access to
those healthcare services consumed by the majority of the population –
primary and secondary care.

Undertaking strategic planning

Formulating strategy means defining the key issues needed to be

addressed to enable progress to be made in meeting future vision for an
organisation or service, whether at government, regional or local level.
Vision is a conceptual precursor to the creation of corporate policy,
whereas in contrast, mission statements are derived from corporate policy
(Davies 2000). Vision is a positive image of what an organisation or
service could become and the path towards that aim. Bennis and Nanus
(1985) concluded from interviews with 90 top directors that the process
of creating a vision – envisioning – requires translating into realities by
communicating that vision to others to gain their support. Consequently,
vision is the basis for empowering others.
Because implementation of strategy will often involve change, leader-
ship is essential. Vision is the focal point for transformational change
190 Healthcare management

because it provides the leader and followers with a map for where the
organisation or service is going as well as providing identity, meaning and
motivation (Goodwin 2005). Vision has to evolve within the context of
the organisation or service and one of the most important leadership
roles is to make the vision meaningful through language, actions and
stories. When it is communicated clearly, vision seems simple. Consider
Henry Ford’s I will build a motor car for the great multitude; Federal Express
founder Fred Smith’s To deliver all packages within 24 hours; or more simply,
Walt Disney’s To make people happy. As these examples show, vision needs
to be bold and ambitious; otherwise it will be seen as merely another
organisational objective or aim.
Other aspects of envisioning that are relevant at different levels of an
organisation, or across inter-organisational networks, include the formu-
lation of strategies based on a SWOT analysis – strengths, weaknesses,
opportunities and threats – of the organisation or service, its resources
and the interests of its stakeholders, which in the case of healthcare would
be government representatives, insurers, patients and local citizens. For
example, Gillies (2003) concluded in his SWOT analysis of the English
NHS that the fundamental weakness at the time it was undertaken was
access to care (see Box 11.2).
In market-based sectors, which increasingly include healthcare with its
underlying policy emphasis on consumerism and competition, the aim of

Box 11.2 SWOT analysis of the UK NHS

Strengths
• Cost effectiveness
• Patient registration system with GPs
• Health promotion

Weaknesses
• Access to care
• Lack of integrated care

Opportunities
• Build upon experience to date in electronic health records in primary care
• Basic IT infrastructure established through NHSnet
• Interprofessional working

Threats
• Cost control within a global economic downturn
• Staff retention and recruitment
• Organisational change
• Litigation as a pressure to defensive behaviour
• Inappropriate targets driving primary care

Source: Gillies (2003: 72)

Healthcare system strategy and planning 191

strategic planning is to master a market environment by understanding

and anticipating the actions of other economic agents, especially com-
petitors. However, strategic development and management should not be
regarded as a technique that will provide a quick fix for an organisation
that has fundamental management, leadership or service delivery prob-
lems (Swayne et al. 2006). Quick fixes for organisations are rare and
successful strategic management often takes years to become part of the
values and culture of an organisation. Practically every long-lived and
highly successful company attributes the primary source of its business
success to its culture (Youngblood 2000).
If strategic development is regarded as a technique or gimmick then it
is doomed to failure. For organisations operating in markets or quasi-
markets, competitive-based strategy will focus on the development of
competitive advantage, meaning something an organisation can do that
rivals cannot match. It is important to note that competitive advantages
are related to characteristics of the external environment in which an
organisation operates, primarily its competitors, and not to its internal
practices. This means, for example, that although ongoing operating pres-
sures will force healthcare organisations continually to look for economic
efficiencies, these are not a competitive advantage because they can be
and usually are adopted by other organisations. Most competitive advan-
tage is generated by three factors – customer or consumer captivity,
proprietary technology and economies of scale (Porter 1980).
The practical purpose of strategy is to provide a plan that employs
multiple inputs, options and outputs to achieve an organisation’s policy
goals and objectives. Those responsible for leading the formulation of a
strategic plan must be able to formulate and evaluate appropriate
organisational or service responses and arrange for implementation in
detailed operational plans (Wortman 1982). They will be more effect-
ive in undertaking this if they are proficient in gathering ideas and
information, thinking logically and learning from past strategic and
planning mistakes. As people are promoted through their organisations
or service, their personal skills in terms of strategic thinking and plan-
ning will have to shift from dealing with concrete matters with short-
term consequences and for which all the parameters are known to
more abstract issues with greater amounts of uncertainty (Jacobs and
Jaques 1987).
There are numerous texts available for helping healthcare professionals
and managers to undertake competitive strategic analysis. It is not the
intention of this chapter to review these texts, however, in 1980 Michael
Porter’s seminal work, Competitive Strategy: Techniques for Analysing Indus-
tries and Competitors, was published. This offered a rich framework for
understanding the underlying forces of competition in industries, the
important differences among industries, how industries evolved and how
organisations can find a unique competitive position. Given the direction
of current health policy with its increasing emphasis on competition and
consumer choice, understanding competitive strategy and planning has
never been so important for healthcare leaders. Porter’s work, which
192 Healthcare management

brought structure to the concept of competitive strategic advantage

through defining it in terms of cost and differentiation, precipitated an
industry of publications on strategic and competitor analysis and also led
to competitive strategy becoming an academic field in its own right.
Consequently, managers looking for concrete ways to tackle strategic
planning’s difficult questions will find Porter’s frameworks to be of
enormous benefit.
Although the operating context for healthcare gives the impression of
a convergence of global consumer demand, understanding and analysing
context remains important in strategic development thinking. The ability
to understand and distil context into local meaning is an often underrated
leadership skill. Separate local environments are still characterised, in both
obvious and subtle ways, by different tastes, different business practices
and ways of working, and different cultural norms. The more local an
organisation’s strategies are, the better the implementation tends to be
because local ownership of strategies and plans will be greater. Localism
facilitates decentralisation and since the days of Alfred Sloan decentralised
management has consistently served as a superior structure for con-
centrating management attention (Greenwald and Kahn 2005). The
consequence of this is that if governments are driven to develop market-
based approaches for certain services, for example, diagnostics, primary
care and elective secondary care, then although they can stimulate market
entry by new providers, the successful development of regional markets
for healthcare provision should be a local rather than national strategic
activity. What is appropriate and works in one region may be neither
appropriate nor workable in another because the local contexts and ways
of working are likely to be different.
The formulation of strategic plans by organisation or service leaders is
typically a group process involving a number of key participants working
together. Although strategic planning, particularly SWOT analysis, pro-
vides the structure for thinking about strategic issues, effective strategic
planning also requires the exchange of ideas, sharing perspectives, devel-
oping new insights, critical analysis, and give and take discussion. Stra-
tegic momentum is also important because this is the day-to-day activity
of managing the strategy to achieve the strategic goals of the organisation
or service. Given the increasing complexity of healthcare context, man-
agers responsible for strategy and planning may find general systems
theory or a systems approach to be a useful perspective for organising
strategic thinking. Attwood et al. (2003) argue twofold: first, that gov-
ernments the world over are desperate to find more effective ways of
delivering better services and new forms of governance that are respon-
sive to user, citizen and community needs; second, that economic forces
and globalisation have pushed these previously domestic matters into a
wider international context. Government priorities worldwide are now
focusing on stabilising national economies and improving public services
such as health and healthcare provision. This underscores the importance
for healthcare leaders, from government level downwards, to develop
effective and sustainable policies, strategies and implementation plans to
Healthcare system strategy and planning 193

respond to these pressures and the resultant changes to health services

that will follow.
A system is a set of interrelated elements connected to each other,
directly or indirectly. In healthcare, there are many such interconnections
across primary, secondary and specialist services as well as with social care.
Systems thinking brings a way of understanding complexity. Specifically,
a systems approach:
• aids in identifying and understanding the big picture
• facilitates the identification of major components of future change
• helps identify important relationships and provides proper perspective
• avoids excessive attention to a single component part
• allows for a broad scope solution
• fosters integration between components and people
• provides a basis for redesign.
As the term implies, the use of the systems approach requires strategic
leaders to define the organisation or service in broad terms and to iden-
tify the important variables and interrelationships that will affect
decisions (Swayne et al. 2006). By so doing, leaders and followers are able
to see the big picture in proper perspective. The potential for using
systems thinking in strategic development and planning is exemplified by
considering the strategic future of hospitals. Today, many hospitals face an
uncertain future because of advances in healthcare technology enabling
more hospital-based services to be provided outside in community set-
tings; changes in the workforce, especially a reduction in the hours
worked by doctors in training; evidence that if some services are better
concentrated in fewer centres they are able to achieve superior outcomes;
and as referred to above, government policies designed to increase patient
choice and stimulate greater efficiency in the use of resources (Ham
2005). Many countries, particularly across Europe, are responding to
these pressures by strengthening the primary care based gatekeeping role
for access to secondary care, including those not traditionally known for
controlling access to hospital physicians such as France, Germany and
Poland. In England the introduction of practice-based commissioning is
intended to create stronger incentives for primary care physicians to
manage demand for care by offering patients alternatives to hospital,
resulting in commissioners being able to use the savings to develop the
services they see as priorities.
Ham (2005) has identified at least three possible strategic futures for
general hospitals, each of which would also emerge by undertaking a
SWOT analysis of the average general hospital’s organisational strengths,
weaknesses, opportunities and threats. The first strategy is to compete
aggressively to maintain and if possible increase market share. The second,
is to reduce or cease some activities and focus on improving produc-
tivity in areas where they have competitive advantage; in other words,
cutting costs by concentrating on providing services for which hospital
performance enables them to attract patients and income. In this scenario,
hospitals might find advantage in horizontal integration, including
194 Healthcare management

partnership with other provider organisations and collaboration with

specialist centres to enable patients to access care at different hospital
locations. Third, diversify into other services, for example sub-acute and
primary care. However, experience from the United States would not be
a good indicator for strategic success elsewhere. Hospitals and physician
groups decided to broaden their services by merging with or acquiring
other institutions, which resulted in some 700 hospital mergers between
1996 and 2000 but with few economic and service quality benefits (Por-
ter and Teisberg 2004). Further, in cases where US hospitals pursued
vertical integration, they found it difficult to bring together the different
cultures of hospital medicine and primary care (Ham 2005).
Undertaking SWOT analyses of individual clinical services would
produce more refined results and probably a wider range of strategic
options for consideration than those identified above for whole hospital
organisations. This is important because it is the level of individual
patient care services that should drive the development of strategies and
service improvement plans. The more experienced physicians and teams
have in treating patients with a particular disease, the more likely they are
to create better quality outcomes of care and ultimately generate
improved cost effectiveness of service delivery and treatment. However, It
would be virtually impossible to explore each strategic option effectively
for every service without taking a holistic, system-wide view in conjunc-
tion with staff, patients, citizens and other stakeholders.
Finally, there are pitfalls with strategic planning flowing from develop-
ing strategies and the associated implementation plans (see Box 11.3).
The two interrelated themes running through the list of pitfalls are
process and people. It should be remembered when developing
inter-departmental and inter-organisational working, which is an essen-
tial precursor to formulating strategies and plans, that it is actually indi-
vidual people who do business with other people, not the corporate
management of services or organisations. Consequentially, the develop-
ment of sustainable interpersonal relationships is crucial to collaborative
success. This is important if citizens and stakeholders are to participate
effectively in the development of an exciting and stimulating vision.
Process and effective people engagement are also important for the
leadership and performance management of implementation plans.

Regulation and strategic planning

Most organisations cannot be left to themselves to deliver effective and

excellent services. Healthcare organisations, their leaders and staff know
they are subject to a range of influences that may act against the object-
ives desired by themselves, other organisations and patients. For example,
a common complaint is that healthcare services are insufficiently respon-
sive to patients or that productivity could be higher. Perhaps it is not
surprising that, for example in the UK the last 25 years have seen the
Healthcare system strategy and planning 195

Box 11.3 The pitfalls of strategy and planning

Developing strategic plans

• The vision is insufficiently inspirational, challenging, passionate and motivating.
• The vision is not understood by staff and stakeholders, often because they
have been insufficiently engaged in its formulation.
• The strategy has been poorly formulated in terms of implementation steps,
performance milestones, resource requirements and supporting structure.
• The strategy is not written down and therefore not understood by staff and
stakeholders.
• The strategy does not reflect the culture of the organisation or service.
• Too many organisational or service opportunities are identified resulting in no
clear strategy emerging that will act as a decision filter for determining future
priorities.

Implementation
• Leadership and managerial accountabilities and workforce resources have not
been properly determined resulting in poor implementation and the
possibility of senior staff turnover.
• Poor quality leadership results in differing levels of support during
implementation and consequentially there is limited implementation.
• Performance management arrangements are poor or non-existent, resulting in
an inability to understand and account for progress.
• Insufficient delegation of power and authority for implementation resulting in
decisions frequently having to be referred upwards.
• No managerial processes have been identified for responding to unforeseen
events resulting in the potential for the strategy to be irrevocably ‘blown off
course’.

governmental pendulum swing back and forth from command and con-
trol approaches to decentralised market-type changes (Hunter 2005). In
market-based systems regulation is one of the range of policy tools to
ensure that the core objectives of health and social care systems are met.
In their efforts to improve quality, safety and efficiency, many European
countries, in reforming their healthcare systems, have introduced regula-
tory reform either through recentralising or devolving regulatory powers.
There are numerous definitions of regulation including the sustained and
focused attempt to alter the behaviour of others according to defined
standards or purposes with the intention of producing a broadly identi-
fied outcome or outcomes which may involved mechanisms of standard
setting, information gathering and behaviour modification (Black 2002).
In many countries there has been an increase in the number of regula-
tory bodies and activities at state and local level in healthcare with the
twofold aim of creating a system that provides incentives to innovate and
improve quality and efficiency; and providing information to patients
and their carers to facilitate choice. To achieve these aims necessitates
balancing safety, equity and innovation.
196 Healthcare management

In market-based industries, regulation often takes the form of protect-

ing the consumer from abuse. In public services there can be some
blurring of the boundary between internal and external regulation: the
state is largely responsible for improving performance and value for
money (through internal regulation or performance management), but
external regulation (via independent regulators) is concerned with some
activities that could be thought of as internal regulation – for example,
the UK’s Healthcare Commission is required by statute also to improve
the performance and value for money of health services.
Regulation is about licensing and accreditation. It is not about a new
way of managing the performance of provider organisations although
independent regulators often have significant space to define their activ-
ities that may result in them straying into internal regulatory areas such as
performance management (Dixon 2005). However, a significant chal-
lenge for governments is to determine the type and extent of regulation
and performance management that will be needed in the development of
market-based systems of competition and consumer choice. Specifically
how should a market or quasi-market system be regulated and what are
the implications for strategic development and planning? Some com-
mentators argue that inequalities are likely to increase as a consequence
of the introduction of a market-based approach (Fotaki and Boyd 2005);
and that quality and efficiency may well not improve because market
mechanisms introduced into public services, particularly health, rely on
oversimplified assumptions. Further, there is evidence that services in the
UK have already been deregulated to some extent and made less universal
as a result of unrelated and gradually implemented policies rather than
strategic planning (Higgins 2004).
Although the role of external regulators is generally not to formulate
strategy, their activities will directly influence the strategic planning activ-
ities of healthcare organisations in two ways. The first way is as a result of
the day-to-day activities of regulation. The publication of regulatory
reports on intra-organisational issues and inter-organisational compar-
isons, such as financial management or performance against quality
standards, should precipitate local strategic thinking not only to respond
to any immediate adverse performance or failure but also to plan for the
longer term sustainability. The second way external regulators will have
an impact is via their relationship with national government. The poten-
tial temptation for governments is to use concerns arising from regula-
tion reports to formulate or demand greater healthcare strategic activity,
which is likely to widen the scope of regulatory inspection and thereby
increase the burden of regulation. The result would be increasingly cen-
tralised strategic and performance management by another name with
consequential little development of strategic planning and implementa-
tion skills by local healthcare organisations.
 Healthcare system strategy and planning 197

Conclusion

Strategic planning has to be driven by its purpose, which is to achieve the

successful implementation of policy – whether that of governments,
insurance funds or healthcare organisations and services – but two cau-
tions are needed. The first caution is that where there is no linkage
between policy and strategy then strategy becomes a means without an
end, or is relegated to merely achieving an operational end and not that of
an exciting and visionary design or plan for achieving policy objectives.
The second caution is that top-down strategies, grand plans and major
change initiatives are rarely successful. Despite the persistent mantra of
learning from best practice, much local innovation is rarely widely shared
and frequently gets lost in its dissemination.
Healthcare internationally is undergoing far-reaching and potentially
radical reform. The pressures continue to grow for new forms and stand-
ards of delivery and for local joining up and reconnecting of services to
users, citizens and communities. These activities are likely to be under-
taken against a backdrop of increasing regulation and new relationships
formed between healthcare organisations, regulators, citizens and gov-
ernment. The result will be the consequential need for the development
and implementation of effective local strategic plans, the success of which
will be judged by the development of new, more accessible configur-
ations of healthcare services; the defining of new roles for the hospital of
the future; and the devising of new forms of partnership and local and
neighbourhood governance. The personal and organisational challenges
facing healthcare leaders to meet these changing and challenging
requirements by more effective and sustainable strategic development,
implementation and leadership are considerable and should not be
underestimated.

Summary box

• Policy defines goals and objectives whilst strategy and plans determine how
goals and objectives are to be implemented using available resources.
• Strategy can be formulated at different levels – government, organisation,
service and department – and understanding the policy and current and
future operating contexts of healthcare is crucial to successful strategic
development.
• Formulating strategy means defining the key issues to be addressed to enable
progress to be made in meeting future vision and because implementation of
strategy often involves change, leadership is essential.
• The aim of strategic planning in a market environment is to understand and
anticipate the actions of economic agents, especially competitors. Strategic
development is best undertaken using SWOT analysis – strengths, weaknesses,
opportunities and threats – of an organisation or service.
198 Healthcare management

• Competitive advantages are related to characteristics of the external

environment in which an organisation operates, primarily its competitors, and
not to its internal practices. Most competitive advantage is generated by three
factors – customer captivity, proprietary technology and economies of scale.
• As people are promoted their personal skills in terms of strategic thinking and
planning will have to shift from dealing with concrete matters with short-term
consequences to more abstract issues with greater amounts of uncertainty.
• The formulation of strategic plans is typically a group process involving a
number of key participants working together and given the increasing
complexity of healthcare context, general systems theory offers a useful
perspective for organising strategic thinking.
• The pitfalls of strategic planning focus on the process of developing strategic
plans and engaging people. Remember, it is people who do business with other
people.
• By the publication of reports on intra-organisational and inter-organisational
performance, the actions of external regulators directly influence the strategic
planning activities of governments and healthcare organisations.
• The personal and organisational challenges facing healthcare leaders to
develop more effective and sustainable strategic development, implementation
and leadership are considerable.

Self-test exercises

1 Identify the national and local contextual policy, strategic and oper-
ational pressures for change facing your organisation, service or net-
work. Make sure you understand the impact that each of the pressures
will have, identify which of them will have more impact than others
and the timescale when the impact will be felt.
2 Undertake a SWOT analysis for your organisation, service or network.
What are the main messages? Identify the competitive advantages
when compared to competitor organisations or services. How sustain-
able do you think the competitive advantages are in terms of timescale
and the extent to which competitors can replicate them? Identify
the necessary changes to increase sustainability and then formulate
implementation strategies and plans for change.
3 What are the main components of the system within which your
organisation or service sits? Identify the leaders across the system, the
key intra- and inter-organisational/service relationships, the extent of
their inter-dependency and the influence they have on the ongoing
success of your organisation or service.
4 Reflect on your experience of leading or participating in implement-
ing strategy. Consider what went well and what did not go well in
terms of participation, process and decision making. List the
learning points from your experience, particularly what you would do
differently next time and how.
5 In the light of your career experience to date, coupled with your
 Healthcare system strategy and planning 199

understanding of the contextual policy, strategic and operating pres-

sures facing your organisation and system, reflect on your personal
development needs for leading or participating in future strategy
development and planning. List your main development needs and
prepare a personal development plan clearly showing how these needs
will be met and within what timescale.

References and further reading

Attwood, M., Pedlar, M., Pritchard, S. and Wilkinson, D. (2003) Leading Change:
A Guide to Whole Systems Working. Bristol: The Policy Press.
Bennis, W.G. and Nanus, B. (1985) Leaders: The Strategies for Taking Charge. New
York: Harper and Row.
Black, J. (2002) Critical Reflections on Regulation. Discussion paper. Centre for the
Analysis of Risk and Regulation. London: London School of Economics.
Davies, W. (2000) Understanding strategy. Strategy and Leadership, May:
25–30.
Dawson, S. and Dargie, C. (2002) New public management: A discussion with
special reference to the UK. In K. McLaughlin, S.P. Osborne and E. Ferlie
(eds) New Public Management. Current Trends and Future Prospects. London:
Routledge.
Department of Health (DH, 2005) Commissioning a Patient Led NHS. London:
The Stationery Office.
Dixon, J. (2005) Regulating Healthcare: The Way Forward. London: King’s Fund.
Fotaki, M. and Boyd, A. (2005) From plan to market: A comparison of health and
old age care policies in the UK and Sweden. Public Money and Management,
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Gillies, A. (2003) What Makes a Good Healthcare System? Comparisons, Values,
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in welfare provision in the United Kingdom. International Journal of Health
Services, 203–18.
Goodwin, N. (2005) Leadership in Healthcare: A European Perspective. Abingdon:
Routledge.
Greenwald, B. and Kahn, J. (2005) All strategy is local. Harvard Business Review,
September: 94–104.
Ham, C. (2005) Does the district general hospital have a future? British Medical
Journal, 331: 1331–3.
Higgins, J. (2004). Incrementalism in UK policy-making: Privatisation in health-
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Analysis of Eight Countries. Rotterdam: Elsevier.
Hunter, D.J. (2005) The National Health Service 1980–2005. Editorial. Public
Money and Management 25(4): 209–12.
Jacobs, T.O. and Jaques, E. (1987) Leadership in complex systems. In J. Zeidner
(ed.) Human Productivity Enhancement. New York: Praeger.
Oliver, A. (2005) The English National Health Service: 1979–2005. Health
Economics, 14: S75–S99.
Porter, M.E. (1980) Competitive Strategy: Techniques for Analysing Industries and
Competitors. New York: Free Press.
200 Healthcare management

Porter, M.E. (1987) From competitive advantage to corporate strategy. Harvard

Business Review, May-June: 43–55.
Porter, M.E. and Teisberg, E.O. (2004) Redefining competition in healthcare.
Harvard Business Review, June: 65–76.
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review of public administration. Belfast, 22 November.
Scottish Executive Health Department (2000) Our National Health: A Plan for
Action, a Plan for Change. Edinburgh: Scottish Executive.
Scottish Executive Health Department (2003) Partnership for Care. Edinburgh:
Scottish Executive.
Scottish Office Department of Health (1997) Designed to Care: Reviewing the
National Health Service in Scotland. Edinburgh: Scottish Office.
Swayne, L.E., Duncan, W.J. and Ginter, P.M. (2006) Strategic Management of Health
Care Organisations, 4th edn. Oxford: Blackwell.
Wanless, D. (2002) Securing Our Future Health: Taking A Long-Term View. London:
The Stationery Office.
Webster, C. (1998) National Health Service Reorganisation: Learning from History.
OHE annual lecture. London: Office of Health Economics.
Wigdahl, N. and Tomqvist, K. (2004) Improving Efficiency in European Healthcare.
London: Applied Value LLC.
World Health Organization (WHO, 1996) European Health Care Reforms.
Analysis of Current Strategies. Copenhagen: WHO.
Wortman, M.S. (1982). Strategic management and the changing leader-follower
roles. Journal of Applied Behavioural Science, 18: 371–83.
Youngblood, M.D. (2000) Winning cultures for the new economy. Strategy and
Leadership, November–December: 4–9.

Websites and resources

Healthcare regulation. Strategy for delivery: www.healthcarecommission.org.uk

Strategy implementation. www.prospectus.ie. www.birnbaumassociates.com.
www.centreforstrategyimplementation.com
Systems thinking. Basic explanation: www.harehall.co.uk/systems.html. General
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www.nelh.nhs.uk/quality/Process_and_system.asp
Whole System Partnership: www.thewholesystem.co.uk.
 12 Healthcare commissioning and
contracting
Juliet Woodin

Introduction

Commissioning and contracting (also sometimes described as purchasing

or procurement) are complex and much debated features of many health-
care systems today. This chapter initially explores commissioning and
contracting through an account of the healthcare policy context within
which they have developed, as a backcloth to understanding how the
terms are commonly defined and understood. The key elements of
commissioning and contracting will then be described, and the technical
difficulties of implementing such systems in healthcare discussed. The
chapter then considers how commissioning is organised to deliver this
complex role. Finally, the chapter examines the evidence about the
effectiveness and impact of commissioning in achieving health system
goals.

The policy context

Organised healthcare systems are complex entities and include a number

of fundamental functions and roles, which are shown in Box 12.1. In
insurance-based systems, such as the United States of America (USA),
Germany and the Netherlands, the insurance organisation (third party
payer) is usually separate from the provider of services (although there are
also examples of integration in the USA (Enthoven 1994). In tax funded,
publicly run systems such as the United Kingdom, Sweden and New
Zealand, third party payers and service providers have traditionally been
largely within the same organisation.
During the last decades of the twentieth century healthcare reforms
took place in many developed healthcare systems, which made changes
to the third party payer role and its relationship with the provider role.
These trends during the 1970s to 1990s can be seen as consisting of two
phases: during the late 1970s and early 1980s a focus on cost containment
202 Healthcare management

Box 12.1 Roles in the healthcare system – a conceptual framework

Principal funder The citizen or consumer of healthcare who provides the funds
– directly or indirectly – to pay for healthcare.
Third party payer The organisation that buys healthcare on behalf of the
individual citizen or consumer. This may be the government
itself, a public body such as a health authority, or an insurance
fund, an employer, or some other form of association. Where
the individual buys their own care direct from a healthcare
provider, there is no third party payer. This role is often
referred to as the ‘commissioning’ or ‘purchasing’ role.
Provider The organisation or clinician delivering care to the patient.
Government The generator of the national health strategy and priorities
which form the framework within which the healthcare system
operates.
Source: Adapted from Figueras et al. (2005a)

at the macro level; then during the late 1980s and early 1990s, a focus on
micro efficiency and responsiveness to users, including the introduction
of market-like mechanisms, management reforms and budgetary incen-
tives (Ham 1997). The development of purchasing as a function was a key
part of this second phase and illustrates well the phenomenon known as
the new public management (Ferlie 1996). NPM embodies the ideas of
‘disaggregation of units in the public sector’, ‘greater competition in the
public sector’ ‘explicit standards and measures of performance’ and
‘greater emphasis on output controls’ (Hood 1991), all of which are
features of a commissioning or contracting system.
In the UK an internal market was introduced into the formerly integ-
rated, directly managed healthcare system (DH 1989). Health author-
ities and general practitioner (GP) fundholders took on a purchasing role
and provision was strengthened through the creation of NHS trusts. After
the devolution of political power to Scotland, Wales and Northern Ire-
land, the UK systems diverged somewhat, with Scotland returning to a
more integrated system, but England developed the internal market even
further (Ham 2004). Similar developments can be observed in the New
Zealand health system (Ashton et al. 2004).
In Europe, there is considerable diversity amongst healthcare systems
but purchasing or commissioning has become a feature of many (Dixon
and Massialos 2002; Figueras, et al. 2005a; Saltman et al. 1998). In the
USA, purchasing was well established in a system based predominantly
on insurance arrangements and private provision, but many initiatives
attempted to strengthen the purchasing function, through the introduc-
tion of health plans and managed care, and through experimentation
with new funding and contracting mechanisms, such as capitation fund-
ing (Chambers et al. 2004; Enthoven 1994; Hughes et al. 1995; Hummel
and Cooper 2005; Light 1998; Rodriguez 1990).
 Healthcare commissioning and contracting 203

There were a number of drivers for these reforms. Most industrialised

countries experienced economic crises during the 1970s and 1980s and
public spending became a focus of attention. In addition, in economies
such as the UK, the public sector (including the NHS) was seen as part of
the problem in that its bureaucratic nature was perceived to cause inef-
ficiencies and hold back economic recovery. Added to this there was a
view, supported by survey evidence, that healthcare systems were
unresponsive to the needs of patients and public and needed reform
(Commonwealth Fund 2001). In some countries, political ideas were also
a driver, with New Right politicians providing an ideological justifica-
tion for a reform process which introduced market-type arrangements
(Walsh 1995). Pollitt, in examining the drivers for NPM generally, argues
that it was ‘not so much caused as chosen’, ‘chosen by practitioners who
have been less concerned with purity of theory than with solving
(perceived) practical problems’ (Pollitt 2003: 36–3).
Whatever the underlying drivers, there has been a burgeoning policy
and academic interest in commissioning and contracting roles and pro-
cesses, against the background of expectations that they will improve the
efficiency and responsiveness of healthcare systems. The UK has intro-
duced a number of experiments with commissioning and contracting,
which have been studied and reported on, and this chapter will therefore
draw on the UK literature to develop case study material and examples
from other systems will also be used.

Definitions of commissioning and contracting

The increased interest in the role of the third party payer during the last
two decades of the twentieth century has given rise to a vocabulary of
terms such as commissioning, contracting, purchasing and procurement.
The dynamic and evolving nature of the role has, unsurprisingly but
confusingly, led to different terminology being used in different contexts,
or the same terms being given slightly different meanings. These differ-
ences appear in policy documents and academic literature alike. This
chapter will in the main use the terms commissioning, purchasing and
contracting, and will define commissioning as the broadest and most
strategic set of activities and contracting as the narrowest. These def-
initions accord with common usage in the UK NHS. The definitions are
given in Box 12.2.
Commissioning is a term used most in the UK context and tends to
denote a proactive strategic role in planning, designing and implementing
the range of services required, rather than a more passive purchasing role.
A commissioner decides which services or healthcare interventions
should be provided, who should provide them and how they should be
paid for, and may work closely with the provider in implementing
changes. A purchaser buys what is on offer or reimburses the provider on
the basis of usage.
204 Healthcare management

Box 12.2 Definitions

• Commissioning is the set of linked activities required to assess the

healthcare needs of a population, specify the services required to meet those
needs within a strategic framework, secure those services, monitor and
evaluate the outcomes.
• Purchasing is the process of buying or funding services in response to
demand or usage.
• Contracting is the technical process of selecting a provider, negotiating and
agreeing the terms of a contract for services, and ongoing management of the
contract including payment, monitoring, variations.
• Procurement is the process of identifying a supplier and may involve, for
example, competitive tendering, competitive quotation, single sourcing. It may
also involve stimulating the market through awareness raising and education.

Procurement and contracting focus on one specific part of the process

– the selection, negotiation and agreement with the provider of the exact
terms on which the service is to be supplied. Procurement usually refers
to the process of provider sourcing and selection, and contracting to the
establishment and negotiation of the contract documentation.
These definitions are similar to those offered by Øvretveit, although
his definition of commissioning is even wider, incorporating activities
which do not directly involve payment for services, such as influencing
other agencies to promote the health of the population (Øvretveit 1995).
These broader activities are indeed very likely to be undertaken by organ-
isations designated as ‘commissioners’. It is in their interests to encourage
others to undertake health-promoting activities and thus contribute to
the improvement of health and reduce the call on healthcare services.
However, in this chapter the term ‘commissioning’ is reserved for those
activities associated with securing healthcare services. This definition is
illustrated in the three distinct functions given to primary care trusts
(PCTs) when they were established in the NHS: improving the health of
the population; commissioning secondary care services; and developing
primary and community health services (NHS Executive 1999).
Finally, it should be noted that in much of the literature describing the
US, European and New Zealand health systems the term most frequently
used for third party payers is ‘purchasing’. Yet the role described increas-
ingly displays the more strategic proactive characteristics associated with
‘commissioning’ in the UK context. So inevitably when referring to
international experience the term ‘purchasing’ will have a wider meaning.

Commissioning and contracting in theory and practice

As experience and evidence have accumulated about the implementation

of health system reforms during the 1990s, a number of books have been
Healthcare commissioning and contracting 205

published which provide a comprehensive analysis of the theory and

practice of commissioning, contracting, primarily in the UK context (for
example, Bamford 2001; Øvretveit 1995; Walsh 1995; Hodgson and
Hoile 1996; Flynn and Williams 1997; Walsh and Spurgeon 1997). Prac-
tical guides to contracting were later produced by government to support
commissioning organisations in developing their roles. (DH 2003;
National Primary and Care Trust Development Programme 2004).
There is not space in this chapter to cover the breadth and detail of these
texts, but a brief overview of the tasks and processes involved in commis-
sioning and contracting follows.

The commissioning cycle

As described above, commissioning consists of a set of linked activities.
There are many ways of modelling the commissioning process, such as
cycles, task lists and levels (Øvretveit 1995: 71–3). The presentation of
commissioning as a cycle of activity has become well established, espe-
cially in the UK, so this will be adopted as the starting point for this
section, as illustrated in Figure 12.1.
This cycle is a simplified model of a process which is in reality far more
complex, containing many tasks and activities which cannot always be
addressed sequentially as the cycle suggests, and often take place concur-
rently with each other. Box 12.3 illustrates the some of the more specific
tasks that go to make up the main stages of the cycle.

Contracts
Contracts fulfil a number of functions within a commissioning or pur-
chasing system: they incorporate details of the services required (the

Figure 12.1 Adapted from the commissioning cycle (DH 2003)

206 Healthcare management

Box 12.3 Commissioning and contracting activities

Main stage Activities

of cycle
Assess needs • Quantification of need based on epidemiological
studies, census data, mortality and morbidity rates and
other population data
• Quantification of need based on health records of
registered population/members
• Identification of evidence-based interventions
• Patient surveys and focus groups
• Professional and stakeholder views.
Plan • Review of current provision
• Gap analysis
• Prioritisation
• Assessment of market capacity
• Specification of services required including quality
standards
Contract • Educating the market
• Competitive tendering
• Determination of contract currency
• Negotiation with providers on volume quality and price
• Terms and conditions of contract
• Arrangements for variations
• Determination of routine monitoring requirements.
Monitor • Reconciliation of invoices
• Payment
• Analysis of information provided
• Reporting and investigation of trends and variances
• Contract monitoring meetings
• Agreement to variations
• Payment.
Revise • Adjust contract volumes price and other aspects in
accordance with terms and conditions
• Feed trend and usage information through to longer
term needs assessment and planning cycle.

specification), the price to be paid, the quality standards to be met, the

information to be collected and supplied, the monitoring arrangements,
the mechanisms for variation and review of the contract, the duration of
the agreement and so on:
Contracts are the most visible and practical part of purchasing. They
are a key tool that defines the relationship between principals (pur-
chasers) and agents (providers). They can be used to reflect the
purchaser’s health objectives and the health needs of the population,
and to make clear what services are to be provided and under which
Healthcare commissioning and contracting 207

terms. They also have an important function in specifying the

risk-sharing arrangements that apply to either the purchaser of
provider in the event of unplanned events. (Duran et al. 2005:
187)
An example of the contents of a healthcare contract is given in Box
12.4. Healthcare systems use a range of contract types, and some of the
commonest are shown in Box 12.5. Their use depends partly upon the
degree of difficulty of specifying the service required, on the quality of
information systems available to support the contracting process, and on
the volume and cost of the relevant service or activity. While the theory
of commissioning and contracting may suggest that it is a relatively
straightforward process, experience has revealed a number of technical
difficulties in implementing it in healthcare.

Box 12.4 Illustration of contents of a healthcare contract: the NHS

Model Contract

1 Definitions and interpretation

2 Commencement and duration
3 Review
4 Services
5 Quality
6 Service improvement
7 Service environment
8 Emergencies and other referrals
9 Information requirements
10 Access target management
11 Payment
12 Service variation
13 Serious untoward incidents and adverse patient incidents
14 Choice
15 Brokerage
16 Clinical audit
17 Information audit
18 Representatives
19 Dispute resolution
20 Termination
21 Discrimination
22 Data protection and freedom of information
23 Assignment
24 Legal status
25 Entire agreement
26 Schedules
27 Amendments
Source: DH (2003)
208 Healthcare management

Box 12.5 Types of contract

Type of Description Use

contract
Block Like a budget for a service. The When costing and
purchaser or commissioner activity information
agrees to pay a fee in exchange is scarce
for access to a broadly defined
range of services. Volumes may
not be mentioned or may only
be indicative
Cost and Payment is related to treatment When reliable
volume of a specified number of information is
patients in a given specialty or available to monitor
service. Payment arrangements activity and volumes
for activity above or below the are relatively high
specified volume are defined in
the contract.
Cost per case A cost is set for an individual For high-cost care
item of service or care which occurs
package. relatively
infrequently.
Source: adapted from Savas et al. (1998)

How best should services be specified?

It is perhaps self-evident that in order to place a contract it is necessary to

define the product which is to be purchased. The service specification
sets out in writing the services required from suppliers, including volume
and quality standards. The specification forms the basis of the contract
and of monitoring of delivery. Designing service specifications is one of
the most challenging parts of the commissioning cycle in healthcare
because the healthcare product is in many cases difficult to define and
describe in a precise way (Flynn and Williams 1997). These difficulties
relate to:
• definition of services at a macro level
• the currency used to describe activity and interventions
• the pace of change of healthcare technology
• provider dominance.
The first difficulty is defining healthcare provision at a macro level. For
the purposes of policy, strategy and planning, healthcare is traditionally
subdivided or categorised largely on the basis of the professional expert-
ise that delivers the services (e.g. by medical specialty such as general
surgery, or ophthalmology, or professional group such as district nursing
or physiotherapy). These descriptions reflect the way in which services
Healthcare commissioning and contracting 209

are conventionally organised and delivered. They map against the supply
side of healthcare very easily.
However, health system reform seeks to streamline patient care, remov-
ing inefficiencies that occur at organisational and professional boundaries
and becoming more responsive to patient experience. Other ways of
specifying services have become attractive to commissioners as they seek
to pursue this objective; for instance, by reference to the client group to
be served (e.g. mental health services, children’s services, older people’s
services), or as disease or condition based (such as diabetes services, cancer
services, coronary heart disease services, long-term medical conditions).
These categorisations enable all the relevant service elements for that
client or disease group to be included, whether they are supplied by
primary, community, secondary or tertiary care organisations. However,
specifying services in this way raises new boundary issues (many people,
especially those who consume most health resources, experience mul-
tiple health conditions) and is also dependent upon the development of
appropriate information systems and costing structures. Service defin-
ition needs to be resolved at this fundamental level for the purpose of
designing appropriate specifications.
The second difficulty is in finding a common and meaningful
currency in which service activity and interventions can be described.
There are many options: diagnosis-related groups, consultant episodes,
hospital stays, outpatient attendances, specific operations, complex care
packages, capitation (that is the number of individuals for whom com-
prehensive care must be provided), patient pathways (where the specifi-
cation describes the care process for a given condition which providers
must follow), outcomes of care in terms of improved health status.
Commentators have debated the merits and feasibility of some of these
(Buckland 1994; Soderland 1994; Kindig 1997). It is generally agreed
that some aspects of healthcare activity are more straightforward to
specify than others; in particular, elective hospital inpatient activity as
opposed to community health services, where interaction between pro-
fessional and patient is key to the service (Atkinson 1990; Flynn et al.
1996).
The rapid pace of change of healthcare technology provides a further
challenge for service specification. New drugs and medical technologies,
research evidence about existing treatments and new disease patterns are
all part of the fluid environment in which healthcare systems operate. It is
not possible therefore to specify service requirements with certainty very
far into the future. Service specifications date rapidly and this contains
risks for the contracting parties. A further issue related to service specifi-
cation, which probably compounds the difficulties referred to above, is
that in many systems knowledge and expertise about healthcare provision
are concentrated in the supplier organisations. Commissioners may not
have the detailed understanding of services to specify them fully and
incomplete or flawed contract documentation may result. Alternatively,
as case studies of the early years of the internal market in the UK
showed, purchasing organisations may rely upon providers to write their
210 Healthcare management

service specifications, which not only reinforces the tendency towards

passive purchasing rather than active strategic commissioning but also
undermines the credibility of the purchaser (Dopson and Locock 2002;
Short and Norwood 2003).

Making contracts effective

The contract is a key part of any commissioning or purchasing process,

but its value is not as an end in its own right but as a means of implement-
ing the strategies and plans of the commissioner. Although contracts are
in place in many healthcare systems today, they suffer from number of
limitations (Ferlie and McGivern 2003). Amongst these are two areas
which will be commented on here:
• information deficits
• enforcement issues.
The information deficits affecting contracts largely mirror those related
to service specifications. The problem in many systems is that data collec-
tion systems are not developed sufficiently to support the monitoring of
activity through contracts. Although some commentators argue that data
is available but not systematically used (Soderland 1994), there is agree-
ment that many aspects of healthcare are simply not covered by current
systems in a meaningful way. Costing systems contain similar difficulties,
especially in the tax-funded systems. A further issue is the management of
risk within the contract. The introduction of formal contracts requires
arrangements to be agreed about how increases in activity over and above
the contracted volume are to be dealt with. The reduction of this risk
through predictive modelling is an established technique in predomin-
antly privatised insurance systems such as the USA (Chambers et al.
2004), but is only recently being considered for use in systems such as the
UK (Roland et al. 2005).
Effective contracts contain mechanisms such as financial incentives and
penalties and the ultimate possibility of termination, which can be used
to steer the provider in the direction required or to move to an alternative
supplier. Healthcare contracts may be commercial, legally enforceable
contracts – as in the USA, New Zealand in the early years of the reforms
there (Ashton et al. 2004) and between NHS commissioners and
foundation trusts or independent providers – or may be internal service
agreements (as within the UK NHS). In principle, both types are
enforceable: the former with recourse to the courts if necessary and the
latter through managerial action. However, there is evidence that in the
UK at least commissioners have been discouraged from enforcement
action that would destabilise an NHS provider and that this has impeded
the use of contract-type instruments to achieve change (Walsh 1995).
Finally, the extent to which a real market exists will affect a commis-
sioner’s scope to enforce contract penalties. If there are no alternative
suppliers in the market the threat of termination is hollow.
Healthcare commissioning and contracting 211

Relational contracting

Although it can be argued that better constructed, written and legally

enforceable contracts would have benefits for health systems (Ferlie and
McGivern 2003), the real problems and constraints associated with for-
mal or ‘hard’ contracting in a healthcare context suggest that there are
likely to be ongoing obstacles to the achievement of this aim. In addition,
there are significant transaction costs associated with establishing a con-
tractual environment which must be set against any benefits gained
(Light 1998).
These issues point to the importance of recognising the role that the
wider context of relationships, including trust, common values and estab-
lished and new networks, play in the operation of healthcare systems
(Lapsley and Llewellyn 1997). Recognition of this dimension was illus-
trated in the moderation of the internal market at the start of the New
Labour government in the UK, set out in The New NHS, Modern,
Dependable (DH 1997) and in the development of new styles of agree-
ment between commissioners and providers in Scotland (Deffenbaugh
1998).
Some writers identify the potential for conflict when commissioner–
provider relationships and formal contracting are introduced into
pre-existing trust-based relationships:
The development of trust is central to the maintenance of social
systems, and the danger of contract is that it undermines trust,
through basing contracts on punishment for failure. If we under-
mine trust then we may find that the making of agreements, and
ensuring that they are kept, will become very costly. The value of
trust is that it is cheaper to trust people, and to develop institutions
that will ensure trust, rather than to watch them. Control and influ-
ence over producers may go along with trust and the development
of distrust make efficient public service impossible to attain. (Walsh
1995: 255)
However, a number of other writers (Bennett and Ferlie 1996; Ferlie
1996; Flynn et al. 1996; Hodgson and Hoile 1996; Forder et al. 2005;
Dopson and Locock 2002; Ferlie and McGivern 2003; Ashton et al.
2004) have observed trust and informal contact continuing to play an
important part in commissioner–provider relationships in healthcare
alongside a formal contract or service agreement.
A caveat to the discussion about relational contracting is that such
relationships cannot be understood without reference to the distribution
of power within the system (Cox et al. 2003). Reference has already
been made to the dominance of providers in the design of service
specifications and this is a broader issue:
Purchasing in health care is highly vulnerable to provider capture.
After all, they control the technology, make the diagnosis, control
what is ordered, and control the information that the buyers need.
212 Healthcare management

Thus it has been a long struggle for American commissioning

groups of employers to learn how to do it effectively. (Light 1998:
14)
The application of relational contracting ideas to healthcare is an interest-
ing area but one which as yet has not been subjected to systematic analy-
sis or development, taking account of the relative power of the parties.

The commissioning organisation

Discussion of the practical realities of commissioning and contracting for

healthcare leads naturally to the question of who, or what type of organ-
isation should be charged with this challenging and difficult role. There is
considerable debate about the effectiveness of the variety of types of
purchasing organisation that can be seen in different healthcare systems.
Employers, commercial insurance companies, sick funds, mutual associ-
ations, groups of healthcare professionals and the national or local state in
various forms all take on the purchasing or commissioning role (Dixon
and Massialos 2002).
The UK has seen a vigorous debate about the appropriate organisa-
tional model for commissioning, which has been accompanied by fre-
quent restructuring (Walshe et al. 2004). Locality-based models have
been favoured since the mid-1990s, including small-scale, GP-led ones,
largely because of the opportunities to build on the traditional strengths
of UK primary care in demand management and the potential for joint
commissioning with local government (Balogh 1996; Exworthy and
Peckham 1998). However, the benefits of an approach based on pro-
grammes for specific client groups or conditions, which often need a
larger population base, have also been argued (Dalziel 1990; Chappel et al.
1999). The evidence and arguments about the effectiveness of different
organisational models are fully examined by Smith and colleagues
(2004) who conclude that a mix of approaches is needed in each health
economy in the light of the services involved and context.
The concept of the purchaser–provider split implies a clear separation
of roles and functions. However, many systems display some degree of
integration of the two. In the USA, the growth of managed care has
resulted in organisational forms which provide some services in house
and purchase others externally (Enthoven 1994). In the UK, GP fund
holding, then primary care groups and trusts and now practice-based
commissioning build on the gatekeeping role of primary care by giving
general practitioners a central role in commissioning, and displaying only
a partial separation of functions. Similar approaches were developed in
Canada and New Zealand (Peckham 1999).
Linked with this debate about separation or integration is a related one
about whether commissioning should be primary care led or not. In the
UK the introduction of GP fundholding from 1991 onwards paved the
Healthcare commissioning and contracting 213

way for further development of primary care led commissioning, so that

by 2005 the majority of services were commissioned by primary care
organisations. A number of studies of primary care led purchasing have
identified an impact on services, albeit modest (Le Grand et al. 1998;
Smith and Goodwin 2002; Smith et al. 2004). Internationally, though,
this is not a common approach and Light (1998) commenting from a US
perspective, has identified a number of drawbacks:
Primary care lacks the clout to take on powerful specialty groups
and hospitals; the technical skills and infrastructure to challenge inef-
fective or inefficient practices; the time and training to carry out
this complex task; the ability to address inequalities and wasteful
practices in primary care itself. (Light 1998: 72)
The debate about the extent of separation or integration of commission-
ing and provision reflects the tension between two principles: impartiality
and independence of commissioning, versus integration of care. In a
market situation independence is needed to ensure that the commis-
sioner selects the most cost-effective service provision. On the other
hand, managing some services directly (usually at the primary care end
of the care pathway) may enable commissioners to improve micro-
efficiency by integrating care for the patient, and better controlling
demand and referrals (Forder et al. 2005).
Wherever commissioning is located, the organisation must possess suf-
ficient capacity and capability to commission effectively. Mays and Dixon
identify the following features which affect commissioners’ ability to
exert influence: holding a budget; ‘voice’; pursuing an ‘exit’ strategy; size;
detailed knowledge; personal characteristics; and the influence of the
local environment and managerial culture (Mays and Dixon 1996: 24–5).
Some of these characteristics are matters of policy (for example, whether
or not a budget is held) but others flow from the characteristics of the
commissioning organisation, particularly from the information at its
disposal and the skills and capabilities of its staff.
Many commissioning organisations in tax-funded systems have
evolved from their more bureaucratic and hierarchical predecessors with
little attention paid to whether they are appropriately staffed or skilled
for their new role. Light compares UK commissioners with US
organisations:
The best American commissioning groups have concluded that
health care is far more complicated to purchase than anything else
. . . Their salary and bonus packages are designed to attract the best
and the brightest. They require excellent data systems analysts and
programmers, clinical epidemiologists, clinical managers, organiza-
tional experts, financial specialists and legal advisers. (Light 1998: 67)
Other writers have endorsed and added to this list of skills and com-
petencies to include competencies such as negotiation, political
sensitivity, knowledge of needs and demands of the population,
quality management, service improvement, awareness of evidence on
214 Healthcare management

effectiveness and cost effectiveness of different interventions, team work-

ing, understanding of ethics, and leadership (Mays and Dixon 1996; Jack-
son 1998; Bamford 2001; Kaufman 2002; Velasco-Garrido et al. 2005).
While some of these are general management skills, and not inherently
lacking in the evolving purchasing or commissioning organisations,
others are more commercially oriented and may not be present in public
sector bodies. Little investment has been made by governments into pro-
viding training and development which could ameliorate this. Ham con-
cludes from his review of international experience that ‘the importance
of the purchaser role was not fully appreciated at the outset of recent
reforms and only latterly has action been taken to rectify this’ (Ham 1997:
137). In addition, some purchasing organisations have lacked the clinical
skills to engage credibly with providers, yet clinical engagement has been
identified as a key requirement for successful commissioning (Bhopal
1993; Siverbo 2005).
The frequent restructuring of commissioning organisations men-
tioned earlier has not been confined to the UK, and other systems such as
New Zealand and Sweden have experienced requirements to change
commissioning arrangements. Organisational restructuring has impeded
the development of a cohort of skilled and experienced commissioning
staff, changed the flow of information, and caused a loss of organisational
knowledge. All these factors have constrained the ability of commis-
sioners to establish themselves as authoritative and effective bodies (Smith
et al. 2004; Walshe et al. 2004).

The impact of commissioning

Having considered the policy context for commissioning and contract-

ing, the theory and the practice, this section discusses the evidence about
the strategic impact and effectiveness of commissioning.
The goals of commissioning reflect health system goals. Efficiency,
responsiveness, health improvement and quality, while not a comprehen-
sive list and not always mutually compatible, are relevant to most systems
and form a basis for the evaluation of the effectiveness and impact of
commissioning (Figueras et al. 2005b; Le Grand et al. 1998).

Commissioning for efficiency

The evidence as to whether commissioning has improved system effi-

ciency in any sense is mixed. The OECD states: ‘In systems where both
financing and delivery of care is a public responsibility, efforts to dis-
tinguish the roles of health-care payers and providers, so as to allow
markets to function and generate efficiencies from competition, have
proved generally effective’ (OECD 2004: 17). The purchaser–provider
separation appeared, in the 1990s, to be widely accepted and little
Healthcare commissioning and contracting 215

challenged in the UK NHS (Walsh 1995: 255). Le Grand and colleagues,

examining the NHS internal market of the 1990s, noted an increase in
efficiency as measured by the cost per unit of activity, but found little
evidence to demonstrate whether this had been caused by the reforms or
by other factors (Le Grand et al. 1998).
However, Ashton and colleagues (2004) found no evidence of major
efficiency gains in the hospital sector following the introduction of
market reforms in New Zealand. A review of purchasing in the US
system in 1996 concluded that ‘it is too soon to conclude that pur-
chasers in every market are in the driver’s seat guiding changes in the
health market’ and ‘despite some impressive reductions in the rate of
health care premium growth, it remains unclear whether these lower
annual growth rates are the result of purchaser pressure or are due to
exogenous factors at work in the health care market place’ (Lipson and
de Sa 1996: 75–6).
Several commentators identify the transaction costs incurred by the
new system and Light points to a range of new inefficiencies, including
‘managerialism, datamania, accountability as an end, disruptions and
inefficiencies of underused losers and overused winners and an ethos of
commercialism replacing ethos of service’ (Light 1997: 322).

Commissioning for responsiveness

Purchasing or commissioning organisations are by definition third-party

payers acting on behalf of a population or membership. Lupton and
colleagues refer to the ‘formal role of purchasers as champion of the
people’ (Lupton, et al. 1998: iii), within both collectivised and market
health systems. Where purchasing or commissioning has been introduced
as a system reform, there have been formal expectations that the commis-
sioning organisations will engage with their populations or membership
and demonstrate responsiveness to their requirements. The mechanisms
for doing this can be categorised as ‘voice’ and ‘exit’ (den Exter 2005);
the former broadly meaning the use of administrative and managerial
techniques for hearing what patients and the public want, and the latter
building in market-type mechanisms which give patients maximum
opportunity to choose their care.
However, the evidence that exists on this topic suggests that practice
has in most health systems been limited in scope and depth and often
only occurred in relation to marginal investments or ad hoc issues (Lup-
ton et al. 1998; Peckham et al. 1997). A review of international experi-
ence identified many examples of initiatives which facilitate patients or
members of the public to influence purchasers, either through the exer-
cise of ‘voice’ or ‘choice’. However, it was not clear how far these mech-
anisms resulted in changes in the purchaser’s policies or improvements in
services in response to the issues raised (den Exter 2005). Similar conclu-
sions were drawn in relation to the UK health reforms (Le Grand et al.
1998).
216 Healthcare management

There are a number of reasons why this may be the case. Commission-
ing organisations in systems with strong national direction (such as the
UK) are constrained by nationally determined policies and targets and
the scope to respond to the priorities of local populations may be limited.
Purchasers may have concerns about the legitimacy of the views of those
members of the public who engage in consultation and involvement
exercises, and there are costs involved in the proper organisation of
patient and public involvement which purchasers may not consider justi-
fied (Lupton et al. 1998). The emphasis on clinical involvement in com-
missioning in many healthcare systems may be in tension with public
involvement, in terms both of beliefs and understandings about what
constitutes valid evidence of need and benefit, the clinical focus on the
individual patient as opposed to the population or group focus, and in
terms of established patterns of collaborative or non-collaborative
behaviour (Peckham 1999). Finally, poor information systems impede
the ability of commissioners to provide precise and meaningful accounts
of their activities to the public on whose behalf they are acting.

Commissioning for health improvement

The tendency of contracting to focus on the available measures of activ-

ity, which are usually rather limited input measures as described earlier, has
stimulated calls for a greater focus on the desired end product of health
services: improved outcomes based on the commissioning of evidence-
based services (Bhopal 1993; Milne and Hicks 1996; Kindig 1997). Studies
of commissioning in the UK illustrate that in practice, however, there
have been difficulties in translating strategies for health improvement into
action through contracts. Case studies of the implementation of a strategy
for stroke services (North 1998) and maternity services (Dopson and
Locock 2002) demonstrate that in practice there has been a discontinuity
between the needs assessment and planning stages of the cycle and the
contracting stage. Contracts departments tended to focus on annual
negotiation of volumes and prices of activity, while public health and
planning functions considered the changes in services required in the
longer term to meet the needs of the population (Milner and Meekings
1996). Implementing service change was not the main focus of contract-
ing activity, and where it did occur, change tended to be at the margin.
Studies of GP fundholding do show that fundholders used contracting
to achieve service changes but again this tended to be small scale and
localised rather than strategic (Le Grand et al. 1998; Smith et al. 2004).

Commissioning for quality

Improving the clinical quality of healthcare was not initially part of the
European health system reform agenda, especially not in the case of the
UK (Glennester 1998: 405). However, there has been a growing interest
 Healthcare commissioning and contracting 217

in this aspect. Reviews of quality in the early stages of the NHS internal
market comment on the limited attention paid to quality in the purchas-
ing process, as opposed to the focus on activity and price (Gray and
Donaldson 1996; Thomson et al. 1996; Glennester 1998; BRI Inquiry
Secretariat 1999). However, a later review of international experience
identified a range of examples in France, Germany, Italy and the UK of
quality being made an issue in contracts (Velasco-Garrido et al. 2005).
The recent development in the NHS of the Quality and Outcomes
Framework (DH 2004) as part of the new General Medical Services
contract for GPs, provides a mechanism for linking payment to the
achievement of defined quality standards, both clinical and organisational.
In the USA, large employers have attempted to use quality standards as a
contracting tool (Mello et al. 2003).
In terms of the effectiveness of commissioning in achieving the goal of
improved quality, evidence is mixed. Le Grand and colleagues (1998)
found some evidence that GP fundholders obtained greater provision of
outreach services, quicker admission for their patients and generally more
response from providers, compared with those non-fundholding GPs
whose services were commissioned for them by health authorities. Des-
pite a major focus on quality improvement in the USA, a review found
little evidence of impact (Goldfarb et al. 2003). An international review
of quality-based purchasing concluded that ‘there is some evidence of
public-sector purchasers acting as agents to improve quality, but there is
almost no documentation of either formal-sector private insurers, or
community-based health financing schemes promoting quality through
purchasing’ and highlighted the ‘large knowledge gaps concerning the
results of initiatives taken’ (Waters et al. 2004).

Conclusion

Commissioning and contracting have been introduced into health sys-

tems comparatively recently against a background of high expectations
and within an environment of significant social and economic challenge.
There has been little systematic evaluation of their impact, and in any case
evaluation of such policy interventions is fraught with difficulties (Le
Grand et al. 1998). Such evidence as exists of the success or otherwise of
commissioning and contracting is mixed. This is unsurprising given the
complexity of the task, the relative youth of the roles and organisations
and the limited attention paid to organisational development. What is
clear is that commissioning organisations have struggled to assert their
authority vis-à-vis provider organisations, which are able to exert influ-
ence through their detailed knowledge of services, their control of
information, the power and influence vested in their medical staff and the
public support which they enjoy. In the context of this imbalance of
power, the commissioning role needs investment and development in
order to realise its potential.
218 Healthcare management

Summary box

• The separation of commissioning (or purchasing) and providing roles and the
establishment of contractual relationships between health commissioners and
providers has been a feature of healthcare system reform in many countries
during the last two decades. They were expected to provide a means of
controlling costs and generating greater efficiency and to make healthcare
systems more responsive to public requirements.
• Commissioning and contracting are relatively straightforward concepts in
theory, but there are technical difficulties associated with implementing
contracting in the healthcare context. In particular, there are a number of
problems with the design of meaningful service specifications and contracts.
• The constraints on formal contracting and other features associated with
healthcare systems suggest that commissioning and contractual relationships
in healthcare display many of the characteristics of relational contracting.
• The challenges of commissioning and contracting in all healthcare systems
require strong and competent commissioning bodies. The development of
such bodies has been slow, impeded, especially in the UK, by frequent
restructuring.
• There has been little focus on the organisational development of the
commissioning function.
• There is limited evidence that commissioning and contracting have
successfully impacted on system efficiency and responsiveness. There has been
considerable interest in their impact on other connected health system goals
such as quality, and health improvement, but again evidence is limited.
• This is hardly surprising given the relative youth of commissioning and
contracting for health, the lack of consistent attention to the development of
the function, and the inherent difficulties of evaluation.

Self-test exercises

1 Obtain a copy of a health service specification. Review it with the

following points in mind:
• How adequate is the description of services?
• Does it link to the strategic objectives of the commissioning body?
• Is the service’s activity described in relation to inputs, outputs or
outcomes?
• Will data be available with which to monitor whether the service is
being delivered?
• Generally, do you feel this specification provides a satisfactory basis
for a contract?
2 Imagine you are the chief executive of a healthcare commissioning
organisation setting up a five-year prospective evaluation of the
effectiveness of your commissioning process. Make a list of the
 Healthcare commissioning and contracting 219

dimensions and indicators you would ask the evaluators to monitor in

order to provide the evidence you require.

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Velasco-Garrido, M., Borowitz, M., Øvretveit, J. and Busse, R. (2005) Purchasing
for quality of care. In J. Figueras, R. Robinson and E. Jakubowski (eds) Purchas-
ing to Improve Health Systems Performance. Maidenhead: Open University Press.
Walsh, K. (1995) Public Services and Market Mechanisms: Competition, Contracting
and the New Public Management. Basingstoke: Macmillan.
Walsh, K. and Spurgeon, P. (1997) Contracting for Change. Oxford: Oxford
University Press.
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and Robinson, R. (2004) Primary care trusts. British Medical Journal,
329(7471): 871–2.
Waters, H. R., Morlock, L. L. and Hatt, L. (2004) Quality-based purchasing
in health care. International Journal of Health Planning and Management, (19):
365–81.

Websites and resources

Care Services Improvement Partnership, Better Commissioning Net-

work. The Better Commissioning Learning and Improvement Network was
established in April 2004 under the auspices of the Health and Social Care
Change Agents Team, part of the English Department of Health. It now
forms part of the national networks of the Care Services Improvement
Partnership. Its main focus is on commissioning social care but its web
pages also provide resources which are relevant to health care: http://
www.changeagentteam.org.uk/index.cfm?pid=7
Commonwealth Fund. A private foundation supporting independent research
on health and social issues. While US focused, it conducts and publishes
international comparative surveys of health systems performance and policy
approaches: www.cmwf.org
Department of Health. Official UK government site. The commissioning
pages provide access to policy documentation, guidance and resources for the
National Health Service on commissioning and contracting: http://
www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/Commissioning/fs/en
National Committee for Quality Assurance. The NCQA accredits US
Health Plans for quality. The website explains the quality rating system, the
Health Plan Employer Data and Information Set (HEDIS) which is the
NCQA’s data collection tool, and provides information about the quality
Healthcare commissioning and contracting 223

ratings of individual health plans. It gives a useful insight into the US health
system of managed care: www.ncqa.org
National Electronic Library for Health Specialist Health Management
Library. Official electronic library for the English NHS. Produces hot topic
guides which include a number on commissioning and contracting related
topics: http://libraries.nelh.nhs.uk/healthManagement/
National Primary and Care Trust Development Programme. An official
government programme linked to the Department of Health. This is an
archived site but its commissioning page gives access to key documents sup-
porting primary care-led commissioning such as the PCT Commissioning
Friend: http://www.natpact.nhs.uk/cms.php?pid=99
Organisation for Economic Co-operation and Development. Health
pages give access to key statistics and publications about the health systems of
the OECD’s 30 member countries: http://www.oecd.org/topic/
0,2686,en_2649_37407_1_1_1_1_37407,00.html
World Health Organisation Regional Office for Europe. Health systems
pages provide details of WHO projects and programmes on all aspects of
health systems, and access to publications and reports: http://www.euro.who.int/
healthtopics/HT2ndLvlPage?HTCode=health_systems
 13 Information technology and
information systems:
so beguiling, so difficult
Justin Keen

Introduction

Electronic services are all around us. Millions of us use the internet, the
mobile phone and the many services that they have spawned. Yet peer
into any healthcare system and it will still be awash with paper. The
technologies and services will be there in the form of email and pagers
and sometimes clinical systems, but the relative lack of penetration is very
striking.
This chapter argues that electronic services are now very appealing to
politicians and policymakers, but they remain difficult to develop and
implement in practice. In spite of the ubiquity of electronic services in
our everyday lives, policymakers do not have convincing strategies to
promote cost-effective solutions in healthcare settings. The next section
sets out some of the reasons why IT and electronic services are attractive
to politicians and policymakers. The following sections review the cur-
rent state of implementation, offer a political explanation for this state of
affairs and argue that a radically different approach to policymaking is
required in order to develop an environment where electronic services
can be properly integrated into the fabric of health and social care
delivery.

Why is IT so beguiling?

As with many new technologies, IT has long been associated with a

number of bold claims. In the 1970s and 1980s these claims focused
on the capacity of IT to generate cash savings by reducing the numbers
of staff needed for administrative tasks, and quality improvements
that would be achieved through increased standardisation and reliability
of data processing. In the 1990s the technologies changed and new
claims came to the fore. One was that IT was a panacea for a range of
 Information technology and information systems 225

management ills, notably in business process re-engineering (Hammer

and Champy 1993). IT was a new tool for tackling an age-old problem,
namely facilitating the coordination of activities within and between
firms. In the expansive language of the business world, the claim was that
IT would ‘transform’ business (Scott Morton 1991). Another, following
the arrival of the internet and mobile telephony as social and economic
forces, was that technologies and the services they enabled would
fundamentally change our private and social lives (Castells 2001).
These developments increased expectations that IT would soon be
used extensively in public services, including health services. After all, if
we all use them at home, why not at work as well? They were already
used in ‘back office’ functions in the great majority of finance depart-
ments and for patient administration. But in all developed countries IT
had only penetrated a short distance into the working lives of clinicians.
The high penetration of general practice computing in the UK, the
extensive networking of healthcare organisations in Denmark and the
computerisation of the US Veterans’ Administration hospital network
were among the few exceptions that proved the general rule. In the UK
the problem was compounded because perceptions of IT projects in
public services were negatively influenced by a string of high profile
failures (Inquiry into the London Ambulance Service 1993; National
Audit Office 1996, 1998). Understandably, health service managers and
many clinicians were wary of the bolder claims.
But from the late 1990s onwards, politicians and civil servants world-
wide bought into the claims. They believed that IT and electronic ser-
vices would increase the efficiency of public services, partly through
service redesign, and would help to improve service quality. They also
realised that core government policies would depend for their success on
IT implementation in a way they never had done before. For example, it
is difficult to imagine delivering choices to consumers of healthcare
without real time information systems that show availability and allow
people to book their preferred options.

From claims to policies

The bold claims about the transformational potential of IT would, of

course, only be fulfilled if ‘front office’ usage in clinical practice, and the
networking of systems to facilitate the exchange of data between services,
could be achieved. The main policy response was to publish IT strategies
reflecting acceptance of the claims. In many countries – though not the
USA – these policies were funded particularly for the development of
national or regional network infrastructure and for shared electronic
health records.
It is useful to think of the network infrastructure as the spinal cord of
an IT infrastructure. In any healthcare system, including centrally funded
systems such as the NHS, individual medical centres, hospitals and other
226 Healthcare management

organisations purchase their own systems from suppliers. Having done so,
organisations can link to the spine and use it to send data to one another.
Governments have found themselves funding the spines, principally
because no single healthcare organisation has sufficiently strong incen-
tives or the necessary funding; that is, government funding of these
network spines solves a ‘first mover’ problem.
In a few countries elements of this infrastructure have been in place for
some years. The NHS and the Danish health services began development
of national networks in the mid-1990s. The NHS network, NHSnet, was
little used initially but carried substantial volumes of email traffic – up
to one million emails on a working day – by 2002. It was not used to
exchange clinical information though, partly due to a recommended
boycott of NHSnet by the medical profession (Anderson 1995), and
partly due to the realisation by civil servants that data within NHSnet
were – as doctors’ representatives claimed – not secure. The Danish net-
work, in contrast, carried both clinical and administrative data so that by
2002 the majority of prescriptions, as well as hospital referrals, were
handled electronically.
It only makes sense to finance a network infrastructure if there are data
that can usefully be sent over it. For many policymakers, the key data are
in personal electronic health records; that is, the networks and the records
systems are really two elements of a single policy idea. Australia, for
example, is implementing HealthConnect (Department of Health and
Ageing 2004). The federal government is providing funding – equivalent
to around £50 million at 2005 prices – to develop a national network
infrastructure. This is happening in parallel with the development of the
technical infrastructure for electronic records. Following a series of trials
the Australian government has decided, largely on the basis of data pro-
tection considerations, to create health summaries which will be shared
across the new network. The intention is that these summaries will con-
tain current information needed to treat someone, including their ‘live’
prescriptions, wherever they happen to access healthcare. Full patient
records will not be shared, but kept by the people who treat patients on a
regular basis.
Many other countries are pursuing strategies which combine the use
of networks and personal records (Gunter and Terry 2005). In his State of
the Union address in 2004, President Bush stated: ‘By computerizing
health records, we can avoid dangerous medical mistakes, reduce costs,
and improve care.’ His address was accompanied by statements that set a
target of access to complete health records for everyone in the USA,
anywhere, anytime within ten years (i.e. by 2014). This announcement
followed a series of reports from influential bodies, including The
Computer-Based Patient Record (Institute of Medicine 1997) and Crossing
the Quality Chasm (Institute of Medicine 2001). Detmer (2003) provides
an overview of these developments. One key difference, compared to
Australia, is the intention to make complete personal records universally
accessible. Another difference is that the fragmented structure of US
healthcare creates serious coordination problems, which are perhaps
 Information technology and information systems 227

more evident in electronic services than in other spheres. The US federal

government is temperamentally averse to solving the ‘first mover’ prob-
lem by funding the network infrastructure directly itself, and prefers
exhortation of the healthcare sector and the IT industry to develop and
implement the new infrastructure.
Shared health records have a similar place in policymaking in the
Department of Health’s National Programme for IT in England. It will
come as little surprise to English readers to hear that the National Pro-
gramme, which was formally launched in 2002, is hedging its bets and
following Lindblom’s (1959) famous dictum – it is muddling through.
Building on experience with NHSnet, the National Programme now
supports its successor, called N3, which policymakers hope and expect
will be used to carry clinical as well as administrative data. In the first
instance, summary patient data will be held in something called the
‘Spine’, a central database connected to N3, in a model broadly similar to
Australia’s. The long-term aspiration, and one long desired by policy-
makers, is to build up lifetime medical records and make all records
available ‘anywhere, any time’. On the face of it this would move England
closer to the US proposals, but it remains unclear what data will be
available to clinicians operationally. For example, it is not unusual for
three different clinicians to see a patient on the same day. It does not
make much sense if all three only have access to summary data, when the
three of them may need to share vital, detailed contextual information.
But there are as yet no formal policies that suggest that this more detailed
data will be available, either via local systems or the Spine.
In Denmark, Australia and England, the governments have brought
together healthcare organisations and suppliers and provided funding.
This said, the National Programme in England is being funded far more
generously than initiatives in other countries. Contracts have been
awarded for the development of the infrastructure for the NHS Care
Records Service to a value of over £4 billion over 10 years from 2004.
Further contracts have been awarded for three national initiatives, includ-
ing N3, hardware and software for booking of appointments (called
Choose and Book) and for the electronic transmission of prescriptions, to
a combined value of £2 billion. That is, over ten years the additional
investment will run at around £600 million per year. It is also significant
that the Programme in England is placing its faith squarely with com-
mercial contractors, albeit in an arrangement where they have been set
stringent, legally binding performance targets.

The current situation: the evidence base

The policy environment is now encouraging investment then, but what

is the state of affairs on the ground? Two types of evidence are available
on this question, one conventional, the other less so. The conventional
source is the published evidence on the costs and effects of IT and
228 Healthcare management

electronic services. The news is dispiriting. Systematic reviews of evi-

dence about electronic health records suggest that there is little evidence
of positive effects of records on the working practices of clinicians or
administrative staff (Ross and Lin 2003; Delpierre et al. 2004; Poissant et
al. 2005). Even where there is evidence of positive change, it tends to be
associated with countervailing negative changes. For example, some well-
conducted studies show that electronic records reduce the time costs of
administrative staff – but the same studies show they simultaneously
increase doctors’ time costs. For all practical purposes, there is no
evidence about cost changes associated with electronic health records.
Casting the net wider, there is little positive evidence about the costs or
effects of other information technologies, including communications
technologies (Whitten et al. 2002), or large-scale network infrastructure,
where there does not appear to be any empirical evidence at all. As a
result, there is no evidence that the various claims, such as reduction of
medical errors and increased efficiency, will be substantiated in practice.
In short, policies around the world are based on beliefs about information
technologies and services, not evidence.
Man cannot live by experimental evidence alone, however, and it
would be a brave person who suggested that hospital finance departments
could be run without the aid of computers, or that no electronic service
will ever prove to be effective. Indeed, one possible explanation for the
depressing state of the evidence is that academics are guilty of designing
the wrong studies. For example, it is possible that the main effects of
modern electronic services is structural – that is, experienced across hun-
dreds or thousands of users – and that even large effects of this kind will
never be detected using conventional health services research methods.
There is indirect evidence that this may be the case, in studies which
suggest that differences in IT investment appear to explain differences in
economic growth rates for a range of countries during the 1990s (Pilat
and Wyckoff 2005). High investment in IT, particularly in the USA, does
seem to have led to structural changes in several sectors of the economy,
which are in turn now being reflected in productivity gains in those
sectors.

The current situation: diffusion

The second type of evidence about the current state of affairs comes from
evidence on the diffusion of technologies and services in healthcare sys-
tems. Keen and Wyatt (2005) make two observations about diffusion that
appear to be borne out in many developed countries. First, there are stark
differences between the diffusion of IT across economies in general and
in healthcare settings. Second, within healthcare settings it is possible to
identify distinct patterns of diffusion for different technologies:
• No diffusion: many technologies and services have never progressed
beyond the research and development (R and D) phase.
Information technology and information systems 229

• Extensive diffusion for networked activities: for example, for accessing

health information on the internet.
• Extensive diffusion within any one function: most hospitals in developed
countries now have financial management systems and patient
administration systems (PAS).
• ‘Polynesian’ patterns of diffusion within any one function: for example, some
radiology departments have picture archiving and communication
systems (PACS) but the majority still do not.

Various explanations can be offered for these different diffusion patterns

(Rogers 1995; Van de Ven et al. 1999), but Keen and Wyatt (2005) argue
that a political model offers the most convincing explanation. The argu-
ment is most easily understood by starting with Moran’s (1999) technol-
ogy policy framework. Moran argues that the state, clinicians (particularly
doctors) and technology suppliers are locked into a long-term triangular
relationship with one another. The arrangement has been stable over
long periods and in many countries because each party derives benefits
from the relationship. For example, in the pharmaceutical industry firms
have access to markets to sell their products, doctors can use those prod-
ucts to treat people, and governments benefit by being perceived to have
paid for a valued service.
In the case of IT and electronic services the same three groups all have
interests but, crucially, they have not been able to form stable, long-term
relationships with one another. There are two distinct reasons for this.
First, the technologies and services are immature and relatively poorly
understood: electronic health records are just not as well developed as
modern pharmaceuticals, or medical devices. Second, the arrival of the
new technologies creates tensions in a system in which working relation-
ships between doctors, other clinicians and managers are often problem-
atic. Examples such as Kaiser Permanente in the USA notwithstanding,
it is typical for healthcare delivery to be riddled with coordination
problems.
Historically, IT did not pose any new problems because systems were
developed initially by small groups of people interested in a particular
technology, often together with a relatively small supplier company. This
led to the ‘cottage industry’ feel of IT solutions in many countries. Now,
as we have seen, government policies reflect the creation of new, formal
alliances between the state, suppliers and other key interests such as large
private healthcare providers or insurers. Doctors and other clinicians are
faced with a challenge rather than a cosy political alliance.
The problem for clinicians is that, unlike pharmaceuticals or medical
devices, electronic services are double-edged. The positive edge is that
new services promise plausible sounding quality improvements; for
example, in allowing clinicians to access a patient’s records in any location
and at any time – in someone’s own home at 2am, for example – and
hence make better diagnosis and treatment decisions. The negative edge
is that the same services seem bound to lead to fundamental changes
in the nature of clinical work. One does not have to be a disciple of
230 Healthcare management

electronic services to believe this claim. By their nature, new services

necessitate greater standardisation and greater transparency – transpar-
ency being the natural consequence of improved coordination of ser-
vices. To give a simple example, at the moment there is at best limited
cross-over between primary care and hospital patient records. In the
future, when all clinicians can access a single patient record, the record
will only make sense to readers if everyone agrees to use common terms,
but by definition many clinicians will be able to see the decisions and
actions taken by all clinicians. While some clinicians are used to working
in teams and sharing patient records, this represents a major change
for many. It is therefore unrealistic to imagine that all clinicians will
immediately welcome the changes.
The extent of this change cannot be overstated and is perhaps best
understood using cultural theory, developed originally by the anthro-
pologist Mary Douglas (1987) and since applied to problems of public
administration by Christopher Hood (1998). Figure 13.1 shows a 2*2
grid, defined by the dimensions ‘grid’ and ‘group’. Hood explains them
in the following way:
‘Grid’ denotes the degree to which our lives are circumscribed by
conventions or rules, reducing the area of life that is open to indi-
vidual negotiation. . . . ‘Group’, by contrast, denotes the extent to
which individual choice is constrained by group choice, by binding
the individual into a collective body. For example, if we live in a
community which involves common pooling of resources and is
differentiated from the world outside – as in a monastic community,
a hippy commune, or even some types of exclusive ‘clubland’
environment – we are operating in high-group mode. (Hood
1998: 9)
Using the grid–group distinction, we can say that doctors have
historically been individualists, located in the bottom left-hand corner.

Figure 13.1 Four styles of public management organisation

Source: Adapted from Hood (1998).
Information technology and information systems 231

Electronic services, as in the example of shared electronic records, tend to

increase the pressures to coordinate their activities, particularly with
other clinical professionals, and thus move from the low to the high
group. Because they require standardisation of descriptions of health
events, they also imply the need for a move from a low to a high grid
environment: electronic services imply compliance with routines, at least
in respect of record keeping, but this seems likely to influence clinical
behaviour more generally. In short, electronic services require doctors to
change along both key dimensions of public administration.
Turning to nurses, we can say that they have historically been located
in the fatalist quadrant, at the top left of Figure 13.1. As they are already
used to rule-based working, particularly in relation to key aspects of their
record keeping, they are likely to have to move along the group dimen-
sion, joining many doctors in the high grid–high group quadrant. This
said, there is unlikely to be a uniform response and some doctors and
nurses will find themselves closer to the bottom right-hand quadrant,
particularly in contexts where local discretion remains important, for
example, in a range of emergency care contexts. It is also very likely that
individual clinicians will respond to these pressures in different ways.
Some will judge that the improved coordination and the standardisation
are welcome, possibly even overdue, developments. Others will feel
threatened by the changes and be inclined to resist them.
The overall result is that IT and electronic services in many countries
now have a high political profile and committed public funds, but in a
context of immature relationships between the key stakeholders, and
where clinicians are likely to respond in different ways to policies
reflecting the interests of governments and suppliers.
The politics of IT and electronic services seem set to be further com-
plicated by the emergence of patients as active participants. Policy docu-
ments in many countries emphasise the importance of moving from
producer-driven to consumer-driven models of healthcare – or put
another way towards more person-centred care. This is important in the
context of electronic services because increasing numbers of patients,
quite reasonably, want to have access to their records and indeed to
enter data themselves. In England there is a plan to formalise this
arrangement. The NHS has a website called Healthspace (https://
www.healthspace.nhs.uk/) where individuals can enter their own details. In
time, individuals’ Healthspace sites will be linked to their NHS records
(although again detailed policies are not available at present).
Many readers might view this as an obvious and positive development,
but again it is worth emphasising its political dimension. The co-
production of care, where doctors and others work collaboratively with
patients during diagnosis and treatment, would be a natural consequence
of working in a ‘high-group’ environment. Some clinicians, particularly
in primary care, could reasonably be said to do this already, but it will be
an unfamiliar way of working to many others. So, this further emphasises
the point that many clinicians are facing a fundamental shift in their
working practices.
232 Healthcare management

Towards better regulation

The political account of IT and electronic services highlights two key

challenges for policymakers. One is to ensure that suppliers operate in a
competitive market. The other is to improve the coordination of services,
in order to provide a more conducive environment for R and D, and for
the implementation of systems and services.
There are compelling reasons to focus on competition, over and above
the general point that competition will tend to encourage an efficient
(and therefore keenly priced) market and product innovation. One is that
the letting of large contracts creates natural monopolies for some services,
and monopolies always need watching. A second is that e-government
policies also encourage monopolies because they tend to recommend the
creation of single channels of communication, for example, individual tax
returns filed via a single website such that whoever controls the website
has a natural monopoly on that service. A third reason is that the health-
care IT market seems to have unusual features, and has historically been
filled with niche firms operating on small margins, and consequently
investing little in R and D and offering uninspiring products. (These
niche players are important because national policies are concerned
mainly with infrastructure, and organisations will continue to have to
purchase their own systems for internal purposes.) In short, markets seem
to have a natural tendency to inefficiency, including low investment in
R and D.
A fourth reason concerns ownership arrangements, particularly in
countries like England where there is a shift from state-owned to a
‘mixed economy’ of publicly and privately owned organisations provid-
ing services. In a mixed economy the state may have relatively limited
control over either the supplier or the healthcare provider – as is the case
already in countries with more extensive private or voluntary sector
ownership of health organisations. If a government wants private or
voluntary providers to adhere to its policies, then it needs a strategy for
ensuring proper commercial relationships between them and IT
suppliers.
Turning to implementation, there is a key problem of coordination.
Whereas healthcare organisations used to be able to purchase systems on
their own behalf, electronic services will be used by clinicians across
many organisations, so that purchasing decisions and implementation
need to be coordinated. Even though governments are contributing to
the infrastructure, local organisations will continue to need to purchase
and maintain their own systems, and any one organisation will therefore
be dealing with many suppliers for the foreseeable future.
In practice, the coordination and competition problems are linked.
Two examples help to clarify the nature of the regulatory challenge. First,
it is tempting to think that ‘Choose and Book’ policies in England which
allow patients a choice of secondary care providers at the point of referral
will be successful if targets set in the national contracts are met. In a
Information technology and information systems 233

regulatory environment, though, the government’s task should be to

encourage the development of a healthy market for booking services.
Bearing in mind the potential for technological monopolies, it might
decide to offer different ways of booking appointments, for example,
using software in a GP surgery, using alternative software for booking
from home and by telephone. There could thus be competition between
different communication channels.
Second, there will be some natural monopolies whatever governments
do, most obviously in the management of the network infrastructure.
Again, it may be tempting to steam ahead and try to fulfil the contracts. A
regulator could, though, devise a number of strategies for limiting the
deleterious effects of any monopoly, for example, by enforcing quality of
service standards and by encouraging a number of firms to stay in the
market, even though they do not currently hold contracts. In both cases,
the regulator’s behaviour would be determined by its view of its own
role.
It seems reasonable to argue that these two major issues, both con-
cerned with the regulatory environment, should be the main focus of
policies in this area. As we have already seen, governments are seeking to
address the large-scale coordination problems through the funding of IT
infrastructure. It is striking, though, that there is relatively little in the way
of strategies for encouraging the necessary coordination of implementa-
tion between individual healthcare organisations beyond the (sensible)
identification of standards for exchanging data. Indeed, a fairly laisser-
faire approach seems to be the order of the day. If the earlier political
analysis is even partially accurate, then this looks like an oversight in
policymaking. Neither is there much comment on the need to ensure
proper competition in the healthcare IT sector: there is no policy
statement on this issue at all in England.
This line of argument has implications for the triangular relationship
described earlier. It could be argued that the biggest single regulatory risk
lies in the alliance of the state and the suppliers. Conflicts of interest could
easily arise because both of them want clinicians to use the new services –
even though there is scant evidence of their effectiveness. Governments
therefore need to appoint regulators with a formal remit to act as referees
in the relationship between suppliers and healthcare organisations, partly
to ensure that the supplier–clinician relationship works efficiently, but
also to avoid conflicts of interest. There are plenty of precedents for this
sort of role. Regulators might, for example, develop a role similar to that
of OFCOM, the regulator of telecommunications, wireless services, tele-
vision and radio in the UK: that is, regulators would need to be able to
influence all aspects of the market for IT services, ranging from key data
and technical standards, through software marketing regulation to rules
for accessing patient records.
234 Healthcare management

Conclusion

The argument in this chapter is that IT and electronic services in health-

care systems are intuitively attractive and appealing, but difficult in
practice. There is very little empirical evidence that investments are
worthwhile, and to date diffusion of systems into clinical work has been
patchy. Current policies, around the world, are designed to embed IT and
electronic services into clinical work and thereby ‘transform’ it. The
political analysis and the argument about the need for a new approach to
policymaking suggest that the bold claims about system reform are
unlikely to be substantiated in the short term. A radical rethink of the
focus of policies is a priority if governments are to avoid problems of
monopoly and market failure in this sector, and provide an environment
where organisations can coordinate their implementation efforts. This
is not to say that current policies will fail, but is to say that diffusion of
the use of shared electronic services will be subject to the vagaries of
organisational politics, and likely to proceed in fits and starts.

Summary box

• IT and electronic services are attractive to politicians and policymakers.

• There is scant evidence that investments in IT and electronic services are
cost effective.
• On the ground, implementation has historically been patchy, with far greater
penetration of IT in ‘back office’ functions than in clinical practice. Looking at
the international picture, general practice computing in the UK is a rare
example of high penetration into clinical work.
• Current patterns of diffusion of IT and services are best explained within a
political framework.
• Government policies tend to underplay or ignore the political dimension of IT
and electronic services. They also ignore a number of problems inherent in the
structure of the healthcare IT market. A radical rethink of policies is required,
which would involve governments moving towards a more overtly regulatory
role.

Self-test exercises

1 What is the ratio of paper and electronic transactions in your own

work? In answering the question you should include all communica-
tion channels, including post, telephone and email.
2 Why do so many clinicians continue to rely on paper rather than
electronic records? What are the arguments in favour of retaining
paper records?
 Information technology and information systems 235

3 How do you think doctors’ and nurses’ work will change when they
eventually begin to share personal electronic health records?
4 How can governments ensure that private healthcare organisations are
able to generate and share patient health data electronically with one
another? Think of ways in which governments can influence organisa-
tions in other sectors, such as the television industry, where there are
rules governing the technologies that organisations can use and the
content of programmes.

References and further reading

Anderson, R. (1995) NHS-wide networking and patient confidentiality. British

Medical Journal, 311: 5–6.
Castells, M. (2001) The Internet Galaxy. Oxford: Oxford University Press.
Danish Centre for Health Telematics (2006) http://cfstuk.temp.fyns-amt.dk/
wm150976 (accessed January 2006).
Delpierre, C., Cuzin, L., Fillaux, J., Alvarez, M., Massip, P. and Lang, T. (2004) A
systematic review of computer-based patient record systems and quality of
care: More randomized clinical trials or a broader approach? International
Journal of Quality Health Care, 16: 407–16.
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Australian policy. Department of Health and Ageing: http://www.healthcon-

nect.gov.au/pdf/overviewDec04.pdf
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CMS/8089.aspx
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 14 Human resource management
in healthcare
Anne McBride and Paula Hyde

Introduction

Healthcare delivery relies upon the ability of healthcare organisations to

train and develop, then deploy, manage and engage their workforce.
Challenges to healthcare managers are demonstrated through difficulties
involved in getting good staff to provide high quality services as effi-
ciently as possible. These challenges remain critical to healthcare man-
agement as significant staff shortages are predicted, exacerbated by
increasing demand for services. Managers around the world, therefore,
share a common desire to manage people in ways that enable the
workforce to perform at their best.
There is a range of approaches to managing the healthcare workforce
for high(er) performance. In the UK, two streams of activity are evident:
the first focuses on making the NHS a ‘good employer’ thereby recruit-
ing and retaining ‘good staff’, which could be called human resource
(HR) management; the second approach concerns rethinking how to
provide ‘high quality services’ as ‘efficiently’ as possible, which could be
called ‘different ways of working’. Such approaches are often referred to
as ‘modernisation’ (see Bach 2002). However, Seifert and Sibley’s argu-
ment that ‘ “modernisation” is not a neutral step forward but a highly
coloured version of progress rooted in market-style efficiency’ (2005:
226) indicates the contentious nature of such terminology. ‘Different
ways of working’ is an attempt to avoid value judgements on the process
and outcome of the different ways of working for employees, employers
and service users. Given that the UK NHS is the third largest employer in
the world, employing 1.3 million staff in 2004, it provides a useful case
study to illustrate the processes, outcomes and questions raised by both
streams of work.
The chapter begins by outlining characteristics of the healthcare work-
force in the UK and the challenges raised for managers. Against this
background, the chapter reviews the rationales put forward for HR man-
agement and different ways of working, providing recent UK examples of
both types of initiatives. The authors then use the Changing Workforce
238 Healthcare management

Programme as an example to provide an illustration of some issues which

should be of particular concern to managers endeavouring to get the best
from their healthcare workforce.

Characteristics of the UK healthcare workforce

Healthcare organisations are characteristically made up of a large propor-

tion (around 50%) of professionally qualified staff providing frontline
services to recipients of healthcare. Table 14.1 gives the proportions of
clinical and support staff groups in the NHS. This type of organisational
arrangement has been called a ‘professional bureaucracy’ (Daft 1992).
Such organisations are characterised by having high proportions of pro-
fessionally qualified staff organised around clients or services. Decision
making takes place around the operating core (professional frontline staff)
and management and administration take place by mutual agreement.
Healthcare is a rapidly growing industry sector. A combination of
rapid expansion, high staff turnover and an increasingly ageing workforce
has contributed to significant projected staff shortfalls of registered pro-
fessionals and other skilled staff in countries such as the USA, UK and
Australia (Wanless 2002; National Center for Workforce Analysis 2004;
Australian Government Productivity Commission 2005). The NHS
workforce has experienced an annual staff growth rate in the UK of
around 3.5% per year since 1997 (DH 2005a). Doctors and other profes-
sionals traditionally work long hours and absence rates in the NHS are
high. The average time lost per year in the health service is around 5%,
compared to 3.1% elsewhere. Furthermore, management style, poor
communication, poor working conditions and stress are cited as reasons
for nurse exit or intention to leave (Levell and Jones 1996; Cangelosi et al.
1998; Newman and Maylor 2002). Successful recruitment has been ham-
pered by poor public perceptions of the NHS as an employer because of
poor pay, lack of flexible hours and pressures associated with low staff
numbers (Arnold 2004).
In this context, healthcare managers face particular challenges not only
of recruitment but also of improving working conditions in order that
absenteeism reduces and staff retention improves. Managers are chal-
lenged with overcoming skills shortages and reducing labour costs. A

Table 14.1 Professionally qualified and support staff in the NHS, 2004
Staff Group Percentage of NHS workforce

Professionally qualified clinical staff 49.7

Support to clinical staff 34.7
Infrastructure support 15.9

Source: Adapted from Department of Health (2005a).

 Human resource management 239

frequent panacea offered up to address such challenges is workforce

‘modernisation’. This can refer to a range of changes to working prac-
tices, but within the health service attention has often been focused on
challenging professional demarcations. Professional staff groups have dis-
tinctive characteristics which include a commitment to a distinct body of
knowledge, restrictive entry and peer group evaluation, control and pro-
motion (Dawson 1992). The NHS Plan (DH 2000a) and subsequent
materials imply that there is a greater scope for overlapping responsi-
bilities, flexibility, multi-skilling and generic work – none of which fits
easily with the aforementioned characteristics of professionals. The UK is
involved in two streams of activity with the healthcare workforce – HR
management and different ways of working.

Why HR management?

There is a substantial body of work supporting the claim that HR man-

agement contributes significantly to improved organisational perform-
ance (Guest and Peccei 1994; Huselid 1995; Pfeffer 1998; Ulrich 1998).
For example, within the UK, a link has been reported between human
resource management (HRM) and patient mortality (West et al. 2002)
and within the US health sector research has shown that hospitals able to
attract and retain good nursing staff (Magnet Hospitals) demonstrate
lower mortality rates (Aiken et al. 1994). The exact nature of this HR–
performance relationship, however, remains unclear. Common sense sug-
gests that there must be a link between good employment practices and
improved performance, but some authors claim that more practices are
better; others that specific bundles of practices are more effective and
others that the link between HR management and performance is
indirect and that there are no clearly identifiable bundles of effective HR
practice.
Since linkages between HR management and performance were iden-
tified, much has been written about the form HR management should
take. These can be broadly categorised into three approaches: ‘best prac-
tice’, ‘resource based’, and ‘best fit’. Each approach implies different
means of improving organisational performance through the manage-
ment of the workforce. For competitive advantage HR practices also aim
to improve employee attitudes such as motivation and commitment.
Hutchinson and Purcell (2003) illustrate the vital role that frontline man-
agers play in converting HR policies to meaningful action for staff. The
following commentary on these three approaches is derived from Boxall
and Purcell 2003; Marchington and Wilkinson 2005; Hyde et al. 2006;
McBride et al. 2006.
240 Healthcare management

Best practice HR management

Best practice HR management is a universalistic view that the adoption

of sets (or bundles) of HR practices will improve performance and bene-
fit organisations and employees. This approach suggests that the closer an
organisation gets to applying best practice HR and the more they apply,
the better their performance will be. Advocates of this approach stress the
importance of mutual goals, a climate of respect, ability of employees to
influence decisions, adequate reward structures and shared responsibility.
Although the ‘best practice’ HR management literature unquestion-
ably flags up key priorities in areas of HR management activity and draws
attention to areas where synergy or complementarity between HR man-
agement practices are likely to be important in influencing organisational
performance, there is no universally accepted list of best practices. Some
models involve four or five key practices while others have a dozen or
more (Boxall and Purcell 2003: 62). Table 14.2 contains a list of eight HR
practices (adapted from Hyde et al. 2006) and will be referred to again
later.
Because of its unitary view of the organisation, the best practice
approach is likely to create tensions in complex, pluralist healthcare
organisations. This is likely to render the unilateral implementation of a
single management vision impractical. The constituent organisations that
make up healthcare systems will have their own priorities which may
constrain implementation of broader policy objectives, and failure to
appreciate potentially divergent interests of management and employees
could prove costly.

Resource-based HR management

A second approach to HR management is the ‘resource-based view’

(RBV). This model derives from ideas of ‘sustained competitive advan-
tage’; such advantage arising from ‘firm resources that are valuable, rare,
imperfectly imitable and non-substitutable’ (Barney 1991: 116). This
model emphasises the role of managers in generating competitive advan-
tage through the development of human capital (see Colbert 2004).
Under the RBV, ‘core competencies’ form the focus as sources of unique
competitive advantage, with a priority placed on knowledge within the
organisation and developing a focus on ‘knowledge management’ in
order to build on these competencies (Boxall and Purcell 2003: 82). The
emphasis here is on competition, with a focus on external factors in
determining which resources have value and are worth developing. This
approach assumes a competitive environment so would not be suitable
for the NHS in its current form. The universal nature of provision that
NHS organisations are obliged to provide make it impossible for them to
focus only on what they are ‘good’ at. This approach may, however,
be useful to organisations in other countries that do need to develop
competitive advantage in the healthcare market place.
 Human resource management 241

Table 14.2 HR practices and NHS policies

HR practice Purpose and illustration NHS policy or initiative

Recruitment and Means of hiring new staff Productive Time

selection Techniques can include assessment centres, Efficiency Map
interviews, psychometric tests, reference checks
and work sampling.
Pay and rewards Means of compensating worker Agenda for Change and
Extrinsic or monetary rewards include: wages, HR in the NHS Plan
salaries, bonuses, health insurance, company cars
and occupational pensions.
Intrinsic or non-monetary rewards include:
recognition, personal development and social
status.
Appraisal and career Means of assessing performance and offering new NHS Career Framework,
development opportunities Knowledge and Skills
Evaluation of performance according to Framework, Skills
managers, work colleagues and/or employees Escalator, and HR in the
own assessment. NHS Plan
Career development may take the form of
mentoring, training, career tracking and be
linked to appraisal.
Learning and Education and training opportunities Career Framework,
development On-the-job training: training on how to do the Knowledge and Skills
job within the place of work. May include Framework, and Skills
observation and trial and error. Escalator
Off-the-job training: takes place away from the
place of work and may be based on theory.
Examples include: competency training,
management development, graduation schemes.
Employment security Means of retaining workers HR in the NHS Plan
Making use of internal labour markets through
internal promotion.
Employee involvement Means of communicating between managers and staff Improving Working
and communication Downwards communications from management Lives
to workers including briefing groups, town hall
talks and informal communications.
Upwards communication including quality
circles, attitude surveys, suggestion schemes,
problem-solving groups.
Team working and task- Means of increasing worker participation Changing Workforce
based participation Task-based participation – enlarged or enriched Programme
jobs in terms of widening skills or having greater
responsibility for organising and managing work.
Work–life balance Means of improving working conditions Improving Working
May include crèche facilities, job sharing, Lives
parental leave or flexible working hours.

Source: Adapted from Hyde et al. (2006)

242 Healthcare management

Contingency HR management

Contingency or best-fit models (from here referred to as contingency

models) offer an alternative model. These approaches advocate the tailor-
ing of HR practices based on contingent factors and the principle that
such practices must also complement one another. Boxall and Purcell
(2003) identify two main groupings of factors affecting management
choices of HR strategy. The first grouping consists of economic and
technological factors including sector and competitive strategy, the
nature of the dominant technology, size and structure of the firm and
stage in the industry life cycle, whether the organisation is well funded or
under-capitalised, and general economic conditions. The second group-
ing of factors is social and political, including labour scarcity, expectations
and power of employees, including union strategies, managerial capabil-
ities and politics, labour laws and social norms and general education
levels and vocational training systems.
There is a risk that this model is too complex and that at least the ‘best
practice’ model suggests a clear policy focus. However, this approach is
more pragmatic and contextually based than the ‘one size fits all’
approach of the best practice model, in that it considers the range of
external and internal factors affecting an organisation when deciding
which HR policies to implement. This creates a very flexible framework
for analysis that can be applied by managers in any organisational
circumstances. (See Self-test exercise 1.)

Why different ways of working?

There is a growing trend across the globe towards changes in workforce

configuration and skill mix in healthcare that has been driven by a range
of environmental pressures and challenges (Davies 2003). These drivers
include: the need to respond to skills shortages; pressure for better man-
agement of labour costs (which account for much of overall healthcare
cost); a desire to enhance organisational effectiveness; and changes in
professional regulation (Adams et al. 2000; Sibbald et al. 2004). Central to
such initiatives have been ideas borrowed from two overlapping tradi-
tions: first, business process re-engineering, which includes emphasis on
worker responsibility, multi-skilling and job variety (Leverment et al.
1998; McNulty and Ferlie 2002); second, role redesign, which focuses on
skill variety, task identity and significance, autonomy and feedback
(Parker and Wall 1998).
Role redesign ‘concerns the way jobs are designed or configured
within the overall organization of production’ (Bélanger et al. 2002: 17)
and dates back to the 1960s. Such initiatives took place against a back-
ground of trade union activism and labour shortages and were part of an
attempt to deal with rising absenteeism and high staff turnover often
linked with Taylorist production systems (Payne and Keep 2003). Role
 Human resource management 243

redesign initiatives were claimed to improve outcomes by increasing the

meaningfulness of work whilst encouraging employees to experience
responsibility for outcomes and to have active knowledge of the results of
work activities. Moderating factors included knowledge and skills of the
workers and motivation to adapt the role (Parker and Wall 1998).
In the 1980s with labour surpluses and declining union power, role
redesign was focused on improving organisational performance. Kelly
(1992) proposed that role redesign led to improved performance through:
employees negotiating changes in content (and increased output) in
exchange for increased pay; employees perceiving closer links between
effort, performance and valued rewards; increased goal setting motivating
better performance; and improved efficiency of work methods leading to
performance improvements. However, improved efficiency can come at a
price. Within the NHS, work by Thornley (1996: 165) illustrates how
‘the state was able to play on the nebulous character of “skill” in nursing’
and substitute cheaper labour for more expensive grades in a process that
Thornley calls ‘grade dilution’.

The UK policy context

In recent years government policy has moved away from restructuring

and reorganising health services towards modernising working practices
in particular, and systems and processes of care generally. These policies –
aimed at tackling skills shortages and reducing labour costs – originated
with The NHS Plan which presented a ten-year plan of investment in the
NHS (DH 2000a). Furthermore, it laid out two objectives for the work-
force: first, specified increases in staff numbers; second, major redesign of
roles for NHS staff. Although emanating from the same policy document,
in effect these have become two streams of activity.

The HR management approach

The policy document HR in the NHS Plan underpins much of the HR

management activity in the NHS. Officially launched in 2003, it set out
‘a comprehensive strategy for growing and developing the NHS work-
force to meet the challenges in the NHS Plan’ (DH 2002). The strategy
involved four ‘pillars’ of activity with associated measures to enable staff
to redesign jobs around the patient:
1 Making the NHS a model employer by creating an environment con-
ducive to healthy work–life balance, a diverse workforce, job security,
fair pay, lifelong learning and staff involvement and partnership
working. Measured through a national target called Improving Working
Lives.
2 Providing model careers through the ‘skills escalator’, pay modernisation,
244 Healthcare management

learning and personal development, professional regulation and work-

force planning.
3 Improving staff morale, recognising that staff attitudes and behaviours
impact on patient care.
4 Building people management skills through leadership development
programmes and national HR networks.
Development of the strategy as a whole has been underpinned by a
national HR in the NHS conference, and the development of leadership
development programmes and national HR networks. Progress is meas-
ured against annual national targets, for example, Improving Working Lives,
which contributed to the overall performance rating of each NHS organ-
isation. As noted earlier, Table 14.2 illustrates a range of HR practices
(adapted from Hyde et al. 2006). Against each practice is an example of an
NHS HR policy initiative, which demonstrates the comprehensive
nature of the NHS HR approach. Whilst some policy initiatives have
multiple aims, for example, the HR in the NHS Plan focuses on HR as a
whole, others, like Agenda for Change, focus on pay.
This example of a ‘best practice’ approach managing the workforce,
with the NHS endeavouring to become a good employer, was an explicit
attempt to address labour market challenge and overcome negative atti-
tudes to working in the NHS noted above. However, this approach has
been criticised as its emphasis on national, short-term targets preclude
longer term, locally adapted developments. It is therefore possible to see
the downside of a best practice approach, which assumes one approach
fits all organisational circumstances. National policies and targets have
been criticised for diverting manager’s attention away from local (rather
than national) priorities onto short-term (rather than long-term) devel-
opments (Bach 2004). In addition, McBride and Shephard (2006) note
that the HR in the NHS Plan neglects to focus on the development of line
managers, which they note is a serious omission, given the raft of policies
they are required to implement and the need to involve line managers in
implementing policies (Procter and Currie 1999; Hutchinson and
Purcell 2003).
Although the HR in the NHS Plan emphasised ‘more people, working
differently’, which infers different ways of working, the HR approach has
tended to dominate. Indeed, New Ways of Working was a separate stream of
activity developed under the Modernisation Agency.

Different ways of working

The policy document A Health Service of all the Talents (DH 2000b)
underpins much of the NHS work encouraging different ways of work-
ing. It argues for an emphasis on ‘maximising the contribution of all staff
to patient care, doing away with barriers which say only doctors or nurses
can provide particular types of care’ (original italics; DH 2000b: 5). In
particular, professional staff groups are being challenged to change
 Human resource management 245

traditional roles, conventional team structures and hierarchies and exist-

ing care processes. The example given in the following section examines
one attempt to introduce different ways of working (other examples are
available at www.wise.nhs.uk).

Introducing different ways of working: the CWP example

One of the key mechanisms employed to move towards a patient-centred

health service was the NHS Modernisation Agency. This agency was
established in 2001 and absorbed into a new NHS Institute for Improve-
ment and Innovation in July 2005. The Modernisation Agency’s New
Ways of Working team was given a remit that involved the revision of pay
and staff structures and introduction of new and redesign roles.
Introducing the latter was the responsibility of the Changing Workforce
Programme (CWP).
Beginning in 2001, 13 CWP pilot sites were established within NHS
organisations or health economies around England. The intention was
that roles would be redesigned locally under the guidance of CWP who
provided project managers and workforce designers to each pilot site for
the period of the pilot programme. Potential roles were identified and
redesigned through the Role Redesign Workshop (a set of materials
aimed at supporting local staff in redesigning their own roles) where local
stakeholders came together to redesign roles around a particular patient
pathway. A phase of testing was planned to precede anticipated
implementation and national spread throughout the NHS, should the
redesigned role be judged a success.
CWP employed a contingent, emergent approach to workforce design
that could be adapted and used locally. Project managers and workforce
designers worked locally, with staff from organisations to initiate role
redesign. Nationally, the CWP team worked with professional bodies and
education institutions to overcome barriers to change. CWP established a
national database of information on new and redesigned roles in health
and social care and printed materials and guides (Modernisation Agency
2002a, 2002b). They established Accelerated Development Programmes
to support speedier implementation of new roles in areas where the
benefits had been tested and proven models were available to guide
implementation (Hyde et al. 2005).
Hyde et al.’s (2004) evaluation of CWP led them to conclude that
nationally CWP played a key role in developing capacity in the health
service for workforce modernisation through role redesign – providing
training across the UK, national level support to ‘join up the dots’
between different initiatives and bodies, and disseminating learning.
Locally, CWP led to personal development and job satisfaction for staff;
service improvements and strengthened organisational partnerships
through the development of roles that involved cross-boundary working.
However, Hyde et al. (2004) indicate that notes of caution were
246 Healthcare management

sounded. Questions were raised about how far the new role would free
up specialist time. Some CWP participants raised doubts about how rad-
ical the redesign roles had been. The researchers also noted that a number
of roles were stalled at the funding stage, with neither the organisation
nor the funders being prepared to underwrite roles that were in effect
additional to previously agreed workforce quotas. The authors also noted
that line managers were not easy to involve as they often felt they had
more pressing issues to deal with.

Economic and technical factors

Attention to this set of factors means looking at the economic position of

the organisation and making decisions based on its organisational strategy
and where it stands within the sector/industry. As noted above, a number
of roles were not funded beyond the testing stage. This was despite the
roles being effective, addressing patient needs and giving staff high levels
of job satisfaction and greater commitment to the organisation. McBride
et al. (2005) argue that this is explained by the competing logics within
the NHS that are geared around the needs of the customer at the same
time as being geared around the need for rationality and efficiency. These
logics are frequently in contradiction such that a nurse (taking over a task
from the junior doctor and thereby saving 20 hours per week) may wish
to spend (more) time taking consent from a patient commensurate with
patient need, not productivity concerns. If this additional time cannot be
absorbed into the overall workforce plan, or become part of a new ‘pre-
mium fee’ business strategy, then such role redesign will not proceed past
the testing stage. As noted by one interviewee, ‘Directorates are very
good at saying they want more, but not that good at saying we are going
to fund it by stopping doing Y’ (Hyde et al. 2004: 66). Attention to the
interface between the economic status of the organisation, organisational
strategy, workforce planning and workplace development would be one
way of counteracting the tensions between providing patient-centred
care and being as efficient as possible. (See Self-test exercise 2.)

Social and political factors

Peck observes (Chapter 19) that power is an underplayed theme in dis-

cussions about leadership. Power is also an underplayed theme in discus-
sions about HR and different ways of working and certainly an important
feature of the nurse–doctor relationship (Wicks 1998). As noted earlier,
CWP was explicitly attempting to challenge profession role demarca-
tions, conventional team structures and hierarchies and established
health/social care divides. Parker and Wall (1998) stress the need to
involve stakeholders. In complex healthcare organisations there are many
to consult: senior managers, line managers, professional groups, unions,
users/carer groups. A number of CWP role redesigns required agreement
 Human resource management 247

from a number of different stakeholders to a transfer or delegation of

duties, and gaining this agreement often took considerable time and
expertise.
It is suggested that clear routes for management and accountability
should be established prior to the introduction of new roles as failure to
provide clear systems can amplify existing professional tensions (Parker
and Wall 1998). Generally, within CWP, there were fewer problems of
management and accountability when redesigned roles could draw upon
existing lines of control. Where organisational or professional boundaries
were crossed, responsibility often remained with the delegating profes-
sional group who needed to be convinced that appropriate clinical
governance procedures were followed. (See Self-test exercise 3.)

Links between HR approach and different ways of working

Hyde et al. (2004) indicate important issues for the manager of the
healthcare workforce by illustrating the inextricable links between HR
management and different ways of working. Remuneration provides one
such illustration.
A large number of redesigned roles were staffed through extensions of
existing staff roles (53%). This testing of extended roles through existing
staff raised concerns about future recognition and remuneration. For
example, one role redesign was delayed because the staff group ‘wouldn’t
do it without remuneration’. Settling pay in advance was an important
factor. Not discussing pay in advance of role development led to limita-
tions in the numbers involved (Hyde et al. 2005). Difficulties were also
found in roles that crossed professional boundaries where there were
existing pay disparities. One example of this was the emergency care
worker who could be a paramedic or a nurse who were performing the
same new role but who received substantially different remuneration.
Difficulties in determining pay settlements faced by healthcare organisa-
tions are not unique to this programme (see Bach 1998) and the import-
ance of pay for successful policy implementation has already been noted
(Sibbald et al. 2004: 34). Parker and Wall (1998) argued that remuneration
should be settled prior to implementation of role redesign and some pilot
sites managed this whilst others did not. Increased pay has been linked to
increased performance, especially where the employee is involved in
negotiating changes of role (Kelly 1992).
Where the links between HR management and different ways of
working operate successfully, new practices may become embedded in
the organisation. Successful role redesign, whilst developed at a service
delivery level, was successful only where strong, explicit support of senior
managers was obtained along with associated funding. This meant that
roles that had been redesigned by the frontline staff providing the service
could be examined at a higher level in the organisation for sustainability
by addressing a series of key questions:
248 Healthcare management

• Could the role be financed if expanded to include other workers?

• What arrangements were needed for managerial accountability of
roles that crossed traditional boundaries?
• Would it be possible to offer the necessary training and development
to a wider group of staff?
• Would the role fit with organisational strategy?
Each of these questions involves an HR management approach in under-
standing different ways of working. CWP roles that did not continue
beyond the testing phase were often impractical in terms of one of the
questions above and had proceeded without explicit involvement or
commitment of senior managers. Although not stated explicitly, Hyde et
al. imply that lack of HR involvement made it more likely that role
redesigns would be singular examples, for one or two people, and
that they would not be fully funded on a permanent basis. However,
Bach (2004) noted that HR management already has numerous and
conflicting objectives.

Conclusion

We would argue that HR managers stand in a good position to link HR

management to different ways of working as illustrated in successful
CWP role redesigns. Indeed, at the time of writing the Department of
Health appear to be aligning these two streams of activity by indicating
job and service redesign as one of their recommended high impact HR
changes (DH 2005b). HR staff have a background in staff involvement
and change management as well as an understanding of workforce plan-
ning and development, although implementation may be delegated to
others.
The example of Changing Workforce Programme suggests that an
appropriate role for HR management would be to apply a contingency
approach to different ways of working. This approach emphasises the
need to understand the economic and technological, and the social and
political. (See Self-test exercise 4.)

Summary box

• Approximately 50% of healthcare workforce is professionally qualified.

• Managers challenged with overcoming skills shortages and reducing labour
costs often focus on professional demarcations.
• There are links between HR management and improved organisational
performance that seem to operate through the employee and line manager,
making workforce management an important area for attention.
• There are three different approaches to HR management: best practice,
resource-based view and contingency.
 Human resource management 249

• Different ways of working can lead to improved performance, but care must
be taken that improved performance is through working smarter rather than
harder (since this will only be a short-term gain).
• Considerable recent investment in workforce development in NHS UK
through two streams of activity (HR management and different ways of
working).
• Using a best practice approach, the UK has focused significant attention on a
number of HR practices, but sometimes ‘one size does not fit all’.
• Using a contingent approach, the NHS has developed a number of new roles
across the UK which has enabled tasks to be delegated to other staff groups to
the mutual satisfaction of all stakeholders.
• Critical success factors in long-term workforce development are an
awareness of economic and technical and social and political factors of
organisation.
These practices are more likely to be embedded in organisations if there are links
between HR management and different ways of working.

Self-test exercises

1 Consider the three HR management models (best practice, resource

based and contingency). Consider the circumstances of your organisa-
tion. Which of these models do you think best suits your organisation?
Why do you think this? Which model, or combination, applies to your
organisation at the moment? What could you do differently? What
benefits would this change bring?
2 Consider the economic and technical factors facing your organisation.
What is the level of competition within your healthcare sector? What
is the position of your organisation within this environment? Is your
organisation well funded or under-capitalised? What is the dominant
technology in your organisation? What are the implications of this for
developing different ways of working across the organisation?
3 Consider the social and political factors facing your organisation. Is
labour scarce? What are the expectations of employees, unions and
professional staff groups? What are managerial capabilities? Does the
organisation have a workforce plan? What are the politics of the organ-
isation? Is there senior commitment to developing the workforce?
What is line management capability and capacity? What is the general
level of education of employees? What does the vocational training
system provide? What lines of accountability exist within the organisa-
tion? What are the implications of this for developing different ways of
working across the organisation?
4 In your organisation, consider the extent to which HR are involved in
the introduction of different ways of working. Could HR be involved
more? If so, what could facilitate this change? What is your role in
building these links?
250 Healthcare management

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Australia Industries Skills Council. Details from industry skills council for
community services and health industry, Australia: http://www.cshisc.com.au/
load_page.asp
Changing Workforce Programme (UK). Also role redesign more generally:
http://www.wise.nhs.uk/cmsWISE/default.htm
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default.cipd
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research/teams/project.asp?id=913&tID=100&pID=913
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www.skillsforhealth.org.uk
UK workforce development. For details of UK national policy covering
workforce development: http://www.dh.gov.uk/PolicyAndGuidance/Human
ResourcesAndTraining/MoreStaff/fs/en
 15 Working with healthcare
professionals
Carol Brooks

Introduction

The relationship between managers and doctors is pivotal to the effective

delivery of healthcare services. Healthcare organisations can succeed or
fail as a consequence of the nature of this relationship. Edwards et al.
(2003) comment on the risks of not allowing medicine and management
to come together in the organisational setting. They illustrate that there is
a ‘mounting body of evidence that badly managed organisations fail
patients, frustrate staff, deliver poor quality care, and cannot adapt to the
rapidly changing environment in which they operate’ and go on to sug-
gest that ‘poor management practice is at least as lethal as poor clinical
practice’.
This chapter seeks to explore the nature of this relationship between
managers and doctors, both from an interpersonal perspective and an
organisational perspective as illustrated in Figure 15.1. Although the dis-
cussion will focus primarily on the manager–doctor relationship, it is
clear that many of the themes and frameworks can be extrapolated and
transferred to other relationships between managers and the wider clin-
ician community in healthcare organisations. This chapter particularly
explores the changing nature of the relationship between doctors and
managers over the last 30 years within the context of National Health
Service changes and reforms in the United Kingdom, but it is fair to say
that the issues faced by managers and doctors in the UK are found in
many other countries globally, particularly in the United States and
Europe.
It is critical for managers to understand the impact of professional and
organisational cultures on the relationship they have with doctors, par-
ticularly in terms of behaviours displayed at an organisational level. The
design and implementation of specific types of organisational structures
will also affect behaviours within the relationship. This chapter illustrates
how the organisational forms prevalent in healthcare have a significant
impact on how doctors and managers work together. The overarching
aim of the chapter is to provide both managers and doctors with the
254 Healthcare management

Figure 15.1 Relationships between managers and doctors

awareness, information, knowledge and frameworks to facilitate the

development of positive and productive relationships, which in turn are
crucial to the successful delivery of healthcare to patients.

The historical context: the changing relationship between managers and

doctors in the uk

Before the 1980s, healthcare services in the UK’s National Health Ser-
vice were dominated by doctors in terms of both influence over decision
making about the distribution of resources and the control of the day-to-
day running of healthcare establishments. Doctors managed with a senior
nurse or matron at their side, with administrators providing the third
member of the triumvirate, and taking primary responsibility for non-
clinical support services and for general administration and coordination.
Hospital doctors exercised their professional autonomy and used their
professional power base to achieve the outcomes they thought were best
for the service they provided (Davies and Harrison 2003).
The Griffiths Report in the 1980s (Griffiths 1983) introduced the
concept of general management to the NHS – a single person with
overall managerial responsibility at each level within the organisation, to
replace the triumvirate of doctor, nurse and manager. These reforms both
reflected and promoted a move towards a more managerial and business-
like culture in the National Health Service, particularly within hospitals.
Although the reforms did create a new cadre of identified senior leaders
with whom ‘the buck’ stopped (in terms of financial decision making),
doctors still remained entirely responsible and accountable for their own
Working with healthcare professionals 255

clinical practice. However, the new managerial structures did serve to

break up the old triumvirate structure for decision making and created a
career management structure for healthcare managers. The introduction
of general management signalled the future drive for closer parallels with
private and commercial organisations’ structures and governance
arrangements. In the early 1990s, the internal market was introduced and
provider and purchaser organisations, marketing and strategy depart-
ments, chief executives and boards were all the paraphernalia of the
commercial sector. Small ‘business units’ were created in healthcare
organisations, manifesting themselves as directorates arranged around
clinical areas. The dynamic between managers and doctors shifted again,
with doctors being asked to lead and manage directorate areas, working
with a senior nurse and a manager, usually a business manager. This
relationship was reminiscent of the pre-1980s triumvirate arrangements.
However, there were some fundamental differences in that arguably doc-
tors in these positions had less freedom as they were now a part of a
corporate management structure, and were expected to contribute to the
development of the whole organisation. Business managers (usually from
a general management background) were expected to support the lead
clinician, but were also expected to challenge and facilitate service devel-
opment, rather than reinforce the status quo. The place of the doctor
within the corporate management structure was reinforced by having a
place for a lead doctor, or medical director as a part of the management
executive.
In today’s healthcare organisations, the legacy of this history can still be
seen within hospital structures. Most hospitals still arrange the services
around specific clinical or disease areas. However, the trend more recently
has been to further enhance the significance of the doctor in the man-
agement and leadership of the organisation, played out through the role
of clinical director. There has been increasing importance attached to
these roles, with a gradual shift from doctors being voted into the role
by their peers, or simply taking on the role as part of a rotation of
responsibilities, to chief executives running recruitment more formally
and recruiting to the role against a job description and person specifica-
tion. These job descriptions often have an emphasis on management and
leadership which goes beyond the professional world of doctors.
Examples from a ‘live’ job description (in 2006) are given in Figure
15.2.
General managers are still working alongside clinical directors to man-
age the operational aspects of the service, and in some hospitals a general
manager takes overall responsibility for the performance within the ser-
vice. This is a move on from the clinical directorate structures of the
1990s when the most senior person within the service team was always
the lead doctor. The continuing engagement and direct involvement of
doctors in management will remain central to the public sector reform
agenda around choice, empowerment and personalised care (DH 2005a,
2005b, 2006). Doctors working as equals to managers, working in
partnership, will be required to lead huge strands of the organisational
256 Healthcare management

Figure 15.2 Examples from a job description

Source: reproduced with permission from Airedale NHS Trust (2006)

development agenda in order to successfully implement policies and

achieve the reform agenda.

Working with doctors in management and leadership roles

Understanding the historical context and development of the changing

relationship between doctors and manager is important if the attitudes
and viewpoints of doctors in leadership roles in modern healthcare
organisations working in the twenty-first century are to be explored.
Managers have a responsibility to draw on their own professional skills
and expertise to encourage and support doctors in these leadership roles,
which are so important to the effective delivery of health services.
The leadership roles occupied by doctors in hospitals are distributed
throughout the organisation. At board level it is a statutory requirement
to appoint a medical director as a part of the executive team. This indi-
vidual will have a challenging role in that they are expected to provide
Working with healthcare professionals 257

leadership to their medical colleagues, but are also required to take a

corporate stance whilst being a member of the executive team and a
member of the trust board. The medical director can be viewed as
a conduit between the body of medics working in the hospital and the
board. This leadership role often requires degrees of diplomatic and polit-
ical skills that the role holder has not been required to deploy in any other
arena. The leap from a clinical director role to medical director needs to
be managed carefully, or the risk of failure in the role increases. Ferlie and
Shortell (2001) explore the concept of leadership within the context of
improving quality of healthcare in the UK and USA. They write of the
importance of distributing leadership throughout the different levels of
the healthcare system; the individual, the team, the organisation and the
wider environment in which healthcare organisations exist. It is therefore
of limited effectiveness to focus leadership development solely at the
individual clinicians or individual managers. Instead, a ‘whole system’
approach should be taken, with managers, doctors and other professional
groups participating together in leadership activities.
Clinical directors, as noted earlier, are often in position because it
happens to be their turn, or they have been voted into the position by
other doctors. Sometimes they are in the role because there is no one else
willing to take it on, and sometimes it can be that managers (the execu-
tive team and chief executive) see the person as the one least likely to
cause tensions and trouble for the organisation. For managers, this is a
tempting route to take in appointing clinical directors, as it then means
that the managers are likely to have more relative control and influence in
the organisation. However, this approach carries its own risks in that inept
and unassertive clinical directors are very unlikely to become signifi-
cantly involved in leading their medical colleagues (they are likely to lack
the necessary credibility), shaping services and leading organisational
change. Somehow, managers have to find the right balance so that doctors
and managers, as far as possible, both play their part within the organisa-
tional setting. Chief executives shape the organisational culture and
climate in which these roles of medical director and clinical directors are
played out, and so have a considerable influence on (and responsibility
for) the way things work.
The transition from consultant to clinical director (still usually
encompassing the consultant’s clinical responsibilities) presents some
similar challenges to the individual occupying the role. In the majority of
organisations, a move into the clinical director post is not usually accom-
panied by any structured development programme to facilitate the acqui-
sition of skills and knowledge needed to carry out the job. It is often
the case that consultants do not have a shared concept with managers as
to what ‘management’ means as an activity. If this is so, there is little
likelihood of any shared concept of how ‘leadership’ is played out in
the organisation in terms of behaviours and activities. It can be observed
that doctors embarking on their career as a new consultant often see
management narrowly as a matter of sorting out rotas and dealing with
other administrative tasks, and do not immediately see the role of clinical
258 Healthcare management

managers as leading and motivating teams of people, or having to be a

part of a change management process. Most junior doctors have actually
participated in these types of activity when questioned, but this percep-
tion of what management and leadership is may not change very much
over time without some organisational effort to provide development
opportunities for doctors and a recognition that doctors in managerial or
leadership roles do not necessarily start with the same understanding as
career managers. The ideal scenario is for doctors and managers to par-
ticipate in facilitated development opportunities together in order to
identify common perceptions and understandings and acknowledge dif-
ferences in fundamental beliefs and viewpoints.
Transition across different work roles for individuals is common in all
healthcare organisations, and partly reflects societal expectations that
people do not necessarily choose a career path and remain in the same
role and organisation for the entirety of their working life. Such expect-
ations have become more dominant within the medical profession since
the end of the 1990s. These days new consultants are much less likely to
expect that they are entering a ‘job for life’. They accept that there will be
changes and choices presented to them throughout their career as a doc-
tor, some of which may well relate to embarking on more specific man-
agement or leadership roles, such as clinical director or medical director.
However, this does not mean that they are particularly well prepared to
deal with such personal transitions in the workplace. The organisation
and its leaders need to recognise that, as with any change in job role, the
transitions from specialist registrar to consultant, from consultant to clin-
ical director and from clinical director to medical director should be
approached from a change management perspective. Nicholson (1990)
has examined this work role transition and how it is managed. His work
shows how organisations can either support or fail individuals, in this case
doctors who are experiencing work role transition. This is a practical
framework that managers (both within the generalist and human
resource fields) can adopt to ensure that they are supporting individuals
effectively during the key career transitions, and it can encompass people
development initiatives such as mentoring, appraisal and induction.
Nicholson identifies four key stages to any work role transition, and these
are summarised in Table 15.1. An important aspect of Nicholson’s
approach is the link he makes between each of the stages. If the transition
process begins in a negative manner, then it will be difficult to break out
of the negative cycle and the situation is likely to feel increasingly worse
for the doctor concerned. However, if the transition is actively managed
within the organisation, a positive cycle is stimulated, which is clearly
desirable for the doctor, work colleagues and the organisation. For man-
agers and doctors working in leadership roles, it can be helpful to under-
stand the nature of work role transitions so that there can be support for
each other within the organisational context.
 Working with healthcare professionals 259

Table 15.1 The transition cycle

Stage in Cycle Positive cycle Feelings/ Negative cycle Feelings/ Practical support
reactions reactions

Preparation (before the Anticipation. High Fear. Anxiety. Continuous

role change) expectations. Reluctance to move communication,
Excitement. provide written
documents, face-to-
face discussion, begin to
involve.
Encounter (first few Coping well. Shock. Regret. Induction. Intense one-
weeks into new role) Confident. Enjoying to-one support.
the move.
Adjustment (first year Developing new role. Grieving for what used Frequent one-to-one
of new role) Building new networks. to be. Not appearing to discussion. Frequent
Developing culture. ‘fit in’. appraisal. Positive
feedback and
reinforcement.
Stabilisation (after first Performing job well. Failure to perform. Continue to reinforce
year of new role) Committed to people Possibly leave. commitment. Appraisal.
and tasks. Mentoring. Possibly
manage exit from the
organisation.

Source: Nicholson (1990).

Working within doctor and manager cultures

Mintzberg (1998: 265) refers to an organisation’s culture as ‘collective

cognition’ or the ‘organisation’s mind’. If this is the case, then it is reason-
able to describe the NHS and other healthcare systems as having more
than one mind, all of which happen to come together in sharing funda-
mental beliefs and principles. In the NHS this would be about healthcare
being a service that should be provided free at the point of contact, based
on need, and irrespective of an individual’s level of wealth. If doctors and
managers were to be observed working together over a substantial period
of time, then these differences in ‘mind’ would become obvious. The two
groups would work partly within a context of a shared values and beliefs
system, but also from within cultures typical of their own profession.
Degeling et al. (2003) provide evidence to suggest that ‘understanding
different professional cultures is crucial for understanding each profes-
sion’s response to . . . reforms’. For example, they illustrate how managers
tend to systematise organisational activities, whilst doctors in manage-
ment roles tend to start with an individualist perspective. Clearly, it is
possible to make links back to the training and culture of the two profes-
sions. Career managers will have been exposed to management training
starting with an organisational perspective, whilst doctors have been
260 Healthcare management

trained to focus on the individual presenting to them at a particular point

in time. Simply beginning to understand and acknowledge differences,
however, can significantly help to reduce and manage any potential con-
flict between the two groups, as behaviours demonstrated can usually be
rationalised within the context of differing cultures.
Ferlie and Shortell (2001) also examine the differences in manager
and doctor cultures as a way to aid understanding of behaviours in
organisations. They suggest that doctors will resist managerial efforts to
impose systems for achieving organisational perspectives, arguing that
‘while managers view physicians and other professionals as a means for
achieving the organization’s overall patient care goals, physicians view
organizations as a means for achieving their goals for individual patients’.
The nebulous and sometimes ambiguous nature of the concept of
organisational culture may make it difficult to operationalise, but there
are frameworks available that can help to bring some structure to the
analysis of organisational culture. Johnson and Scholes (2002) describe
the activity of cultural mapping, where a cultural ‘web’ is developed
under six headings: symbols, power structures, organisational structures,
control systems, rituals and routines, stories and paradigm. For each
group, at a very general level, the cultural web is illustrated in Table 15.2.
For managers and doctors who are working together in an organisa-
tion, a useful activity would be to create this cultural web from each
group’s perspective, compare and contrast the outputs, agree to acknow-
ledge differences, and agree any actions that could bring the two ‘webs’
closer together, so reducing the potential for conflict (see Johnson and
Scholes 2002). This can be the first step towards achieving some bringing

Table 15.2 The cultural web

Doctors Managers

Symbols Stethoscope, stereotypical attire for Reserved parking, dark suits,

specialty, titles, colleges, language/jargon, laptops
terminology
Power structures Negotiating committees, cliques of Executive management team
‘political’ doctors
Organisational structures Hierarchy based on seniority and ‘Macho’ behaviours, fluid, project
respect for longevity/experience based
Control systems Who knows who, audit Financial/activity reporting, targets
Rituals and routines Patient consultations, merit awards Board meetings, long hours in the
office, meetings and committees
Stories ‘Us and them’, heroes, mavericks, ‘Us and them’, things have to
‘in the old days’ change, change is for the best
Paradigm NHS a ‘good thing’, should be free NHS a ‘good thing’, should be free
at point of delivery, desire to be the at point of delivery, desire to be the
best best

Source: Johnson and Scholes (2002).

Working with healthcare professionals 261

together or synthesis of cultures. Belasen (2002) sees this as a challenge for

organisations attempting to strive for ‘high-performance leadership’. He
writes that where cultures are ‘separated by contradictory values and
realities’ then the organisation’s leaders (and this would be both doctors
and managers in healthcare organisations) have a responsibility ‘to foster
loyalty and facilitate the assimilation process to reduce cultural clash and
resistance’.
It is probably not possible or even desirable for there to be a total
merger of managerial and medical cultures, or indeed any other profes-
sional culture within healthcare. There should perhaps be more focus on
achieving what Nahavandi and Malekzadeh (1995) refer to as assimila-
tion, as opposed to full integration. This could mean that the different
cultures do not become fully merged, but rather retain the identity of the
profession, but organisational structures strive to disperse and interweave
the cultures throughout the organisation by design. Current organisa-
tional structures which aim to bring doctors into management structures
are probably an acceptable way to try and achieve this. However, recipro-
cal arrangements tend not to exist to the same extent with career
managers becoming an integral part of the clinical structures.
One of the key domains of organisational culture is power (as illus-
trated in the cultural web), and how power is played out in terms of
organisational activities and, more importantly, individual behaviours.
Managers and doctors have sources of power available to them which can
be used in a positive or negative manner in the organisational setting.
Understanding each other’s power sources can aid negotiation between
the groups and provide a route into resolving conflict. Hellriegal et al.
(1992) and Makin and Cox (1994) refer to the French and Raven classifi-
cation of power developed 40 years ago, but which still has resonance in
the twenty-first century organisation. At a basic level, this classification
identifies five sources of interpersonal power: reward, coercive, legitimate,
expert and referent. In the NHS, doctors and managers have each of these
at their disposal. It is useful to demonstrate how each of these sources of
power is displayed in the organisational setting. Reward power is dis-
played when a manager or doctor offers a staff member or colleague
promotion, a reference or more money in return for compliant
behaviours. Coercive power can be identified in the disciplinary pro-
cedures used by both doctors and managers, or at a more general level it is
a source of power which simply threatens that something bad and awful
will occur as a consequence of not complying with desired behavioural
codes. Legitimate power refers to the use of a person’s position in the
organisational structure, so the fact that someone is a manager or doctor
should give at least some leverage in achieving compliance. Expert power
is demonstrated when doctors attempt to influence outcomes by refer-
ring to their medical knowledge base, whilst managers could refer to
their broader and more detailed knowledge about healthcare, policy ini-
tiatives and government directives. Finally, referent power is displayed in
organisations when individuals use force of personality to gain compli-
ance from others. At various junctures during a doctor’s or manager’s
262 Healthcare management

career, the strength of each of these sources will be variable. For example, as
doctors progress up the medical career pathway they will have increasing
expert power at their disposal. For managers, one of the most significant
sources of power to increase as their career progresses is legitimate power,
as they acquire more status from their job title and role in the organisation.
Another perspective to consider when examining sources of power is
the situational source of power (external as opposed to interpersonal).
Hellriegal et al. (1992) identify four such sources of power: knowledge,
resources, decision making and networks. Knowledge power refers to
knowing information about the strategy and direction of the organisa-
tion. Clearly, unless doctors decide actively to increase their personal
knowledge outside their own speciality area, there will be an imbalance
of power between doctors and managers in this sphere. Power related to
resources can be seen around organisations when individual departments
choose to allow others to have some of their resources at their discretion.
This might include money equipment or information. Basically, indi-
viduals have this type of power at their disposal if they have a resource
someone else wants or needs. The most obvious resource to impact on
the relationship between doctors and managers is finance. Usually, man-
agers have the funding and the doctors need it or want it to purchase
equipment, support posts or develop services. Within all healthcare set-
tings, there will be a plethora of meetings, committees, working parties,
or similar decision-making fora. The individuals who attend and belong
to such groups are building up their decision-making power base. It is
likely that the majority of these decision-making groups sit at or near to
corporate decision-making structures, and will be heavily populated by
managers. Again, if doctors wish to distribute or build their power base
within the organisation, there is an argument for them becoming more
involved in corporate decision-making structures. Finally, the fourth
external source of power, as identified by Hellriegal et al., is networking
power. This could be viewed as the informal source of power from within
an organisation. If a doctor or manager has this power at their disposal,
then they are likely to engage in the behaviour of building networks and
relationships quite intensely, so that when needed there will be an army
of allies prepared to support their actions. Both doctors and managers can
be observed engaging in this type of behaviour. Unfortunately, the net-
works of both groups do not always overlap or join forces. This can lead
to tensions and conflicts between the two groups. Similar to inter-
personal sources of power, doctors and managers can choose to deploy
the situational sources of power in either a positive or negative manner.
Conflict can arise between the two groups when there is a clash of the
different power bases. For example, if the board and executive team are
attempting to deploy a legitimate source of power in order to achieve
compliance to an organisational policy, but the consultant body is ignor-
ing this and using its network and expert sources of power, it is likely that
tension will be the outcome. Both parties will need to respect and under-
stand the power bases being used. To ignore each other’s power bases is a
risky business for the organisation and patients.
 Working with healthcare professionals 263

Working with doctors in different organisational structures

Managers are usually responsible in organisations for designing and chan-

ging organisational structures and systems. Such activities tend to be
related to the requirement to implement national policies and initiatives.
With every major reform in healthcare, there has been a parallel change
in organisational structures. Indeed, during the last ten years it has been
possible to observe an increasing trend within healthcare to redesign the
shape of organisations to best reflect the trend towards more collabora-
tion and partnership working, both within the healthcare sector and
across health and social care. Such redesign exercises have demanded
that managers think beyond the traditional hierarchical structures of
traditional organisations.
The traditional shape of organisations (which can still be seen in
healthcare organisations across the globe) is one which reflects Taylorism
or a scientific management approach from the nineteenth century. The
emphasis is on the division of labour and having well-defined role and
job boundaries. Belasen (2002) refers to Perrow (1986) in explaining how
such organisations ‘are geared toward maximising efficiency’. He con-
tinues to describe how these traditional organisations ‘adopt a strategy of
centralised control through vertical hierarchies and functional depart-
ments’. Communication is expected to flow up and down the hier-
archical structures, as opposed to across or around the organisation. This
bureaucratic organisational shape depends heavily upon the respect of
status and seniority in order to be successful. In fact, such respect is an
integral part of culture within the medical profession itself and has
underpinned medical training and development for many years, still
having the same significant impact today. It could be argued that the
organisational shape of the medical profession is bureaucratic, driven by
the need and necessity to have rules, compliance and monitoring, to
ensure quality and safety for the public. All bureaucratic organisations
would be peppered with committees and structures required to give
permission for organisational activities. It is in fact incredibly difficult for
large organisations to avoid adopting some of the characteristics of the
bureaucratic organisation. Belasen (2002) states that in the bureaucratic
organisation ‘managers rely heavily on rules and quantitative skills to
generate compliance and achieve desired results’.
Referring back to the preceding reference to medical culture, it is
understandable if doctors have a preference for working within a tradi-
tionally designed organisation with little ambiguity and a high degree of
predictability. Their profession is based on science and rationality, whilst
the profession of management, although underpinned by research and an
attempt at order and discipline, is basically less deterministic and more
open to interpretation. In today’s healthcare organisation (and indeed in
most other sectors) managers are being placed in roles which are an
antithesis to doctor roles. They are increasingly being expected to lead
the way in breaking up the traditional organisational shape and creating
264 Healthcare management

organisations which are arguably less certain, have more ambiguity and
more complexity. It is easy to see how these contradictions between the
roles will potentially raise tensions for managers and doctors as they work
together to implement major policy reforms. Managers have a challenge
and responsibility to lead, motivate and inspire doctors to fully participate
and engage in major organisational change initiatives.
The ‘new’ organisational structures appear to take two particular
forms. First, traditional hierarchy is being replaced by flatter, more fluid
structures. Matrix structures, where linear superior–subordinate relation-
ships have less significance for achieving outputs, and where communica-
tions can flow across the organisation as well as vertically, are becoming
the norm. Doctors and managers can find themselves working increas-
ingly in teams, but in a growing number of teams, each with a different
‘raison d’être’. It is becoming more common for individuals to be
accountable to more than one person and to be responsible for staff who
may have roles within structures outside of the department, or even the
organisation. Shortell et al. (2005) identify the challenge of developing
effective teams in healthcare both in the UK and USA, showing that
there is increasing evidence that effective teams are associated with a
higher quality of healthcare. However, they also suggest that insufficient
attention is being given to the interactions and relations between differ-
ent teams in healthcare. This point can only be of growing importance as
the provision of healthcare becomes integrated across organisational
boundaries and sectors. Teams of doctors and other healthcare profes-
sionals will increasingly find themselves having to work in matrix or
virtual type organisational structures.
Second, we are seeing the growing use of networks or virtual organisa-
tions. These organisations break down all traditional organisational bar-
riers, with individuals working across large geographical areas, or across
different health, social and government agencies, and they may be more
difficult or demanding to manage in some respects. For example, a key
organisational change challenge is achieving excellent communication,
and the network organisation compromises the traditional way of com-
municating in bureaucratic structures. Managers and doctors will need to
identify and agree new methods of communicating in order to avoid a
communication vacuum, or inefficient communication. Yet another chal-
lenge is achieving best fit between organisation design and styles of work-
ing. Styles of working and behaviours are challenged in networks because
there has to be less dependence upon hierarchy to achieve results and far
more emphasis on developing partnerships and working in a collabora-
tive manner. Managers and doctors will need to develop partnership
working between themselves as two distinct groups, focusing on some of
the success factors of building partnerships as outlined by Belasen (2002).
First, it is crucial to identify the critical drivers for working together, or
reasons for the two groups having to work together. There is also a need
to develop what Belasen refers to as ‘strategic synergy’, which would
mean doctors and managers striving to use their complementary
strengths to achieve an excellence that could not be achieved by one
 Working with healthcare professionals 265

group alone. Clearly, if it is possible to create a win–win situation where

both groups perceive that they are benefiting from partnering and that
the relationship is fair, this will also increase the probability of successful
working together. However, none of this is likely to work unless there is
top-level commitment to building partnerships within the organisation
and a desire and spirit to behave in a cooperative manner (Belasen 2002).
Observing behaviours in healthcare organisations, there are in fact
many contradictions that have to be dealt with by managers and doctors
in relation to organisational structures. Board structures tend to reinforce
the bureaucratic decision-making processes associated with traditional
organisations and a command and control approach to achieving goals
and objectives. There can be tension between this approach and the
desire to stimulate more flexible, innovative organisations through having
flatter organisational shapes at sub-board level and encouraging doctors
and managers to become involved in activities external to the organisa-
tion. A leaner, flatter, more flexible organisational shape is indeed desir-
able in an increasingly complex healthcare environment. Belasen (2002)
writes that organisations must ‘adopt decentralised structures of decision-
making’ in an organisational world full of complexity. This would ensure
that the new organisational shape is supported through the infra-
structures. However, the willingness and desire to create new infra-
structures does not guarantee an easy route through the transition from
working in a bureaucratic manner to working more flexibly. If it is
assumed that medicine tends to reflect a bureaucratic approach towards
service delivery, then managers must acknowledge that ‘bureaucratic
organisations have limited capacity to change due to inertia and preserva-
tion of the status quo, and also due to systemic barriers such as limited
resources, high specialisation, and such formal constraints as rules and
standardised work processes’ (Belasen 2002: 228).
It is then the responsibility of managers from their professional per-
spective, knowledge and understanding to illustrate these potential ten-
sions to medical colleagues, so that practical solutions can be identified to
reduce conflict and maximise effectiveness in service delivery.

Conclusion

There will always be potential for tension and conflict between doctors
and managers in healthcare. The challenge of facing this and then dealing
with it in a constructive manner is an integral part of the organisational
landscape. Dukerich et al. (2002) argue that managers are challenged to
‘elicit cooperative behaviours from professionals in organisations’. If the
context, history and interpersonal factors are understood clearly, then
neither doctors nor managers should be striving to become dominant
over the other group. Both groups have a responsibility to develop aware-
ness and understanding of individual behaviour within professional cul-
tures, the impact of organisational structure on behaviours and attitudes,
266 Healthcare management

and the opportunities for joint professional and personal development.

Huge untapped and undeveloped potential exists to maximise the part-
nership between doctors and managers to stimulate and implement ser-
vice changes that will benefit patients.

Summary box

1 The relationship between doctors and managers has a historical context that
impacts on organisations and individuals today. The role of doctors in
management is central to the effective delivery of healthcare services and
doctor–manager posts can be found dispersed across organisational
structures.
2 Managers have a role and responsibility to support doctors progressing into
management roles. More attention should be given to initiatives such as
succession planning, coaching and mentoring. There is also an argument to
suggest that leadership training and development would be best delivered to
multi-professional groups, including doctors and managers, who then learn
together.
3 Managers and doctors inhabit different cultural worlds that cannot and should
not be totally merged. Both groups have been trained from different
professional perspectives, namely the individual versus the organisation. It is
probably not desirable to merge both cultures, but there is a need to
understand the two and to be aware of how different sources of power are
played out through behaviours observed in organisations.
4 Organisational structures present challenges for working style and behaviours.
The transformation from essentially bureaucratic organisational structures to
flatter, less hierarchical structures presents challenges for doctors and
managers in organisational activities such as communication and team
working.
5 Partnership working is the way forward to ensure the strengths of both
groups are deployed effectively to implement change and achieve excellence.
Currently, the emphasis appears to be on managers stimulating appropriate
organisational behaviours from doctors. There is a need for both groups to
understand the huge untapped and undeveloped potential that could be used
to continually improve patient care, if working more closely to some shared
explicit agenda could be achieved.

Self-test exercises

1 Consider the current practice in your organisation in supporting doc-

tors experiencing the work role transitions of:
• new consultant (first post)
• becoming clinical director (or equivalent)
• becoming medical director (lead doctor at board level).
 Working with healthcare professionals 267

Use the Nicholson framework to identify what improvements might be

introduced to ensure a positive transition cycle, that is:
• preparation
• encounter
• adjustment
• stabilisation.
2 Identify a small group of doctors and a small group of managers you
could work with to explore organisational/professional cultures. Using
the cultural web framework of Johnson and Scholes (2002), brief the
two groups to:
• map out each other’s culture as they perceive it
• map out their own professional culture as they perceive it
• compare and contrast the outputs of the discussions highlighting
potential areas of tension and conflict, highlighting strengths and
opportunities.
3 Identify a number of doctors you work with on a regular basis. Reflect
on your interactions with them:
• What sources of power are you drawing on during these
interactions?
• What sources of power do the doctors you know tend to use?
• Do your respective sources of power ever lead to tension and
conflict?
• Are there different sources of power you could deploy in order to
reduce the likelihood of tension and conflict?

References and further reading

Belasen, A. T. (2002) Leading the Learning Organisation. Communication and Com-

petencies for Managing Change. New York: State University of New York Press.
Davies, T. O. and Harrison, S. (2003) Trends in doctor–manager relationships.
British Medical Journal, 326: 646–56.
Degeling, P., Maxwell, S., Kennedy, J. and Coyle, B. (2003) Medicine, manage-
ment and modernisation: A ‘danse macabre’? British Medical Journal, 326: 649–
52.
Department of Health (DH, 2005a) Commissioning a Patient-Led NHS. London:
DH.
Department of Health (DH, 2005b) Creating a Patient-Led NHS. London: DH.
Department of Health (DH, 2006) Health Reforms in England: Update and Next
Steps. London: DH.
Dukerich, J. M., Golden, B. R. and Shortell, S. M. (2002) Beauty is in the eye of
the beholder: The impact of organizational identification, identity, and image
on the cooperative behaviours of physicians. Administrative Science Quarterly,
47: 507–33.
Edwards, N., Marshall, M., McLellan, A. and Abbasi, K. (2003) Doctors and
managers: A problem without a solution? British Medical Journal, 326: 609–10.
268 Healthcare management

Ferlie, E. B. and Shortell, S. M. (2001) Improving the quality of healthcare in the

United Kingdom and the United States: A framework for change. Milbank
Quarterly, 79: 281–315.
Griffiths, R. (1983) NHS Management Enquiry: Report. London: Department of
Health.
Hellriegal, D., Slocum, J. W. and Woodman, R. W. (1992) Organizational
Behaviour. St. Paul, MN: West.
Johnson, G. and Scholes, K. (2002) Exploring Corporate Strategy. Harlow: Prentice
Hall.
Makin, P. and Cox, C. (1994) Managing People at Work. London: British Psycho-
logical Society.
Mintzberg, H. (1998) Strategy Safari. The Complete Guide through the Wilds of
Strategic Management. New York: Prentice Hall.
Nahavandi, A. and Malekzadeh, A. (1995) Acculturation in mergers and acquisi-
tions. In T. Jackson (ed) Cross-Cultural Management. Oxford: Butterworth
Heinemann.
Nicholson, N. (1990) The transition cycle: Causes, outcomes, processes and
forms. In S. Fisher and C. L. Cooper (eds) On the Move: The Psychology of
Change and Transition. Chichester: Wiley.
Perrow, C. (1986) Complex Organisations. New York: Random House.
Shortell, S. M., Schmittdiel, J., Wang, M. C., Li, R., Gillies, R. R., Casalino, L. P.,
Bodenheimer, T. and Rundall, T. G. (2005) An empirical assessment of high-
performing medical groups: Results from a national study. Medical Care
Research and Review, 62(4): 407–34.

Websites and resources

BAMM. Provides support to doctors in all management and leadership roles

across the UK and guides medical managers through the complex changes as
the service moves towards a truly patient-led NHS, with clinicians and
managers working together to a single set of ideals and values:
www.bamm.co.uk
British Medical Journal. The general medical journal website offering best
treatments evidence for patients from the British Medical Journal:
www.bmj.com
General Medical Council. Website promoting and protecting the health of
the public by ensuring proper standards in medicine. www.gmc-uk.org
 16 Governance and the work of
health service boards
Naomi Chambers

Introduction

The term governance has only relatively recently gained currency as a

distinct entity within the study of the management of organisations. The
development of the debate around governance can be largely traced to
incidents relating to the high profile organisation failures of the early
1990s (Maxwell, Polly Peck, Barings Bank), the US corporate scandals
(Enron, WorldCom) a few years later and which have continued on into
this decade (Equity Life, Parmalat). These examples demonstrate that the
problem is international. The responses to these events have provided
much of the impetus for clarifying concepts of ‘good’ governance and
have also framed the discussions around the management of corporate
risk. This chapter examines the impact of the governance debate on the
management of health services, outlines different board models and
analyses the evolving role of boards of health organisations. Many
examples used relate to the English NHS but reference is also made to
other health systems, and the discussion is in addition framed within the
wider context of debates around the role of boards.
Three main strands of argument will be developed; first that the gov-
ernance debate is largely overshadowed by notions of control and that
this impacts significantly on health service governance; second, that there
is some consensus that board structures and forms matter less than
choices around behaviours and clarity of purpose; third, that despite
extensive elaborations of the roles of boards there are enduring concerns
about board performance. A putative framework will be outlined for
developing effective boards, based on a study in the English NHS but
with relevance for other types of boards and other health systems. The
chapter will end by arguing that boards do matter, but we need better
ways of expressing why this is the case, and that research is required
to find out exactly how they make a difference to organisational
performance.
270 Healthcare management

Evolving trends in health governance

A number of different elucidations of the term ‘governance’ exist and it

is worth examining these in order to arrive at a working definition for
the purposes of this discussion. Within a political science paradigm,
Pierre and Peters argue that at a state level governance revolves around
the capacity of government to make and implement policy – in other
words, to steer society (Pierre and Peters 2000). A recent OECD review
identified six levers in modernising governance at state level, comprising
open government, performance management, restructuring, marketisa-
tion and new forms of employment (OECD 2005). Within healthcare,
Davies (2005) examines markets, hierarchies and networks as the main
contrasting forms of governance, relating these to different incentives and
hence to different outcomes. At an institution level, the Cadbury Report
describes corporate governance as a system by which an organisation is
directed and controlled (Cadbury 1992). This is amplified by a sub-
sequent OECD definition of corporate governance as ‘the structure
through which the objectives of the company are set, and the means of
attaining those objectives and monitoring performance are determined’
(OECD 2004:11). The Langlands Review of governance for public ser-
vices in the UK outlines the following as the function of governance: ‘to
ensure that an organisation or partnership fulfils its overall purpose,
achieves its intended outcomes for citizens and service users, and operates
in an effective, efficient and ethical manner’ (Independent Commission
2004: 7). Beyond the notion of governance as steering society, four clear
generic strands, which are all non-country or sector specific, emerge
from these statements: the need for direction, the importance of control,
the relevance of an underpinning set of values and the requirement to
demonstrate accountability. These strands are also, as we shall see, embed-
ded within the health sector. It is interesting to note that governance
discussions are dominated more by terms relating to control and account-
ability than by those relating to renewal and entrepreneurship. This
has implications for priorities in the management of health services: one
of the consequences is that lapses of control are more likely to be
deemed governance failures rather than lack of attention to innovation.
We can track this in the development of and the focus of attention paid to
governance arrangements in the English NHS over the past 15 years.
Having adopted a private sector business model in place of the stake-
holder model for its local bodies (about which more below) in 1990, the
English NHS, via guidance from HM Treasury, moved quickly to
embrace lessons from the corporate failures of the 1990s. A number of
reports emanating from these failures were used to strengthen corporate
governance in the NHS. Key recommendations from the Cadbury
Report (1992) to separate roles of chair and chief executive and to
strengthen audit and establish remuneration committees were swiftly
adopted. One of the products of the Nolan Committee report on stand-
ards in public life, the Code of Conduct, with its crucial public sector
 Governance and the work of health service boards 271

values of accountability, probity and openness, first issued in 1994,

remains – with some updating – in force (NHS 2004). The Turnbull
Report (1999) on internal control resulted in the development of a con-
trols assurance framework for the NHS (DH 2002) itself superseded by a
move towards integrated governance, the latest manifestation of which is
encapsulated in Standards For Better Health (DH 2004).
Despite the plethora of guidance, challenges remain. The documents
outlined above imply that the existence of frameworks and audit trails
will suffice: for example, the Foreword to The Good Governance Standard
for Public Services argues: ‘Good governance leads to good management,
good performance, good stewardship of public money, good public
engagement and, ultimately, good outcomes’ (Independent Commission
2004: v). The evidence from financial and wider organisational failings in
the NHS suggests that this is somewhat wishful thinking. On the finan-
cial side, one of the first significant failures was at North Bristol NHS
Trust, which forecast a deficit of £11.6 million in November 2002, rising
to an end-of-year position in March 2003 of £44.3 million. External
consultants reviewed the case and pointed to failings within the finance
directorate, internal audit, executive management team and the board
(Avon 2003). In November 2005, the NHS was forecasting a deficit of
£1 billion with 43 trusts having to make cuts in clinical services (Health
Service Journal 2005). Reasons – or excuses – for the shortage of cash in
the system range from the financial turbulence caused by the introduc-
tion of the new funding system (Payment by Results), the cost of the new
consultant and GP contracts, the implementation of the new staff pay
system (Agenda for Change) and shorter waits for care (Plumridge 2005).
On the clinical and reputational side, organisational failures in the
NHS over the past 15 years, referred to in more detail elsewhere in this
book, have arguably matched or surpassed those in the UK commercial
sector. NHS organisations have successively failed to protect children
with heart problems in Bristol, elderly patients who were registered with
GP Harold Shipman, babies in the care of nurse Beverley Allitt and
parents whose deceased children’s organs were removed without their
consent at Alder Hey hospital. The question has to be asked about who is
responsible for this apparent unevenness of quality and assurance within a
dense architecture of corporate governance arrangements and within a
‘national’ health service: it is not unreasonable to suggest that local boards
which have ultimate control for what goes on in their organisations bear
at least some of that responsibility.

Forms of health boards

Boards, as Pointer (1999) has pointed out, are late nineteenth-century

inventions. They were developed as a result of the industrial revolution
and the growing commercial complexity of business. Boards, as agents of
the owners, represented absent shareholders’ interests, and management
272 Healthcare management

became the agents of the board. Today the function of the board in the
commercial and the non-profit and state sectors is essentially the same –
the main difference being that shareholders are replaced by ‘stakeholders’
(Pointer 1999). The term ‘board’ itself is not universal. In different parts
of the public sector in the UK, for example, in school education, the
equivalent is the governing body; within the voluntary sector it might
be the trustees; in local government it is the council. The term ‘council’
is used in different countries to denote the body that oversees the
management or procurement of local health services.
Local boards in the English NHS are derived in structure from the
Anglo-Saxon private sector unitary board model which predominates in
UK and US business (Ferlie et al. 1996; Garrett 1997). The unitary board
typically comprises a chair, chief executive, executive directors and
independent (or non-executive) directors. All members of the board bear
the same responsibility, individually and collectively, for the performance
of the enterprise. In the English NHS, local provider boards (hospital
trusts) and commissioning bodies (primary care trusts) consist typically of
11 people: five executive directors (including the chief executive and
finance director), five non-executive directors and a non-executive chair.
Until 2001, chairs and non-executive directors were appointed by the
Secretary of State for Health, but they are now selected on behalf of
parliament by the independent NHS Appointments Commission. This
method of appointment (instead of via local elections for example) has
led to criticisms of a ‘democratic deficit’ in the local NHS (Ferlie et al.
1996). But despite successive reorganisations and reconfigurations of clin-
ical services this model has survived more or less intact since 1990,
although an alternative governance model is now being developed with
the introduction of NHS foundation trusts.
NHS foundation trusts are independent public benefit corporations
modelled on cooperative and mutual traditions which by the end of 2005
were providing acute hospital care to about one quarter of the population
in England (www.dh.gov.uk/PolicyandGuidance). Although subject to
national targets and standards, they have greater freedoms than other
types of NHS hospitals. The financial regime underpinning foundation
trusts is significantly more rigorous and the consequent expectations
by the regulator, Monitor, of board performance in ensuring financial
control are also therefore markedly enhanced.
The governance structure of foundation trusts is also quite different:
there are two boards – a board of governors (up to about 50) made up of
people elected from the local community membership, and representa-
tives of other stakeholders such as primary care trusts, education bodies
and local authorities, and a board of directors (around 11 people) made
up of a chair and non-executive directors appointed by the governors,
and a chief executive and executive directors, appointed by the chair and
approved by the governors. This whole structure resembles the Anglo-
Saxon unitary board model we have seen adopted by the English NHS
but nested within a two-tier European or Senate model, commonly
found in the Netherlands, France and Germany. Here there is a lower tier
Governance and the work of health service boards 273

operational board which deals with management and strategic issues and
an upper tier supervisory board which ratifies certain decisions taken by
the operational board, sets the direction and represents the different inter-
ests in the company, particularly those of shareholders and employees
(Johnson et al. 2005).
In a variant of the English NHS structures and an example of a non-
executive board, New Zealand has 21 district health boards tasked with
strategic oversight of local health services, but in this case all 11 people on
the board are non-executive directors: seven are elected at the time of
local government elections and four are appointed by the Ministry of
Health; the chief executive is appointed by and accountable to the board
but is not a board member (www.moh.govt.nz/districthealthboards).
From the US perspective, Pointer outlines four types of boards com-
monly found within US healthcare. Parent boards govern free-standing
independently owned institutions; subsidiary boards are local boards of
large enterprises; advisory boards provide steer and guidance without a
formal corporate governance role; affiliate organisation boards serve their
members’ interests. There are 7500 hospital and health system boards in
the US – part of an economic and social system which supports 5.5
million boards altogether or one for every 45 citizens (Pointer 1999).
Within the UK itself with the advent of devolution there have been
deepening policy differences (for example, in the role of the market) and
an increasing divergence in the structures for managing health services.
Wales has separated commissioning from providing functions but its local
health board model is stakeholder based with up to 25 members on each
board, resembling the English NHS pre-1990. Scotland has an integrated
health model and a unified board structure with strong local authority
representation.
The above illustrates the broad range of board structures and models in
use in health services and demonstrates the highly contextual nature of
the board form chosen. There are non-executive boards, executive
boards, two-tier boards and unitary boards. There are models for different
health service purposes: for insurers, commissioners, providers and for
partnerships (cross public sector and public/private). Board membership
is achieved through different processes of nomination, appointment and
election and can be paid or unpaid.
What is the evidence around the relative effectiveness of these different
board models? In his review of public sector boards, Cornforth argues
that searching for an idealised board model and membership is ultimately
futile, but that boards can work on enhancing their legitimacy and
effectiveness (Cornforth 2003). Carver and Carver (2001) argue that key
governance principles can work with whatever structural arrangements
have come about as a result of a board’s composition, history, and particu-
lar circumstances. There is more evidence available about the conditions
under which boards preside over organisation failures. Inquiries and
reviews have repeatedly pointed to a lack of challenge by the board at
critical junctures. In his examination of US corporate failures, Makosz
points out the importance of board members in asking the tough
274 Healthcare management

questions and reviewing the effectiveness of internal controls (www.csa-

pdk.com). In the case of the financial meltdown at North Bristol NHS
Trust in 2003, Deloitte and Touche reflect on relationship difficulties at
board level and a failure to probe the financial situation and to put in
place risk management processes (Avon 2003). A review of inquiries over
the past 30 years into failures of care in the UK demonstrated a remark-
able consistency in key recurring themes which include inadequate sys-
tems and processes, lack of leadership, isolation, disempowerment of staff
and patients and poor communications (Higgins 2001). Echoes of these
themes are also found in a study relating cultures to performance, in
which low performing acute hospital trusts in England were found to be
characterised by charismatic leaders with poor transactional skills and a
tendency to cliques, confused internal lines of accountability and under-
developed external relationships (Mannion et al. 2003). There is also a
growing literature on failure and turnaround, some of which is health
related (for example NHS Confederation 2003; Walshe et al. 2004). The
literature suggests that the challenge for health service boards is not there-
fore to embark upon a quest for the perfect structure or model but to
acknowledge the need for clarity of purpose in order to steer high
performing organisations towards providing or securing safe and high
quality healthcare for patients.

Roles of boards

The Langlands Review produced six core principles for good govern-
ance to guide the work of public service boards (see Figure 16.3 in Self-
test Exercise 2). These comprise a focus on purpose and outcomes,
clarity about functions and roles, promotion and demonstration of values,
transparent decision making whilst managing risk, developing the cap-
acity and capability of the governing body itself and engaging stake-
holders and making accountability real (Independent Commission
2004). This ‘good governance standard’ indicates both core style and key
content for board work in the public sector and comes closest to the
iterative and cyclical framework advocated by authors working from the
commercial sector.
Turning now to some of these authors who work within the private
sector, Garratt (1997) has developed Tricker’s (1983) model of four prin-
cipal board roles into a board tasks model reproduced in a simplified form
in Figure 16.1. Garratt emphasises the importance of Revans’ axiom that
for organisations to survive and grow, their rate of learning has to be
equal to or greater than the rate of change in their environment. Drawing
also from the Institute of Directors publication Standards for the Board
(IOD 2005), Garratt argues that boards have to pay attention to both the
conformance (accountability and supervision of management) and to the
performance (policy formulation and strategic thinking) aspects of
their role, and in turn to the iterative cycle of policy development,
 Governance and the work of health service boards 275

Figure 16.1 Board tasks model

Source: Adapted from Garratt (1997).

strategic formulation, supervision/monitoring and accounting to key

stakeholders. Within these cycles, boards need to be sensitive to the well-
being of their own organisation and attuned to the external environment,
and to take into account both short-term pressures and longer term
trends in making their decisions. The conclusion appears to be that there
is a need to pay appropriate attention to activities in all four quadrants, to
face inwards and outwards and to find a balance between short-term and
long-term thinking, but how easy is this to achieve?
High profile corporate failures in the UK and US have, as we have
seen, prompted stricter rules around conformance through tighter
corporate governance arrangements and clearer controls assurance
frameworks. As organisations are subjected to ever more rigorous risk
management, is ‘performance’ being subjugated to ‘conformance’?
Power (1999) warns against the growing influence of the audit society,
reward systems which pay checkers more than doers and the rituals of
verification: ‘Does the rustle of paper systems . . . provide only slogans of
accountability and quality which perpetuate rather than alleviate organ-
isational rigidity? (p. 123) Pollitt (1999) suggest that audit itself is
undergoing a transformation, with auditors developing performance
audit programmes in addition to traditional financial audit. These
programmes have the potential to add managerial effectiveness to the
traditional values of prudence and procedural correctness and could in
themselves help to swing the pendulum back to ‘performance’. At best
they could exert pressure and provide an evidence base for policymaking
and strategic choice. Taylor (2001) further argues that the time has now
come to move from the current corporate governance paradigm with
its emphasis on controls and restraint to corporate entrepreneurship,
276 Healthcare management

creating the conditions for corporate renewal, encouraging the develop-

ment of new activities and the elimination of old ones.
In another framing of the conformance/performance dichotomy,
Hodgkinson and Sparrow argue that organisations depend for their sur-
vival on developing strategic competence. This is defined as an ability to
acquire, store, recall, interpret and act upon information of relevance to
the longer term survival and well-being of the organisation (Hodgkinson
and Sparrow 2002: xiv-xv). Strategic competence comes from organisa-
tional memory, learning, knowledge management, creativity, intuition
and use of knowledge elicitation techniques. The authors warn against
the competency trap ethos where there is no place for devil’s advocates
or court jesters and where organisations always favour exploitation (of
existing expertise and knowledge base) over exploration (search for new
knowledge).
How can we place the work of health service boards within these
discussions? The unitary learning board model described by Garratt has
clear resonances with the NHS where board structures and modus oper-
andi are heavily drawn from the private sector business model. NHS
boards are expected to operate along all four of Garratt’s quadrants from
developing a clear vision, to clarifying strategic direction, and also to
monitoring performance and accounting to local communities and to
government. These map onto the principles of good governance advo-
cated in the Langlands Review for the public sector (Independent
Commission 2004). The key challenges for NHS boards can therefore be
segmented into these four quadrants and existing guidance reinforces
this.
There is indeed plenty of guidance available to support NHS boards in
their work. In Governing the NHS the NHS Appointments Commission
outlines the duty of NHS Boards to ‘add value . . . . by providing a
framework of good governance within which the organisation can thrive
and grow’ (NHS Appointments Commission 2003: 9). The Commission
divides the role of boards into four main areas: collective responsibility for
adding value, leadership and control, looking ahead by setting strategic
aims and reviewing performance, and setting and maintaining values. The
part played by individual members, including the chair, non-executive
directors and the role of board committees is also given much attention.
The overall tone is one of exercising control rather than of setting direc-
tion, and this is reinforced by additional mandatory guidance from the
Department of Health and HM Treasury issued for the NHS in order to
to ensure that statements of internal control can be signed by the chief
executive of each NHS organisation. The more recent guidance on inte-
grated governance, the new suite of healthcare standards and the annual
healthcheck required and vetted by the Healthcare Commission offers
little relief. This does provide substance for the argument that current
conformance requirements are acting as ‘dead weight’ against carefully
considered risk taking, innovation and entrepreneurship. The counter-
argument is that, given the recent examples of high-profile clinical, finan-
cial and organisational failures in the NHS, it is irresponsible not to have
Governance and the work of health service boards 277

in place controls (and assurances about those controls) against the risks of
these occurring. The solution may be to find new ways of thinking and
doing within the processes of establishing and verifying controls; for
example, by using Hodgkinson and Sparrow’s (2002) knowledge elicit-
ation techniques, or performance, programme and policy audit as
suggested by Pollitt (1999).
The added value of boards mentioned by the NHS Appointments
Commission is questioned in a couple of papers. The NHS Confeder-
ation has identified four key characteristics of effective boards: a focus on
strategic decision making, trust and corporate working, constructive chal-
lenge and effective chairs. In their examination of boards at work, how-
ever, the authors found that ‘the daily grind’ often obscured strategic
decision making, and whilst there was often a good deal of trust between
board members, there was too little constructive challenge and therefore
some missed opportunities (NHS Confederation 2005). Peck argues, on
the other hand, that even as a mainly ratifying body the board ritual has
some value in itself as a way of according significance to important
decisions (Peck et al. 2004).
As significant players within a country’s social and economic system,
boards of local health services face continuing challenges in setting strat-
egy, monitoring performance and in balancing tensions between risk
management and innovation, and governance duties versus entrepreneur-
ship. But their sphere of influence is also limited. In the UK, for example,
local boards are constrained by operating within a ‘national’ health ser-
vice. In other countries, the power of professional accrediting bodies and
national regulators is significant. There is also the emergence of shadow
boards without formal or statutory authority but with immense power;
for example at a local level in the UK a health community chief execu-
tives group, and at a national level the NHS chief executive Top Team
meetings. As state sector health services across the OECD countries shift
from being providers to commissioners (OECD 2005), there has been a
proliferation of different types of boards to direct, approve and monitor
developments which cross institution or sector boundaries. One example
of this is the partnership boards for joint commissioning of those services
which are typically provided by a combination of health and social care
staff. A second example is the private-public joint venture boards (e.g.
controlling capital developments in primary care in England via the LIFT
companies). These may at present be ‘mini boards’, but the formalisation
of inter-organisational and inter-sectoral working both in the UK health
sector and elsewhere (analysed in more detail in Chapter 17) suggests
these types of boards will have an increasing influence.
The perspectives provided above indicate that the current environ-
ment in which health service boards operate is both complex and febrile.
Advice on the role of boards is not wanting but organisations are pulled
and pushed in different directions and their boards need to face at least
four ways in order to remain standing. How can boards proactively per-
form these delicate balancing acts and how can they know when they are
about to fall from the wire?
278 Healthcare management

Making a difference: developing effective boards

Over recent years there has been a particular focus on the role of the
non-executive director. The Higgs Report (2003) into this role within
the UK commercial sector called for greater clarity around responsi-
bilities, induction, development and performance. In the US there is a
focus on developing governance tools for boards – for example, by the
Center for Healthcare Governance (www.americangovernance.com). Follow-
ing a commissioned survey of NHS non-executive directors (MCHM
2002), the NHS Appointments Commission has developed a training and
development programme at national and regional levels for non execu-
tive directors. Extensive guidance about the work of board committees is
also available, for example, from the Audit Commission. In the NHS the
Clinical Governance Support Team has reported on its work with many
boards to improve the quality of constructive challenge (NHS Confeder-
ation 2005). Less guidance is available for board secretaries and a deep
ambiguity about the nature of their role (are they silent servants or cor-
porate guardians?) may be hampering the work of boards (Chambers and
Smith 2004). As we have seen from the litany of past failures and the
complexity of present challenges facing health service governance across
the world, there remains a way to go. An exploratory study outlined
below attempts to construct a systematic method for developing health
boards utilising a synthesis of theoretical frameworks.
Although arguing from different perspectives, Cornforth and West
both emphasise the need for reflexivity. Cornforth suggests that reflex-
ivity compensates for the impossibility of achieving an ‘ideal’ board
structure and defines reflexivity as the process of achieving a better
understanding of behaviours, roles, teamworking and impact of the board
(Cornforth 2003). West proposes that reflexivity provides the space to
promote team health, creativity and robust challenge to the existing ways
of doing things (West 1997) that is essential for innovation. Boards some-
times seek external support to help them in this task and may also embark
on a wide-ranging organisation development programme of which
development of the board is only a part.
Patching offers a two-by-two grid to understand the range of different
interventions for effective organisation development (Patching 1999).
His argument is that the choice of interventions should depend on
what the organisation’s main concerns are around organisation develop-
ment (OD). One half of the grid comprises achieving success through
alignment (divided into OD activities for enhancing specific and generic
capabilities, for example, by implementing an agreed organisation-specific
strategy, or embedding industry-wide best practice). The other half of
the grid comprises success through change (divided into OD activities
which are transformational and exploratory, for example, developing a
new vision or testing new ideas and challenging the status quo).
Cockman et al. (1999) describe four distinct consulting styles or facili-
tator modes. The acceptant mode involves listening actively, encouraging
Governance and the work of health service boards 279

‘story telling’, and is particularly helpful in revealing the impact of emo-

tions in shaping organisational life. The catalytic mode comprises collect-
ing, shaping and rearranging information, for example, through forcefield
analysis, multi-voting, flowcharts, staff/customer interviews and surveys,
and is essential in helping the client to take decisions and move forward.
In the confrontational mode the consultant highlights discrepancies, for
example, in behaviours, decisions, espoused values, and offers both chal-
lenge and support. Finally, the prescriptive mode involves the provision
of expert advice and depends on the consultant’s technical or content
expertise in the client’s area, for example, his or her knowledge of
comparable organisations.
Using Patching and Cockman’s frameworks together with Garratt’s
board tasks model (see Figure 16.1) it is possible to construct a framework
for board development which has a degree of relevance for all boards and
in different kinds of health systems. An exploratory study to determine
the utility of this for NHS boards revealed that, with three refinements,
the framework had both resonance and relevance (Chambers and Hig-
gins 2005). In the first main refinement, the study found that the board
development cycle needs a further iteration to reflect different levels of
maturity, depending on the newness of whole boards and individual new
appointments to boards. Second, as it stands, the framework omits suf-
ficiently to acknowledge the need for boards to do work around the
identification, articulation, espousal and demonstration of a set of core
values for the organisation. These values inherently imbue all parts of the
board cycle of work; for example, from the principles agreed which
underpin policy development, the range of legitimate strategic choices
and tactics employed, the monitoring of organisation behaviours and the
style of accounting to stakeholders. Recent work from the public sector
perspective, for example, the Langlands Review, has emphasised the
importance of this area of work. A third proposed refinement is the fifth
facilitator approach identified by participants in the course of this study.
In addition, therefore to the acceptant, confrontational, catalytic and pre-
scriptive styles, we would now add ‘reflective’ as an alternative facilitator
approach. This encapsulates the role of the facilitator who is grounded in
wider health policy and culture to provide understanding and insight
about the context in which the board is operating and knowledge of
health ‘realpolitik’.
There is a final lesson for boards in this study about the commissioning
of external facilitators to support their development. Boards need to have
clarity around their own expectations and should understand the poten-
tial of upstream diagnostic work before awayday events. Proper attention
also has to be paid to the processes for securing facilitators to ensure that
the recruitment results in support which is appropriate for the work that
is required.
The framework for NHS board development incorporating Garratt’s
board tasks, Patching’s organisation development schema and Cockman’s
facilitator modes, and refinements arising from the Chambers and Hig-
gins (2005) study are outlined in Figure 16.2. Further work is now
280 Healthcare management

Figure 16.2 Framework for NHS board development

Source: Adapted from Chambers and Higgins (2005)

needed to test a revised framework with a wider group of boards and

in other health systems. Equally important, there is a need to examine
through empirical research the relationship between high performing
organisations, the attention they pay to board development and the
balance they strike between the board tasks described above. Like all
other forms of organisational life, boards benefit from attention being
paid to their development. There is evidence of an association between
organisational cultures and performance, but the precise positive
impact of boards is less clear and it is here also that further research is
required.

Conclusion

How much does any of this matter? A key challenge in debates about
governance at state and institutional level is how to engage a wider audi-
ence beyond those immediately engaged in, affected by or intellectually
interested in the topic. One way of doing this is to demonstrate how
decisions about governance issues can directly affect people’s lives. We
 Governance and the work of health service boards 281

have traced the development of the ‘audit society’ and demonstrated how
the impact of organisation failures across the world has influenced how
health service organisations are governed. Issues of control are arguably
accorded more weight than those of renewal. Put simply, we might be in
danger of continuing to do the same thing better at times when we
should be trying out new things. This can occur at an international, state
and institution level. Within organisations, boards are responsible for
making these kinds of choices. This means that within health services,
deep-seated beliefs and values which boards espouse will guide decisions
affecting staff performance and behaviours and the kinds of care and
treatments provided to patients. The issue of board competence is equally
important and, deservedly, under scrutiny. As well as a need to articulate
more clearly the point and purpose of governance and the work of
boards, the evidence shows that proper attention to developing the
effectiveness of boards is also required.

Summary box

• Ideas about governance in public sector are evolving and are particularly
affected by high-profile organisation failures across the world.
• Health service boards have a range of key roles in directing organisations but
there are also limits to their influence.
• There are many different board models; the perfect model may not be
attainable and is less important than positive behaviours and clarity of
purpose.
• Boards and board members need structured development in order to be
more effective.
• There is a need for better articulation about the point and purpose of
governance and the work of boards.

Self-test exercises

1 How well do you know the work of the board/council/governing

body of your organisation?
2 How far does the board of your organisation meet the tests of the
Good Governance Standard? (See Figure 16.3.)
3 Ask to attend a board meeting (many are held in public anyway),
reflect on content and behaviours and examine how much attention is
paid to the four areas of board focus in the four quadrants in Figure
16.2.
282 Healthcare management

Figure 16.3 How far does the board of your organisation meet the
tests of the Good Governance Standard?
Source: Adapted with kind permission from Good Governance Standard for Public
Services, the report of the Independent Commission on Good Governance in Public
Services CIPFA/OPM (2004)
 Governance and the work of health service boards 283

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Center for Healthcare Governance. US membership organisation with aims

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Governance. Monthly newsletter on issues of corporate governance and
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Governance and the work of health service boards 285

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pdk.com
 17 Managing in partnership with
other agencies
Jon Glasby

Introduction

In almost every country of the world there are problems of fragmentation

and a lack of continuity in services for frail older people and other groups
with complex, multiple needs (for examples see Glasby 2004 for a sum-
mary; see also Banks 2004; Leichsenring and Alaszewski 2004; Nies and
Berman 2005). Almost irrespective of language, culture, structure, context
and funding, there are different services responsible for different aspects
of service provision and with different financial and regulatory systems,
roles and responsibilities, and organisational and professional cultures.
Making sense of this in a way that leads to joined up and well-organised
experiences for service users and their families is a difficult political,
managerial and practical task. Put simply, people do not live their lives
according to the categories we create in our welfare services, and any
holistic response to health needs will have to link to and be coordinated
with the responses of other agencies if it is to be successful.
In pursuit of more effective inter-agency working, a number of coun-
tries have sought to develop more formal partnerships between local
organisations. These tend to share a number of characteristics such as a
focus on a particular at risk group and a defined catchment area, overall
responsibility for arranging and/or delivering comprehensive services,
the active involvement of primary care services and a focus on multidis-
ciplinary teamwork at ground level. Such an approach is a powerful idea
and intuitively seems like a sensible way forward. In theory, such integra-
tion could lead to more seamless services, user-centred care, an emphasis
on prevention and rehabilitation, greater continuity of care, improved
access to services, more integrated primary and secondary care and a
reduction in inappropriate service use. However, key concerns include
the difficulty of combining medical and social models and the risk of
acute care (and the high cost of such services) distorting priorities.
There is a range of different models in different countries – each with
strengths and limitations. Examples include the Program of All-Inclusive
Care for the Elderly (PACE) and Social Health Maintenance Organisations
 Managing in partnership with other agencies 287

in the USA; the SIPA project in Canada; the Rovereto Project in Italy;
and Co-ordinated Care Trials in Australia (see Kodner and Kay Kyriacou
2000 for a summary). However, in a UK context, partnership working
between health and social care is a central feature of current government
policy and the focus of a significant range of activities at a local level.
Although there has long been a recognition of the need for inter-agency
collaboration to provide seamless services for users and carers (see, for
example, Means and Smith 1998; Glasby and Littlechild 2004), this has
acquired increasing impetus following the commitment of the New
Labour government to achieving ‘joined-up solutions’ to ‘joined-up
problems’. Responding to the emphasis of central government on part-
nership working, a large number of different partnership arrangements
are being developed in different parts of the country, including Care
Trusts, use of the Health Act flexibilities, joint appointments, and the use
of staff secondments/joint management arrangements (see below for
further discussion).
Against this background, the chapter reviews the rationales put for-
ward for partnership working, summarises the history of recent partner-
ship initiatives and provides brief discussion of some key theoretical
models that managers can use to conceptualise and develop working
relationships with other agencies. While this discussion focuses on UK
approaches to health and social care, reference is also made to inter-
national models, and many of the key issues may well be applicable to
other contexts and to other types of partnership. Finally, the conclusion
challenges healthcare managers to reflect on the skills that have tradition-
ally been valued in their profession, and consider the extent to which
new values, skills and approaches may be required in order to work
effectively in partnership.

Why work in partnership?

Although there is a substantial and growing literature on partnership

working (see, for example, Hudson 2000; Payne 2000; Rummery and
Glendinning 2000; Balloch and Taylor 2001; Sullivan and Skelcher 2002;
Glendinning et al. 2002a), there are a number of limitations to our exist-
ing knowledge. In particular, much of the current literature is very
descriptive and sometimes very ‘faith based’, emphasising the perceived
virtues of partnership working without necessarily citing any evidence
for the claims made. Moreover, as a recent literature review suggests, most
studies focus on the process of partnership working (how well services
are working together), not on the outcomes of partnerships (whether
they make a difference to services or to outcomes for users and carers;
Dowling et al. 2004).
As a result of these shortcomings, many accounts provide long lists of
potential benefits, but are less clear about the extent to which these
benefits are realisable in practice or about how to achieve such desired
288 Healthcare management

outcomes. Thus, the Audit Commission (1998) suggests that partnership

working can help to deliver coordinated packages of services to indi-
viduals; tackle so-called ‘wicked issues’; reduce the impact of organisa-
tional fragmentation (and minimise the impact of any perverse incentives
that result from it); bid for or gain access to new resources; align services
provided by all partners with the needs of users; make better use of
resources; stimulate more creative approaches to problems; and influence
the behaviour of the partners or of third parties in ways that none of the
partners acting alone could achieve. Similarly, Payne’s (2000) work on
multidisciplinary teamwork holds out the hope that effective teams can,
in theory: help to bring together key skills; share information; achieve
continuity of care; apportion and ensure responsibility and accountability;
coordinate the planning of resources; and coordinate in delivering the
resources for professionals to apply for the benefit of service users. These
are powerful claims, but possibly ones that must be treated with a degree
of scepticism – while these proposed benefits seem common sense,
achieving them may be more complex than the literature often suggests.
In spite of this, the English Department of Health provides a very
strong but very helpful critique of agencies that fail to work in partner-
ship, setting out a clear rationale why services must work together more
effectively (DH 1998: 3):
All too often when people have complex needs spanning both
health and social care good quality services are sacrificed for sterile
arguments about boundaries. When this happens people, often the
most vulnerable in our society . . . and those who care for them find
themselves in the no man’s land between health and social services.
This is not what people want or need. It places the needs of the
organisation above the needs of the people they are there to serve. It
is poor organisation, poor practice, poor use of taxpayers’ money – it
is unacceptable.
Behind this official pronouncement and behind much of the literature is
a working hypothesis that effective partnerships should lead to better
services and better outcomes for service users and their families (see
Figure 17.1).
Unfortunately, many of these links currently remain unproven, and

Figure 17.1 Effective partnership working (in theory)

 Managing in partnership with other agencies 289

further research is required to understand this model in more detail. For

example, which approaches to partnership work best for whom in what
circumstances? Until such questions receive more definitive answers,
however, the Department of Health summary above remains one of the
most powerful arguments for working together, even if it is stronger on its
critique of the current situation than it is on possible ways forward.

The policy context

In a UK context, the post-war welfare state that was developed in the late
1940s is based on the assumption that it is possible to distinguish between
people who are sick (who have ‘health’ needs and receive care free at the
point of delivery) and those who are merely frail or disabled (who receive
‘social care’ services that are often means tested and subject to charges). In
addition to this, many wider services (for example, education, policing,
social security, etc.) have tended to be organised on hierarchical lines,
with resources and policy flowing from the centre downwards. More
recently, there has been increasing recognition of the need to create links
between these different central government functions at a regional and,
in particular, at a local level, with more effective inter-agency working for
people who have range of needs. Thus, a disabled person who lives in
local-authority housing may need adaptations making to their house,
have particular transport needs, have particular health and social care
support needs, and be keen to access training opportunities in order to
gain employment. Similarly, a child at risk of abuse may be living in poor
housing in a rundown inner-city area with few social amenities, be in
trouble at school, at risk of crime (either as a victim of crime or as a
perpetrator), and may self-harm or have substance misuse problems (or
both). In both these hypothetical scenarios, the person concerned will
need a wide range of agencies to work together in a coordinated way to
meet their needs.
In response to this need to coordinate local services more effectively,
there have been a number of key policy initiatives. For example, in 1973
the NHS Reorganisataion Act placed a statutory duty on health and local
authorities to collaborate with each other through joint consultative
committees. Advisory rather than executive, these bodies were soon seen
to be inadequate for the task in hand (Wistow and Fuller 1982), prompt-
ing calls for further reform. In 1976, these arrangements were strength-
ened by the creation of joint care planning teams of senior officers and by
a joint finance programme to provide short-term funding for social ser-
vices projects deemed to be beneficial to the health services. Despite
growing criticisms of these mechanisms for joint working, formal
arrangements for collaboration remained substantially unchanged until
the community care reforms of the 1990s (Hudson et al. 1997). Here,
there was an attempt to create a more market-based approach to the
delivery of public services, with a purchaser–provider split in healthcare
290 Healthcare management

and the stimulation of a much more mixed economy of provision in adult

social care. Since 1997, the emphasis has arguably been more on creating
local networks or partnerships between local agencies. Key policies
include:
• The Health Act 1999: three new legal powers (or ‘flexibilities’)
enabled health and social care to create pooled budgets, to develop lead
commissioning arrangements or to create integrated providers (see
Glendinning et al. 2002b).
• The creation of Care Trusts (NHS bodies with social care responsi-
bilities delegated to them). With nine such organisations currently in
existence, this is the closest model to a full merger of health and social
care (see Glasby and Peck 2003).
• The creation of Children’s Trusts: more virtual in nature than adult
Care Trusts, these typically bring together a wider range of partners
than just health and social care, and are local authority based. Alongside
these new organisational arrangements, there is also an emphasis on a
common assessment framework for children, greater information shar-
ing, a lead professional to coordinate care and greater co-location of
different professions working with children and young people (HM
Treasury 2003).
In recent years, political devolution has allowed a series of new
approaches to develop in the different countries of the UK. While
England is formally integrating some services via the Care Trust and
Children’s Trust model, Scotland is developing a joint performance
information and assessment framework to explore the outcomes (rather
than just process issues) that whole systems working is achieving (see, for
example, Hudson 2005). In addition, rather than distinguish between free
healthcare and means-tested social care, Scotland is also seeking to pro-
vide all personal care free of charge, developing a new way of conceptual-
ising needs that moves beyond the traditional health and social care
divide. In Wales, use has been made of the Health Act flexibilities (Young
et al. 2003), but further changes will also undoubtedly follow after an
influential review of health and social in Wales by Derek Wanless (2003).
In contrast, Northern Ireland has long had integrated health and social
care structures, although some commentators debate the extent to which
this system is truly integrated and delivers different outcomes to other
parts of the UK (see, for example, Hudson 2004; Hudson and Henwood
2002). More recently, greater local flexibility in England has also enabled
new models to emerge in individual health and social care communities,
with, for example, proposals to integrate primary, secondary and social
care on the Isle of Wight. Throughout all these changes, however, it is
important to remember that partnership working is not a panacea and
should never be an automatic response to a policy problem. Instead,
policymakers and health and social care managers need to think through
the outcomes they are trying to achieve, and choose the most appropriate
organisational structures and processes to deliver these goals.
 Managing in partnership with other agencies 291

Useful theoretical frameworks

Against this background, there are a number of theoretical frameworks

and models available that may help local managers and systems to think
through their aspirations for local people and the different ways in which
they might need to engage partner organisations. These are tools that my
own organisation – the Health Services Management Centre (HSMC) –
uses regularly in its consultancy and development work, and so we have
considerable experience of applying them in practice.

Theories of change

When working with health and social systems around the country,
HSMC often draws on an approach adapted from the ‘theories of
change’ literature (utilised, for example, in the national evaluation of
Health Action Zones; see Figure 17.2). In particular, this asks systems to
explore:
• the outcomes which different stakeholders wish to achieve for service
users
• the current context (including both strengths and weaknesses)
• possible ways forward and issues to be resolved.
In particular, HSMC uses this approach to prevent controversial discus-
sion about issues of process and structure from dominating initial inter-
agency debate. Instead, this model encourages services to ask themselves
the following questions:
• Where do we want to be/what do we want to achieve? (outcomes)
• Where are we now? (context)
• What do we need to do to achieve our desired outcomes? (process)
In our experience, this allows greater time to surface and potentially
reconcile different interpretations about desired outcomes and the cur-
rent context before moving on to more practical discussions about next
steps at a later stage. In particular, it allows managers and practitioners to
see partnership working (and any structural changes that may ensue) as a
means to an end (of better services and hence better outcomes for users
and carers). While partnership working should never be an end in itself, it
is easy to see how this happens when an already busy manager is tasked
with setting up a new partnership. However well intentioned, it is all too

Figure 17.2 Theories of change

Source: Adapted from Judge (2000).
292 Healthcare management

easy to lose sight of why the partnership was so important in the first
place and the outcomes it was meant to deliver. Instead, having the
partnership becomes the main aim. In contrast, ‘theories of change’
encourages a difficult but helpful focus on outcomes.

Depth v breadth of partnership

Having clarified desired outcomes and the strengths and limitations of

the current context, there is scope for individual organisations to reflect
in more detail on the partners they need to engage and the way in which
they might need to work with different partners. Depending on desired
outcomes, there may need to be very different organisations involved,
and a range of options exist with regard to the depth and breadth of
partnership that may be appropriate. This is set out in Figure 17.3 and it
may be helpful for local services to map existing partnerships onto this
graph in order to reflect on current relationships and their fitness for
purpose.

Figure 17.3 Depth v breadth

Source: Adapted from Peck (2002).
 Managing in partnership with other agencies 293

Different levels of partnership working

In addition, Glasby’s (2003) research into delayed hospital discharges

identifies three different levels of activity which health and social care
agencies need to address in order to develop effective partnerships (see
Figure 17.4): individual (I), organisational (O) and structural (S). While
there is much more that can be done to encourage joint working
between individual practitioners and local health and social care organisa-
tions (the I and O levels), Glasby argues that more action is required at a
central government level to tackle some of the legal, administrative and
bureaucratic barriers to partnership working. These are deeply ingrained
in our current service structures and, ultimately, derive from the fact that
the current health and social care system is based on an underlying div-
ision between two very different organisations with different priorities,
values and ways of working. The framework is presented in terms of a
series of interlocking circles, as each level of activity has the capacity to
influence or be reinforced by the others. Thus, the way in which indi-
viduals behave is based in part on the norms, values and policies of their
organisations, which in turn are shaped by a series of structural barriers to
partnership working at a central government level. Similarly, these struc-
tural barriers depend in part on the characteristics of particular types of
health and social care organisation, which depend ultimately on the
people working in these organisations. As a result, any policy designed to
achieve true partnership working will need to operate at all three levels of
activity at the same time if it is to be successful.

Figure 17.4 Different levels of partnership working

Source: Glasby (2003).
294 Healthcare management

Key factors that may help or hinder partnership working

Although focusing on outcomes can be difficult, there is a large and

growing body of evidence with regard to process. Over time, a series of
consistent messages has emerged from various studies about the under-
lying factors and local conditions that may assist or hamper attempts to
work together across organisational boundaries. Two of the most prom-
inent frameworks are set out in Boxes 17.1 and 17.2 There is scope to use
these in conjunction with external facilitation to explore shared under-
standings of progress to date, outstanding barriers, mutual perceptions of
current partnerships and the ‘readiness’ of local services for new ways of
joint working.

Box 17.1 Partnership working: what helps and what hinders?

Barriers
• Structural (the fragmentation of service responsibilities across and within
agency boundaries)
• Procedural (differences in planning and budget cycles)
• Financial (differences in funding mechanisms and resource flows)
• Professional (differences in ideologies, values and professional interests)
• Perceived threats to status, autonomy and legitimacy

Principles for strengthening strategic approaches to collaboration

• Shared vision: Specifying what is to be achieved in terms of user-centred goals,
clarifying the purpose of collaboration as a mechanism for achieving such goals,
and mobilising commitment around goals, outcomes and mechanisms.
• Clarity of roles and responsibilities: Specifying and agreeing who does what and
designing organisational arrangements by which roles and responsibilities are
to be fulfilled.
• Appropriate incentives and rewards: Promoting organisational behaviour
consistent with agreed goals and responsibilities, and harnessing organisational
self-interest to collective goals.
• Accountability for joint working: Monitoring achievements in relation to the
stated vision, holding individuals and agencies to account for the fulfilment of
predetermined roles and responsibilities, and providing feedback and review of
vision, responsibilities, incentives, and their interrelationship.
These factors have also been summarised in a Partnership Assessment Tool to
help local systems evaluate the ‘health’ of their inter-agency relationships
(available via www.odpm.gov.uk).
Source: Hudson et al. (1997).
 Managing in partnership with other agencies 295

Box 17.2 The partnership readiness framework

1 Building shared values and principles.

2 Agreeing specific policy shifts.
3 Being prepared to explore new service options.
4 Determining agreed boundaries.
5 Agreeing respective roles with regard to commissioning, purchasing and
providing.
6 Identifying agreed resource pools.
7 Ensuring effective leadership.
8 Providing sufficient development capacity.
9 Developing and sustaining good personal relationships.
10 Paying specific attention to mutual trust and attitude.
Source: Poxton (2003)

The limits of structural change

In addition to factors that help the development of partnerships, there is a

growing literature on what does not help and, in particular, on the limits
of structural change. This material is summarised in detail elsewhere
(see, for example, Social Services Inspectorate/Audit Commission 2004;
Peck and Freeman 2005). However, messages from research and from
practice seem to suggest that:
• structural change by itself rarely achieves stated objectives
• mergers typically do not save money – the economic benefits are often
modest at best and are more than offset by unintended negative
consequences such as a potential reduction in productivity and morale
• mergers are potentially very disruptive for managers, staff and service
users and can give a false impression of change
• mergers can stall positive service development for at least 18 months.
Instead, research suggests (Peck and Freeman 2005) that successful
mergers may depend upon the following:
• clarifying the real (as opposed to the stated) reasons behind the merger
• resourcing adequate organisational development support
• matching activities closely to intentions to reduce cynicism among key
staff groups whose support will be crucial in realising the intended
benefits.
A more detailed discussion of partnership working and organisational
culture is available from the Integrated Care Network website (Peck and
Crawford 2004).
296 Healthcare management

Conclusion

While the key points raised in this chapter are set out in the Summary
Box below, the current partnership agenda raises significant issues about
the management styles and behaviours that will be required in the future.
For example, what knowledge do current and future NHS managers have
of social care, wider services and the voluntary and private sectors? Is
there scope for interprofessional education and training to help NHS
managers learn more about the roles and responsibilities of other
agencies? Could the current NHS Management Training Scheme be
reformed to become more of a generic public sector management
scheme, with a common foundation and then greater specialism later in
the course? What sorts of skills and values will future managers need
to empathise with other agencies, lead by example, model effective
collaboration and influence across boundaries? Whatever the detailed
answers to these questions, it seems likely that NHS management in the
future will not be the same as it is now, and that a new generation of
managers with new skills, new horizons and new worldviews may have a
very different role to play in future inter-agency collaborations.

Summary box

• People do not live their lives according to the categories we create in our
welfare services.
• Meeting healthcare needs in a joined up and holistic way means working with
other agencies.
• Partnership is a current government priority and a range of different models is
developing in services for particular user groups and in different parts of the
UK.
• Against this background, there is a range of theoretical models available to
help managers think through the outcomes they are trying to achieve, the
partners they need to engage and common factors that help or hinder
partnership working.
• In the future, healthcare managers may need very different skills, values and
experiences in order to be able to work effectively across agency boundaries.

Self-test exercises

1 What are service users and their families telling you about the experi-
ence of using your service and about the outcomes they are seeking
from local health and social care? What opportunities are there for
involving users in evaluating current partnerships and planning new
services?
2 What knowledge do you have of social care and of other services in
 Managing in partnership with other agencies 297

your area? What fora exist to meet relevant people from different
agencies, and is there scope to shadow a manager from a different
organisational background to yourself?
3 What interpersonal and management skills do you possess, and are
these the right ones to work in partnership with other agencies?
4 How can you support more junior staff to work effectively with other
agencies?
5 How can you influence upwards in order to encourage senior
commitment to partnership working?
6 With a mixed group of staff (for example, social workers and district
nurses) ask each professional group to list the attributes of their profes-
sion/organisation they admire and those that frustrate them. Ask them
also to list things that they admire about the other profession/organisa-
tion and those that they find frustrating. Bring the groups back
together to share these perceptions, and facilitate a discussion about the
extent to which these perceptions of each other are true, why each
organisation/profession is like that, and what can be done locally to
build on commonalities and tackle potential barriers to more effective
joint working.

References and further reading

Audit Commission (1998) A Fruitful Partnership: Effective Partnership Working.

London: Audit Commission.
Balloch, S. and Taylor, M. (2001) Partnership Working: Policy and Practice. Bristol:
The Policy Press.
Banks, P. (2004) Policy Framework for Integrated Care for Older People. London:
King’s Fund/CARMEN Network.
Department of Health (DH, 1998) Partnership in Action: New Opportunities for
Joint Working between Health and Social Services – A Discussion Document.
London: DH.
Dowling, B., Powell, M. and Glendinning, C. (2004) Conceptualising successful
partnerships. Health and Social Care in the Community, 12(4): 309–17.
Glasby, J. (2003) Hospital Discharge: Integrating Health and Social Care. Abingdon:
Radcliffe.
Glasby, J. (2004) Integrated Care for Older People. Leeds: Integrated Care Network.
Glasby, J. and Littlechild, R. (2004) The Health and Social Care Divide: The Experi-
ences of Older People, 2nd edn Bristol: The Policy Press.
Glasby, J. and Peck, E. (eds) (2003) Care Trusts: Partnership Working in Action.
Abingdon: Radcliffe Medical Press.
Glendinning, C., Powell, M. and Rummery, K. (2002a) Partnerships, New Labour
and the Governance of Welfare. Bristol: The Policy Press.
Glendinning, C., Hudson, B., Hardy, B. and Young, R. (2002b) National Evalu-
ation of Notifications for the Use of the Section 31 Partnership Flexibilities in the
Health Act 1999: Final Project Report. Leeds/Manchester: Nuffield Institute for
Health/National Primary Care Research and Development Centre.
HM Treasury (2003) Every Child Matters. London: The Stationery Office.
Hudson, B. (2000) Inter-agency collaboration: A sceptical view. In A. Brechin, H.
298 Healthcare management

Brown and M.A. Eby (eds) Critical Practice in Health and Social Care. Maiden-
head: Open University Press.
Hudson, B. (2004) Care Trusts: A sceptical view. In J. Glasby and E. Peck (eds)
Care Trusts: Partnership Working in Action. Abingdon: Radcliffe Medical Press.
Hudson, B. (2005) Pick up the pieces. Community Care, 22 September. Available
at www.communitycare.co.uk (accessed 11 October 2005).
Hudson, B. and Henwood, M. (2002) The NHS and social care: The final
countdown? Policy and Politics, 30(2): 153–66.
Hudson, B., Hardy, B., Henwood, M. and Wistow, G. (1997) Inter-Agency
Collaboration: Final Report. Leeds: Nuffield Institute for Health.
Judge, K. (2000) Testing evaluation to the limits: The case of English Health
Action Zones. Journal of Health Services Research and Policy, 5(1): 3–5.
Kodner, D. and Kay Kyriacou, C. (2000) Fully integrated care for frail elderly:
Two American models. International Journal of Integrated Care, 1. Available at
http://www.ijic.org/ (accessed 25 February 2004).
Leichsenring, K. and Alaszewski, A. (eds) (2004) Providing Integrated Health and
Social Care for Older Persons: A European Overview of Issues at Stake. Ashgate:
Aldershot.
Means, R. and Smith, R. (1998) From Poor Law to Community Care. Basingstoke:
Macmillan.
Nies, H. and Berman, P.C. (2005) Integrating Services for Older People: A Resource
Book for Managers. Dublin: European Health Management Association
(available to download free online).
Payne, M. (2000) Teamwork in Multiprofessional Care. Basingstoke: Macmillan.
Peck, E. (2002) Integrating health and social care, Managing Community Care,
10(3): 16–19.
Peck, E. and Crawford, A. (2004) ‘Culture’ in Partnerships: What Do We Mean by It
and What Can We Do About It? Leeds: Integrated Care Network.
Peck, E. and Freeman, T. (2005) Reconfiguring PCTs: Influences and Options. Brief-
ing paper prepared for the NHS Alliance. Birmingham: HSMC, University of
Birmingham.
Poxton, R. (2003) What makes effective partnerships between health and social
care? In J. Glasby and E. Peck (eds) Care Trusts: Partnership Working in Action.
Abingdon: Radcliffe Medical Press.
Rummery, K. and Glendinning, C. (2000) Primary Care and Social Services: Devel-
oping New Partnerships for Older People. Oxford: Radcliffe Medical Press.
Social Services Inspectorate/Audit Commission (2004) Old Virtues, New Virtues:
An Overview of the Changes in Social Care Services over the Seven Years of Joint
Reviews in England, 1996–2003. London: SSI/Audit Commission.
Sullivan, H. and Skelcher, C. (2002) Working Across Boundaries: Collaboration in
Public Services. Basingstoke: Macmillan Palgrave.
Wanless, D. (2003) The Review of Health and Social Care in Wales. Cardiff: Welsh
Assembly.
Wistow, G. and Fuller, S. (1982) Joint Planning in Perspective. Birmingham: Centre
for Research in Social Policy and National Association of Health Authorities.
Young, R., Hardy, B., Waddington, E. and Jones, N. (2003) Partnership Working: A
Study of NHS and Local Authority Services in Wales. Manchester/Leeds: Centre
for Healthcare Management/Nuffield Institute for Health.
 Managing in partnership with other agencies 299

Websites and resources

CARMEN. Network of organisations and countries focusing on the care and

management of services for older people across the European Union. Sup-
ported by the European Health Management Association, the CARMEN
website contains links to a range of reports, good practice guides and
resources for managers: www.ehma.org/projects/carmen.asp
Centre for the Advancement of Interprofessional Education (CAIPE).
National body dedicated to supporting education and training that helps
workers from different backgrounds to come together to learn from and with
each other: www.caipe.org.uk
Change Agent Team. Department of Health, part of the Care Services
Improvement Partnership working to support frontline services working
across agency boundaries in older people’s services: www.csip.org.uk
Every Child Matters. Department for Education and Skills website dedicated
to this agenda and the integration of children’s services:
www.everychildmatters.gov.uk
Integrated Care Network. Key UK resource for anyone interested in partner-
ship working, with an online bulletin board, news of forthcoming events and
series of practical publications on topics such as culture, governance and
human resources: www.integratedcarenetwrok.gov.uk
International Journal of Integrated Care. Free online journal with articles
from a range of different countries and continents: www.ijic.org
International Network for Integrated Care (INIC). Runs a series of inter-
national conferences and study tours on the subject of integrated care:
www.integratedcarenetwork.org
Joint Future Unit. Responsible for promoting collaboration between local
government, the NHS and other partners: www.scotland.gov.uk
Journal of Integrated Care. Practice-focused UK publication devoted to
exploring inter-agency working. With contributions from managers, practi-
tioners and academics, it contains a range of very accessible discussion pieces,
summaries and new research studies with regard to partnership working:
www.pavpub.com
Social Care Institute for Excellence (SCIE). Independent body funded by
government to identify and disseminate good practice in social care. SCIE
also hosts Social Care Online, a free database that enables users to search key
social care databases and documents. SCIE currently covers England, Wales
and Northern Ireland and has a series of practice guides, discussion papers and
toolkits available to download free of charge: www.scie.org.uk
Welsh Assembly. Guidance on the health, social care and well-being agenda in
Wales. (See, for example: www.wales.gov.uk/subihealth/content/keypubs/
pdf/policy-guide-e.pdf).
 18 Performance measurement and
improvement
Tim Freeman
Too much policing will not create a culture of quality. Rather it is
likely to distort practice and prioritise the conventional and the
measurable. (Smith 1995c: 308)

Introduction

This chapter avoids the limitations of rapid obsolescence and inability to

explain change associated with simple ‘lists’ of contemporary regulatory
practice by providing a conceptual overview. Drawing on cultural theory,
regulation is considered within the context of international trends in
governance, and regulatory approaches such as accreditation, inspection,
performance management and peer review are situated within a con-
ceptual framework consisting of two independent dimensions: control
location (internal/external); and nature of resultant action (formative/
summative). The axes combine to produce quadrants: internal control,
formative action (Q1); external control, formative action (Q2); internal
control, summative action (Q3); and external control, summative action
(Q4). The focus is firmly on Q4, with a consideration of the interplay
of the summative and formative within real-world regulatory and
inspection systems.
Recent UK NHS regulatory experience is considered, together with
an overview of the generic empirical and theoretical literature on use of
performance indicators in performance management. Conceptual and
technical issues are explored, including the potential displacement of
informal modes of quality assurance; the status of indicators as ‘con-
ceptual technologies’; difficulties associated with availability, reliability,
validity and confounding; the importance of sensitivity and specificity;
and the potential for unintended negative consequences. The chapter
concludes with a cautious assessment of the potential value of perform-
ance measurement in governance systems.
 Performance measurement and improvement 301

The rise of regulatory and inspection systems

The role of external regulation is perhaps best understood in the context

of governance, where governance is defined as a form of social coordin-
ation (Mayntz 1993), of which multiple patterns or modes are available.
Cultural theory (Hood 1998; Hood et al. 1999) identifies four ‘ideal
types’: oversight (bureaucracy); mutuality (professional or ‘clan’); com-
petition (market); and contrived randomness (fatalism). Each has its
strengths and weaknesses, so that while markets provide flexibility and
dynamism, the competitive environment makes collaboration on joint
ventures difficult. Cultural theory’s assertion that the pursuit of each
‘ideal type’ in isolation leads to negative feedback that undermines its
ability to function provides a rationale for drawing on each of the four
ideal types, continually readjusting the blend of hybrid governance forms
operating in any system, to maintain a dynamic tension between the
elements – a complex dance, in which the music never stops (Figure
18.1).
While it is important not to overemphasise the degree of homogeneity
in emergent public sector management practices, during the 1980s public
services in western Europe increasingly became managed rather than
administrated, governance practices tending to emphasise market provi-
sion and indirect regulatory systems rather than hierarchical control
(Hoggett 1996; Jacobs and Manzi 2000; McLaughlin et al. 2001). Marry-
ing central control with local responsibility, New Public Management
(NPM) sought to verify the compliance of semi-autonomous provider
agencies by auditing performance against targets (Carter et al. 1992;
Power 1997). While strongly associated with New Right political theory
and the entrepreneurial governance thesis (Osborne and Gaebeler 1992),
in which clients are conceptualised as customers and service provision
decentralised to competing autonomous providers in regulated markets,
the demands of political accountability required close management of the
market leading to a rapid expansion in systems of inspection, accounting,
regulation and review (Clarke et al. 2000). Indeed, the simultaneous use
of both centralisation and decentralisation is a defining paradox of the
approach (Clarke and Newman 1997), regulatory mechanisms providing

Figure 18.1 Modes of governance

Source: Adapted from Hood (2000)
302 Healthcare management

the means to ‘steer’ the behaviour of semi-autonomous organisations at a

distance.
While the UK Labour Party vehemently opposed the use of internal
markets in healthcare provision while in opposition during the early
1990s, when elected to government in 1997 the new administration
retained and extended the emphasis on decentralisation and performance
management, with additional elements of central direction and new regu-
latory bodies to set and monitor standards. Thus, care standards were to
be set nationally via a new National Institute for Clinical Excellence
(NICE) and new National Service Frameworks (NSFs). National stand-
ards were monitored through performance management and external
regulation via a rolling programme of visits from a new Commission for
Health Improvement (CHI) and a series of high-level performance indi-
cators under a Performance Assessment Framework (PAF). While com-
mentators satirised the continuities with the earlier NPM by coining the
term Modern Public Management (‘MPM’; Newman 2000), the new
regulatory bodies signalled a significant step away from market modes of
governance associated with competition and contracting towards new
forms of regulatory oversight associated with guidance and monitoring.
They constituted a strong system of performance improvement, with an
underlying emphasis on the increased accountability of professionals to
government, drawing on a comprehensive set of high-level performance
indicators and central targets (McLaughlin et al. 2001). At the time of
writing, more recent policy innovations such as Payment by Results
(PbR), Patient Choice and use of Independent Sector Treatment Centres
(ISTCs) for clinical and diagnostic procedures may be seen as
reintroducing a number of market-based incentives into governance
systems. (See Box 18.1.)
From the perspective of cultural theory the above shifts in emphasis
over time are less new ‘post-bureaucratic’ forms than a dynamic blend of
different forms of social coordination drawing on market, hierarchy, clan
and fatalist modes of governance to address emerging negative feedback
over time. The increased centralism of NICE and CHI could be seen as
an attempt to increase collaboration and standardisation in the face of
competitive pressures; and the introduction of PbR, patient choice and
ISTCs as an attempt to increase competitive incentives in the light of
concern over ‘management by targets’. While the number of ideal types
of governance mode is limited, the relative balance between these

Box 18.1 Cultural theory

• Suggests that all governance systems require blends of competition, oversight,

mutuality and contrived randomness.
• Blends are only ever in unstable, dynamic balance: all governance systems
require continual renewal to offset emerging negative unintended
consequences.
 Performance measurement and improvement 303

approaches and their hybrids is almost without limit and there is much
scope for new forms of regulatory practices within these emergent gov-
ernance hybrids. For example, publication of Creating a Patient-led NHS:
Delivering the NHS Improvement Plan (DH 2005) raised the prospect of
contestable provision from multiple providers in primary as well as sec-
ondary care within the UK NHS, necessitating the development of mar-
ket regulation mechanisms for entry, exit and consumer protection. At
the time of writing, it is unclear which agency or agencies will be
charged with these functions, or how they will be organised.

Conceptual framework: control location and resultant action matrix

Given the fluidity of governance hybrids considered above, there is a

wide and potentially bewildering array of measurement indices for assess-
ing the quality of healthcare provision at the level of local health econ-
omy, organisation, clinical directorate or service team. Options include
accreditation, quality management frameworks, performance manage-
ment systems, benchmarking and statistical process control, among many
others. The emphasis placed on the various elements has continued to
evolve necessitating periodic ‘shuffles’ of structural and institutional
arrangements, such as the expansion of CHAI’s responsibilities to include
performance indicators and the reconfiguration of the Modernisation
Agency into the NHS Institute for Innovation and Improvement (NIII).
In the context of such dynamic complexity, Boland and Fowler (2000)
provide a useful conceptual framework of performance measurement,
indicators and improvement initiatives (Figure 18.2). Their model is
expressed as a simple matrix with two axes: the source of control (internal
or external); and the nature of resultant action – positive (supportive and
formative) or negative (punitive or summative).
The vertical axis identifies the source of authority for control, either

Figure 18.2 Control locations and resultant action matrix

Source: Adapted from Boland and Fowler (2000)
304 Healthcare management

from within the organisation (internal) or from outside (external). While

the former implies using indicators for internal purposes, the latter
implies the existence of an outside body holding the organisation to
account for its actions – regulation. The horizontal axis concerns percep-
tions of the nature of resultant controlling actions: supportive and forma-
tive (positive) or punitive and summative (negative). Negative action
implies an assumption that underperformance is due to inefficiency,
leading to actions such as a reduction in resource allocation. In contrast,
positive action implies that in the same situation an investigation would
be undertaken to explore why the situation had arisen, leading to
redeployment of resources or organisational development activities such
as staff development. Considered as two independent dimensions of con-
trol location and resultant action, the axes combine to produce four
potential options (Box 18.2):

Box 18.2 Control location and resulting action quadrants

• Q1: controlled by the organisation and used formatively for development

• Q2: controlled by an external agency and used formatively for development
• Q3: controlled by the organisation and used for sanction and blame
• Q4: controlled by an external agency and used for sanction and blame

1 Quadrant 1: Internal control, positive action. These typically include

internal quality improvement procedures such as total quality man-
agement (TQM), benchmarking and statistical process control – meas-
urements are taken in order to support internal quality improvement.
2 Quadrant 2: External control, positive action. This quadrant includes
external bodies charged with auditing the performance measurement
and quality improvement systems of organisations, i.e. audit of systems
at one step removed, in order to offer advice on how the whole organ-
isation can develop component parts to ensure continued improve-
ments. It is positive in nature given its supportive, largely nurturing
role.
3 Quadrant 3: Internal control, negative action. This concerns measurement
of internal subunits as in Quadrant 1, but here negative actions may
arise. Although data may be gathered internally, in practice informa-
tion is often required by an external agency. Thus in the UK the
collection and reporting of waiting time data in hospitals is an internal
concern, but also required by a central agency. Such local collection of
data used externally to monitor performance is a defining feature of
New Public Management (NPM) approaches.
4 Quadrant 4: External control, negative action. As in Quadrant 3, organisa-
tions may expect to be judged on their activities with punitive con-
sequences for poor performers. However, in this quadrant authority is
imposed through lines of accountability to an external regulatory
agency.
 Performance measurement and improvement 305

The remainder of this chapter concentrates largely on the regulatory

options available in Quadrant 4, as internal quality improvement
approaches such as statistical process control (SPC) and benchmarking are
considered elsewhere in this book. It is important to note at this point
that the potential of internal formative approaches such as TQM in
influencing behaviour should not be underestimated. Indeed, when con-
sidered in Foucaultian terms as a series of techniques and practices that
encourage clinicians in their own self-surveillance, TQM may be charac-
terised as a particularly subtle internal regulatory practice, in which the
behaviours accepted internally by clinicians as the hallmark of profes-
sionalism become increasingly aligned with those expected by the
external ‘gaze’ of the performance manager (Flynn 2004).

Regulation

The external quadrants Q2 and Q4 are in essence regulatory, the key

feature being placement of responsibility for overseeing performance
with an external body, i.e. the regulator. Walshe (2002) identifies two
paradigms of regulation – deterrence and compliance – each with a
distinctive perspective on the nature of those regulated and the behaviour
required of the regulator. The former assumes that regulatees need to be
coerced to behave well through strict enforcement of demanding stand-
ards, lest they pursue their own interests to the detriment of others. They
require searching judgement and it is the duty of the regulator to bring
them to account. In contrast, the compliance model assumes that those
regulated are well meaning and seeking to comply, requiring support and
advice from their external assessors. Given the above, it is clear that
Walshe’s deterrence and compliance models equate respectively to Q4
(external summative) and Q2 (external formative) in Boland and
Fowler’s model (Box 18.3).
While the above distinctions are helpful in conceptualising the options
available within external regulatory systems, Walshe (2002) is careful to
emphasise their heuristic status. In practice, regulators may seek to differ-
entiate their behaviour, drawing on deterrence or compliance approaches
according to the demands of the situation, the degree of discretion

Box 18.3 Regulation

• Deterrence-based approaches assume actors are self-interested and will seek to

avoid regulation unless coerced.
• Compliance-based approaches assume well-intentioned actors who are seeking
to comply.
• Real-world regulatory systems seek latitude to balance these two approaches as
appropriate
306 Healthcare management

available to them and political exigencies. Thus an organisation in which

management is open and honest about shortcomings and has been work-
ing towards solutions may well receive rather more sympathetic treat-
ment than one where management have hidden their difficulties and
attempted to ‘hoodwink’ the regulators, if such differentiation is within
the gift of the regulator and will not cause political disquiet when
exercised. The following section considers recent healthcare examples of
four major regulatory forms: accreditation; inspection; performance
management; and external peer review.

Accreditation: a healthcare organisation perspective

Organisational accreditation originated in the USA with the Joint Com-

mission on the Accreditation of Healthcare Organisations, and was
exported to Canada via Australia and then to Europe in the 1980s (Shaw
2000). Usually voluntary in nature, accreditation is typically undertaken
by a multidisciplinary team of healthcare professionals against published
standards, and those organisations which are able to show their conform-
ance to standards receive accreditation from the award-making body.
Examples that have been used internationally within the context of
healthcare provision include the Malcolm Baldrige and European Foun-
dation for Quality Management approaches to organisational excellence,
as well as the International Organisation for Standardisation (ISO 9000)
approach to quality management. In the UK, accreditation became
increasingly widespread (see Box 18.4), evinced by a wide range of pro-
grammes such as the Hospital Accreditation Programme (HAP), the
King’s Fund Organisational Audit (now HQS), Investors In People (IIP)
for training and development of staff, and Clinical Pathology Accredit-
ation (CPA) (Heaton 2000).

Box 18.4 Accreditation – the US experience

The US accreditation model for external evaluation of healthcare organisation

quality, initiated by the American College of Surgeons (ACS) in 1917, evolved into
the Joint Commission in 1951. This was entirely professionally driven (standards
set, results used exclusively by health professionals for quality improvement and
graduate education) until 1964. The subsequent pervasive influence of the Joint
Commission is the result of government, purchaser and public use of
accreditation. Establishment of the Medicare programme for older Americans in
1965 created ‘deemed status’ for provider eligibility for funding – thus
accreditation became a mechanism for public accountability and control of costs,
involving government, purchasers and the public. The primary reasons for seeking
accreditation under this arrangement are thus rather different than those under
the earlier professionally controlled ACS external evaluation.
Performance measurement and improvement 307

Inspection: Commission for Health Improvement (CHI)

CHI was created in the UK under the Health Act (1999) as an independ-
ent body charged with monitoring performance and facilitating
improvements in clinical care quality, through routine reviews and special
investigations. This constitutes a potential double paradox: that of sup-
portive and developmental in the context of reviews and the hard-edged
investigator charged with naming and shaming; and the extent of its
independence from government, given that Secretary of State may
request investigations. The dual identity has been discussed by classical
allusion to Janus, the Roman god of beginnings with two faces (Rowland
2003).
From its inception, senior CHI personnel consistently sought to place
the emphasis firmly on facilitating improvement. While generally well
received within the service, Day and Klein (2002) raised a number of
important tensions within the clinical governance reviews undertaken by
CHI. These included the combination of summative and formative
dimensions of the reviews; the balance between checking for the imple-
mentation of mechanisms and assessing their impact; and queries over
data quality and the extent of critical evaluation of data in context. The
NHS Reform and Healthcare Professions Act 2002 and Delivering the
NHS Plan (DH 2002) outlined new powers and responsibilities for CHI,
along with a change of name to Commission for Healthcare Audit and
Inspection (CHAI), and latterly Healthcare Commission. Its expanded
portfolio included performance management, waiting lists and value for
money. These included the creation of an Office for Information on
Health Care Performance, licensing private healthcare provision,
conducting value for money audits, validating published performance
statistics, publishing star ratings and an ability to recommend special
measures. (See Box 18.5.)

Box 18.5 Inspection – the Dutch experience of ‘Visitatie’

Originating in the Netherlands, ‘visitatie’ (to visit) was introduced in the late
1980s by the specialist medical community to assure patient quality and
reconfirming the trust of the public, financiers and government in professional
self-regulatory mechanisms. The collegial peer-review system was doctor-led,
and aimed to assess the quality of practice of hospital-based specialist groups. On
completion of a visit, findings are documented in a confidential report, listing
recommendations for improvement, and implementation is left to the specialists
who were reviewed. While there are no formal sanctions for failure to comply
with recommendations, the specialist societies expect members to act on the
recommendations; governance is collegiate rather than hierarchical.
308 Healthcare management

Performance management

The NHS Performance Assessment Framework (PAF)

Central influence over policy implementation in England increased dra-
matically under reforms instituted by New Labour, principally via Public
Service Agreements (PSAs) between Whitehall departments and the
Treasury, and service delivery agreements explaining how the high-level
targets contained in the PSAs are to be reached (Lee and Woodward
2002). Agreements were implemented through the Performance Assess-
ment Framework (PAF), the routine quantitative instrument for monitor-
ing the progress of healthcare organisations under the 1997 reforms
(NHSE 1999). Six areas of the PAF were agreed in 1999: health
improvement; deaths from all causes; fair access; effective delivery of
appropriate healthcare; efficiency; patient/carer experience of the NHS;
health outcomes. Under the Health and Social Care (Community Health
and Standards) Act 2003, the performance assessment framework for
2005–8 (‘Standards for Better Health’) promised fewer national targets
and a renewed focus on outcomes and patient experience, in order to
stimulate local flexibility and innovation. Seven domains are identified:
safety; clinical and cost effectiveness; governance; patient focus; accessible
and responsive care; care environment and amenities; public health. How-
ever, while the new system offered the prospect of greater autonomy for
trusts within the national framework given the system of ‘core’ and
‘developmental’ standards within the seven domains, they are still based
on Treasury Public Service Agreements.

Box 18.6 Performance management: New Zealand PHOs

Similar to the UK Quality Outcomes Framework, primary healthcare

organisations (PHOs) in New Zealand receive financial incentives for
improvements in performance against a range of nationally agreed indicators
under the PHO performance management programme. The indicators were
developed by a PHO clinical governance advisory group and government
representatives, and include clinical, process/capacity and financial indicators.
PHOs become eligible for payments as they improve their performance on the
indicators against targets as laid out in an agreed development plan with the
district health board (DHB). Additionally, DHBs agree with PHOs on how the
performance payments will be used.

Performance ratings (‘stars’)

Under the ‘star’ rating system of NHS trusts in England, three sets of
information were combined to produce a summary measure of perform-
ance from ‘excellent’ (three stars) to ‘poor’ (zero stars). The first area
comprised performance under key targets in the PAF such as waiting
Performance measurement and improvement 309

times; the second a battery of additional indicators under headings of

patient, clinical and capacity focus; and the third CHI review informa-
tion, used (where available) for adjustment. Star ratings had important
effects as only three-star trusts were allowed to spend improvement fund
monies at their discretion, or to apply for foundation status. Crucially,
trusts failing badly on the key targets received no stars, no matter how
good the CHI report or how well it performed under the other measures.
Given the possibility of reward or sanction, the potential for perverse
incentives leading to misrepresentation was high.

National Service Frameworks (NSFs)

NSFs are developed with the intention of setting national standards and
defining service models for specific services or care groups including
mental health (DH 1999), coronary heart disease (DH 2000), diabetes
(DH 2003) and older people (DH 2001); and establishing implementa-
tion programmes and performance measures against which progress may
be measured. Each NSF includes national standards of care which
patients may expect, a definition of the evidence base associated with
interventions and their associated costs, as well as work commissioned to
support implementation such as research, appraisal, benchmarks and
outcome indicators, and supporting programmes including workforce
planning, education and information management.

Local authority Overview and Scrutiny Committees (OSCs)

Introduced from 2002, OSCs have the ability to require local NHS repre-
sentatives to answer questions concerning local health service matters,
and provides an opportunity for lay elected representatives to influence
the development of local health services on behalf of the community.
Guidance from the Audit Commission (2002) emphasises the need
for inclusive local processes in drawing up its scrutiny programme;
careful organisation around a series of subpanels; extensive and robust
evidence gathering and review cycles; and extensive ‘informal’ lines of
communication. (See Box 18.6.)

External peer review

A review of the scope, mechanisms and use of external peer review

techniques (ExPeRT) operative in western European healthcare systems
(Shaw 2000) identified four assessment mechanisms: accreditation, ISO
9000, EFQM and visitatie, each of which are used in the UK (Heaton
2000). Klazinga (2000) embeds these assessment mechanisms within
broader perspectives of external review: organisational (accreditation);
process control (ISO 9000); quality management (European Foundation
for Quality Monitoring Excellence Model EFQM EM); and professional
(visitatie). Traditionally, the focus of the standards in each model reflected
310 Healthcare management

their original purpose: professional standards (visitatie), health service

delivery (accreditation); management systems (EFQM); and quality assur-
ance systems (ISO). Models are typically complementary rather than
mutually exclusive, the differences in uptake in any healthcare system
being a function of the attributes of the models and the interests of
different professional groupings (Heaton 2000). Thus, debates over
models and methods are ultimately concerned with professional control,
and the perceived value of approaches is dependent upon judgements
concerning the appropriate balance between professional self-regulation
and external accountability.
At the level of healthcare organisations, clinical professionals tend to be
supportive of visitatie and accreditation. Their enthusiasm is, however,
dependent on who is going to use the model and to what aims, and they
will seek to limit accreditation programmes to areas of professional per-
formance that they deem appropriate. Similarly, managers may either
promote or oppose visitatie depending on their perspective on the value
of self-regulation, and those managers intent on increasing managerial
control will tend to pursue accreditation and ISO. At the government
level, debate among policymakers ultimately concerns the ability of the
mix of models to achieve a balance of power between stakeholders con-
gruent with government policy towards accountability (Klazinga 2000).
Figure 18.3 identifies a range of contemporary regulatory practices
within Boland and Fowler’s framework.

Figure 18.3 Populated control locations and resultant action matrix

 Performance measurement and improvement 311

Using performance indicators in performance management

While the previous section considered a number of contemporary regu-

latory mechanisms, there is an extensive literature on the generic issues
associated with use of performance indicators in any performance man-
agement system (Freeman 2002), and a careful reading reveals two broad
traditions. The first is practice oriented, prescriptive and optimistic of the
value and use of performance indicators, while in contrast the second is
more critically engaged and sceptical. Much of the practice-oriented
literature focuses on matters internal to healthcare organisations and links
conceptually to total quality management (TQM) and continuous qual-
ity improvement (CQI) approaches. In contrast, the academic literature is
more consistently negative, and forms a discourse defined in terms of
conceptual difficulties and statistical proof. In the UK, the use of per-
formance indicators in assurance and performance management systems
has heavily influenced debate over their value. Indeed, many of the con-
ceptual and technical problems considered below arise due to problems
over validity, reliability and perverse incentives that tend to characterise
such systems.

Conceptual difficulties

In common with all assurance approaches, the primary goal of assurance-

focused performance indicator systems is the verification of improve-
ments – quality must not only improve but be seen to do so. Yet faith in
measurement may be misplaced. In the context of external assurance, the
existence of indicators does not remove the need for trust but relocates it
from the internal control systems of professionals to audit systems (Power
1997). Under such circumstances performance indicator frameworks
may simply displace existing informal modes of quality assurance. The
irony is that new structures may displace these informal strategies, and in
seeking to verify the accountability of agents may generate suspicion and
fear, undermining the conditions of trust required for quality improve-
ment (Sitkin and Roth 1993).
Indicators provide information on a potentially limitless number of
dimensions. As indicator systems are unable to capture more than a frag-
ment of what is important about the human experience of healthcare,
some selection is required. A delicate balance needs to be struck between
coverage and practicality: too few indicators and important aspects will
be missed; too many indicators and the instrument will be impractical to
use and costly to maintain. By making some aspects visible, indicators
marginalise other aspects and perspectives (Van Peursem et al. 1995).
They are thus conceptual technologies (Barnetson and Cutright 2000),
shaping which issues are thought about and how people think about
them. (See Box 18.7.)
312 Healthcare management

Box 18.7 Conceptual difficulties with performance indicators

• They risk displacing formal quality assurance approaches and undermine the
conditions of trust and openness required for quality improvement.
• Given the limited number of indicators that may be incorporated into any
system, they inevitably marginalise other aspects and perspectives which are
not included.

Technical difficulties

One of the main attractions of indicators is that they promise visible and
concrete proof of performance. The claim to objectivity is essential to the
use of indicators in performance league tables, yet poses many difficulties.
Much of the debate is conducted in terms of statistical proof, but includes
indicator selection, meaningfulness, and robustness in the light of adjust-
ments for confounding factors, as well as difficulties that arise when using
them to inform service change. Indicators based on a limited range of
items available in pre-existing information systems may additionally have
significant problems with their validity, reliability and comparability.

Imprecision
The structured reporting of indicators further obscures the layered mean-
ings involved in interpretation, and subtle variations in definitions of
indicators such as ‘readmission’ at different centres may lead to the failure
to compare like with like (Gross et al. 2000; McColl et al. 2000; Jackson
2001). Further difficulties in operationalising indicators arise specifically
in the public sector because of the existence of multiple conflicting
objectives and overriding importance of political objectives (Hepworth
1988). There are no technical solutions to these problems and value
judgements are required given the existence of legitimate political
debates surrounding the definition of ‘appropriate’ measures (Stewart
and Walsh 1994).

Data: availability and reliability

There are often problems with the availability of data, resulting in a
tendency to focus on measuring what there is data for, rather than items
that correlate with the system’s goals and objectives (Lowry 1988; McKee
and James 1997; Lorence et al. 2002). Data accuracy is also important, the
issue being whether between-group differences reflect quality of data
rather than quality of care (Kazandjian et al. 1996), a particular problem in
the context of summative assurance. All data collection relies on the
goodwill of clinicians and is thus susceptible to manipulation, particularly
when reward and censure depend on results (Audit Commission 2000).
Performance measurement and improvement 313

Data: validity and confounding

Even where data is available and reliable, it may be potentially misleading
and easily misinterpreted (Smith 1995b; McColl et al. 1998). Measure-
ment validity reflects the extent to which indicators truly represent a
more abstract variable. In order to be valid measures of healthcare quality,
indicators need to reflect attributes of the healthcare system, rather than
attributes of the patient or of other non-healthcare characteristics. For
example, readmission rates are a valid indicator of care quality to the
extent that readmission is due solely to deficiencies in the quality of the
previous care. The point at issue here is that indicators should only relate
to factors that are under the control of those under scrutiny (Parry et al.
1998; Hauck et al. 2003).
To avoid confounding, all other exogenous and endogenous factors
affecting the indicators must be controlled (Barnsley et al. 1996; Daven-
port et al. 1996). Potential confounding factors include configuration of
the local health economy (Carter 1989; Brown et al. 1995), socio-
economic variations (Giuffrida et al. 1999), case mix, comorbidity and
severity (Mant and Hicks 1996; Rigby et al. 2001). Without adjustment,
it is not clear to what extent indicators identify the contribution of health
services to healthcare (Mulligan et al. 2000). There are particular prob-
lems associated with outcome measures, as they may occur over long time
scales and suffer from problems of attribution, especially in measures of
chronic illness (Smith 1995c).

Dealing with confounding

Risk adjustment models such as standardisation, cluster analysis, multiple
regression and data envelope analysis (DEA) may be used (Blumberg
1986; Giuffrida et al. 2000; Giuffrida and Gravelle 2001). Perhaps the
greatest difficulty with such methods is that they are not transparent to
the end user so that attempts to increase the validity of the data may
simply undermine its credibility. The tendency of different adjustment
methods to yield different results brings the robustness of the process
further into question (Nutley and Smith 1998).

Indicators: robustness, sensitivity and specificity

Indicators may falsely convey an impression of objectivity to what is
often weak and ambiguous evidence (Davies and Lampel 1998). Small
numbers of cases mean low significance (McGlynn 1998; Sheldon 1998),
the data requirements for precision are excessive (Mant 1995), and ran-
dom variation in measures may be misinterpreted (Smith 1995c). In
short, comparisons become difficult and potentially deceptive. It is
important that indicators are able to identify all poorly performing units
(sensitivity) and that all units identified by indicators as performing
poorly really are performing poorly (specificity); poor sensitivity and
specificity results in false assurance or denigration, where indicators
incorrectly identify individuals/organisations as poor, or fail to identify
314 Healthcare management

the poorly performing (Goldstein and Spiegelhalter 1996; Davies 1998).

(See Box 18.8.)

Box 18.8 Technical difficulties with performance indicator systems

• Imprecision and lack of technical solutions to political objectives.

• Limited availability and reliability.
• Poor validity due to difficulties in attribution of outcomes to processes, a
result of extraneous confounding factors.
• Techniques for dealing with confounding may be subject to legitimate challenge.

Perverse incentives

Performance management systems may give rise to perverse incentives

and unintended consequences (Smith 1990, 1995a; Goddard et al. 2000),
arising from the fact that people anticipate the reactions of those charged
with controlling them (Thompson and Lally 2000). Smith (1995c) out-
lines the potential distortions induced by performance indicators by
drawing attention to the implicit management incentives of such
schemes (Table 18.1). Drawing on a wealth of literature, he concludes
that the almost universal finding is that performance indicators distort
behaviour in unintended ways.

Table 18.1 Unintended consequences of public sector performance indicator systems

Emphasis on phenomena quantified in the measurement scheme
Pursuit of narrow local objectives, rather than those of the organisation
Pursuit of short-term targets
Pursuit of strategies enhancing the measure rather than the associated objective
Deliberate manipulation of data
Drawing misleading inferences from raw performance data
Deliberate manipulation of behaviour to secure strategic advantage
Organisational paralysis due to rigid performance evaluation

Source: Adapted from Smith (1995c)

Conclusion

The recent exponential growth in external regulatory mechanisms

throughout western Europe has been occasioned by increased decentral-
isation and use of regulated markets in healthcare service delivery, with
greater emphasis on oversight methods of accountability (Power 1997;
Hood et al. 1998). Consistent with the growing influence of managerial-
ism, since the early 1990s the European Union experience is of con-
vergence between external peer review models, each moving towards
comprehensive standards for organisation, management and clinical
Performance measurement and improvement 315

performance. Thus, accreditation systems are embracing ISO 9000 stand-

ards (Heaton 2000) and EFQM is being used as a framework within
which the other models are incorporated (Moullin 2002). Notwithstand-
ing such pressures of convergence, the shifting balance of formative and
summative elements within these various approaches to external review
remains. Indeed the recent UK experience suggests that the general
international picture of convergence of techniques around the New Pub-
lic Management agenda may be deceptive, as new variant approaches are
continuously added to the mix in an attempt to avoid the unintended
negative effects of the previous regimes.
In the context of performance indicators, the weight of evidence con-
sidered in this chapter suggests that their use in a summative way without
adequate recourse to countervailing governance strategies is almost
inevitably corrosive and corrupting. Such accounting systems place trust
in systems rather than individuals, potentially undermining the condi-
tions of trust required for quality improvement. A range of technical
problems arise due to the precision of data required to make summative
comparisons, and further negative unintended consequences follow due
to the pressures on clinicians and managers to ‘get good results’. Perform-
ance measurement may thus be considered a complex art rather than a
science, requiring considerable sensitivity and sophistication.

Summary box

• Regulatory practices are dynamic over time and best considered within the
context of shifting modes of governance. Cultural theory suggests that all
governance systems will require additions to offset emerging negative
unintended consequences in the previous ‘blend’.
• The rise of external inspection from the 1980s onwards across western
Europe is linked to the requirement for mechanisms capable of ‘steering’ the
behaviour of semi-autonomous organisations from a distance. While New
Labour’s ‘modernisation’ project initially increased regulatory oversight, later
reforms such as Payment by Results (PbR) and patient choice may be seen as a
reaction against the excesses of oversight and ‘target culture’ and
reintroduction of quasi-market incentives.
• Regulatory frameworks may be conceptualised in a simple matrix with two
axes: the source of control (internal or external); and the nature of resultant
action (summative or formative).
• While regulation can be either ‘deterrence’ or ‘compliance’ focused, real-
world external regulatory systems typically contain elements of each in order
to differentiate their response to regulate behaviour.
• The major approaches are: accreditation; inspection; performance
management; external peer review.
• Use of performance indicators in performance management systems poses
serious technical and conceptual difficulties. The former include aspects of
availability and reliability; validity and confounding; and robustness, sensitivity
and specificity. More fundamentally, they may displace informal assurance
mechanisms.
316 Healthcare management

Self-test exercises

1 Identify an indicator that others use to judge your work performance.

In what ways has the existence of this indicator changed the way that
you both think about and do your work? Identify the positive and
negative consequences of these changes for you, your organisation and
your professional group.
2 Think about the regulatory mechanisms (accreditation, inspection,
performance management, peer review) to which you are subject.
What is the relative balance between them and how has this changed
over time?

References and further reading

Audit Commission (2000) On Target: The Practice of Performance Indicators.

London: Audit Commission.
Audit Commission (2002) A Healthy Outlook: Local Authority Overview and
Scrutiny of Health. London: Audit Commission.
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Websites and resources

Healthcare Commission. Provides an overview of the Commission’s regula-

tory and external inspection programmes, as well as its annual report and
forward plan. Also includes detail on performance ratings and ‘star’ rating
systems: http://www.healthcarecommission.org.uk/Homepage/fs/en
320 Healthcare management

International Organisation for Standardisation (ISO). Overview of the

ISO approach, its systems and products, together with news and workshops:
http://www.iso.org/iso/en/ISOOnline.frontpage
Investors In People. Provides an introduction to the IIP approach to accredit-
ation in human resource development: http://inverstorsinpeople.co.uk/IIP/
Web/default.htm
Joint Commission on Accreditation of Hospital Organisations
(JCAHO). Provides access to detail on US hospital accreditation pro-
grammes: http://www.jcaho.org
Monitor. Provides access to annual reports, regulatory activity, and discussion
documents concerning the role of a regulator in a quasi-market: http://
www.monitor-nhsft.gov.uk/index.php
National Institute of Clinical Excellence (NICE). Provides an overview of
the work of the institute: http://www.nice.org.uk/page.aspx?o=home
NHS Institute for Innovation and Improvement (NIII). Resources for
learning and leadership, together with forward plan: http://
www.institute.nhs.uk
Overview and Scrutiny Committees (OSCs). Overview of responsibilities,
together with series of case studies: http://www.dh.gov.uk/PolicyAndGuidance/
HealthAndSocialCareTopics/BuildingQualityInSocialCare/fs/en
Total Quality Management (TQM). Outline of the historical evolution of
the approach, together with information on tools such as Statistical Process
Control (SPC) and force-field analysis: http://www.dti.gov.uk/quality/6i.htm
Visitatie. Provides a comparative overview of expert peer review systems in the
UK and Netherlands: http://caspe.co.uk/expert/nl-uk.htm
Part III
Management theories, models
and techniques
 19 Leadership and its development
in healthcare
Edward Peck

Introduction

This chapter explores four themes around leadership:

• the main theories of leadership that have emerged over the last 50
years, drawing out the ongoing influence of each
• the ways in which these theories are reflected in specific policy
documents on leadership in UK healthcare
• the components of one typical model for leadership development
• the evidence – such as it is – of the impact of leadership development
in healthcare, both on individuals and on the system.
The chapter finishes with a summary of the key points. Before embarking
on these more detailed discussions, however, I want to set the context by
making four broader points about leadership.
First, the current interest in leadership in UK healthcare is relatively
recent. Up until the late 1990s the word ‘leadership’ appeared
infrequently in policy pronouncements in healthcare. In contrast, the
concept now occupies a prominent position in most major documents
issued, for example, by the English Department of Health. In this respect,
the UK NHS is merely following a broader trend in the public sector,
both nationally and internationally. Storey (2004a) charts the explosion
in papers, programmes and projects dedicated to leadership in public
services over the preceding ten years. Both Storey and myself (Davidson
and Peck 2005) have mapped out the reasons why leadership has risen to
such prominence. However, the very variety of challenges discussed in
this book suggest why some form of organisational alchemy has been
seen to be necessary (and leadership is often discussed in such florid
language – see Rooke and Torbert 2005 for a discussion of leaders as
alchemists). Nevertheless, fashions in management theory – and thus
practice – ebb and flow (Abrahamson 1991, 1996) and the current focus
on leadership may yet prove ephemeral. Already much of the discus-
sion is turning to followership (for example, Daft 1999), and even non-
followership (for instance, Prince 1998), and the connected notion of
324 Healthcare management

authenticity (for example, Alvolio et al. 2004; Illes et al. 2005). Further-
more, there is a whole school of writers who have always argued for the
importance of fundamental organisational assumptions and arrangements
(e.g. forms of accountability) rather than the impact of individuals (for
instance, Giddens 1993). In response, some champions of leadership
acknowledge that leaders may indeed experience constraints – but no
more – on their influence (for example, Dubrin 2004). I have explored
this debate elsewhere (Peck 2005b) and limitations of space prohibit
further examination of this significant issue. There are also critiques of
leadership texts that challenge their predominantly Anglo-American
assumptions (e.g. Prince 2005); again, space precludes more investigation
here.
Second, Storey also identifies some of the major problems with this
enthusiasm for leadership: ‘precise meanings are . . . usually under-
specified . . . its value is simply asserted and its nature assumed . . . there is
a tendency to assume and assert that leadership is the answer to a whole
array of intractable problems’ (2004a: 5). Collins (2001: 21) goes further:
‘the “Leadership is the answer to everything” perspective is the modern
equivalent of the “God is the answer to everything” perspective . . . in the
Dark Ages’. We shall return to these problems of definition and attribu-
tion when we consider below the evidence on impact. This is not to
suggest that there are no commentators who venture apparently helpful
definitions of leadership. Based on his review of previous formulations,
Bass (1990: 19) suggests:
Leadership is an interaction between two or more members of a
group that often involves a structuring or restructuring of the situ-
ation, perceptions and expectations of the members. Leaders are
agents of change – persons whose acts affect other people more
than other people’s affect them. Leadership occurs when one group
member modifies the motivation or competencies of others in the
group . . . any member of the group can exhibit some amount of
leadership and the members will vary in the extent to which they
do so.
This definition draws out three themes that are important later in this
chapter: leadership is enacted through relationships with others (who
might be termed ‘followers’); leadership – or at least the potential for
leadership – is widely distributed throughout an organisation; and much
writing on leadership has developed out of the authors’ in-depth work
with small groups rather than with large organisations.
Third, it is worth pondering for a moment the distinction between
leadership and management, especially given that many of you reading
this volume will have titles that refer to you as managers. Much of the
literature seems to assume that leaders are butterflies whilst managers are
caterpillars. It is proclaimed regularly that leaders are transformational
and managers are transactional (Zaleznik 1992; Dubrin 2004); the former
do the right thing whilst the latter merely do the thing right (Bennis
1994). The contrast between transformational and transactional
 Leadership and its development in healthcare 325

approaches is summarised by one contemporary guru of public sector

leadership – Alimo-Metcalfe – as follows:
Leadership has experienced a major reinterpretation from represent-
ing an authority relationship (now referred to as management or
Transactional Leadership which may or may not involve some form
of pushing or coercion) to a process of influencing followers or staff
for whom one is responsible, by inspiring them, or pulling them
towards the vision of some future state . . . this new model of leader-
ship is referred to as Transformational Leadership because such
individuals transform followers. (Alimo-Metcalfe 1998: 7)
Presented as a simple dichotomy, this distinction seems to me misguided
(not to mention potentially intimidating to those of us who are being
expected to make the alleged move from one to the other (see Fullan
2001). At the outset, therefore, I want to establish an alternative meta-
phor: if artistic creation is 90% perspiration (for example, the under-
standing of your materials) and 10% inspiration (Harrison 1979), then
leadership in healthcare may be a similar mix of transaction (for example,
the putting in place of performance review procedures) and transform-
ation (for example, the creating of new meanings for colleagues). Fortu-
nately, there are other commentators who share this more balanced view
(e.g. Fullan 2001; Alvolio and Bass 2002).
The quotation from Alimo-Metcalfe takes me to my fourth and final
broader point. Much as the theme is underplayed in many – especially
contemporary – accounts, leadership has a lot to do with power (see
Lukes 1974 for a seminal debate on three forms of power). When the
concept of power appears at all in the recent literature, it is often viewed
pejoratively (for example, in the reference to ‘coercion’ in the previous
quotation). Ignoring the reality of power in discussions of leadership has
at least two major dangers. On the one hand, it can render some analyses
of leadership rather fanciful, not to say naive, apparently regarding the
exercise of any hierarchical or professional authority as almost illegitim-
ate. On the other hand, it can overlook the ‘shadow side’ of leadership,
the abuses of authority that can take place under its banner (DeCelles and
Pfarrer 2004). With these four points in mind, it is time to turn to a short
history of leadership.

The evolution of leadership theory

The history of leadership has been told chronologically many times,

perhaps most magisterially by Bass (1990), but also by the present author
(Davidson and Peck 2005, and this chapter draws on that source), as well
as thematically by Storey (2004b). I shall therefore compress this history,
giving copious references for further reading, and focusing on those
aspects of the various theories that still seem influential.
326 Healthcare management

Great man and trait theories

Much of the early literature initially focused on the leadership of ‘great

men’ (for instance, Woods 1913; Wiggam 1931). Examples tended to be
military or political leaders and the predominant organisational forms
were large, apparently requiring command and control. There was inter-
est in establishing the inherent traits that might make these great men
such great leaders (for example, Bernard 1926; Tead 1929). However, as
the context for leadership research changed from these settings to other
human systems (for instance, education) the prevalent leadership traits
seemed to change. As a consequence, simple trait theory fell out of
favour; for example, Stogdill (1948) concluded that both the person and
the situation (see next paragraph) had to be considered in the emergence
of leadership. Nonetheless, the residue of this theory – or maybe just the
everyday perception that some individuals prominent in public life seem
to exhibit extraordinary self-confidence or intelligence or whatever –
still shape our view of leadership (and, therefore, it is still necessary, for
contemporary writers to assert that ‘leaders are made, not born’ – see
Rooke and Torbert 2005: 67). Thus, the search for the personality types
of successful leaders still continues (e.g. Antonikas et al. 2004, who iden-
tifies emotional maturity, integrity, various forms of intelligence and
task-relevant knowledge). Certainly in healthcare settings the great man
approach seems alive and kicking, particularly amongst politicians (pre-
sumably because they see one regularly in the mirror); for example, it is
evident in the New Labour proposal for management ‘franchising’ in
healthcare, where a chief executive apparently successful in one organisa-
tion would be given responsibility for another that is perceived to be
failing.

Personal-situational theories I

In contrast to trait theorists, the situational approach suggested that lead-

ership styles have to be adopted as a response to the demands of a given
situation; contextual factors thus determine who emerges as a leader.
Initially these theorists argued that ‘great men’ were a product of the
particular situation that required them to step forward (see Schneider
1937; Murphy 1941). At this stage it was still thought that some personal-
ity factors made a difference to who could emerge and, therefore, trait
theory could not be completely dismissed. In time, this led to the evolu-
tion of personal-situational theories. These maintain that, in any given
case of leadership, some aspects are due to the situation, some result from
the person and yet others are consequent on the combination of the two
(Bass 1960). This way of thinking established that there was a crucial
relationship between context and leadership which was to prove increas-
ingly influential and, indeed, still shapes many leadership development
programmes delivered today.
Leadership and its development in healthcare 327

Humanistic theories

After the 1939–1945 war, psychologists and social scientists brought a

renewed energy to the search for an understanding of the causes of such
events, including the ways in which they affected – and were affected by –
leadership behaviours. These writers concluded that leadership was based
on a number of factors which again put the individual centre stage: the
interrelations between individuals (Likert 1961); individual motivation
(Maslow 1954); the interdependence between individuals and organisa-
tions (Blake and Moulton 1965); and the fit between individual and
organisational needs (McGregor 1966). These writers established the
importance of the individual’s psychological profile to leadership, and
also the potential benefits of their examination. Perhaps the best known
psychological inventory – the Myers Briggs Type Inventory – was ini-
tially put together by psychologists in the 1940s (Briggs Myers 2000); it is
still widely used in leadership development programmes.
These writers also set the stage for the entrance of concepts which are
also now commonplace in such programmes. For example, ‘emotional
intelligence’ (EI; Salovey and Mayer 1990; Goleman 1996). George
(2000) stresses the importance of four aspects of EI to leadership (the
appraisal and expression of emotion, the use of emotion to enhance
decision making, knowledge about emotions and the management of
emotions). These theorists – with their stress on the importance of the
personal resources of the individual – found their ideas very much back
in favour when the solution to the problems of late twentieth century
corporations was seen as lying in the capabilities of chief executives
(Storey 2004a).

Personal-situational theorists II

During the same period, a number of accounts took forward the idea that
the interaction between the person and the situation was of paramount
importance. Path–goal theory (House 1971) suggested that successful lead-
ers show their follower the rewards that are available and the paths (that is,
the behaviours) through which these rewards may be obtained (and this
seems to have resonance with the approach adopted by the Department
of Health in England three decades later in the notion of ‘earned auton-
omy’ – see below). Contingency theory (Fiedler 1967) argued, rather sim-
plistically, that leaders have a tendency towards either task-orientation or
relation-oriented leadership. Later, Vroom and colleagues (Vroom and
Yetton 1973; Vroom and Jago 1988) elaborated this theory. They postu-
lated that three factors influence the choice of leadership style: the degree
of structuring of the problem; the amount of information available;
and the quality of decision required. Hersey and Blanchard (1988) added
as an additional variable the readiness of followers to accept leadership.
Whilst sharing the limitations of other theories in this tradition – for
example, paying no regard to the constraints imposed on leaders by the
328 Healthcare management

pre-existing assumptions and arrangements of organisations (Giddens

1993) – the suggestion that leaders can identify certain factors which
might shape their selection of leadership style has become important in
leadership development.

Charismatic and transformational leadership

Before transformational leadership made its entrance onto the theoretical

stage, it was preceded by charismatic leadership. In many respects, this
signalled a return to the certainties of the great man era. Perhaps best seen
as one, and only one, characteristic of transformational leaders – a neces-
sary but not a sufficient condition – the charisma of chief executives was
a cause for celebration in the 1980s (e.g. Peters and Waterman 1985) and
a cause for concern 20 years later (Mangham 2004). Perhaps the most
considered overview of this theory is provided by Bryman (1992).
Although many writers (e.g. Bass 1990) have given sober accounts of the
attributes of transformational leaders towards their followers – individual-
ised consideration, intellectual stimulation, inspirational motivation and
idealised influence (that is, providing a role model) – and these undoubt-
edly contain some wisdom, the concept has become tainted by the
corporate scandals, primarily Enron, that Mangham (2004) discusses.
Nonetheless, this account can draw attention to two often overlooked
aspects of leadership, both of which are highlighted by Grint (2005). First,
the identity of a leader – charismatic or otherwise – is relational rather
than individual: ‘leadership is a function of a community not a result
derived from an individual deemed to be objectively superhuman’ (p.2).
Second, leadership has to be embodied: ‘leadership is essentially hybrid in
nature – it comprises humans, clothes, adornments, technologies, cul-
tures, rules and so on’ (p.2). This dimension of leadership is central to the
approach to leadership development that is introduced below.

Post-transformational leadership

Despite losing some of its currency in the private sector (and also being
challenged by studies in the public sector, see Currie et al. 2005), trans-
formational leadership continues to exercise significant influence in the
NHS (for example, Bevan 2005). Nonetheless, there are also signs of
some new trends emerging. These seem to suggest a number of direc-
tions that have not yet coalesced into a ‘school’ (which is presumably
why Storey 2004b gives them the name ‘post-transformational’). The
extent to which these will catch the imagination of politicians and
policymakers is still unclear, so I will restrict myself to two examples.
The first is servant leadership (e.g. Greenleaf 1977; Boje and Dennehey
1999). At first sight, this seems at the opposite end of the spectrum to
charismatic leadership, about as far as the pendulum could realistically
swing. Boje and Dennehey (1999) make ‘servant’ an acronym where the
 Leadership and its development in healthcare 329

letters stand for: Servant, Empowers, Recounter of stories, Visionary,

Androgynous (that is, being able to speak in the voices of both genders),
Networker and Team Builder. However, as Clegg et al. (2005) point out,
rather than representing a radical departure, this account has much in
common with its forebears. For instance, the Transformational Leader-
ship Questionnaire – another example of a feedback instrument for puta-
tive leaders which may enable them to learn from their followers – was
developed following an investigation into leadership styles across the pub-
lic and private sectors in the UK (Alimo-Metcalfe 1998). The framework
contains 3 dimensions with 14 scales and is shown in Figure 19.1. The
points of overlap with the acronym of Boje and Dennehey (1999) are
clear. However, it could be argued that this checklist starts to appear
overly aspirational, not to say fanciful, in its description of the character-
istics that we would like to see in our perfect leader (and perhaps in
ourselves). This tendency is no doubt influenced by its origins in a survey
– albeit very extensive – of employees. Perhaps we are also seeing
here the development of a ‘great woman’ theory of leadership (see
Alimo-Metcalfe and Alban Metcalfe 2003).
The second is leadership as sense-making (Fullan 2001), building on
the earlier work of writers such as Brown and Duguid (2000) on organ-
isational learning, Stacey (2000) on chaos and complexity theory and
Goleman (1996) on emotional intelligence. He identifies five independ-
ent but mutually reinforcing components of effective leadership: moral
purpose; understanding the change process; relationship building; know-
ledge creation and sharing; and coherence making (and there are obvious
links here to the seminal work of Weick 1995 on sense-making in organ-
isations; see also Peck 2005a; Pye 2005, who explores in depth the idea of
leading as sense-making).
Given all of these sources to draw upon, how have policymakers con-
ceptualised leadership? In the next section, I want to look at a few of the
leadership frameworks developed for use in UK healthcare in the early
twenty-first century.

Figure 19.1 Transformational leadership questionnaire.

Conceptual frameworks for leadership in healthcare

In the early years of the twenty-first century, there has been a flurry of
frameworks for leadership in UK healthcare (e.g. DH 2001, Scottish
330 Healthcare management

Executive 2004). For reasons of space, I want to focus here on the first: the
NHS Leadership Qualities Framework (DH 2001). This is reproduced in
Figure 19.2. Initially aimed at NHS chief executives and subsequently
adapted to cover other roles, it consisted of three dimensions and 15
scales; its influence can be clearly seen in its successors. Its own origins lay
in a comparison of existing frameworks used in the UK and US health
sectors and also from existing models in commerce and industry. It can
thus be seen as being both timeless and very much of its time.
What do I mean by this apparent paradox? The timeless aspect can be
seen in the importance given to personal qualities; arguably, this is trait
theory reinvented for the twenty-first century. A later derivative of the
framework argued: ‘the scale and complexity of the change agenda and
the level of accountability mean that NHS leaders need to draw deeply
on their personal qualities’ (Modernisation Agency 2003: 4). These per-
sonal qualities seem largely to derive from notions articulated by advo-
cates of emotional intelligence (e.g. Goleman 1998). Furthermore, the
emphasis on delivery seems to echo path–goal theory (House 1971) whilst
its aspirational language appears to draw upon ideas from transformational
leadership (e.g. Alimo-Metcalfe 1998). In many respects, therefore, this
framework – and its successors – is a bold attempt to apply 50 years of
leadership theory to the challenges of contemporary healthcare reform.
Possession of this portfolio of characteristics would undoubtedly assist
good managers to be more effective leaders.
So why, then, is it very much of its time? For me, the foreword to a
later document from the Scottish Executive (2005) captures the moment:
‘Leadership is not a peripheral issue; it is central to improving perform-
ance, redesigning services and securing better delivery’ (p.1). Investment
in leadership is thus an intervention in healthcare that will support the
reform agenda of government. In these circumstances, as I have argued at
greater length elsewhere (Peck and 6 2006), good leadership starts to look
suspiciously like smart followership. This trend is perhaps particularly
apparent in the notion of ‘earned autonomy’ (which has been extensively
critiqued, by, for example, Wall 2004). Furthermore, this emphasis on
followership seems to be manifest in the apparent aspiration of the Mod-
ernisation Agency (2005) for so-called Improvement Leaders to become
more adept at encouraging peers to adopt innovations initiated in other
organisations. Finally, Grint (2005: 31) suggests that if leadership is too

Figure 19.2 The NHS leadership qualities framework

Source: Department of Health (2001)
 Leadership and its development in healthcare 331

focused on achieving targets then ‘we should not be surprised to find

hospitals . . . manipulating their activities to generate the requisite results
even if the overall performance . . . plummets’.

A model of leadership development

I want briefly to describe the model that Deborah Davidson and I have
developed over recent years (and one programme based on this approach
is described in Davidson et al. 2002). The ‘repertoire’ model is based on
the idea that the key characteristic of good leaders is their ability to adjust
their behaviours to the context in which they are operating in order to
deliver an effective outcome (see also Davidson and Peck 2005).
At first sight, this notion of ‘repertoire’ might seem like little more than
a resurrection of situational leadership (Bass 1960), suggesting that
divergent situations demand different styles of leadership. This should not
be a surprise; any leadership development programme ought to have its
roots firmly planted in established theory. At the same time, this concept
of ‘repertoire’ leadership has a more extensive range of ‘dimensions’.
These can be summarised under three headings:
• Intellectual – the range of theories and concepts available to the leader.
• Psychological – the depth of understanding that the leader has of her or
his responses and relationships with others.
• Performative – the breadth of behaviours that the leader can call upon
to enact leadership in the system.
In addition to these three ‘dimensions’ of repertoire, there are three
related ‘mechanisms’ through which repertoire can be exercised:
• Use of multiple aspects of the self which are brought to the fore by
different demands and situations (and where the challenge of leader-
ship is to select the aspect of self that will have the most impact) in
contrast to the reliance on the so-called essential self.
• Use of emotional intelligence, of being sensitive to the needs and
responses of oneself and others as a way of linking performance to
integrity and credibility.
• Use of the physical enactment of the performance, that is, body language,
dress, speech, text, symbols, etc.
As with many other leadership programmes (see below), these dimen-
sions and mechanisms are nurtured through a combination of: seminars
and directed reading around theories and frameworks or organisational
development (see Chapter 20); action learning, coaching and mentoring
(see Chapter 21); work-based projects; and explorations of personal and
presentational styles.
To date I have focused on the prescriptive parts of the literature; that is,
the broad theories, the specific frameworks and one development pro-
gramme. These tell us what leadership in healthcare ought to be like,
332 Healthcare management

albeit that these prescriptions are not all mutually consistent. However,
they do not reveal the impact of attempts to develop leadership in UK
healthcare that follow from these prescriptions. For such insight, we have
to turn to the research evidence.

Evidence on leadership development in healthcare

A literature search looking for papers published since 1997 deploying the
words ‘leadership’, ‘healthcare’, ‘UK’ and ‘development’ produced
reports of six separate studies published in peer-review or professional
journals. The key characteristics of these leadership development pro-
grammes and the central findings arising from their evaluation are sum-
marised in Table 19.1. Broadly speaking, the nature and length of the
interventions are similar both with each other and also with the pro-
gramme described in the previous section, with two clear outliers in
approaches lasting only 3 days and 75 minutes. Further, the evaluative
approaches are generally consistent, focusing on pre- and post-
programme questionnaires from participants and their colleagues. It
would appear that a consensus has emerged, therefore, over the past dec-
ade about the most appropriate methods for developing leadership and
for assessing the impact of such development. Let us reflect for a moment
on the design and delivery issues that arise from these studies.
A number of important assumptions seem to underpin most of these
programmes. The obvious one is that leadership can be developed
through structured interventions. Indeed, a review (Williams 2004)
commissioned by the erstwhile NHS Leadership Centre of literature
derived from a number of sectors concluded that: ‘leadership develop-
ment for professional groups can be effective in driving organisations
forward . . . [it] does however need to be the appropriate kind, to be both
work-based and programme-based, and to take into account organisa-
tional culture’ (p. 4). The second is that leadership is best seen as distrib-
uted throughout organisations. As Cooper (2003) notes: ‘the government
. . . hopes to create visionary leaders at all levels’ (p. 33) and programme
participants range from junior nurses to board members. The third is that
developing leadership is a small-group activity to be undertaken at a
distance from the system in which it will be exercised, albeit linked to
some form of work-connected project. Both of these last two assump-
tions seem to reflect the influence of Bass (1990) that was noted earlier. A
fourth is that clinicians and managers can make a significant – indeed a
transformational – difference to organisations based on the enhancement
of their individual knowledge and skills alone. As has been suggested
above, this may be an overly optimistic view and a study by Stordeur et al.
(2000) provides evidence from healthcare that ‘structure and culture are
major determinants of leadership styles’ (p. 40). Fifth – and finally – these
programmes (as well as the review by Williams) seem to assume that the
notion of leadership is unproblematic. Interestingly, this is not the view of
 Leadership and its development in healthcare 333

the more senior participants involved in the studies by Edmonstone and

Western (2002) or that emerges from the review of leadership develop-
ment in UK companies undertaken by Alimo-Metcalfe and Lawler
(2001).
There are methodological problems shared by all of these studies.
Leaving to one side concerns about programme facilitators in some cases
also being programme evaluators and the small size of many of the
samples, there are three major weaknesses: the absence of comparison
(i.e. the lack of any studies that compare programmes with contrasting
process and content leading to the suspicion that any competent inter-
vention focused on the personal development of a small group of
selected individuals would be viewed positively by participants); the typ-
ically short length of the follow-up regarding perceived individual and
organisational impact; and the routine lack of any quantitative data
derived from measures of organisational performance that supports any
claims about benefits for organisations. Morgan (2005) is the most
marked exception here in linking the programme to reduced staff
turnover amongst the target group albeit without any discussion of the
problem of attribution identified by Edmonstone and Western (2003).
Nonetheless, we do seem to be a little further on than Goodwin’s (2000)
reflection that ‘evaluations of current NHS leadership programmes are at
best, anecdotal;‘ (p. 399). best, anecdotal’ (p. 399).

Conclusion

It would seem churlish to conclude other than that the programmes

discussed in Table 19.1 supported the personal development of their
participants. Whether they contributed to the creation of a cadre of
distributed leaders who can transform the NHS through the power of
their enhanced ideas is much more debateable. In this respect, the NHS
may be consistent with the UK private sector. Alimo-Metcalfe and
Lawler (2001) conclude that ‘although leadership development may assist
individuals in their self-development, their impact on organisations is, at
best, inconclusive’ (p. 402).
Overall, then, the recent focus on leadership in healthcare may be
producing managers and clinicians who are much more adept at handling
the everyday transactions of organisational life. The positive impact of
this focus should not, therefore, be underestimated, even if it often
falls short of the transformational aspirations of many contemporary
leadership games
Table 19.1 Summary of studies of leadership development in the NHS since 1997
Programme name
(reference) Sample site of
Role of evaluator in participants and
programme Interventions Intensity/duration length of follow-up Methodology Impact

1) Leading an • Teaching sessions 3 days 15 • Pre- and post-programme • Statistically significant improvement reported by
empowered and group work leadership skills questionnaire participants in:
organisation 6 months completed by participants – articulating goals
• Interviews with and pre- and – maintaining organisational objectives
(Cooper 2003) post-programme – exhibiting trust
None questionnaires from members – getting outside support
of participants’ teams • ‘No overall improvement in team members’ ratings of
their leader’ (p.35) although improvement perceived
in:
– maintaining organisational objectives
– presenting them with challenging opportunities

2) Advanced Life • Lectures, videos 75 minutes 68 • Randomised control trial • ‘There was a generalised improvement in leadership
Support Programme and discussion • Observation of participants’ performance for both control and experimental
Leadership Module groups Immediate facilitation of group scenario groups’ (p.37). although ‘more work is required to
before and after leadership evaluate the degree to which this improvement is
(Cooper 2001) training session for transferred to practice’ (p.38).
Author was trainer experimental group • ‘In summary, 76% of leaders rated themselves as more
• Pre- and post-programme effective overall; 63% of the followers rated their
questionnaires for participants leaders as being more effective overall’ (p.36).
and staff

3) RCN Clinical • Personal 18 months 27 • Five themes emerged:

Leadership Development Plan – learning how to manage self
Development • Action Learning Immediate – building, developing and managing team
Programme • Teaching Sessions relationships
• Mentorship – patient focus
(Cunningham and • Observation of – networking
Kitson 2000a, participants’ work – political awareness
2000b) environments • ‘Results show a significant improvement in the
• Use of patient organisation of care in eight out of 24 wards as judged
Lead author was narratives by ward leaders, and ten wards as judged by ward staff’
‘expert’ facilitator (p.39).
on programme
Table 19.1 continued
Programme name Interventions Intensity/duration Sample site of Methodology Impact
(reference) participants and
Role of evaluator in length of follow-up
programme

4) Trent Leadership • Action learning 2 years Just under 200 All participants received • Seven themes emerged:
Development • Mentoring who underwent questionnaire following – need for a common vision of leadership
Programme • Learning network programme programme (but no information – design issues – making programme bespoke
on response rate) and range of – promoting leadership development (i.e. ensuring
(Edmonstone and Immediate interviews with participants and participation of all professions)
Western 2002) ‘sponsors’ (i.e. line managers)
None over three cohorts
– creating more coherence between a number of
leadership programmes
– achieving a balance between tight client
specification and provider flexibility to respond to
participants
– challenges arising from geographical dispersal of
participants
– differences in individual and organisational benefit’
(p.46).

5) Northern and • Development As above As above As above As above

Yorkshire Board- Centre
level Development • Personal
Programme Development Plan
• Teaching Sessions
(Edmonstone and • Action Learning
Western 2002)
None

6) ‘Grow its own’ • Teaching sessions One day a Unclear Unclear but based around six- • Met original objectives based around trust
future leaders • Personal month for six point pragmatic approach competency framework and:
Development Plan months Three months derived from Pawson and Tilley – increased participants’ confidence
(Morgan 2005) • Action Learning (1997) – increased professional voice
Design and Delivery – increased organisational understanding
– reduced turnover of junior sisters from 19.3% to 10%

:
336 Healthcare management

Summary box

• Theories of leadership have a long and in some respects contested history.

• Despite this history, the importance of leadership has only come to
prominence in healthcare relatively recently and has resulted in the UK in
frameworks which draw selectively on those theories.
• In common with much of the recent literature, these frameworks tend to
focus on the potential benefits of transformational leadership at the expense
of consideration of the positive impact of transactional leadership where it is
the combination of the two that may be most efficacious.
• At the same time, at least in England, effective leadership by local managers has,
for some politicians and policymakers, come to be seen as identical with smart
followership.
• Effective leadership development programmes may have to address
simultaneously the intellectual, psychological and performative aspects of
leadership.
• The evidence suggests that the programmes designed to enhance leadership
do contribute to the personal development of their participants, but it is less
certain whether they are creating a cadre of leaders who can transform the
NHS through the power of their enhanced ideas.
• Many accounts of leadership can be accused of being too Anglo-American in
their assumptions, too narrow in their focus on the influence of individuals on
change rather than considering the impact of organisational assumptions
(culture) and arrangements (structure) and too naive in their consideration of
power (especially when leadership pursues goals that for much of society may
be morally reprehensible).
• Finally, ‘it may well be that one of the secrets of leadership is not a list of innate
skills and competences, or how much charisma you have . . . but whether you
have a capacity to learn from your followers’ (Grint 2005: 105).

Self-test exercises

1 Identify three leaders who you admire, one who is a national figure
(for example, a politician or sportsperson), another who is an import-
ant figure in your profession and a third who is a manager in your
organisation. Then think about the intellectual, psychological and per-
formative characteristics that they bring to their leadership and which
prompt your admiration. How much do you already or could you in
future adapt these characteristics into your own approach to
leadership?
2 Reflect on a recent work experience where you can see that you
possessed some followers (and were thus a leader). On a scale of 1 (I did
not do this) to 10 (I could not have done more of this) analyse your
approach to leadership on this occasion against the characteristics in
Figure 19.2 (NHS Leadership Qualities Framework). For those items
 Leadership and its development in healthcare 337

where you rate yourself as 6 or below, think through what you could
have done to have rated yourself 7 or above.

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Websites and resources

Art and Science of Leadership. Offers articles and links exploring numerous
aspects of leadership: www.nwlink.com/∼donclark/leader/leader.html
Businessballs. Free management and training templates, resources and tools:
www.businessballs.com/freeonlineresources.htm
Cabinet Office Leadership Programme. CMPS courses, programmes and
tailored training provided by the Cabinet Office’s Corporate Development
Group (CDG) cover the skills and knowledge that public servants need to
meet the challenges of improving delivery in the twenty-first century:
www.cmps.gov.uk/
Center for Health Leadership and Practice (CHLP). Provides health lead-
ership development consultation and training: www.cfhl.org/
Council for Excellence in Management and Leadership. Appointed by
Secretary of State for Education and Skills and the Secretary of State for Trade
and Industry to develop a strategy to ensure that the UK has the managers
and leaders of the future to match the best in the world: http://
www.managementandleadershipcouncil.org/
Health Services Management Centre Quarterly Leadership and Man-
agement Bulletin. Latest news on issues and publications around leadership
and links to other useful sites: www.bham.ac.uk/hsmc
Leadership through effective HR management. Good people management
in the NHS is everybody’s business – chief executives, board members and
non executives, HR professionals and staff, general managers, doctors, nurses,
allied health professionals, line managers and frontline staff: www.hrmdev.com/
Leadership Trust. Established in 1975 to enhance and develop managers’ and
directors’ leadership skills: www.leadership.co.uk
Leader Values. Provides resources focused on leadership and value systems,
innovation, complexity, and organizational change: www.leader-values.com
Managing and Organizations: An Introduction to Theory and Practice
by Stewart Clegg, Martin Kornberger and Tyrone Pitsis. A portal from
where you can connect the literature on management and organizations to
Leadership and its development in healthcare 341

that of leadership. The goal is to provide readers with information, resources,

and interactive features that allow them to get what they want, just in time,
updated, wherever they are: www.ckmanagement.net
National Leadership and Innovation Agency for Healthcare in Wales.
Provides strategic support to NHS Wales in building leadership capacity and
capability to secure continuous service improvement underpinned by tech-
nology, innovation, leading-edge thinking and best practice to deliver the
service change agenda: www.nliah.wales.nhs.uk
NHS Institute for Innovation and Improvement. Focus on expertise in
service transformation, technology and product innovation, leadership devel-
opment and learning on a small number of big priorities at any one time:
www.institute.nhs.uk
NHS leadership qualities framework. The framework is evidence based
being grounded in research with 150 NHS chief executives and directors of
all disciplines. The framework sets the standard for outstanding leadership in
the NHS: www.nhsleadershipqualities.nhs.uk/
NHS Leaders. The NHS Leaders team at the NHS Institute for Innovation
and Improvement provides supported personal development for leaders in
the NHS: www.nhsleaders.nhs.uk/brochure/brochurewareRUN.asp?url=NHS%20
Leaders
Northern Ireland Office. Home page of the Department of Health and Social
Services in Northern Ireland: www.dhsspsni.gov.uk
Scottish Executive. A range of resources linked to leadership in healthcare
and public services more generally are accessible through this site:
www.scotland.gov.uk
 20 Organisational development and
organisational design
Deborah Davidson and Edward Peck

Introduction

Across the world, governments are devoting increasing amounts of time

and energy to the design and development of healthcare services – and
the organisations that deliver them – so as to meet the demand of the
public for improvements in access, choice and quality (Dixon and
Mossialoss 2002). In the UK, where healthcare systems seem to be in a
state of permanent ‘structural revolution’, New Labour’s Performance
and Innovation Unit has analysed these pressures (see Box 20.1); taken
together they represent a challenging agenda which is broadly familiar
across the developed world.

Box 20.1 Demands and new expectations on public services in the UK

• The increase in the size and complexity of service organisations.

• The demand for joined up inter-sectoral provision.
• The delivery of individualised services.
• The need to rapidly and continuously improve, innovate and learn.
• The need to be more outward looking, strategic and business focused.
Source: Adapted from performance and Innovation Unit (PIU, 2001: 3).

In the context of this heightened interest in organisational design and

development, this chapter addresses three key questions:
1 How does the dominant model of organisations influence the ways in
which they are designed and developed?
2 How can alternative understandings of organisations help to establish a
richer palette from which to draw structures and processes for change?
3 What are the approaches in the literature on organisational design and
development that might enable these understandings to be influential?
In so doing, the text summarises a number of arguments that are dealt
with in much more depth in Peck (2005a).
 Organisational development and design 343

The dominant model of organisations

From the early eighteenth century to the mid-twentieth century, most

frameworks for understanding the world of work shared an increasingly
strong belief in the power of reason, from the outset placing accounts of
organisations in the broader context of social, political and scientific
thought (in this case, broadly aligning with the so-called ‘Enlightenment’
– see Porter 2000). As Parker (2000) notes, within this school of thought
‘the world is seen as a system, one that comes increasingly under human
control as our knowledge increases . . . a rationalism that is unchallenge-
able and a faith that it is ultimately possible to communicate the results of
enquiry to other rational beings’ (p. 3). This dominant model – which
might be seen as one aspect of modernism – gave life to the notion of the
organisation as machine reflecting its origins in such social institutions as
the church and the military. Subsequently, the model was refined by the
routinisation of work following the Industrial Revolution, where it started
to attract the attention of the initial generation of commentators specific-
ally interested in organisational design. Two important points should be
noted here: first, the trend towards descriptions of organisations that rely
on metaphors derived from other areas of human intellectual endeavour
was there from the start (and we return to the importance of metaphors
below); second, to a large extent, the organisation in our mind remains
rooted in this rational model such that other perspectives are frequently
squeezed out.
The first famous contribution to the literature on organisations came
from the German sociologist Max Weber (e.g. 1947) at the turn of the
twentieth century, who developed the idea of the ‘bureaucracy’ as the
ideal type of organisation (at least, it has been argued, for that particular
time). He suggested that bureaucracies are goal-oriented organisations
designed according to rational principles in order to achieve them effi-
ciently (Coser 1977). This understanding of organisation emphasised
precision, regularity and reliability. These characteristics were to be
achieved through a specialised division of task, hierarchy of authority and
impersonally applied explicit rules that stated duties, responsibilities and
standard procedures.
Two more authors are very important to the growth of the dominant
model. Scientific management theory is associated most with an Ameri-
can engineer, Frederick Taylor (e.g. 1967/1911), who believed that
enormous gains would result from the substituting of ‘rule-of-thumb’
methods with more ‘scientific’ methods. He set about codifying the most
efficient methods of working for specific tasks: ‘the development of each
man [could deliver] . . . his state of maximum efficiency, so that he may
be able to do . . . the highest grade of work for which his natural abilities
fit him’ (1967/1911: 8). Apparently, productivity dramatically increased
using such methods and the introduction of mass production lines into
large-scale industries were significantly influenced by Taylor’s ideas.
Advocates of such techniques live on – suitably updated – in the writings
344 Healthcare management

of the gurus, for example, of business process re-engineering, where the idea
of the organisation as a machine could scarcely be more prominent (e.g.
Hammer and Champy 1995).
At about the same time, a French engineer – Henri Fayol (e.g. 1949) –
began identifying the elements that seemed to make organisations suc-
cessful. He became particularly interested in the exercise of authority and
developed his famous five functions of management: plan, organise,
command, coordinate and control (that is, inspect the output). He then
went on to develop a set of 14 principles of management – classical
management theory – that he argued were common to all effective
organisations. These included: specialisation of input; unity of command;
clear line of authority; coordination by managers. The links to Weber’s
and Taylor’s ideas of command and control through hierarchy are obvi-
ous (and the key characteristics of a machine bureaucracy are summarised
in Box 20.2). Fayol’s principles live on in the popular texts of writers like
Peter Drucker (e.g. 1954) and Charles Handy (e.g.1985).

Box 20.2 Summary characteristics of a machine bureaucracy

• Designed according to rational principles in order to attain goals efficiently.

• Emphasises precision, regularity and reliability.
• Specialised division of tasks.
• Hierarchy of authority with chain of command.
• Impersonally applied explicit rules that state duties, responsibilities and
standard procedures.

It is hardly surprising that this dominant model is readily apparent in

the design and development of healthcare (most branches of nursing,
after all, have their origins in the convent and the army). To support this
interpretation we can call on writers on the UK healthcare system in
recent years who have highlighted:
• a highly developed focus on hierarchy, structure and rules (Attwood
1994)
• a command and control approach (Green 1995)
• a centralised unitary system (Laing 1994)
• a tiered, specialised approach to management tasks (Ham 1999).
The extent to which the organisation in our minds is a machine bureau-
cracy is illustrated by the report into neonatal surgery at the Bristol
Royal Infirmary in the 1990s (Kennedy 2001). First, the features sum-
marised in Box 20.2 are vividly represented in the all too familiar depic-
tion of the management structure of the Bristol and Weston District
Health Authority reproduced in the report (see Figure 20.1). Second,
the apparent influence of the machine bureaucracy is discussed, albeit
implicitly, in the report:
The fundamental political driving forces of the 1980s and 1990s
 Organisational development and design 345

Figure 20.1 Example of NHS organisational design – management structure of the Bristol
& Weston District Health Authority, May 1985
Source: Reproduced from the Royal Bristol Infirmary Inquiry (Kennedy 2001: 63).

were the desire to transform the economy to make it more efficient

and competitive and to control (and if possible reduce) public
spending . . . The NHS, as part of the public sector, attracted atten-
tion . . . because it was part of the public sector . . . The changes
introduced, therefore, were the application to the NHS of a more
general set of ideas . . . those of commerce, of output and through-
put, of cost control and cost-efficiencies, of managerial rather than
professional direction. (Kennedy 2001: 50–51)
Other writers have looked at the influence of machine bureaucracy on
the way hospitals are managed more directly:
The ‘machine bureaucracy’ model often influences current think-
ing in hospitals. This assumes that all knowledge, responsibility,
authority, and power is [sic] vested at the top of the organisation,
from where it is delegated to lower levels. Leading therefore means
controlling all processes and decisions. (Koeck 1998: 1268)
346 Healthcare management

The argument suggests that there was a concerted attempt in the NHS in
the late twentieth century to extend the prevalent notions of hierarchical
command and control – already very familiar to nursing – to the medical
profession (that is, to make the neat contours of the organisational chart
in Figure 20.1 encompass the accountabilities of consultants). That this
trend may have been sufficiently successful to contribute in some way to
the tragic events in Bristol should give us pause for thought. It certainly
contrasts with the view in much of the academic literature that senior
doctors were largely able to resist the assertion of hierarchical control by
NHS managers earlier in this period (e.g. Harrison et al. 1992). Indeed,
there is a case for saying that, in the initial years of the twenty-first
century, the approach has changed, at least in England, from one based on
the assertion of national hierarchy – which broadly failed to bring these
senior doctors into the chain of command – to the empowerment of
local hierarchy equipped with the real or imagined incentives and threats
of market pressures which may be able to succeed in so doing (on the
basis that private hospitals have no problem in getting their doctors to
conform to organisational norms and rules).
This is not to say that the dominant model went unchallenged on its
own terms. Parallel strands of work arose which focused on cooperation
between management and workers in order to achieve improved prod-
uctivity and to provide better working conditions (Follett 1918) as well as
on the relationship of individual motivations to the formal structures of
organisations (Mayo 1922). Overall, these approaches combined the
needs and interests of individuals working in organisations with the earl-
ier concerns around productivity. Perhaps the best known example from
the period are the Hawthorne Studies. These found that informal social
relationships between workers in a group and between workers and their
bosses were key factors in productivity gains: ‘For responsibilities to be
discharged, sentiments had to be engaged; the rationality of functions
alone could not be relied on. Authority, similarly was insufficient in itself;
it had to be buttressed by moral leadership that could produce cooper-
ation and collaboration within organizations’ (Clegg et al. 2005: 33).

Moving beyond the dominant model

More profoundly, however, from the mid-twentieth century onward, the

ideas available for understanding the world of work broadened to
embrace other fields of study such as, for example, philosophy, sociology
and the so-called ‘new science’. At their core, these ideas challenged the
Enlightenment faith in the explanatory power of rationality and reason. We
shall return to the link between this ‘new science’ and theories of
organisational design and development later in this chapter.
Organisational development and design 347

Postmodernism

A slippery concept, originating in architecture and literary criticism, for

present purposes postmodernism can be defined as the death of the grand
narrative of society. For example, Lyotard (e.g. 1979) suggested that the
dominant narrative of the modern era was that of Newtonian science
which subordinated all other narratives. In contrast, postmodernism
offers the idea that there are multiple and often competing narratives and
accounts of reality. As a consequence, it rejects the search for one defini-
tive truth which is central to modernism. Postmodernism also asserts that
the world is both more complex and less controllable than modernism
would have us believe. In the world of healthcare, the promotion of the
importance of the voice of patients – through schemes in England such
as the expert patient programme and patient choice – can be interpreted
as a manifestation of postmodernism in action as the previously prevailing
narrative of the medical profession is increasingly brought into question.

Social constructionism

This asserts that the world is constantly formed and reformed by our
interactions with it. Given the wide variety of our emotions, experience
and expertise, the world within which each of us lives is therefore unique.
Thus, social constructionism argues (e.g. Berger and Luckman 1967) that
all of our social institutions – including our organisations – are phenom-
ena that come about as a consequence of the local conversations (in talk
or in text) that take place between participants in these institutions. The
meanings that we attribute to organisations are thus multiple (because
each of us has our own), negotiated (because we seek to find common
ground with others), contested (because finding such common ground
can be difficult) and transient (because we are frequently discovering new
meanings in these conversations and discarding old ones). Social con-
structionism holds that such conversations have the power to shape the
culture of the organisation and thus the attitudes of its members to
change.

Applying postmodernism and social constructionism

Clearly, these two ideas are mutually reinforcing, but how do they relate
to understanding the design and development of organisations? Box 20.3
sets out the implications for ways in which management practice would
change as a result of a rigorous application of such thinking. Two central
tenets of current organisational theory – the acknowledgement of mul-
tiple accounts of reality and the recognition of the power of organisa-
tional narratives – derived from these two schools of thought feature
strongly in the remainder of this chapter. They are each represented by a
major contribution to the literature: the first by Gareth Morgan’s Images
348 Healthcare management

Box 20.3 Implications of postmodern and social constructionist

thinking for management practice

Postmodern and social Implications

constructionist principles
Multiple and often competing Recognise the legitimacy and influence
narratives and accounts of reality of a number of disparate voices
Paradox and ambiguity are core Respect the divergent interests and
elements of organisational culture perspectives represented in
organisations as valid
World is both more complex and less Acknowledge the uncertainty and
controllable unpredictability of the environment
within which multiple perspectives
interact
Narratives that emerge are The problem of understanding
constructed as a collective regulated organisations could be formulated as
system of statements. These that of understanding which narratives
statements are iterations of ideas, constitute and come to constitute
formed and reformed, as new organisations, what effects they have,
conversations influence new ideas and for what reasons and what resistances
produce new social practices. They they incur.
both inform and are informed by the
institutions within which they take
place.

of Organisations (1997), which looks at the metaphorical analysis of organ-

isations, and the second by Karl Weick’s Sensemaking in Organizations
(1995), which explores the ways in which organisational members
construct their understanding of the organisations in which they work.
In the following two sections, we examine these two different – albeit
interconnected – approaches to understanding organisational design
and development.

Understanding organisational design and development through metaphors

In his seminal text, Morgan suggests that there is a danger in focusing on a

certain way of thinking about organisations – for example, the ‘machine
bureaucracy’ – as ‘it tends to force others into the background’ (1997: 4).
He asserts that we need to read situations ‘with various scenarios in mind’
(1997: 3) until a more comprehensive view is formed. Morgan advocates
we develop this more rounded understanding of organisations through
using different metaphorical lenses. Morgan argues that all theories of
organisation are based on implicit images or metaphors that lead us to see
and understand organisations in distinctive yet partial ways. By using
Organisational development and design 349

different metaphors to understand the complex and paradoxical character

of organisational life, he suggests that we will be able to understand
organisations in new ways. The importance of this argument is the insight
that drawing on new or unfamiliar ways of understanding organisations
can help us design and develop them differently from the ways that they
have been designed and developed previously; that is, the use of meta-
phors can guide action and not just analysis.
In addition to understanding organisations as machines, Morgan offers
readers seven other ‘images’ by which to understand organisations (and in
so doing largely summarises the twentieth-century canon on the subject):
• as organisms living in ecosystems – focuses our attention on the interface
between the human and technological aspects of the organisation, the
importance of the environment and subsystems, adapting to the
environment, different ‘species’ of organisation and their ability to
‘evolve’ and survive (Burns and Stalker 1961; Lawrence and Lorsch
1967).
• as brains engaging in learning and self-organisation – focuses our attention
on the importance of information processing, cybernetics and learning
to learn, learning organisations, holographic design and self-managed
teams (e.g. Simon 1947).
• as cultures creating social realities – focuses our attention on culture and
organisation, corporate and subcultures, creating shared organisational
reality (see below).
• as political systems reflecting interests, conflicts and power – focuses our atten-
tion on systems of government, modes of political rule, systems of
political activity, power and control (decision making, knowledge,
information and technology, boundaries, coping with uncertainty,
interpersonal alliances, gender relations), symbolism and the manage-
ment of meaning (e.g. Pfeffer 1981).
• as psychic prisons containing constraints of our own creation – focuses our
attention on the trap of favoured ways of thinking, the unconscious,
repression, anxiety, transitional objects, shadows and archetypes (e.g.
Obholzer and Roberts 1994)
• as flux and transformation dealing with the unfolding logics of change –
focuses our attention on the nature of the relationship between organ-
isations and their environments, chaos and complexity, mutual
causality, dialectical change (how opposing forces can drive change;
see below).
• as instruments of domination possessing negative aspects – focuses our atten-
tion on charismatic, traditional and rational-legal domination, the use
and exploitation of employees, work hazards, occupational disease and
industrial accidents, social and psychological stress, politics and the
radicalised organisation (Weber 1978).
In essence, Morgan is providing an alternative method of approaching
the tradition of organisational theory, presenting the key ideas as a series
of lenses through which to consider the design and development of
organisations. However, for Morgan there is no one grand narrative
350 Healthcare management

which contains the ‘truth’; to a certain extent, therefore, he is an arche-

typal postmodernist author (Box 20.4). Morgan has his critics (see Peck
2005b, for instance), but he has made the theories he considers accessible
as well as practical.

Box 20.4 Summary of metaphorical analysis

• All theories of organisation are based on implicit images or metaphors that

lead us to see and understand organisations in distinctive yet partial ways.
• Because metaphors can create powerful insights that can also become
distortions, we can appreciate no single metaphor will ever give us a perfect
all-purpose viewpoint.
• We need to read situations with various scenarios in mind until a more
comprehensive view of the situation emerges.
• By using different metaphors to understand the complex and paradoxical
character of organisational life, we are able to understand organisations in
ways that we may not have thought possible before.
• Drawing on new or unfamiliar ways of understanding organisations can help us
design organisations differently from the ways that they have been designed
before.

Indeed, Elkind (1998) applied two of Morgan’s metaphors and two of

her own devising to the National Health Service and concluded that
each illustrates different characteristics of the enterprise:
• ‘the machine metaphor allows us to understand . . . the “single right
answer” view of problem solving, which in turn underpins the
structural approach repeatedly taken to organisational change’
(p. 1723)
• ‘the value of the idea of the NHS as an organism is its emphasis
on need for the organisation to be responsive and adaptive to its
environment’ (p. 1724)
• ‘the value of the image of religion is that it identifies the high aspir-
ations, ideals and mission of the NHS and its positive role contributing to
social cohesion’ (p. 1723)
• ‘the value of the metaphor of the market is that it emphasises the
efficient use of NHS resources and acknowledges the role of incentives
in developing innovative and quality services . . . it gives prominence
to the role and needs of the consumer’ (p. 1724).
Elkind agrees that every one of these metaphors inevitably has its limita-
tions, but argues that by deploying them ‘we have arrived at a reading that
. . . captures the complex uniqueness of the NHS’ (p. 1725). Almost
ten years on, a reform agenda that still seeks to achieve a satisfactory
compromise between centrally imposed structures, market mechanisms
and professional commitments seems to demonstrate the longevity of
these insights.
 Organisational development and design 351

Understanding organisational design and development through sensemaking

If Morgan is our representative of postmodernism, Weick is our standard

bearer for social constructionism. He provides an accessible introduction
to the notion of sensemaking: ‘Active agents construct sensible, sensable
. . . events. They “structure the unknown” . . . How they construct what
they construct, why, and with what effects are the central questions for
people interested in sensemaking’ (1995: 4). For Weick, ‘sensemaking is
about authoring as well as reading’ (p.7); for him, it involves creation as
much as discovery. Unlike Morgan’s and his metaphors, however, Weick
means us to accept sensemaking non-figuratively: ‘sensemaking . . . may
have an informal poetic flavor, that should not disguise the fact that
is literally just what it says it is’ (p.8). Box 20.5 summarises the seven
distinguishing features of sensemaking discussed by Weick (1995). He
describes the expression ‘how can I know what I think until I see what I

Box 20.5 Weick’s seven properties of sensemaking

1 It is grounded in the importance of sensemaking in the construction of the

identity of the self (and of the organisation): ‘Who I am as indicated by
discovery of how and what I think.’
2 It is retrospective in its focus on sensemaking as rendering meaningful lived
experience: ‘To learn what I think, I look back over what I said earlier.’
3 It recognises that people produce at least part of the environment (e.g. the
constraints and opportunities) within which they are sensemaking: ‘I create
the object to be seen and inspected when I say or do something.’
4 It stresses that sensemaking is a social process undertaken with others: ‘What
I say and single out and conclude are determined by who socialised me and
how I was socialised, as well as by the audience I anticipate will audit the
conclusions I reach.’
5 It argues that sensemaking is always ongoing in that it never starts and it never
stops (even though events may be chopped out of this flow in order to be
presented to others): ‘My talking is spread across time, competes for attention
with other ongoing projects, and is reflected on after it is finished, which
means my interests may already have changed.’
6 It acknowledges that sensemaking is typically based on cues, where one simple
and familiar item can initiate a process that encompasses a much broader
range of meanings and implications: ‘The “what” that I single out and embellish
as the content of the thought is only a small proportion of the utterance that
becomes salient because of context and personal dispositions.’
7 It is driven by plausibility rather than accuracy: ‘I need to know enough about
what I think to get on with my projects but no more, which means that
sufficiency and plausibility take precedence over accuracy.’
Source: Derived from Weick (1995: 61–2), from Peck, E. (ed.), Organisational Development in
Healthcare: Approaches, Innovations, Achievements. Oxford: Radcliffe Publishing, 2005.
Reproduced with kind permission of the copyright holder.
352 Healthcare management

say’ as a ‘recipe’ through which each of these seven properties can be

parsed (and the seven statements that result are in the quotation marks in
the box). The importance of Weick’s work to organisational design and
development is that it emphasises the potential for changing the way in
which organisational pasts, presents and futures are constructed by organ-
isational members. In particular, he argues that ‘occasions for sensemak-
ing are themselves constructed’ (p. 85) and may be particularly common
where people reach a threshold of dissatisfaction that previous patterns of
sensemaking are unable to reduce.
In the following two sections, we look in a little more details at two
metaphors – lenses as we term them – through which sensemaking in
and about organisations may be filtered. The first sees organisations as
complex adaptive systems, often also informed by ideas from chaos
theory. The second sees them as cultures. We are focusing on these two
approaches both because they are becoming increasingly commonplace
in the literature on management and the language of managers in health-
care (e.g. Plsek and Wilson 2001 on complexity; Peck et al. 2001 on
culture) and also as they are typically presented as being in stark contrast
to ideas based in the notion of the machine bureaucracy (see Sweeney
2005 for an example of this approach).

Understanding the design and development of organisations through the lens

of complex adaptive systems and chaos theory

Included in Morgan’s metaphor of flux and transformation – arguably

rather unhelpfully – are ideas derived from scientific notions of complex
adaptive systems and chaos theory. In most accounts (e.g. Sweeney 2005,
on which this section draws), there are a number of important concepts
adapted from these ideas that are then applied to organisations. Non-
linearity is central and related to the key processes of sensitivity to initial
conditions (often called receptive contexts) and self-organisation.
Unpacking the title of this section, this framework suggests: a system – that
is, the coming together of parts and their interaction – which is complex –
that is, functions with a large number of elements interacting richly – and
which can adapt – that is, the elements can co-evolve as a result of their
interaction.
A non-linear effect occurs when the output is disproportionate to the
input. Put another way, in a linear world a direct relationship between
cause and effect is accepted and therefore a given action is assumed to
have only one outcome. However, in non-linear relationships, it is
assumed that any action can have many different outcomes and that more
than one outcome is possible. Perhaps the most frequently referred to
example is the butterfly effect where ‘a butterfly flapping its wings over
the Amazon leads to a hurricane on the other side of the world’. A
receptive context is a prerequisite for organisations as complex adaptive
systems if they are to self-organise. It assumes the ability of the agents in
 Organisational development and design 353

the system to interact through a set of shared values in order to sustain

coherent behaviour. Self-organising behaviour refers to the tendency
within complex systems for patterns of coherent behaviour to emerge
from what initially appear to be random interactions.
In human systems, interactions predominantly occur through the con-
versations which the participants conduct with each other. Stacey (2001)
has described the nature and importance of these interactions in human
complex systems. In organisational terms, he argues, the ways in which
participants in a system communicate, interact and co-evolve is crucial to
the development of the system. One of the tasks of managers, therefore, is
to create opportunities for organisational members to interact in novel
and creative ways. In so doing, they will ‘craft’ strategy (and the links to
Weick and his arguments around sensemaking are clear). This approach
contrasts with the rational approach to strategy dominant in the machine
paradigm. It has been characterised as distinction between the ‘deliberate’
approach to strategy and the ‘emergent’ approach (Mintzberg and van
der Heyden 1999). Mintzberg, in common with many other commenta-
tors, has come to the view that the key skill of strategists is pattern
recognition, their most important attributes are intuition and their most
important contribution is the ability to recognise and respond to
unexpected changes as they occur. On this account, managers cannot
command and control and to think they ever could – as the machine
bureaucracy suggests – is unrealistic.
Plsek (2000) has incorporated the principles of complex adaptive sys-
tems into what he calls a set of simple rules for healthcare systems. Plsek’s
rules are summarised in Box 20.6 and contrasted with the approaches
that would be favoured by more linear, machine-orientated theorists.
These rules make the connections between ideas derived from complex
adaptive systems and the priorities of healthcare management very tan-
gible indeed (they do so in a manner perhaps which could itself be
criticised for being overly linear).

Understanding organisational design and development through the lens

of culture

Culture constantly recurs in both theoretical and managerial discussions

of organisational design and development. It is one of Morgan’s meta-
phors and regularly appears in counterpoint to the structural focus of the
‘machine bureaucracy’. Nonetheless, there is a distinct lack of consensus
regarding the term ‘culture’ in the field of organisational studies. As
Scott et al. (2003) point out, several scholars have contributed to the
literature on organisational culture that has appeared since the late 1970s
and many have introduced new frameworks. As they go on to comment:
‘there has been little agreement between scholars over the years as to
what the terms “organisation” and “culture” mean, how each can be
observed and measured or in particular how different methodologies can
354 Healthcare management

Box 20.6 Plsek’s simple rules for the twenty-first century US

healthcare system

Former linear approach New complexity approach

• Healthcare based on episodic office • Care based on continuous healing
visits relationships
• Variability driven by professional • Care customised according to patient
autonomy needs and values
• Professional-centred care • Patient-centred care
• Information located in medical • Knowledge is freely available and
record shared
• Decision making based • Evidence-based decision making
predominantly on experience
• Do no harm seen as individual’s • Safety an inherent feature of the
responsibility system
• Secrecy is necessary • Transparency is necessary
• System reacts to needs • System anticipates needs
• Cost reduction is sought • Waste is continuously diminished
• Preference given to professionals’ • Co-operation and collaboration
roles over the system among professionals a priority for
the system
Source: Adapted from Plsek (2000) by Sweeney (2005), by Peck, E. (ed.), Organisational
Development in Healthcare: Approaches, Innovations, Achievements. Oxford: Radcliffe Publishing,
2005. Reproduced with kind permission of the copyright holder.

be used to inform both practical administration and organisational

change’ (p. 1).
Whilst a wide variety of conceptions of culture exist, Smircich (1983)
suggests that two main perspectives have emerged. The first treats culture
as a critical variable of organisation, in short a component part of a
tangible entity. The second treats culture as a ‘root’ metaphor for organis-
ing, a lens through which to view organisational life (this is the Morgan
approach). It is to a consideration of these two conceptions that we turn
next.
The critical variable approach proposes a direct correlation between
organisational culture and organisational performance. It suggested that
by analysing and actively manipulating this critical variable improve-
ments in quality and competitiveness can be achieved (Wilkins and
Ouchi 1983). However, from their exhaustive study of the literature in
healthcare, Scott et al. (2003) conclude that ‘empirical studies . . . do not
provide clear answers’ (p.129) as to whether there is a link between
organisational culture and organisational performance, whilst noting that
the available research is small in quantity, mixed in quality and variable in
methodology (thus making comparisons between studies difficult).
The most commonly cited writer in this tradition is, however, Schein
(for example, 1985). Schein’s theory specifies three layers: cultural artefacts;
Organisational development and design 355

espoused values; basic assumptions. Artefacts are the outermost layer and the
most visible manifestations of culture, such as its rituals and rewards. The
second layer, espoused values, refers to those values used to justify
behaviour and constitute the grounds on which alternative courses of
action are justified. At the core lie assumptions, that is, the unspoken and
often unconscious beliefs and expectations shared by individuals.
Can we see these three layers within healthcare settings? A recent
briefing from the Department of Health’s Integrated Care Network
(Peck and Crawford 2004: 5) suggests:
The fundamental cultural divide between health and social care is
frequently claimed to be exemplified in the contrast between the
‘medical model’ and the ‘social model’ . . . One cultural artefact of
the ‘medical model’ is its emphasis on the rituals of diagnosis of the
specific part of the individual patient that is perceived to be mal-
functioning. This is underpinned by the espoused value of the pre-
dominance of the clinician’s opinion over that of patient. The
underlying assumption is of the dependent nature of the patient in
relation to the clinician. . . . This is often contrasted with the ‘social
model’ prevalent in social care where one cultural artefact is an
emphasis on an assessment of the individual client within their
wider social environment. This is underpinned by the espoused
value of the importance of a dialogue between practitioner and
client. The underlying assumption is of the independent nature of
the client in active negotiation with the practitioner.
This may appear to be something of a parody, but its importance lies in it
being a recognisable parody. The popularity of Schein’s framework may
lie in its ability to represent aspects of organisational experience that
managers and clinicians recognise.
Meyerson and Martin (1987) argue that Schein’s account represents
the ‘integration’ view of culture, where it is an influence which promotes
cohesion within organisations. Cultural artefacts, including management
styles, are seen as powerful symbolic means of communication which can
be used to ‘build organisational commitment, convey a philosophy of
management, rationalize and legitimate activity, motivate personnel and
facilitate socialisation’ (Smircich 1983: 345).
Meyerson and Martin (1987; see also Peck et al. 2001; Peck and
Crawford 2004) suggest two other views of culture – culture as differ-
ence and culture as ambiguity – which to some extent undermine this
integrative account. Parker (2000) reflects these contrasting dimensions
in his two conclusions about the potential for managers to ‘shape’ cul-
ture. The first is that ‘cultural management in the sense of creating an
enduring set of shared beliefs is impossible’ (p. 228). On the other hand,
he suggests that ‘it seems perverse to argue that the “climate”, “atmos-
phere”, “personality”, or culture of an organisation cannot be con-
sciously altered’ (p. 229). So, a considered position might be that some
manipulation of culture is possible, but the impact may be limited and/
or unpredictable.
356 Healthcare management

Intervening in organisational design and development: the role of

organisational development

So, finally, we arrive at organisational development (OD) as a structured

intervention in the design and development or organisations. There are
numerous lengthy texts on this subject (see Peck 2005a for an account of
the history of OD). Unsurprisingly, definitions of OD vary from the very
rational-scientific:
‘A system-wide application of behavioural science knowledge to
the planned development and reinforcement of organisational strat-
egies, structures and processes for improving an organisation’s
effectiveness’ (Cummings and Worley 2001: 1)
to those more sympathetic to ideas of culture and complexity:
The overall goal of organisation development is not just enhanced
organisational effectiveness and organisational health but, in add-
ition, it aims for an organisation’s culture and processes to change in
order that it is continually reflexive and self-examining. (French et
al. 2000)
Whichever definition is preferred, either the ‘scientific knowledge’ or
the models for reflection, will be derived from the theories – or meta-
phors – that the organisation (or more likely its leaders) favour. At pres-
ent, much OD is based around the three metaphors explored above,
although others are also common (in particular, organisation as psychic
prison). Perhaps, unsurprisingly, healthcare systems frequently utilise lin-
ear techniques to oversee the delivery of projects, especially where they
are required to deliver against very tight deadlines. While Iles and Suther-
land (2001) point out that traditional project management is useful in
‘situations in which there is a defined beginning and end, and in which a
discrete and identifiable set of sub-tasks must be completed’ (p. 70), we
can see from the section above on complexity that such linear processes
may not be the most effective way in which to intervene in complex
organisations. Instead, we need to look to a more iterative and sophisti-
cated approach to plan development and change, all the time knowing
that we cannot predict how it will turn out.
The ‘OD cycle’ is just such an iterative tool and acts as a ‘map’ to guide
participants through a process of change whilst neither specifying the
exact theories or interventions that should be used nor suggesting that
the process will unfold in exactly the way that it is envisaged at the
beginning. Underlying this tool is a belief in the fundamental importance
of engaging organisational stakeholders’ active participation so as to build
ownership of and support for the innovations in practice that emerge.
This cycle is summarised in Figure 20.2 which shows there are six phases
to the OD cycle. While these phases are depicted as discrete stages, and
the cycle as a whole process appears linear, experience of using it with
complex and emergent processes of change prove that it is as applicable in
 Organisational development and design 357

Figure 20.2 The OD cycle

Source: Adapted from Kolb and Frohmann (1970)

those situations as it is with more simple and predictable processes of

change. They are described in more detail in Davidson and Peck (2005).

Conclusion

In tying the ideas of this chapter together, one device is to link the
temporal component of this cycle to the notions of planned and emer-
gent change. The cycle implies three stages of a strategic process: pro-
spective (looking forward); real time; and reflection (looking back). Iles
(2004) has conceptualised the contribution of emergence to organisa-
tional strategy in these three stages. As Sweeney (2005: 160) summarises
her argument:
Running a large organisation obliges managers to have a plan, that
is, to identify a set of critical issues the organisation must address and
to implement a programme to address those issues. There simply
must be a prospective element to strategy and this is where a classic
rational approach is best suited. But in real time, those managers
need to be able to expect the unexpected, to adapt and evolve with
circumstances as they emerge in sometimes unforeseen ways and to
be sufficiently agile to respond to changes in circumstances.
In other words, one message from this chapter is: ‘talk rationally about the
future, think emergently about the present!’ Looking back, of course,
the only way to make sense of what happened in the process of the design
and development of a change programme may be to compare the initial
ambitions with the unpredicted (and perhaps unpredictable) elements
and events that ultimately influenced the outcome.
358 Healthcare management

Summary box

• The dominant model in the design and development of organisations – the

organisation in our minds – is based on scientific rationalism and the metaphor
of the machine.
• However, ideas derived from postmodernism and social constructionism are
creating an environment where the dominance of any one model is
unsustainable.
• As a consequence, there are number of other ways of looking at organisations
which are increasingly seen as metaphors which illuminate distinct aspects of
organisations.
• These metaphors can help the process of sensemaking through which
organisational members both understand and shape their organisations.
• There are two other frameworks – organisations as complex adaptive systems
and organisations as cultures – that are becoming common in discussions of
organisational design and development.
• It is these ideas that inform – either overtly or covertly – the organisational
development cycle which informs structured interventions in design and
development.

Self-test exercises

1 Understanding the organisation using metaphorical lenses. Ask members of

your team to pair up with another person and read one of the follow-
ing chapters from Gareth Morgan’s book Images of Organizations
(1997):
• Organisations as Machines
• Organisations as Organisms
• Organisations as Brains
• Organisations as Cultures
• Organisations as Psychic Prisons
• Organisations as Political Systems.
Each pair will need to read and understand the chapter. At a team
meeting ask the pairs to provide:
• an overview explanation of three of the core concepts that is
provided by that image/metaphor (10 minutes)
• an example of the way in which they have seen this image exempli-
fied in their service or organisation (5 minutes)
• the leadership style best suited to leading an organisation/service
viewed in this way.
After each pair has presented their understanding, provide some time
for the team to ask questions and discuss this understanding further. At
Organisational development and design 359

the end of the explanations, get the team as a whole to discuss the
strengths and limitations of the metaphors used in making sense of
your service or organisation.

2 Multiple accounts of reality. Using a recent organisational event that

involved staff, service delivery issue that involved staff and patients, or
process of change that was announced, each person to write down (on
their own):
• their account of that event – what happened – or of how they see
the change needing to take place
• how they made sense of other people’s behaviours and intents or of
other people’s responses to the announced change
• how they thought and felt about what happened
• the way in which this influences their approach to a similar situation.
Place three chairs in the middle of the room and the remaining chairs
in the room in a circle around the three in the middle (goldfish bowl).
Invite three team members to sit on the three chairs and have a dia-
logue about their different accounts of what happened. Ask the
remaining team members (sitting on the outside to remain quiet but
actively listen).
Taking opportunities to pause the conversation from time to time,
ask the three members to remain quiet, and draw out the observations
and thoughts of the other members of staff. Allow them to contribute
without direction. You can run this exercise for as long as seems useful.
It might be useful at the end to bring the whole team together to
observe:
• the different ways in which people made sense of the same situation
(without attributing a right or a wrong way)
• the rationale behind the sensemaking of each individual
• whether once the different accounts were contributed, a more
integrated account emerged.
3 Defining your context. With other members of your team or service, take
30 minutes to explore the wider context within which your services
are situated. Discuss whether any of the following factors affect your
organisation now or will they in the future:
• active ‘choice’ of different clinical services by patients
• hospital or community services competing to attract patients to use
their services
• use of the web to advertise and market services to patients, e.g. in
relation to clinical outcomes
• focus on services where costs enable you to generate a surplus
• new public service business models, for example, hospitals taking
over neighbouring providers (public or private), reducing hospital-
based care and moving services into the community, shopfront
networks developing in local retail sites
360 Healthcare management

• other changes in response to political, social, economic or techno-

logical influences.
4 Predicting the future. How certain are you about what exists and what is
to come in two years, five years or 10 years:
• Can you predict how your organisation/you will change and adapt
in relation to these future challenges?
• What methods and processes are/will be used to respond to change?

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Davidson, D. and Peck, E. (2005) The organisational cycle: Putting the
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Healthcare: Approaches, innovations, achievements. Oxford, Radcliffe.
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Handy, C. (1985) Understanding Organizations, 3rd edn. Harmondsworth: Penguin.
Hardacre, J. and Peck, E. (2005) What is organisational development? In E. Peck
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Harrison, S., Hunter, D., Marnoch, G. and Pollitt, C. (1992) Just Managing: Power
and culture in the National Health Service. London: Macmillan.
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Iles, V. (2004) Developing Strategy in Complex Organisations. London: NHS

Confederation.
Iles, V. and Sutherland, K. (2001) Organisational Change: A Review for Health Care
Managers, Professionals and Researchers. London: National Co-ordinating Centre
for NHS Service Delivery and Organisation R&D.
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Mintzberg, H. and van der Heyden, L. (1999) Drawing how companies really
work. Harvard Business Review, September–October.
Morgan, G. (1997) Images of Organizations. London: Sage.
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Parker, M. (1992) Post-modern organizations or post-modern organization
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Parker, M. (2000) Organisational Culture and Identity. London: Sage.
Peck, (ed.) (2005a) Organisational Development in Healthcare: Approaches,
Innovations, Achievements. Oxford: Radcliffe.
Peck (2005b) Conclusion. In E. Peck (ed.) Organisational Development in
Healthcare: Approaches, Innovations, Achievements. Oxford: Radcliffe.
Peck, E. and Crawford, A. (2004) Culture in Partnerships: What Do We Mean By It
and What Can We Do About It? London: Integrated Care Network.
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Simon, H. (1947) Administrative Behaviour. New York: Macmillan.

Smircich, L. (1983) Concepts of culture and organizational analysis. Administrative
Science Quarterly, 28: 339–58.
Stacey, R. (2001) Complex Responsive Processes in Organisations. London:
Routledge.
Sweeney, K. (2005) Emergence, complexity and organisation development. In E.
Peck (ed.) Organisational Development in Healthcare: Approaches, Innovations,
Achievements. Oxford: Radcliffe.
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University Press.
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Berkeley: University of California Press.
Weick, K.E. (1995) Sensemaking in Organizations. London: Sage.
Weick, K.E. (2001) Making Sense of the Organization. Oxford: Blackwell
Weick, K.E. and Sutcliffe, K.M. (2001) Managing the Unexpected: Assuring High
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Quarterly, 28: 468–81.

Websites and resources

Bureaucracy. Paul du Gay, Professor of Sociology and Organization Studies

and Co-Director of the Centre for Citizenship, Identities and Governance
and the Open University is one of the few academics that continues to
support the notion of bureaucracy: (http://www.open.ac.uk/socialsciences/staff/
pdugay/info.html)
Change and Innovation. Helps staff in Scotland develop new solutions by
providing information about best practice in healthcare and encouraging
innovative, flexible working to improve patient care: http://www.cci.
scot.nhs.uk/
Complexity and Management Centre. Set up to create links between aca-
demic work and organisational practice using a complexity perspective, in
which the inevitable paradoxes and ambiguities of organisational life are not
finally resolved but held in creative tension. This perspective draws on insights
into evolutionary theory emerging in the natural sciences, strands of social
constructionist thought in the social sciences and various psychological
understandings of the dynamics at work in networks of human relationship.
The Complexity and Management Centre seeks new ways of working with
these ideas, emphasising the self-organising potential of ordinary conversation
in which people reflect together on their personal experiences. There are a
number of useful working papers available on request from: http://
www.herts.ac.uk/business/centres/cmc/
Directed Creativity Involves using specific techniques to perceive things
freshly, break free of the current patterns stored in memory, make novel
associations among concepts stored in memory, and use judgement to
develop rather than reject new ideas: http://www.directedcreativity.com/pages/
CycleFrameset.html
Organisational development and design 363

Improvement Leaders Guides. These improvement guides provide a sum-

mary of current thinking and practical advice and tips for improving patient
care and experience: http://www.institute.nhs.uk/improvementguides/default.htm
Institute for Healthcare Improvement (IHI). US not-for-profit organisa-
tion, driving the improvement of health by advancing the quality and value of
healthcare: http://www.ihi.org/ihi
Karl Weick and sense making. See Michigan Ross School of Business.
There are series of papers on leadership and change, including one Karl
Weick called ‘Leadership When Events Don’t Play by the Rules’: http://
www.bus.umich.edu/FacultyResearch/Research/TryingTimes/Rules.htm
NHS Institute for Innovation and Improvement. Focuses expertise in ser-
vice transformation, technology and product innovation, leadership develop-
ment and learning: www.institute.nhs.uk. One of its key publications is 10 High
Impact Changes for Service Improvement and Delivery, accessible at: http://www.
wise.nhs.uk/NR/rdonlyres/6E0D282A-4896-46DF-B8C7-068AA5EA1121/
654/HIC_for_web.pdf
NHS Service Delivery and Organisation R&D Programme. Produces and
promotes the use of research evidence about how the organisation and deliv-
ery of services can be improved to increase the quality of patient care, ensure
better strategic outcomes and contribute to improved public health: http://
www.sdo.lshtm.ac.uk/
Social constructionism. For further information go to: http://en.wikipedia.
org/wiki/Social_constructionism
 21 Personal effectiveness
Kim Jelphs

Introduction

Mastery and an appreciation of the importance of personal effectiveness

are both fundamental to being a successful manager and leader working
in and across complex ever-changing environments, where situations are
often far from clear and there is no right answer to the problems and
dilemmas that are posed. Leaders and managers do not work in isolation,
and how you behave and react in given situations can be essential to the
outcome and to the relationships with others at all levels of and across
organisations. Equally important is the sense of personal well-being when
individuals are working effectively and both they and others recognise
and value their unique skills.
This chapter aims to give an overview of personal effectiveness and has
chosen to focus upon self-awareness, self-management, working success-
fully with others and becoming a reflective practitioner as comple-
mentary themes in this essential development arena. In recognition that
leaders need to develop real skills, together with an appreciation of why
they need that skill base, this chapter aims to draw upon literature that is
academic and evidence based, together with hints and tips for practical
application in the real world.
Some of the areas covered in this chapter may perhaps be perceived as
‘soft skills’ but that belies their importance, and such an attitude is perhaps
rooted in somewhat dated thinking about learning that tends to appreci-
ate and reward more traditional and didactic methods of teaching over
experiential techniques, where people discover for themselves – a theme
to which this chapter will return.
Learning about ourselves is not always comfortable, for in fact the most
powerful learning experiences are often very uncomfortable because
they challenge individuals to think and sometimes act outside their com-
fort zones. Looking at oneself encourages an individual to be honest,
sometimes about areas they do not like and may find hard to acknow-
ledge and face up to. Fundamental to being honest with ourselves is the
need to develop an enhanced understanding and appreciation of who we
 Personal effectiveness 365

are, how we work and why we do the things we do (or do not do), and a
key component of this is to develop self-awareness.

Self-awareness

Knowing oneself and having an appreciation of the perceptions of how

others see us is key to being an effective leader. But how often do we take
the time to try and see ourselves and reflect upon our behaviour and
personality as others see it? The Johari window (Figure 21.1) was
developed by two researchers at the University of California in the 1950s
(Rogers 2004), and the model provides a framework for identifying what
you and others see (or not) by looking at yourself as if through a window
which has four distinct panes:
1 Open free area – known by individual and also known by others.
2 Blind area – unknown by individual but known to others.
3 Hidden area – known by individual and not known by others.
4 Unknown area – unknown to individual and unknown to others.

360-degree review

Another valuable tool is the 360-degree process where people who work
with you are invited to provide feedback and comment upon your per-
formance as a leader. A variety of people (chosen by the leader under-
going the review, typically including peers, managers, service users, carers
and people who report directly) are invited to comment upon a range
of attributes and skills and the effect they perceive these characteristics
to have upon the organisation and individual relationships. The real value
is in receiving the comments and perceptions of a number of people
across a whole range of relationships and associations (Rogers 2004),

Figure 21.1 Johari window

Source: Adapted from Chapman (1995, 2005, www.businessballs.com)
Origin: Luft (1970)
366 Healthcare management

recognising that perception can vary amongst peers, supervisors and sub-
ordinates (Latham et al. 2005). There are many different 360-degree
review systems available but it is essential to consider the following:
1 Confidentiality of the process. How is the information to be used and by
whom?
2 Feedback mechanisms. Who is going to feed back to you and how?
3 Anonymity of the contributors. This is important for their honesty.
4 Cost and funding of the exercise. This is time consuming and most
processes will have a cost.
5 Coordination and planning. How will the process work?
6 Evaluation. How will the value of the exercise and subsequent actions
be determined? (Adapted from Modernisation Agency 2005.)
We all see the world in different ways but the insights of others can be
invaluable to developing as a leader because those insights often challenge
presumptions and importantly are not always negative insights but an
appreciation of positive traits that are valued and respected by others. The
real challenge lies in using learning and insights in a positive way to
develop further.

Learning and learning styles

Many of us recognise that we enjoy learning in certain ways or situations,

but do we consciously know how we learn best and how to make the
most of learning opportunities? Often we will have been in learning
situations as part of a group of people and yet the reactions to the experi-
ence will be fundamentally different, with some people being really
positive about the experience and others being totally bemused by this
reaction because for them the experience was not helpful or enjoyable
(See Self-test Exercise 1.)
Conscious learning is an essential skill that can improve performance
(Honey and Mumford 1992) and is especially valuable when sharing
learning with others. It is not only important to understand how we learn
as individuals, but to consider the learning needs and styles of individuals,
teams and groups if we are to maximise understanding, sharing and learn-
ing together (Honey and Mumford 1992); for example, when learning
about an incident that has taken place in one part of an organisation that
impacts across the whole.
Cameron and Green (2004: 11) argue that ‘learning is not just an
acquisition of knowledge, but the application of it through doing some-
thing different’. David Kolb (1984) developed a model of learning which
demonstrates that people go through a cycle of both doing and thinking
in order to learn (Cameron and Green 2004). This work has been further
enhanced by Honey and Mumford (1992) who have developed a tool
(Honey and Mumford 2000) that helps individuals assess and understand
their preference for one of the four distinct stages on this learning cycle.
Rogers (2001: 23) describes the stages:
Personal effectiveness 367

• Activity – doing something or undergoing an experience.

• Reflection – thinking about the experience.
• Theory – seeing where it fits in with theoretical ideas.
• Pragmatism – applying the learning to real situations.
To be effective, adult learning has to have some special characteristics that:
recognise and value experiential learning; are challenging, learner centred
and interactive; are relevant (directly related to daily work); and provide
feedback (adapted from Jones 1992). Additionally, it can be helpful to
think about how you learn to make associations and links (Buzan 2003)
and to learn to respect intuition (Figure 21.2). Claxton (2001: 37) argues
that ‘when people are learning to manage a complex environment, their
intuitive grasp, their “know-how”, develops much faster than their ability
to describe what they are doing’. Expertise precedes explanation, meaning
that often people underestimate their performance if they are unable to
articulate what they are doing and why. They need to learn to trust their
intuition which will be rooted in prior learning and experiences. Self-
discovery and reflection are critical to this process and perhaps enhanced
by the use of psychometric tests.

The role of psychometrics

The English dictionary suggests that psychometrics deals with measuring

mental traits, capacities and processes. There is a plethora of tools in use
and there are strict guidelines that inform the use of these tools and

Figure 21.2 Adult learning

Source: Rowe et al. (1997: 10)
© Copyright Liverpool John Moores University/Premier Health NHS Trust
368 Healthcare management

which practitioners administering them must adhere to in order to

preserve confidentiality and maintain the integrity and quality of the
experience. Psychometric tools are all different, but fall mostly into two
categories of either measuring traits (illustrating how much of something
you have, often against a range or scale of ‘normative values’) or measur-
ing preference.
The Myers Briggs Type Indicator is one of the most commonly
applied, respected and valuable tools which is used specifically to develop
personal and interpersonal awareness. The tool is employed worldwide
and culturally sensitive versions are available. The tool identifies personal-
ity type and was developed by a mother and daughter team who based it
on the work of Carl Jung, a Swiss psychologist (Myers 2000). The tool
focuses on preference across eight dimensions:
1 Where you prefer to get your energy from. Extraverts have a preference for
drawing energy from the world around them through people and
doing. Introverts are energised from their internal world through reflec-
tion, time alone and thinking.
2 What type of information you pay attention to and how you like to take it in.
People with a preference for sensing prefer specific facts and like to
focus on what is actually happening. Those with a preference for intu-
ition are interested in connections, the big picture and the art of the
possible.
3 How you make decisions. Thinking is about taking decisions in a logical,
objective way, removed from the situation. Feeling is concerned with
making decisions in a value-driven way that seeks to understand and
empathise from the perspective of a situation.
4 How you prefer to live your life. Judging is a preference for living in a
structured, organised, planned way. Perceiving is a preference for living
in a more flexible way that keeps options open until the last minute.
(Adapted from Cameron and Green 2004: 44.)
The tool is not about strengths, knowledge, skills or abilities and as such
there are no right or wrong preferences. Using the tool should give
individuals an insight and understanding into their own preferences and
the behaviour of others. Each preference is valid, but it is the understand-
ing and valuing of difference that is crucial for effective relationships.
Another tool to consider is Fundamental Interpersonal Relations
Orientation-Behaviour (Firo B). This measures how you usually behave
towards other people and how you expect them to behave towards you in
return (Waterman and Rogers 2000). The tool helps heighten awareness
in order to further understand what we want, what we need and import-
antly how we communicate this (or perhaps not).

Emotional intelligence

Perhaps the whole self-awareness arena is best characterised by the work

on emotional intelligence by Daniel Goleman (1998a), who explored
 Personal effectiveness 369

the ability to understand and manage how you impact upon others
emotionally. Goleman’s work looked at 181 different management com-
petence models that originated from 121 organisations across the world.
The research illustrated that 67% of the abilities perceived as essential
management competence were emotional competencies (Cameron and
Green 2004). Goleman’s (1998b) research challenged traditional thinking
and views about effective leadership by arguing that although technical
skills and intelligence are important, they are not wholly sufficient to
develop truly effective leaders, who are characterised by a high level
of emotional intelligence, including self-awareness, self-regulation,
motivation, empathy and social skill.

Self-management

The previous section focused on the importance of self-awareness for

effective leadership, but awareness is not enough, as the work of Goleman
(1998a) highlights. You need to be able to commit to develop and learn
to manage yourself if you are to be truly effective. For example, if you
know you react badly to undue pressure caused by tight deadlines, then
plan to manage not just the deadline (Goleman 1998a) but yourself, your
attitude and behaviour. If you get anxious about certain issues, then
understand what makes you anxious and commit to try and reduce your
anxiety, because anxiety is destructive and saps energy and confidence. If
you get nervous about presenting, then undertake to develop your pre-
sentation skills, which will not just be about the content of the session but
about how to develop your image and stance to improve both confidence
and performance.
Developing confidence and reducing anxiety are key skills for effective
management of self. The confidence to say no is crucial, as is the con-
fidence to be clear about your limitations. Having the confidence and
knowledge as to when to ask for help is a hallmark of self-awareness
(Goleman 1998b), and not the sign of weakness that some people still
persist in believing. Not everyone can be good at everything and the key
to managing self is an understanding of your strengths and weaknesses
and taking the time to plan and consider what you need to do in given
situations.

Time management

Managing time effectively is perhaps one of the biggest challenges for

health service managers and an area that many people struggle with. It is
important to remember that you can do almost anything, but there will
never be enough time to do everything. The real skill is knowing how to
use time optimally. It is an important career and life skill and an essential
attribute of really successful people.
370 Healthcare management

‘The bad thing is that time flies – the good thing is you are the pilot’
(Michael Altshuler 2005). This comment illustrates that time, as in most
areas of life, is an area over which you can take control if you have the
commitment and the will. It is important to recognise the impact and
cost of poor time management upon managers, their teams and organisa-
tions. But the answer is not to work ever-increasing hours, for there are
clear associations between a long hours culture and lower productivity,
poor performance, health problems and low motivation (Kodz et al.
2003). Different countries adopt different cultural approaches to working
hours, with a long hours culture being more common in the UK than in
many other European Union countries, but quite similar to working
patterns in the USA, Australia and Japan (Kodz et al. 2003).
Covey (1999) identifies that there have been different approaches or
‘waves’ over the years in respect of time management, these having built
upon previous approaches and become increasingly sophisticated and
different in their focus. These waves have developed from systems that
identified demands upon time to a recognition that people need to man-
age themselves and not time. The time management matrix (Figure 21.3)
is a useful tool for considering how time is spent and encourages indi-
viduals to think about what is important as opposed to urgent or per-
ceived to be urgent. We all have some crisis moments (Quadrant I), but
really effective people try to minimise time spent in dealing with the
issues raised by Quadrants III and IV and focus more on Quadrant II,

Figure 21.3 The time management matrix

Source: adapted from Covey (1999: 151)
 Personal effectiveness 371

which in turn becomes a way of reducing elements associated with

Quadrant I as attention has been paid to issues that are important (Covey
1999: 151).
The word ‘urgent’ will have different meanings to people dependent
upon their on background and profession. This is worth understanding
as a healthcare manager for it can be a cause of real discontent in the
clinician–manager relationship. The word is often misused and perhaps
demands over-response because of a lack of understanding of what
urgent really means in given situations. Thus it can be a real barrier to
managing time effectively. However, the healthcare workforce is not
just charged with being reactive – increasingly the whole workforce is
being encouraged to be ever more creative and innovative in the
approaches it adopts to service delivery. Claxton (2001) cautions that a
climate where decisions are often made as fast as possible will mitigate
against quality of thinking which is sometimes compromised by
decisions being made under pressure. In an increasingly pressurised
environment, understanding real priorities is fundamental to being
effective. In reality, however, many things get in the way of good inten-
tions and individuals are easily distracted, preferring to focus on familiar
tasks. It is important to reflect upon what happens when we are
deemed to be working really effectively, perhaps before going on holi-
day, and deciphering what happens in that situation. We are not always
aware of how we really spend our time and the reality is often very
different to perception. It is worth investing in taking the time to
develop a time log, to demonstrate the reality of our use of time (See
Self-test Exercise 2.).
Another important aspect of time management is to consider the
boundaries of roles and responsibilities. It is pertinent at this point to refer
to earlier chapters in this book which affirm that leadership and man-
agement styles are changing worldwide. Leading with and through others
is the current zeitgeist and it is worth considering what this really means
for leaders. In many situations, this will mean not doing, and instead
letting go and delegating – a considerable change in role and practice to
which many people find it difficult to adjust. Often this adjustment is not
made and leaders and mangers end up carrying out roles and tasks
that others really should be doing, which compounds the demands on
their time. Effective leadership is often about negotiation and self-
management is essential if you are to be confident about your own role
and abilities and thus able to work successfully with others.

Working successfully with others

Really effective managers are able to work at all levels of organisations

and be comfortable when working across boundaries – the key is con-
necting with people. Healthcare is no longer delivered in isolation from
other organisations, agencies and services. There is a new and very real
372 Healthcare management

interdependence and networks are a way of establishing and developing

connections that will enhance service development and delivery (the
issue of working in partnership with other agencies is explored in more
depth in Chapter 17). Building and reviewing networks is essential to
understanding links and connections, although networking has become a
bit of a ‘buzz word’ and is in danger of losing its credibility without
consideration being given to what it means.

Networking

Colleen Wedderburn Tate (1999: 80) argues: ‘leaders understand the

power of networks, and use them appropriately. Networking is a key
element in the process of continuous learning. They understand the value
of knowing who is doing what, where, when, and with what result.’
Goodwin (2005) argues that the real key to effective networking is the
development of interpersonal relationships which need time and energy
to develop. Therefore to be an effective leader it is worth taking time to
consider your present networks and consider whether you need to fur-
ther enhance them. A useful exercise can be the development of a net-
work map, whereby you identify and write down your networks and
connections and review them regularly to see how they are changing and
growing. (See Self-test Exercise 3.)

Communication

When discussing networks, Goodwin (2005) identifies the importance of

interpersonal skills, with communication being perhaps the most essen-
tial of those skills. There are many influences upon communication,
including: socialisation associated with families, organisations and their
systems; culture and individual teams; personal preferences; gender;
power. Effective managers need to be able to communicate with a diverse
range of people within and across organisations, people who will all see
the world differently and who will perhaps associate different language
and meaning with issues, thus creating immense potential for mis-
interpretation. It is pertinent to recognise that the worldwide growth in
international recruitment is compounding this issue, making it even
more essential that individuals consider the messages they are sending and
how they are sending them.
Communication is at the heart of many of the issues that have risen to
prominence in relation to poor practice in health and social care, which
have often had terrible consequences for patients: ‘I cannot account for
the way other people interpreted what I said. It was not the way I would
have liked it to have been interpreted’ (Laming 2003: 9). This is a quote
from an inquiry following the death of a child, but illustrates perfectly the
issues associated with sending and receiving messages. It is perhaps worth
remembering that when communicating the verbal word accounts for
 Personal effectiveness 373

7% of the message, whilst 38% of the message is in the way that it is said
and non-verbal (body language) communication accounts for 55% of the
message (Mehrabian 1972).
In England, the third most common cause of NHS patient complaints is
about both written and oral communication, with attitudes of staff being
the second highest cause of complaint (Health and Social Care Informa-
tion Centre 2005). Arguably, these two issues are different sides of the
same coin in that they are about the way messages are delivered and
received. Technology is playing an increasing role in communication
with, for example, the growth of emails and text messaging, but there is
perhaps an over-reliance on these systems of communication. Effective
managers really do need to take the time to reflect upon communication
styles, systems and processes, and to consider how they can be improved.
Individuals will always differ in their preferences for communication
styles and systems, and this in turn will influence responses. Recognising
and tuning in to individual preferences is a key element of personal
effectiveness and considered a vital political skill.

Political skill

Mintzberg (1979) was one of the first people to use the phrase ‘political
skill’ and many people believe that organisations can be viewed as polit-
ical arenas (Perrewé and Nelson 2004). It therefore follows that leaders
need the skills to operate effectively in those political arenas. Perrewé
and Nelson (2004) argue that in political environments the reality of
competing interest groups and scarce resources demands that indi-
viduals develop their influencing skills and tactics in order to succeed
and thrive. These authors assert (p. 239) that political skill ‘is characterised
by social perceptiveness and the ability to adjust one’s behaviour to
different and changing situational needs to influence others’. Key to
influencing others is an understanding of your own style and how it
impacts upon those you are working with and a useful self-assessment
tool can be found in the leadership toolkit developed by Hardacre (2003).
Fundamental to developing influencing skills is a careful reflection upon
your own actions, a subject upon which the next section of this chapter
will focus.

Reflective practitioner

Whilst there are many uncertainties in healthcare today, what is certain is

that the pace of change is and will remain unrelenting. It takes consider-
able time and investment to develop academic courses and competency
frameworks and therefore traditional methods of learning and acquiring
knowledge are not able to keep up with the pace of change. We need to
value and embed other ways of learning, especially as there may not be
374 Healthcare management

answers to given situations and problems. Reflective practice is key to

this.
Historically, reflective practice has not been valued in the same way as
traditional training methods. Schon (1987) argues that technical and
academic training is too limiting for professionals, who in reality face
complex problems and dilemmas in their everyday lives. Redmond (2004)
agrees and posits that a focus on academic rigour and role-related
competencies has meant that, although learners are technically and theor-
etically skilled, they do not always have the skills critically to review and
reflect upon their own practice, which often demands a change in per-
spective and thinking. Johns (2004: 3) clarifies that what is needed is not
an ‘either/or’ situation, but a need to integrate the more traditional ways
of learning with reflective practice, resulting in holistic practice that:
• focuses on the whole experience and then seeks to understand its
significance within the whole
• is grounded in the meaning the individual practitioner gives to the
particular experience and seeks to facilitate such understanding
• acknowledges that the practitioner is ultimately self-determining and
responsible for his or her own destiny and seeks to facilitate such
growth.
Redmond (2004) argues that the work of Argyris and Schön (1974)
identifies that the concept of reflective practice has encouraged profes-
sionals to adopt a ‘less expert stance’ with clients. This concept is surely
transferable to healthcare managers for whom patients’ and service users’
views are fundamental to healthcare in the twenty-first century.

Action learning

One way of practising a reflective approach to one’s management activity

is through the discipline of action learning. Increasingly, action learning
is being used by organisations and individuals across the world to facili-
tate the resolution of complex problems and to support the development
of teams, individuals and organisations (Waddill and Marquardt 2003).
Action learning was developed by Revans in the middle of the twentieth
century and many different approaches now exist. Core to all action
learning approaches, however, is the importance of people taking time to
work and reflect upon problems in small groups of supportive but chal-
lenging colleagues and to learn whilst doing so (Waddill and Marquardt
2003). For Revans, learning required action, and this action had to be
informed by reflection. Thus he developed the learning equation L = P +
Q in which L is Learning, P is Programmed Knowledge and Q is Ques-
tioning to facilitate insight. (Revans 1998: 4). Weinstein concurs: ‘One of
the beliefs of action learning is that we learn best when we are committed
to undertaking some action; another is that without action, there is no
real evidence of learning. Thus the emphasis in action learning is as much
on actions, as on gaining learning’ (1998: 159). It is the taking action that
Personal effectiveness 375

distinguishes this approach from other learning approaches. Additional

core elements of action learning are:
• the small group or set of people who work together – ideally six to
eight
• the task, problem or project that each of the members brings to the set
to work upon
• the processes the team adopts to work together – for example, each
person has air time to present their issue and to be open to questioning
and feedback
• a facilitator/advisor who helps the set to work together (adapted from
Weinstein 1999; Waddill and Marquardt 2003).
Action learning is about groups of people working together in a recipro-
cal way, a feature that differs from another reflective approach – coaching
– which is about one-to-one relationships.

Coaching

There is increasing and international interest in coaching and the profes-

sion of coaching is gaining ever greater legitimacy as evidence grows that
investment in coaching can make a difference to the individual and to the
organisation through improved performance (Latham et al. 2005). The
origins of coaching can be found in different aspects of psychology
(Wright 2005). It is not a form of therapy, although at times the boun-
daries between therapy and coaching can appear blurred. Coaches work
with individuals to help them to grow, develop, see the world differently
and realise more than they believed to be the limits of their potential
(Goldsmith et al. 2000). The relationship between a coach and the person
being coached is one of reciprocity and demands commitment from both
partners. Goldsmith et al. (2000) argue that coaching is the leadership
approach of the twenty-first century as today’s leaders need to learn how
to work with and through people in order to succeed.
The differences between coaching and mentoring are arguable and the
focus of much debate in the literature (see D’Abate et al. 2003). A mentor
is often perceived as an expert who can guide, signpost alternatives, advise
and perhaps teach. A coach fundamentally differs in that he or she does
not give answers, is interested in what the individual thinks and why, and
often disappoints by not taking responsibility for providing answers and
solutions (Goldsmith et al. 2000). A coach’s prime motivation is to work
with individuals on negotiated areas that the individual will take forward.
To do this, coaches need to be able to question, give and receive feedback,
motivate, empathise, listen, tolerate silence and structure conversations
through informed dialogue (Lyons 2000).
Whichever developmental system individuals choose to or are able to
access to support them in their management roles, it is essential that they
recognise the importance of taking control over their own development
and learning. Personal development plans are key to this, whereby
376 Healthcare management

individuals identify their learning needs and the associated skills and
knowledge to gain both confidence and competence to support their
ever-changing roles. It is a hallmark of an effective, reflective, practitioner
to have a tangible and realistic personal development plan.

Conclusion

Traditional training and teaching methods will not give managers every-
thing they need to function as optimally as possible in complex and
changing healthcare environments. Training courses will help with the
acquisition of skills, knowledge and competence, but leaders and man-
agers really need to develop self-awareness and confidence, and to be able
to value learning from a range of experiences. Understanding self, learn-
ing to develop and accept skills and perhaps unlearn others is essential if
you are to develop as an effective healthcare leader and manager, and the
responsibility for making this happen lies with each individual.
Personal effectiveness demands personal investment and perhaps a
change of mindset. You need to commit to developing yourself and be
kind to yourself in order to develop. This means recognising that you and
your development needs are important and that time taken for such
activities is a legitimate use of time even in very pressurised environ-
ments. If you can distance yourself from day-to-day pressures and take
time to learn and to think, then evidence suggests that your performance
will be enhanced (West 2000). If you value personal development and
model it, then others are more likely to feel comfortable and empowered
to follow you, and hence an even greater organisational change may take
place.

Summary box

• Learning more about yourself and associated attitudes and behaviours is key
to understanding yourself, and thus undertaking changes to act and behave
differently.
• Learning about self is not always comfortable, but it is valuable learning
nevertheless.
• Being clear about your strengths and limitations and learning to say no are
crucial management skills.
• Taking control of learning by having clear personal development plans is vital
to a process of ongoing development.
• Acting as a role model will enhance best practice in others and facilitate
greater organisational performance.
• Using the support of others is crucial, for it is not a sign of weakness to ask for
help – the best leaders always do!
• Valuing and respecting experience and intuition is vital to effective heathcare
management.
 Personal effectiveness 377

Self-test exercises

1 Learning experience. Take time to think about your most memorable

learning experience. Reflect upon and try and identify what made it
such a memorable powerful experience for you and consider:
• What did you enjoy or dislike about the experience and why?
• Who else was involved and what role did they play?
• How has it influenced how you react or respond in certain
situations?
2 Time management exercise. We all think we know how we spend our time
at work, but the rhetoric and reality are often different. Undertake to
keep a diary/log at work for at least a whole day. Record all activities,
interruptions, meetings, calls and planned work, and then find time to
truly reflect upon what you have written and consider changes that
you need to make.

3 Networks exercise. Building and reviewing networks and connections is

essential to developing effectively as a leader. This exercise is about
identifying your networks and connections and reviewing them regu-
larly to see how they are changing and growing. Draw three circles and
write in the three circles the people and organisations that make up
your network:
• Inner circle: people you see or have contact with daily
• Middle circle: people you see or have contact with weekly
• Outer circle: people you see or have contact with one–three monthly.

Source: Wedderburn Tate (1999: 84). Copyright: Elsevier Ltd (1999).

378 Healthcare management

When completing the circles think about:

• personal
• professional
• organisational
• strategic
• international.

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380 Healthcare management

Websites and resources

Action Learning, Action Research and Process Management Associ-

ation (ALARPM). A network of people who use action learning and action
research and participatory process facilitation to generate collaborative learn-
ing: www.alarpm.org.au
Businessballs. Free website which has a wealth of material, tools and articles to
support both personal and organisational development: www.businessballs.co.uk
Chartered Institute of Personnel and Development (CIPD). The UK’s
leading professional body for those involved in the management and devel-
opment of people. Many selected resources, papers and tools are free:
www.cipd.co.uk
Coaching network. Coaching and mentoring information. It is primarily
aimed at coaches and people looking for coaches, but has a good resource
centre which is freely available containing full text articles, case studies and
up-to-date news: www.coachingnetwork.org.uk
EffectiveMeetings. Practical advice, support and resources for improving meet-
ings, including presentation skills: www.effectivemeetings.com
Emotional Intelligence Consortium. Facilitates the advancement of research
and practice relevant to emotional intelligence in organisations. The website
contains full text articles, research papers, reports and guidelines:
www.eiconsortium.org
International Coach Federation (ICF). Non-profit professional organisation
that represents personal and business coaches: www.coachfederation.org.uk
Knowledge Exchange. Web-based community where health and social
care managers connect to share information and exchange ideas:
www.theknowledgeexchange.co.uk
Meeting Wizard. Wide range of ideas and techniques to enhance meetings:
www.meetingwizard.org
Mind Tools. Contains a broad range of life, career training and management
training skills, many freely available and supported by articles and exercises:
www.mindtools.com
NHS Leadership Centre (NHSLC). This website contains the 360-degree
assessment tool which has been designed to enable individuals to: manage the
set-up and completion of 360-degree assessment entirely online: complete
questionnaires as a participant in colleagues’ 360-degree review:
www.lqf360.modern.nhs.uk
NHS Networks. Aims to connect leaders in the NHS across geography,
sectors, professions and government, to share new thinking and practice:
www.nhsnetworks.nhs.uk
UK Positive Psychology Network. Promotes research, training, education
and the dissemination and application of positive psychology and gives
access to articles, questionnaires and personal development resources:
www.positivepsychology.org
 22 Appreciating the challenge
of change
Ann Shacklady-Smith
A hospital replaced a notice to outpatients that simply said: ‘Wait
here’, with a notice that said: ‘We promise to see you as soon as we
can. Please take a seat here until a doctor is free.’ The print bill
might have risen fractionally, but patient morale soared. (Elliot
1999)

Introduction

This chapter is written for healthcare managers, who want to learn more
about managing change in the workplace. Rather than a prescription or
description of change, Collins (1998) encourages a ‘thinking practitioner’
approach to the subject. His advice is taken and the chapter is written
with the aim of helping managers to find their own perspective and
approach to the change process. The chapter aims to give managers an
appreciation of the context driving change, change-theory frameworks
and methods, models of change and managers’ roles in change.
As the illusion that there can be a ‘stable’ environment fades and as
organisations are embracing the challenge of thriving in a world of con-
stant change, the impact on organisational change theory and practice has
been profound (Watkins and Mohr 2001: xxxi). Charles Handy (1989)
speaks of entering an age of ‘unreason’ where the future is there to be
shaped by us and for us, where the only prediction that will hold true
is that no predictions will hold true, ‘Change is not what it used to
be.’ The time for new approaches to thinking about and approaching
organisational change has clearly arrived.
In the following discussion the established typologies of ‘planned’ and
‘emergent’ change are explained and Ackerman’s (1997) model is used to
show the lack of a clear boundary between them. Transformational
change is discussed in reference to the ‘emerging paradigm’ literature
referring to the influence of new science (quantum physics, neuro-
sciences, chaos and complexity theory) in shaping organisational change
theory and methods and the challenge it poses to classical scientific
versions of change (Watkins and Mohr 2001; Table 22.1).
Three change examples are discussed to illustrate the main themes of
382 Healthcare management

Table 22.1 Current and emerging paradigms

Current scientific paradigm Emerging paradigm

Newtonian mechanics; reductionist and Quantum physics and new sciences:

dichotomous thinking self-organising systems; chaos theory: complexity
theory
We search for a model or method of objectively We accept the complexity and subjectivity of the
perceiving the world. world.
We engage in complex planning for a world we Planning is understood to be a process of constant
expect to be predictable. re-evaluation.
We understand language as the descriptor of We understand language as the creator of reality:
reality: I’ll believe it when I see it. I’ll see it when I believe it.
We see information as power. We see information as a primal creative force.
We believe in reductionism, i.e. things can be best We seek to understand wholeness and the
understood when they are broken into parts. interconnectedness of all things.
We engage in dichotomous thinking. We search for harmony and the common threads
of our dialogue.
We believe that there is only one truth for which We understand truth to be dependent on the
we must search. context and the current reality.
We believe that influence occurs as a direct result We understand that influence occurs as a natural
of force exerted from one person to another, part of human interaction.
i.e. cause and effect.
We live in a linear and hierarchical world. We live in a circular world of relationships and
cooperation.

Source: Watkins and Mohr (2001).

the chapter: the introduction of service-level financial management;

enhancing the patient experience by reducing waiting time for medical
appointments; generating ‘an exceptional’ twenty-first century global
organisation. Reflective questions follow the case examples and a
summary of the key points raised in the chapter is given at the end.

Context driving change

Much has been said in Chapter 1 of this book concerning the wide-
ranging structural changes that are occurring throughout the health sec-
tor in many countries. These changes represent a shift in vision from one
premised on provision of person-centred care to one located in improv-
ing the system and context of care (Peck: 2005).
Recognising that change is an ever-present and routine aspect of
organisational life (Tichy 1983), there is little that is new about the fact
of organisational change. What is new perhaps is the pace and complexity
of change initiatives that are being introduced throughout the public
Appreciating the challenge of change 383

sector, and the requirement for all affected by the change to have some
part in its implementation.
Public sector transformation is also geared toward achieving broad
socio-economic outcomes such as: reducing health inequalities; improv-
ing a sense of well-being; improving employment prospects; creating
sustainable communities. This also presents some unique challenges to
change agents, not least in finding multi-agency change solutions. Taking
health as an example, there are many determinants involved in producing
‘health and well-being’ as Wanless’s model attempts to show (see Figure
22.1). It follows therefore that the solutions do not reside within any
single organisation. Change efforts will require the active collaboration of
all agencies and organisations who have a role to play in influencing
outcomes.
Transformational change involves altering the overall orientation of
the organisation (Tichy 1983: 17). It is based on new paradigm thinking
and the values that underpin it and represents the most important type of
change facing the ‘new public sector’ (Lovell 1994: 4). The changes
proposed are aimed at transforming the core aspects of an organisation’s
purpose, structures, image and work activity; or, as described (Beckhard
and Pritchard 1992), as shifting the very ‘essence’ of the organisation,
embracing its:
• purpose
• identity or image

Figure 22.1 The determinants of health

Source: Adapted from Wanless (2004: 25)
384 Healthcare management

• type of work
• roles, skills and employment paradigms
• relationship to stakeholders
• ways of working
• culture and values
• organisational processes.
The changes being managed within the health sector are extensive in
their reach and impact. They involve a quantum shift in thinking as well
as in practice and call for approaches to change management that are
capable of handling the multiple dimensions of change involved.

Change theory

It is important to introduce some theoretical consideration of change,

not least because implicit or explicit theories of change often lie behind
the policies and strategies that managers are attempting to implement
(Bolman and Deal 1991: 9). As they observed: ‘Behind every effort to
improve organizations lies a set of assumptions, or theories, about how
organizations work and what might make them work better.’ However,
to point the reader to a body of literature on organisational change is not
an easy task. The subject matter crosses many theoretical, philosophical
and applied scholarly disciplines within the social and natural sciences
(Burnes 1996).
Although it is outside the scope of this chapter to review the many
theories and models of change available, the references that follow, whilst
not exhaustive, will serve to guide the reader to further discussion. To
gain a sense of the history relating to the various intellectual antecedents
in the developing field of organisational change, see for instance: Pugh
(1971); Silverman (1970) Pfeffer (1982); Tichy (1983); Reed (1992);
Reed and Hughes (1992); Burnes (1996); Collins (1998) for analytical
and critical accounts.
Readers are advised to be mindful also of the historical context in
which particular theories were developed. The social, economic and pol-
itical conditions involved in creating the markets in which organisations
must operate are important factors in understanding the task of and
literature concerning change management (Alvesson and Wilmott 1996).
Change is a complex business and its study is best guided by seeking to
understand the unfolding complexities involved and the research that
sheds light on this (Collins 1998; Iles and Sutherland 2001). There is no
one right theory or approach to change management, rather there are
multiple perspectives and lenses through which to view organisations and
from which to develop ideas, actions and technologies for approaching
change (see, for instance, Pettigrew et al. (1992); Collins 1998; Iles and
Sutherland (2001); Peck 2005.
Change management has been popularised somewhat in recent years
 Appreciating the challenge of change 385

by what are known as the ‘how to’ or ‘guru’ texts, which despite their
appeal are not necessarily based on ideas that demonstrate a sound meth-
odological or empirical base (Huczynski 1993). Whilst offering practical
advice to managers who are attempting to introduce ‘new visions, para-
digms, and empowerment strategies’, the anecdotal solutions offered are
criticised by some for using ‘the language of liberation and innovation,
yet being more firmly wedded to refurbishing the status quo’ (Alvesson
and Wilmott 1996).
Collins (1998) similarly found amongst the ‘practitioner genre’ a ten-
dency to offer a simplistic and prescriptive ‘n-step’ approach to change
and an over-reliance on practical advice. Meanwhile Dawson (1994)
identifies an over-emphasis of a planned model of change at the neglect
of a ‘processual approach’. According to Collins, authors neglect to relate
their advice to the theory or research from which it is derived, and
competing theories and explanations of change were not (if at all) fully
evaluated or explored.
With this in mind, it is helpful to draw upon theoretical and diagnostic
models (Iles and Sutherland 2001) which have been developed to reveal
the motivational elements involved in formulating strategy, and in driv-
ing and managing change. For example, Porter’s (1980) model of com-
petitive analysis is used to help determine the forces that influence market
position and strategy. Tichy (1983) makes the case for integrating tech-
nical, political, social and cultural dimensions of organisational reality
when managing strategic change. Checkland and Scholes’s (1999) soft
systems methodology helps to identify the complex social processes
involved in change.
Studies of change implementation (Pettigrew 1987; Buchanan and
Boddy 1992; Pettigrew et al. 1992; Peppard and Preece 1995) have
investigated the factors that contribute to providing ‘receptive contexts
for change’. Guidance on the crafting of strategy for change can be found
in the analysis of ten approaches offered by Mintzberg et al. (1998). They
provide a helpful critique of the different ‘schools of thought’ and the
limitations and contributions that each intellectual tradition brings to a
consideration of strategic change.

Typologies of change

Attempts to characterise the change process have tended to polarise

change either as a mechanistic and planned event (Lewin 1958) or as an
emergent process (Burnes 1996). Change is also commonly presented as a
stable and linear process consisting of a one-off event or a series of single
episodes, while emerging paradigms promise an approach that is
grounded in the moment with stakeholders guiding its direction. A
summary of each follows.
386 Healthcare management

Planned change

Models of planned change rest on the assumption that change is a rational

process. The presenting ‘problem’ can be observed or revealed through
organisational data. Solutions arise from the diagnosis and change out-
comes can be specified in advance. The language of change also tends
towards a reification of the goals and objects of change, as something that
lies outside the experience of people who make up the organisation.
Various models are proposed to characterise a planned change process.
Many have drawn inspiration from Lewin’s three-phase characterisation
of planned change. This involves: unfreezing the organisation from a pre-
sumed steady and stable state, moving towards new goals and view of the
future and refreezing or stabilising the norms, values, behaviours and cul-
ture representing a desired end state. Lewin also found in his fieldwork
that strategies for reducing resistance, rather than exaggerating forces for
change, were more effective for garnering support for change.
There are many criticisms of the planned approach, not least that it is
assumed ‘that we can differentiate between states of change and stability’
(Tichy 1983: 17). The organisation is also assumed to represent a har-
monious system made up of functional elements that cohere around
common goals and shared interests (Alvesson and Willmott 1996). In
practice, the tensions provoked by change inevitably impact on the
experience of the women and men who are intended to embody them
and becomes a significant part of what needs to be managed within
change programmes.

Emergent change

It is widely accepted that change involves both ‘planned for’ and ‘emer-
gent from the situation’ elements and that change outcomes cannot
always be predetermined. Studies have shown that effective communica-
tion with and involvement of those most affected by change can help to
reduce emotional tensions and fear of change, and prevent unnecessary
conflict and resistance to change (Burnes 1996: 187–95).
Ackerman’s three perspectives on change, although illustrating an
essentially linear paradigm (Figure 22.2), does avoid the planned/emer-
gent change duality that is evident in many typologies. Instead, our atten-
tion is drawn to the extent to which change outcomes can be known in
advance of the change. This includes: developmental change, character-
ised by continuously improving on an existing situation; and transitional
change where the organisation is transiting from a known old to known
new state.
The third perspective offered by Ackerman (1997) refers to transform-
ational change. In this case, the emergence of a new state is unknown
until its shape emerges from the old. The change examples discussed later
in the chapter also illustrate how different perspectives on change
influence method choice and can limit the aims and outcomes of change.
Appreciating the challenge of change 387

Figure 22.2 Ackerman’s three perspectives on change

Source: Adapted from Ackerman (1997) in Iles and Sutherland (2001).

Emerging paradigms of change

Within the ‘emerging paradigm’ literature, a linear approach to change is

abandoned in favour of a more relational interpretation. Emphasis is
placed on the complex dynamics of the components of an intercon-
nected social system and the chaotic nature of change (Bartram 2001;
Wheatley 2001; Sweeney 2005) Knowledge about how and what to
change is generated in the moment of change through social interaction
with others. Organisations are therefore urged to become instruments for
continuous learning. This involves embedding processes within the
organisation for ‘learning how to learn’ (Argyris and Schon 1978, 1996)
and for generating from the learning visions, mindsets and strategies for
becoming the change they seek.
Models that attempt to show a generative and non-linear version of
the change process tend to be cyclical in character and promote learning
as the key to change. There are various influential contributions to this
approach to change and notable amongst them are: the learning cycle
(Kolb 1984); action research (ironically,1 Lewin 1946); action learning
(Revans 1980); appreciative inquiry (Cooperrider and Srivastva 1987);
and the learning organisation (Pedler et al. 1989; Senge 1990; Argyris and
Schon 1978, 1996). Fundamentally, all share a view that learning and
change are inextricably interconnected.
388 Healthcare management

Figure 22.3 Appreciative inquiry 4-D cycle

Source: Cooperrider et al. (2000: 7).

The appreciative inquiry cycle (Figure 22.3) is one example of the

models cited here which relies on generative learning. It is also used later
in the case examples to illustrate emerging paradigm approach to trans-
formational change. In the change cycle illustrated in Figure 22.3, change
is generated by the social actors involved in the change process rather
than being something that emerges from the planned and unintended
consequences of change.

Choosing change methods

Change methods are derived from particular theories or assumptions

about human or organisational behaviour. They are chosen with particu-
lar aims of change in mind, and their use in the change effort is designed
to remedy diagnosed problems and produce specific outcomes. The chal-
lenge for change managers lies in revealing the different assumptions
being made about the ‘nature of the problem’ as well as in providing a
basis for assessing the efficacy of the proposed remedy.
There are several major schools of thought within social sciences2 that
have evolved, each with its own ideas. For example, Bolman and Deal
(1991) suggest four influential frames of reference. Rational systems the-
orists will emphasise organisational goals, roles and technology and ways
to align structure and process. Human relations theorists will stress the
functional interdependence between people and organisations and look
to match people’s skills, values and aspirations with organisational roles
and relationships. Political theorists see power, conflict and the equitable
Appreciating the challenge of change 389

distribution of resources as the central issues, which are resolved through

the use or manipulation of influence, power, conflict and bargaining.
Symbolic theorists, on the other hand, emphasise meaning and rely on
images, drama and storytelling as means for understanding the organisa-
tion. The same organisational situation can therefore be viewed in at least
four different ways, depending upon how it is framed (Bolman and Deal
1991: 9).
An alternative approach proposed by Allen (2002) is to accept that
people in organisations understand and navigate change in different ways.
Thus there are multiple change journeys at work. People, she argues, can
go on different journeys, yet arrive at the same destination. What is
important is ‘leveraging the reciprocal influence of individual and organ-
isational transformation to achieve common goals’ (p. 9). By this she
means to focus on helping ‘clients’ to find their own unique solutions for
integrating and synchronising the diverse initiatives occurring.
A vital part of the change management task involves selecting the
methods whose focus matches the purpose and aims of the proposed
change. Utilising Kaplan’s (1964) quote ‘I have found that if you give a
little boy a hammer, he will find that everything needs pounding’, Tichy
(1983: 294–295) cautions managers to avoid faddism in choosing change
technologies and what he calls the ‘panacea hammers’. Change methods,
Tichy advises, should be chosen on the basis of a robust diagnosis, a
strategic change plan and an understanding of the variety, scope and
contribution of potential methods available.
Speaking of change in relation to management development, Molan-
der and Winterton (1994) propose that method selection should be based
on whether change is pitched at individuals, groups or the organisation.
How change is implemented, using either a prescriptive or consultative
style, can also impact on outcomes. Behavioural change, for example, is
perceived as the most common aspect of change management and is
usually tackled through individualised training. To target change remed-
ies at behaviour and neglect other influencing variables such as the
impact of the environment, culture and work teams is, however, likely to
provide only a partial change solution.
Design led by experts can also be problematic, particularly where the
involvement of those subject to the change has been minimal. Appraisal,
job rotation and mentoring require the active participation of learners
and are paramount to their successful implementation: ‘the obvious
option is to involve them in the design of the development experience’
(Molander and Winterton 1994: 89).
It is estimated that two out of three change programmes only partially
realise their specified aims and potential (Kotter, 1994: Higgs and Dule-
wicz 2000; Higgs and Rowland 2001). Some of the reasons cited for this
include:

• choosing the wrong approach

• generating little buy-in or commitment
• a lack of resources to implement change
390 Healthcare management

• ignoring the politics and emotions associated with change

• the tendency to focus on a limited number of dimensions of change
• overlooking the strategic aspects of change
• viewing change as a one-time event that starts and stops.

Manager as change agent

That the manager’s role in leading change is crucial seems widely

accepted among scholars and practitioners in the field (Higgs 2002).
Managers are also likely to find themselves occupying any one of several
roles as change strategists concerned with end results; as change implementers
concerned with the means of change and overcoming resistance; and as
change recipients making the means fit the end while developing personal
benefits (Kanter et al. 1992).
Adapting to new organic structures and ways of working also requires
managers to incorporate values-based strategies and to develop more ‘soft
skills’ in people management. They may need to take on a more facilita-
tive role to empower workers and emphasise a solutions rather than
problems focus in managing change. Consistent with emerging paradigm
thinking, managers also need to develop a more inclusive approach to
interpreting ‘reality’ and to embrace the realities of others (Pascale 1990:
32).
Leaving aside the debate as to whether the task of change management
demands leaders not managers, Higgs attempts to identify a model of
leadership that is relevant to the context and complexity of change facing
organisations in the early twenty-first century.
Summarising a review of the leadership literature and borrowing from
Goffee and Jones (2000), he concludes that leading change is about ‘being
yourself with skill’. Comparing models of leadership (Alimo Metcalfe
1995; Bass 1985; Bennis 1989; Goffee and Jones 2000; Higgs and Dule-
wicz 2000; Kotter 1994; Kouzes and Posner 1988) he sees common
agreement on the need for managers to be authentic and to demonstrate
emotional intelligence in their approach to change. Whilst the models
differ in emphasis, there are some common themes:
1 Reach a shared understanding with stakeholders about source, content
and direction of change.
2 Engage stakeholders throughout in devising and implementing the
change strategy.
3 Respect diversity of contribution and approach in handling and man-
aging change.
4 Build trusting relationships.
5 Seek to learn continuously from the change and share new learning.
6 Own the change process and see that all goes well.
 Appreciating the challenge of change 391

Case studies in change management

What can be said with some certainty about change management is that
there is no ‘one best approach’ or one single change method that will be
capable of tackling the range of problems and situations that arise. Rather,
as Iles and Sutherland conclude: ‘Managers in the NHS need to be adept
at diagnosing organisational situations and skilled at choosing those tools
that are best suited to the particular circumstances that confront them’
(2001: 19). Here we use three change examples to explore the issues of
theory, method and outcomes (Boxes 22.1, 22.2, 22.3).
The second change example (Box 22.2) is funded as a common
problem in the health sector (Maher and Penny 2005) and contains

Box 22.1 Change example: Devolving financial management decision

to service areas

Context driving change: Overspending and lack of accountability at service level.

Change example: Devolving financial management decision to service areas.
Change assumption: Skills gap issue, managers needed training in the new financial
information management system (FIMS) through which they could monitor and
manage their devolved budgets.
Predicted outcomes: More responsible financial accounting, budget control at
source of spends/overspends kept within limits and savings accruing.
Change theory: There is no explicit theory of change operating. This is common
in training solutions to change problems. The training solution may rest on one or
more cognitive, experiential or adult learning theories that are designed into a
learning event to equip learners with new knowledge and skills and lead to
behaviour change (see for instance Galbraith 1991 for a summary of adult
learning theory). Clearly, as the case shows, transferring learning to behavioural
outcomes is a voluntary exercise.
Method: Training for all managers in the use of the new FIMS.
Analysis: The planned-for outcomes of the training did not produce the changes
expected. Managers attended training but continued to refer decisions upwards
and held off using the system on the grounds that the information contained
within it did not match service reality. It emerged that managers collectively were
anxious about managing overspends and the potential unpalatable tasks of cutting
services and staffing, for which they were unprepared.
The focus of the change programme shifted from providing technical training
to uncovering the emotions and blocks that prevented proper budgetary control.
A new strategy emerged which involved managers in service planning and budget
profiling which were based on customer, stakeholder surveys and employee
consultation. Managers became accountable and responsible for the costing and
delivery of user-led services they had consulted on and planned and budgeted for.
The revised change strategy emerged from the expressed needs, values and
emotions of those subject to the change and who helped shape the new
approach.
392 Healthcare management

Box 22.2 Change example: Reducing patient waiting times

Context driving change: Government-led improvement agenda.

Change example: Reducing patient waiting times.
Change assumptions: Change is driven by and grounded in data in and about the
system not unfounded ideas or visions.
Predicted outcomes: Data provide basis for realistic measures of process
improvement. People engaged in the process implicitly derive empowerment and
control from their work since it is they who are involved in and assume
responsibility for their contribution to continuous improvement.
Change theory: Derived from the application of principles of statistical variance
originating from Shewart (1931) and Juran (1964) and incorporated in Deming’s
(1981) system of profound knowledge of management. Deming’s approach to
quality improvement draws on a theoretical mix that incorporates a systems
view of organisation, knowledge about variation and theory of knowledge and
psychology.
Deming’s continuous cycle for process improvement involves four steps: a plan
to improve, do what is planned, study the results and act on what has been learned.
The degree to which the founding principles advocated by Deming are designed
into some CI processes will impact on outcomes.
Method: Continuous improvement (CI) process mapping.
Staff are trained in CI philosophy – ‘plan, do, study, act’ – and process mapping.
Customer surveys and interviews are also used to generate qualitative data.
Analysis: In this case a process mapping approach was used to scope out the
‘patient journey’ involved in making an appointment with a specialist consultant.
The opening quotation to this chapter captures the essence of the patient-led
focus that emerged. Other outcomes were: waiting times cut, a better
appreciation of clinical and non-clinical roles and steps involved in the process;
time savings; more efficient and patient-friendly processes introduced.3

aspects of both planned for and emergent change. It corresponds to Ack-

erman’s developmental model in Figure 22.2.
The discussion of the appreciative inquiry example that follows in
Figure 22.3 is grounded in the values of emerging paradigm thinking
which encourages managers and change agents responsible for imple-
menting change to ‘shift their perspective’ rather than their tools of
practice (Watkins and Mohr 2001). As shown, the methodologies
involved could equally be used within planned or emergent change
scenarios. What is vital is the focus on the appreciative stance, the
constructionist theory and the democratising values that are designed
into their use. The example shown in Box 22.3 is based on the well-
documented case study of Avon Mexico (Schiller, in Watkins and Mohr
2001: 123–6).
Methods that emanate from emerging paradigm thinking are begin-
ning to be used effectively across all business, government and public
sectors, for generating whole system change (see Elliott 1999; Cooper-
Appreciating the challenge of change 393

Box 22.3

Context: Corporate drive for gender equity in global company.

Change example: Valuing gender diversity.
Change assumptions: That organisations move in the direction of the questions
that are asked. The more positive the question asked, the more sustainable the
change (Cooperrider et al. 2000).
Predicted outcomes: The outcomes will be generated through the process of
inquiry. Stakeholders must trust the process to produce positive outcomes of
change (Elliott 1999).
Change theory: Social constructionist theory of change (Berger and Luckman
1977; Cooperrider and Srivastva 1999; Gergen 1992, 1999) provides the
foundation to AI. Central to AI is the idea that we ‘see what we believe’, that
reality is created through the language we use and there are multiple realities.
The act of asking questions of an organisation or group influences the group in
some way. Change begins at the moment the question is posed. Organisations are
holistic ‘social systems’ that evolve towards the most positive images they hold of
themselves.
Change occurs less through the ‘official voice’ of meetings, committees and
exhortations than through inner dialogues that are carried through stories and
narratives which people tell themselves and each other (Bushe 2000).
Organisational stakeholders are encouraged to pay attention to the ‘best there is
or can be’ in the organisation rather than to problems, which involves a
fundamental shift in thinking as well as in associated behaviours.
Method: Appreciative inquiry. Change is generated through an appreciative
inquiry research process, which follows a cycle of activities and processes and the
creation of new positive images through dialogue. This involves discovering ‘the
best of what is’, dreaming what might be, designing, planning for and co-
constructing the ideal future and destiny: empowering, learning, adjusting and
improving, and sustaining the new futures. There are several illustrations of this
fundamental process in Watkins and Mohr 2001.
Analysis: Workshops were held to introduce the AI theory and protocols to a
‘pioneer’ group made up of employees and stakeholders who were to conduct
the AI interviews. They aimed to identify compelling stories about what gave
vitality to the ways women and men worked together within the organisation.
These inspirational stories revealed best practices and formed the basis for
developing a future vision of the company. Reports were drafted, a stakeholder
futures conference (summit) was held, consensus was built to capture the best
stories, which were grounded in what was currently happening, and to clarify
images of the organisation at its best.
The new vision was activated via co-gender work committees through whom
the new culture and values were expressed in employment policies and practices
with the intention of creating an ‘exceptional twenty-first century organisation’.
As important was maintaining the spirit of inquiry, the positivity and solution
focused orientation that characterised the approach (Schiller in Watkins and
Mohr 2001).
394 Healthcare management

The appreciative inquiry intervention was credited with helping a successful

company become even more successful. Profits were increased and the company
won a Catalyst Award for its policies and practices that benefit women in the
corporation. The first woman officer made it to the executive committee within
six months of the project. The spirit of appreciative inquiry continued to be
sustained four years after the inquiry and is part of the alignment with the
mission, goals and values of the company (Schiller).

rider et al. 2000; Watkins and Mohr 2001 for examples of appreciative
inquiry, and variants of it).

Conclusion

As we see from the examples above, change in the real world does not
always correspond to a linear model of change, stable in character, with a
beginning, middle and an end. More often what starts off as a seemingly
one-off episode or event can become something more complex and
transformational. Drawing together the key themes of the chapter, it is
evident that the manager’s role in change will depend upon the way the
change is framed, the scope of change involved and the philosophical
orientation that is ‘designed into’ the change process.

Summary box
• Much of the change agenda faced by a modernising health sector is
intentionally transformational. Its reach extends beyond the boundaries of any
single organisation and requires change methods and approaches that are up
to the scale of this task.
• Intentional transformational change is usually premised on some view, theory
or vision about why the change is necessary, which may be externally or
internally driven.
• The purpose of much of the transformational change agenda is to produce
socio-economic outcomes as well as specific organisational improvements and
changes. Collaboration with all stakeholders is vital.
• Transformational change involves making paradigm shifts that involve values
and the thinking which underpins them. Change models that emphasise
learning are central to this approach.
• There is no single method capable of achieving multilevel, multistakeholder,
multidimensional change. A multimethod approach is advised. Aligning method
to change theory and paradigm is vital.
• Emerging paradigms based on complexity theory and systems thinking more
adequately reflect the level and complexity of contemporary organisational
change than do established planned and emergent approaches.
• Although there are plenty of resources on change management, approaches
that emphasise analysis rather than prescription offer more credible accounts
of change.
• We are all potential change agents.
 Appreciating the challenge of change 395

Self-test exercises

1 Recall a change programme that you have been involved with, and
tackle the following questions about what happened, how it worked,
and what you learned from it:
• What were the memorable moments? And why?
• What best aspects of the change would you want to see more of?
• Who was involved and how can the ‘best of’ be extended?
2 How would you assess your current role and contribution to the
change agenda in your organisation? What models of change are used
and how is change managed? What opportunities are there to help
stretch mindsets and achieve change? What can you do to achieve the
best that can be?

Notes

1 Although often cited as primary advocate of the planned change method, it

should be acknowledged also that Lewin’s pioneering work in using action
research to help tackle social and organisational problems means his influential
legacy can be seen in all three of the paradigms discussed here. See Burnes
(1996) for a fuller discussion on this point.
2 Other critiques which show the relationship between ideas about how change
occurs and the technology to use to effect change can be found in the typ-
ology offered in Tichy (1983: 302–3) and the discussions throughout Pfeffer
(1982) and Burrell and Morgan (1980).
3 See case studies by Iles and Sutherland (2001) and Elliott (1999), each citing
outcomes similar to those mentioned in this chapter.

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Websites and resources

Appreciative Inquiry Commons. Devoted to sharing academic resources and

practice tools. Includes case studies (see practice and management section):
http://appreciativeinquiry.cwru.edu/
AI practitioner: http://[email protected]
www.PositiveEmotions.org
 23 Managing resources
Anne Tofts
There are three types of organisation: those who make things hap-
pen; those who watch things happen; those who wonder what hap-
pened. (Anonymous)

Introduction

The process of planning is essential in all health and care organisations

and departments and is as relevant to health and care professionals as to
managers. In health systems the world over there is a need to become cost
conscious to ensure that increasing health needs and expectations can be
met within the limitation of available resources. Resources are becoming
scarce (e.g. funding and skilled people) or expensive (e.g. buildings and
equipment), whilst an increasing and ageing population is creating
greater healthcare need. As expectations within affluent populations also
increase there will be a greater need to make choices about the use of
funding and between different healthcare treatments. Governments are
continuously making choices on public expenditure, for example,
between health and education. There may also come a time in affluent
societies when individual citizens will need to make personal choices on
how they spend disposable income; for instance, choosing between
buying a new car or a joint replacement for a member of the family.
Two critical skills that health managers must develop are business plan-
ning and budget management. Service priorities must be set to ensure the
effective and efficient allocation of resources to meet the most important
health needs of populations. A business planning approach builds on the
identification of service needs and objectives, planning how best to allo-
cate available resources to achieve those objectives. Health managers can
work within agreed business plans if they are able to understand, monitor
and manage costs using a budget as a framework for so doing.
This topic is also essential reading for health clinicians and profes-
sionals who play a role in managing a service or team. Anybody who has
a responsibility for resources including people, equipment and buildings
as well as money, should work in partnership with managers and
accountants to contribute to the planning and shaping of the resources
required for the future delivery of healthcare services.
As with all professions, resource and business planning has built its own
terminology and language. This gives a false impression that it is an
400 Healthcare management

‘exclusive club’ which is attempting to restrict entry. If health systems are

to innovate and improve as resources become ever scarce and demands
throughout the world ever greater, then all clinical leaders and managers
have a responsibility to learn the language of business planning to be able
to become active members of ‘the club’.
Business planning is the process by which service heads and unit man-
agers plan how best to use available resources to meet the strategic plan.
The two main categories of resources that the business plan will address
in a health context are people and finance. In turn the business plan
should be used to inform the appraisal process – agreeing and reviewing
individual objectives. This chapter explores concepts of business plan-
ning, financial planning, cost management and preparation of business
cases. A list of further reading is also provided as an opportunity to
understand issues of resource management in more depth beyond what is
possible within this chapter.

Business planning and performance management processes

‘Business planning’ is a term not often used in healthcare settings. How-

ever, a business plan is as relevant in all parts of a health service as it is in
the world of business. It is a tool that helps health professionals and
managers to plan and communicate future intentions and developments.
It is sometimes perceived as not fitting with public sector values and
ethos, and instead managers talk about service or development plans. In
effect, these are all part of the business planning process. A business plan
can be defined as follows:
A list of actions so ordered as to attain, over a particular time period,
certain desired objectives derived from a careful analysis of internal
and external factors likely to affect the organisation, which will
move the organisation from where it is now to where it wants to be.
(Puffit 1993: 9)
The attributes of a good plan should be:
• to set out the objectives of the department or unit in relation to the
overall organisational goals
• to provide a structured analysis of the current strengths, weaknesses,
opportunities and threats in relation to its goals
• to develop a detailed action plan to build on the strengths, address the
weaknesses, optimise the opportunities and respond to the threats to
achieve the objectives
• to include a budget for the level of financial resource needed to
achieve the objectives
• to include a workforce development plan to enable the staff to achieve
the objectives.
Where many organisations fail is in the integration of all business or
Managing resources 401

service plans developed by constituent departments or service areas into a

single organisation-wide planning framework: a framework that has a
cohesive set of broader strategic objectives owned not only by all health
professionals and managers within that organisation but also by partner
agencies and stakeholders such as patient groups, commissioners and local
government.

Business planning framework

The following simple but effective framework for a business plan is often
used by health professionals and managers with their teams and stake-
holders as a means of fully engaging them from the start. Weak business
planning processes can result in faulty assumptions and costly errors in
the development of new services and approaches to healthcare (Figure
23.1).

Stakeholder involvement

Every service or department involves a group of individual clinicians and

managers contributing to its running and success. Each will have a
specific view of the direction that the service or department should
be moving in and the best way of doing it. The process of producing a
business plan enables everybody to contribute their experience and ideas,
providing a common agreement on where the service is going and how
to get there. An effective and inclusive business planning process can
therefore prove to be a very effective tool for team building, providing a
common view of the future and commitment to achieving it. It goes
without saying that it is important for all health organisations to engage
their stakeholders in the process of service and business planning, stake-
holders being those people likely to have an interest in, be affected by, or
be able to influence the outcome of the proposed service improvement
or business development.
Professionals and managers should be planning a service that meets the
needs of their patients, service users and carers. The commissioners or
purchasers of the service will also have expectations and views, as will the
organisation’s own board or senior management team. These are all
stakeholders. No single department or service within a health organisa-
tion can work in isolation. There is always some level of interdependence.
For instance, clinical services rely on non-clinical departments to be able
to function effectively. All departments rely on the personnel or human
resources department to recruit and retain their staff. Wards are depend-
ent on an efficient service from the hospital porters, patient information
and records departments. The list is endless, but the principle is the same
– to be effective planning must involve and be owned by all stakeholders
who have expectations of that service and will either performance man-
age it or be in a position to express views on its effectiveness. Planning
402 Healthcare management

Figure 23.1 Framework for business planning

Managing resources 403

within one department or service must involve and be owned by the

departments that it serves, or upon which it is reliant.

Public sector scorecard

One useful framework to coordinate the expectations and views of a

wide range of stakeholders within the business planning process is
Moullin’s (2002) public sector scorecard approach (Figure 23.2).

Figure 23.2 The public sector scorecard

Source: Adapted from Moullin 2002
404 Healthcare management

Moullin has developed the ideas of Kaplan and Norton’s (1992) bal-
anced scorecard to make it more relevant to the public sector and use of
this framework explicitly recognises the increasing importance of the
interests of a key stakeholder group: service users and carers. The use of
the scorecard can similarly assist managers to work together with profes-
sionals to develop multiple objectives that reflect internal organisational
and external stakeholder expectations, balancing the need for both qual-
ity and financial performance. The scorecard is often used both in the
context of performance development and performance measurement.
For performance development it provides a framework for a focused
review of how well the organisation or department is doing, along with
an organisational development plan needed to achieve the agreed object-
ives. The framework likewise enables tangible objectives to be set and
measured in the context of performance management.
If the interests of service users and patients are not met then it is
unlikely that the organisation will be able to meet the needs of other
stakeholders. In health systems that are adopting an internal market
approach that encourages competition and contestability between ser-
vice providers such as England and the US, it is increasingly important for
business planning processes to recognise the relationship between differ-
ent stakeholder perceptions and the need to meet them all. For instance, a
hospital in England that fails to satisfy patients’ expectations of the quality
of service is unlikely to meet its financial targets as patients choose an
alternative service provider. In an urban area with a high density of hos-
pitals and over-supply of beds this could have a significant impact as
hospitals find activity levels decreasing.
The public sector scorecard is a useful framework to help teams to
analyse how well they are doing against a range of expectations and
objectives. It can also be used to shape discussion with stakeholders in
determining future objectives. The scorecard approach can likewise be
used to determine the purpose of the organisation or department. How
closely the service or business purpose is defined will determine how
effective the business planning process is and there can be advantage in
leaving the purpose very open or flexible, although it is then difficult to
plan effectively.
Use of the balanced scorecard enables the organisation to develop and
communicate a clear purpose and establish objectives that are aligned
with its need to respond to the health needs and expectations of the local
population, to meet clinical and service quality standards and to work
within financial constraints.

Tangible and achievable objectives

The stated objectives should be SMART – Specific, Measurable, Achiev-

able (i.e. challenging but not unobtainable), Realistic (explicit about con-
straints) and Time-related (identifying target dates and milestones along
the way). An example of an objective that is not SMART would be ‘to
Managing resources 405

improve access to services for older people’. If this objective applied to

the building of a new unit for older people then it could be restated in
SMART objective terms as ‘to open a new elderly care unit with 100
daily places in the XX city by 1 January 2008 within a budget of YY’.
A long-term business plan should include both long-term and shorter
term SMART objectives. The short-term objectives or milestones
should take the service or department in the direction needed to achieve
the long-term objective. Regular monitoring and review against short-
term objectives allow the manager to review progress towards the long-
term objective, adjusting plans accordingly. Short-term objectives should
be achievable within the given resources, thus providing staff with a sense
of achievement motivating them to continue to strive to achieve the
long-term goal.

Analysis of the current service and its environment

Having defined the purpose and long-term goal, the manager should
undertake an analysis of the internal and external issues that will impact
on the organisation’s or department’s ability to achieve its objectives. A
common and simple model to aid this analysis is SWOT (Strengths,
Weaknesses, Opportunities, Threats). What can seem at first glance to be
a simple, straightforward analysis can be used as an inclusive process
involving staff and other key stakeholders. Some people may perceive
strengths as weaknesses, and opportunities as threats, and vice versa and
hence the dialogue that the manager engages in will help staff and stake-
holders to share their hopes and concerns. A common understanding of
objectives and the current situation can also be built through such a
dialogue. During the SWOT analysis, all resources should be analysed:
staff; financial; equipment; facilities; estates; transport; systems, etc. The
SWOT analysis is undertaken in relation to its purpose and objectives and
a resource is only a strength if it is ‘fit for purpose’ to achieve the stated
objectives, taking advantage of opportunities and overcoming threats. For
example, a health unit that has stated its purpose as specialising in ortho-
paedic care will perceive staff with appropriate clinical skills as a strength
but staff highly skilled in diabetic care as a weakness. Many business plans
include a SWOT analysis but few contain a detailed action plan that
addresses this analysis. The action plan should demonstrate how the
organisation or department plans to:
• build on its strengths
• overcome its weaknesses
• take advantage of opportunities
• minimise the risk from threats.
The process of scanning the external environment can be further
strengthened using the PEST environmental analysis tool (sometimes
known as STEP). PEST stands for: Political; Economic; Sociological;
Technological.
406 Healthcare management

• Political: e.g. national and local government initiatives that may advance
or hinder the service/organisational objectives; or patient lobby groups
that may have an influence on service developments.
• Economic: e.g. budgetary or funding issues at national, local or organisa-
tional level that might impact positively or negatively.
• Sociological: e.g. demographic trends that may impact on service needs;
the organisation’s ability to attract the workforce needed to achieve its
objectives; or local population growth trends.
• Technological: e.g. technological advances in clinical equipment that
may assist in the organisation’s ability to achieve its service objectives;
or advances in information technology.
PEST can help the manager to assess external pressures and influences on
their service area or department that may be perceived as opportunities
or threats within the SWOT analysis. Short-term objectives can be
agreed with staff and other stakeholders which they feel are achievable,
address the issues raised within the SWOT analysis and take the organisa-
tion or department in the direction of travel required to achieve the
long-term goal.

Resource planning

Most of us do not have the luxury of planning from scratch or from a

‘clean sheet of paper’. We are normally working with an ‘envelope’ of
resources that has been built up over a period of time. These resources
may, for example, be existing buildings, equipment and people with spe-
cific sets of skills, knowledge and attitudes. Our ability to change these
will be limited by the availability of money and time for investment.
Possibly the most important factor to consider is the time period within
which a service development must be achieved balanced against the
complexity and scale of change required and the existing resource envel-
ope. Can the development realistically be achieved whilst maintaining
the existing service? Resource factors must be considered at all stages of
the planning process if planning is to be an exercise based in reality and
not just the production of a ‘wish list’ of what it would be nice to do
given unlimited resources. It is easy to demotivate staff and service users
by setting expectations during the planning process that cannot be met
within available timescales or financial resources. An essential part of the
planning process is to assess the ability:
• of current resources to be used in new and different ways to meet
changing needs
• to increase the productivity of existing resources
• to acquire new resources.
It should always be remembered that within the resource package are
included staff (clinical and non-clinical), equipment and buildings as well
as money.
 Managing resources 407

Budget and cost management

Budget setting process

A key element of any business planning process is to estimate the level of

income and expenditure that will be needed to achieve the objectives and
allocate this to specific activities. This is the process of budget setting. A
budget is a financial plan that details:
1 Income: funding available for a service or department.
2 Expenditure: how it is planned to allocate funding.
The process of setting and monitoring budgets should be an important
part of both the planning and performance management cycle. Involve-
ment by managers and health professionals at an early stage encourages
them to take ownership of a budget that reflects the real needs of their
service area. The process of negotiating a budget at the beginning of the
financial year is often rushed, resulting in cost-cutting decisions that do
not reflect service priorities. Equally, a flawed budget setting and moni-
toring process at the beginning of the year can lead to unplanned service
cuts towards the end of the financial year to quickly reduce expenditure
to be able to ‘balance the books’. In a well-planned process that fully
involves health professionals at all stages, department and service heads
would work together to identify areas where cost-effectiveness
improvements can be made that will have least effect on the quality of
services and patient care. Equally, more effective use will be made of
surpluses identified late in the financial year.

Three main types of budget

There are three main techniques of budget setting used in health

organisations:
• zero based budgeting
• incremental budgeting
• activity based budgeting.
The zero based approach to budgeting is most frequently associated with
the business planning process. A zero based budget assumes that the
budget is calculated from scratch for each activity needed to achieve the
business plan objectives. It starts from zero and re-evaluates all resource
assumptions to create a plan for the future.
The incremental approach is the most commonly used in many health
organisations. It builds on the historical budget, the budget that was in
place the previous year. This forms the base line for the following period,
usually being uplifted by an agreed percentage for inflation and adjusted
for other known factors such as planned savings or growth.
Activity based budgeting provides a detailed budget for each specific
408 Healthcare management

activity involved in delivering a service or within a department or organ-

isation. It is only feasible where clear separation between activities can be
identified. Activity based budgeting has been used in the National Health
Service in the UK to develop ‘standard’ costs for each unit of activity, for
example, consultant episodes or outpatient attendances.
Some of the advantages and disadvantages of each approach are
summarised in Table 23.1

Capital and revenue

Financial expenditure is distinguished as capital or revenue and within

the public sector each of these is normally funded from different sources.
Capital expenditure relates to expenditure that has an ongoing value to
the business such as fixed assets including land, buildings, furniture and
equipment. To be categorised as capital, items usually have to have a life
of more than a year and organisations will typically determine a min-
imum level of expenditure that is required per item for an asset to be
determined as capital. Revenue is expenditure on items that continually
recur, or the ongoing costs of running a service or department. Revenue
will include employee costs, rent, rates, utilities, consumables and
training.

Table 23.1 Advantages and disadvantages of approaches to budgeting

Budget approach Advantages Disadvantages

Zero based • A realistic achievable budget is set • Very time consuming to prepare
• It is proactive and forward looking • Requires clear objectives
• Links to business plans • Can be difficult to implement
• Transparency about the relationship
between cost and activity

Incremental • A quick process to complete • Use of historical information can lead

• Accurate if there is little change in to inaccuracies
activity • Inefficiencies can be hidden
• Simple to calculate • No relationship between funding,
• Builds from a known and proven base cost and actual activity

Activity based • Links finance to specific activity • Income may not flex with the budget
• Allows a budget that can flex • Difficult to allocate resources shared
• Simple to adjust to reflect changing by different activities
activity levels • Changes to standard costs may not be
recognised
 Managing resources 409

Budget monitoring

Middle managers and health professionals are usually responsible for the
monitoring and control of revenue budgets for their service area or
department. Effective budget management is dependent on the effective-
ness of the initial budget setting process and the service/department
manager and senior health professional should have worked in collabor-
ation with the management accountant at the beginning of the financial
year to ensure that a realistic budget was set. To be realistic, a budget
should reflect the resources and activity needed to meet the agreed busi-
ness plan objectives. The manager’s monitoring role is then to investigate
budget variances during the year, identifying why the variance occurred
and taking management action to bring the budget back in line. A budget
variance is the difference between planned and actual expenditure. There
can be many reasons for variance to occur; it is not always an indication of
poor management performance. In time, unforeseen circumstances may
mean that the budget no longer reflects reality and should be adjusted for
new and changing circumstances – for example, changed levels of service
activity, new price discounts negotiated with suppliers, and staff absence
resulting in increased use of agency staff.
The designated budget holder should be given responsibility and
accountability to be able to control spending in terms of the major
expenditure items. They may also be given authority to vire between
budgets. Virement is the process by which funds can be moved from one
budget heading to another – for example, changes in service activity in a
day centre for older people may mean that catering costs are going to be
higher than planned, whilst the usage of transport was overestimated and
will not cost as much as originally planned. A proportion of the funds
allocated to transport can be moved or vired to the catering budget to
meet the additional costs. Virement is a way of managing budgets more
efficiently when changes in activity or circumstances result in overspends
in some areas and underspends in others. In practice, it makes the budget
setting and monitoring process more meaningful. When the budget is
being renegotiated at the beginning of the following year any virement
should be analysed and the proposed budget adjusted to better reflect
planned activity and expected costs.

Elements of cost and cost behaviour

Within most organisations, budgets are split between cost centres – an

area of activity, department or function might be designated as a cost
centre.
410 Healthcare management

Cost classification

Costs can be classified in a number of different ways. The most common

used in health settings are:
• Fixed costs. These do not vary within a given period of time with the
level of use or service activity. They would still have to be paid if a
service or department was closed for a short period of time – examples
include equipment hire costs and rent.
• Variable costs. These vary in direct relation to the level of use or service
activity. They do not have to be paid if the level of activity stops –
examples include the cost of food consumed by patients and drugs
used.
• Semi-Variable costs. It is difficult to classify some costs as either fixed or
variable – for example, the cost of staff wages on a ward. If the ward
closed then it may be possible to move some staff to other wards, but
some staff may still have to be paid over a period of time before they
could be redeployed. These are classed as semi-variable costs.
Additionally costs can be categorised as direct or indirect: Direct costs are
those directly related to the department or service, whilst indirect costs or
overheads are incurred in running the organisation within which the ser-
vice or department is located. Using a ward as an example, direct costs
would include: ward staff costs; bed linen costs; catering costs for the
ward’s patients. Indirect costs would include: the costs of the hospital
having a personnel and finance department to support the ward manager;
the sterile supplies department that services the ward. Both direct and
indirect costs can be fixed or variable.
The way that indirect costs are allocated to service areas and depart-
ments will vary within each organisation. It is important for the service
manager to understand how these costs have been allocated as they can
have a major impact on unit costs and affect the manager’s ability to
manage costs and budgets within their area of responsibility.
The concepts of stepped costs and opportunity costs are also important for
a manager to understand. Stepped costs occur when an additional unit of
service results in an additional fixed cost. An example of stepped cost
would be within an occupational therapy unit where it has been decided
that one therapist can safely work with ten patients. At present the unit is
only servicing eight patients and there are two spare places – if these two
places are filled then there is no increase in the fixed staff cost, although
there may be increases in variable costs such as catering. However, if the
unit is instead asked to take three additional patients to fill the vacancies
then this would require the appointment of an additional member of staff
as it would take the unit above the safe ratio of ten patients to one staff.
There is a significant increase in the fixed cost; this would be classed as a
stepped cost.
Resources are always limited. Therefore using resources in one way is
always at the expense of another option. This is the concept of opportun-
ity cost. If a manager has limited development money and has two or
 Managing resources 411

more development proposals to consider, then the opportunity cost of

funding one proposal is that the resources cannot be used to develop the
other proposals. In relation to their own service area or department it is
important for all managers:
• to know and understand the indirect and fixed costs
• to control and manage the direct and variable costs.

Developing a business case

A business case is a management tool that supports planning and decision

making. Its purpose is to demonstrate how a preferred course of action
best meets service needs and provides key decision makers with sufficient
information on costs, benefits and risks to be able to assess proposals for
service or business developments. A well-prepared business case should
provide decision makers with the evidence needed when making choices
between different health treatments or approaches. One example drawn
from the NHS prison health service is the ‘tale of the toenails’. A prison
health service was funding a qualified and highly skilled podiatrist to trim
the toenails of prisoners on a regular basis as prisoners are not permitted
access to scissors on security grounds. A health manager newly recruited
to the prison thought that this was an expensive way of providing an
essential service and undertook an option appraisal. The manager identi-
fied a number of alternative ways of providing this service including
training other members of staff who are paid less, and allowing prisoners
to use toenail clippers under close supervision of prison officers. Both of
these alternative approaches used existing resources differently and the
latter involved minimal expenditure on equipment. Each alternative
released an expensive resource in the form of the qualified podiatrist for
more appropriate work. This may seem to be a simple case study, but
every health organisation will have similar examples which if reviewed
using business case techniques will release resources which can be used
more effectively without involving complex changes.

Framework for a business case

A business case should include:

1 Scoping the need:
• Identification of the service or development need and strategic
context.
• Strategic assessment of the internal and external environment that
impact on the proposed service development using appropriate
tools such as SWOT and PEST.
• Implications for maintaining existing services.
412 Healthcare management

• Anticipated outcomes and benefits of the proposed development.

• SMART objectives.
2 Option appraisal. This section of the business case identifies at least three
different options to achieve the SMART objectives. The options usu-
ally include a status quo or ‘do nothing’ option as a benchmark. The
following should be included for each option:
• analysis of costs and benefits:
— financial
— non-financial
• analysis of the feasibility of achieving the SMART objectives
• risk assessment of feasible options.
This section will end with the identification of a preferred option after
assessing each against agreed criteria.
3 Implementation plan for the preferred option. This section provides a
detailed analysis and implementation plan for the preferred option
which includes the following:
• project implementation plan including key milestones and timelines
• benefits realisation plan
• funding strategy – with a detailed cost appraisal (including
opportunity costs) and identification of sources of funding
• staff and equipment plan
• change management strategy
• risk management plan
• communication plan
• monitoring and evaluation plan.
The identification and assessment of a range of options should involve
a wide range of stakeholders. An inclusive process provides an
opportunity to be creative and innovative, to challenge the status quo
and constraints, and to ensure that stakeholders understand and are
committed to the process of change.
4 Identification and realisation of benefits. The definition of SMART object-
ives to meet the specific service need at the beginning of the process
will ensure that options can be evaluated against explicit criteria that
are agreed by all stakeholders. Objectives should focus on the desired
outcome of the service development; the ‘what’, and not on the pro-
cess of achieving that outcome; the ‘how’. In the private sector the
identification of return on investment (ROI) is a key part of the busi-
ness case. This is translated in the public sector into identification of
quantifiable benefits for the investment made. Benefits may include:
• clinical outcomes
• improvement to the patient experience
• improved quality of life for the patient
• increased capacity to meet demand
 Managing resources 413

• improvements for the workforce

• economic benefits such as efficiency in service delivery, cost savings,
increased productivity
• economic benefits gained by returning the patient to work early.
In 2005 the UK government established the Healthcare Industries
Task Force. In Figure 23.3 Sir Chris O’Donnell, the Task Force Chair-
man, explains the role of the task force in seeking to quantify the benefits
of using increasingly expensive medical equipment and procedures
A scoring system agreed with stakeholders should be used to ensure an
objective evaluation of options and identification of the preferred option.
Each option is assessed against each of the agreed benefit criteria. Benefit
criteria that might be used to appraise options for introducing a new
system of admitting patients for elective surgery might include:
• reduction of waiting times for admission
• improved waiting list management
• patient comfort and safety
• improved utilisation of theatre space
• improved productivity of theatre staff
• improved working environment.
A detailed implementation plan for the preferred option forms part of
the business case. This includes a benefits realisation plan which expands
on each of the anticipated benefits identified in the option appraisal:
• how will they be achieved
• who will be responsible for ensuring they are achieved
• timescales
• stakeholder involvement
• monitoring and review process.

Figure 23.3 The purpose of the UK healthcare industries task force

Source: Extract from ‘A healthcare chief shoots from the hip over patient choices’ Daily Telegraph,
3 January 2006: B5
414 Healthcare management

Risk assessment

An important part of the business case is the identification and assessment

of risks associated with the implementation of the preferred option.
Once again, it is useful to involve stakeholders in this process. Figure 23.4
provides a simple matrix that can be used. All potential risks, however
small or unlikely, are listed and these are then plotted on the matrix
according to the likelihood of their occurrence – from rare to certain,
along with the impact they will have on the project, from minor to
catastrophic.
A risk management strategy must be developed for all risks that fall
into the shaded quadrant. A decision will need to be taken on how other
risks are to be addressed. It may be decided to ignore those that fall into
the ‘rare to unlikely’ and ‘minor to moderate’ quadrant. The cost of
managing these less likely risks will need to be weighed up against the
cost and likelihood of their occurrence.

Conclusion

This chapter has emphasised the need for all health and care managers
and professionals to develop an understanding and competence in plan-
ning the effective use of the resources of their service. This involves
interpretation and management of budgets, understanding the costs of
the service and identifying those that can be managed in line with activ-
ity, implementing an inclusive and continual business planning process to
align available resources with current priorities, and ensuring that
investment in service improvement and growth is supported with a

Figure 23.4 Risk assessment framework

 Managing resources 415

robust business case. The key points raised in this chapter are shown in
the Summary Box.

Summary box

• Involvement of all key stakeholders from the initial stages of business planning
through to implementation will help to gain their commitment to the
objectives and change needed to achieve them.
• Managers can and should monitor and control the direct and variable costs of
their service area or department.
• Historical and incremental budget setting is unlikely to reflect the true costs of
services that are changing.
• Whilst zero based budgeting is preferable to reflect the true activity of a
service, it can be a time-consuming and therefore costly exercise.
• Time spent clarifying and quantifying anticipated benefits and objectives of
proposed service improvements will help to manage expectations.
• It is important to undertake a full cost-benefit exercise for all proposed
service improvements or changes to confirm that the anticipated benefits
outweigh the costs.
• Planning within a framework of reality, i.e. working with the available resources
or realistic expectations of increased resources, will mean that plans can be
realised.
• Business planning is a continuous process in which objectives and plans must
be constantly and regularly revisited to ensure they meet changing needs,
opportunities and challenges.

Self-test exercises

1 Using the framework in Figure 23.1, reflect on a plan that you or a

colleague have written recently for your department or service. Ana-
lyse your plan against each of the four stages. Do you think that you
have included all aspects? How do you think your plan could be
improved?
2 If you currently manage a budget, reflect on how that budget is set?
Using the information in Table 23.1, analyse the advantages and dis-
advantages of the approach that is taken to set your budget currently.
Do you think that it is the most effective approach? What recom-
mendations would you make for setting the budget in the following
year?
3 Using the concepts of cost and cost behaviour (pp. 411–13), analyse
the costs of your service or department identifying those that you can
control and those that are out of your control. Are you effectively
managing the direct and variable costs within your control? Make
recommendations to improve management of those costs.
416 Healthcare management

4 Consider whether the objectives for your service or department are

SMART. If they are not, rewrite them as SMART objectives.
5 Reflect on the process of business planning for your service or
department. Are all key stakeholders involved in the process? What
would you do differently next year to ensure their involvement in and
ownership of the process?

References and further reading

Bailey, D. (2002) The NHS Budget Holders Survival Guide. London: Royal Society
of Medicine Press.
Bean, J. and Hussey, L. (1997a) Business Planning in the Public Sector. London: HB
Publications.
Bean, J. and Hussey, L. (1997b) Finance for Non Financial Public Sector Managers.
London: HB Publications.
Brambleby, P. (1995) A survivor’s guide to programme budgeting. Health Policy,
33(2): 127–45.
Calpin-Davies, P. (1998) A comprehensive business planning approach applied to
healthcare. Nursing Standard, 12(46): 35–41.
Currie, G. (1999) The influence of middle managers in the business planning
process: A case study in the UK NHS. British Journal of Management, 10(2): 141.
Dye, J. (2002) Business planning: A template for success. Clinical Leadership and
Management Review, 16(1): 39–43.
Eagar, K., Grant, P. and Lin, V. (2002) Health Planning: Australian Perspectives.
London: Allen and Unwin.
Finkler, S. (2005) Cost containment. In A. Kovner and J. Knickman (eds) Health
Care Delivery in the United States, 8th edn. New York: Springer.
Finkler, S. A. and Kovner, C. T. (2000). Financial Management for Nurse Managers
and Executives, 2nd edn. Philadelphia: W B Saunders.
Finkler, S. and Ward, D. (1999) Cost Accounting for Health Care Organisations:
Concepts and Applications, 2nd edn. New York: Aspen.
Harrison, J., Thompson, D., Flanagan, H. and Tonks, P. (1994) Beyond the busi-
ness plan. Journal of Health, Organisation and Management, 8(1): 38–45
Jacobs, K. (1998) Costing healthcare: A study of the introduction of cost and
budget reports into a GP association. Management Accounting Research, 8(3).
Kaplan, R. and Norton, D. (1992) The balanced scorecard: Measures that drive
performance. Harvard Business Review on Measuring Corporate Performance,
70(1): 71–9.
Mitton, C. and Donaldson, C. (2004) Health care priority setting: Principles,
practice and challenges. Cost Effectiveness and Resource Allocation, 2(3).
Moullin, M. (2002) Delivering Excellence in Health and Social Care: Quality Excel-
lence and Performance Measurement. Maidenhead: Open University Press.
O’Donnell, C. (2006) A healthcare chief shoots from the hip over patient
choices. Daily Telegraph, 3 January: B5.
Piggot, C.S. (1996) Business Planning for NHS Management. London: Kogan Page.
Puffit, R. (1993) Business Planning and Marketing: A Guide for the Local Government
Cost Centre Manager. London: Longman.
Ratcliffe, J., Donaldson, C. and Macphee, S. (1996) Programme budgeting and
marginal analysis: A case study of maternity services. Journal of Public Health
Medicine, 18(2): 175–82.
 Managing resources 417

Thompson, D. (1996) Business planning in Hong Kong hospitals: The emer-

gence of a seamless health care management process. Health Services Manage-
ment Research, 9(3): 192–207.
Twaddle, S. and Walker, A. (1995) Programme budgeting and marginal analysis –
application within programmes to assist purchasing in Greater Glasgow
Health Board. Health Policy, 33(2): 91–105.
Worthern, J.C. (1992) Business planning: Who, what, when, where, why and
how. Top Health Care Finance, 18(3): 1–8.

Websites and resources

Business case template: www.phac-aspc.gc.ca/pau-uap/fitness/work/case_

template_e.html
www.hfma.org
www.pocketbook.co.uk
www.resource-allocation.com
www.solutionmatrix.com
 24 Managing people: the dynamics
of teamwork
Helen Parker

Introduction

The workforce or ‘people factor’ is recognised as an important organisa-

tional asset in contributing to performance at an individual, team or
organisational level (Senior 1997; Handy 1999). The role of the indi-
vidual managing and developing this asset is distinct from the human
resource (HR) function of organisations, described by Farnham and
Horton (1996) as the ‘professionalization of people management’. Whilst
the HR department provides specialist advice and support to managers in
ensuring good employment practice, workforce development and per-
sonnel support, the direct management responsibility of teams and indi-
viduals is a much closer relationship between the team and the manager
and, unlike the HR function, the overall performance of a team is a
management responsibility.
The role requires an equal mix of management and leadership skills
that on a day-to-day basis are inextricably linked, but in certain situations
will require an increased emphasis of one or the other. Working with
teams and becoming an effective people manager also requires the indi-
vidual manager to have an awareness of their own personal effectiveness
and leadership style and these concepts are explored in earlier chapters.
Healthcare systems undergoing major reform of structures, systems
and workforce, as in the English NHS (DH 2000), require line managers
to have the theoretical understanding and practical skills to lead and
manage teams to work effectively and efficiently. This is on account of
the devolution of corporate objectives to teams of staff across a wider
organisation or service. Barber and Strack (2005) sum this up well by
stating that ‘human resource management is no longer a support function
but a core process for line managers’ and yet investment in training for
these skills is often lacking (Corby 1996; Martinez and Martineau 1998).
Healthcare systems are also complex environments and this is reflected
in their diverse structures, cultures and services. Managing this complex-
ity through the development of teamwork is considered an effective and
efficient model (Ingram and Desombre 1999; West and Markievicz
 Managing people 419

2004). Managers at all levels will find themselves working in and with
teams that include members from different professional, organisational
and cultural backgrounds and successfully managing these potential ten-
sions can be challenging. In addition, most healthcare professionals also
belong to more than one team and can face the pressures of competing
agendas and demands on their time and therefore the management of the
individual requires sensitivity and understanding.
An online search or visit to most academic libraries will reveal the vast
amount of literature now available relating to the theory and practice
of managing or leading teams. Within this literature are interesting
management debates relating to the difference between leadership and
management (Kotter 1990) and between groups and teams (Belbin
2000; Clegg et al. 2005) and further reading on these issues is recom-
mended. This chapter examines the broad theoretical concepts of team
working and the role of the manager in supporting team development,
performance and delivery of agreed objectives.

What is a team?

A simple definition of teams comes from the work of Mohrman et al.

(1995) who assert that a team is a ‘group of individuals who work
together to produce products or deliver services for which they are
mutually accountable’. Higgs (1999) in a literature review of definitions
of teamworking suggests there is a consensus of opinion that teams have
seven common elements and these are outlined in Box 24.1. The elem-
ent of interdependence of team members in achieving team objectives is
an important distinction between a team and a group. A group, as defined
by Clegg et al. (2005), can involve two or more people with common
goals, but they have no shared responsibility and achieving the goals is less
dependent on the members working together. Allen and Hecht (2004)
suggest a group of individuals working together under the title of a team
do not necessarily achieve more than could be achieved by a group of
competent individuals working alone and that empirical evidence shows

Box 24.1 Common elements of team definitions

• Common purpose.
• Interdependence.
• Clarity of roles and contribution.
• Satisfaction from mutual working.
• Mutual and individual accountability.
• Realisation of synergies.
• Empowerment.
Source: Higgs (1999).
420 Healthcare management

it is the psychological benefits or the ‘romance of teams’ that lead people

to assume their team is high performing. Belbin (2000) puts forward the
view that size is the key differentiator between a team and a group and
that when a team reaches a size of more than six to eight then the spread
of individual contributions becomes uneven and other factors play a part
in the team dynamics such as seniority and professional status. Of course,
an appropriately sized team for the task does not automatically create an
effective team. This depends on the quality of the development and
review process explored below.
There is evidence, however, that teams who do work together effect-
ively produce better outcomes for patients, staff and the organisation
(Senior 1997; Borill et al. 2001; Mickan 2005). Examples of this are health
maintenance organisations in America that have moved to a team-based
model of working and developed strategies for empowering their pro-
viders, resulting in significant improvements in the quality and outcomes
of their service both for customers and staff (Wade and Kleiner 1998).
These teams can be seen to display all the elements described in Box 24.1,
but in particular the mutual accountability for performance and patient
satisfaction which provides the motivation of members to maximise their
individual contribution.
As with many other service industries, healthcare professionals have
increasingly needed to work together because of skill specialisation and
complex agendas. Team-based working has implications for those with a
traditional management background where direct one-to-one manage-
ment of all individuals within a management portfolio is the norm.
Those who take the nature of team-based working seriously understand
the concept of teams looking after the individuals within the team, and
the organisations being responsible for enabling the teams. In this way,
direct responsibility for the day-to-day management of individuals is
devolved to a team level enabling them to have greater responsibility
for the way in which they work and utilise resources (see West and
Markiewicz 2004 for further reading on team-based working).

Characteristics of an effective team

So what is it that sets apart an effective team from other teams and what
factors contribute to success or failure? Much has been written on this
subject and warrants more detailed study than can be provided here
(Hackman 1990; West 2003; Belbin 2004; West and Markiewicz 2004)
but is summed up by Parker and Williams (2001: 23) as a team that
‘promotes organisational benefits as well as individual mental health and
job satisfaction’. This recognises that an effective team is not one that just
delivers the organisational objectives but sees team goals and develop-
ment as equal priorities. Research has also demonstrated that effective
teams use healthcare services more efficiently due to effective communi-
cation, processes and use of team and organisational resources (Mickan
2005). This reflects the consensus within the literature of the key
Managing people 421

Box 24.2 Key characteristics of effective teams

• Support from the organisation for team-based working.

• A shared sense of purpose and common goals.
• A shared ownership and accountability for achieving goals.
• A clear and accepted shared leadership model.
• Consensus in decision-making processes.
• A team composition with appropriate skills, resources and experience.
• Mature conflict resolution strategies.
• Clearly defined team roles.
• Clear process for performance management and review.
• A climate of trust, learning and mutual support.

characteristics displayed by effective teams summarised in Box 24.2. A

significant role for managers is to create an environment where these
characteristics can develop and flourish in order to ensure effective team
working is achievable and sustainable. This is discussed further below.

The team as an organisational asset

Teams have an important role and function within the organisation as a

system. Modernist organisation theory includes a conceptual model
of an open system that transforms organisational ‘inputs’ into ‘outputs’
(Hatch 1997). Teams can be described as the ‘transformers’. Figure 24.1

Figure 24.1 The team as transformers

422 Healthcare management

illustrates how teams translate external inputs into agreed objectives and
implementation strategies to successfully deliver organisational outputs.
To do this, each team needs to be equipped with the skills and expertise
to:
• understand the bigger picture of the organisation’s vision, values, prin-
ciples and objectives
• understand other external inputs influencing their environment in
which they operate, including national and local political and eco-
nomic contexts, available resources and different professional and
organisational cultures
• translate the external inputs into a team strategy with agreed goals
using tools such as business planning, skills and resource analysis and
identified team roles
• action a team implementation plan that makes best use of their internal
and external resources, recognising individual skills and competencies
• deliver, monitor and review the team outputs within a performance
management framework.

The team development process

The theory and concepts of team development are well served in the
literature (Adair 1986; Sheard and Kakabadse 2002; West and Markiewicz
2004; Wheelan 2005) with a general consensus that excellent leadership
and management skills are required for teams to become highly effective
and perform well. The team development process takes teams through
various stages that lead to greater autonomy and accountability and the
speed with which teams can move through the various stages depends on
the individuals involved, the team model (see below) and the nature of
management support available. Given the common elements defining
teams, it would be unrealistic to expect a group of people immediately
and confidently to display these elements without some form of managed
development process having occurred. The ‘hands-on’ role of the man-
ager will be determined largely by how far the team has advanced
through the development process, and the extent to which management
responsibilities have been devolved to the team. A skill for managers is
not only to resist the temptation to ‘over-manage’ individuals within the
team but also to ensure that those with delegated team leadership or
management responsibilities have the necessary resources and skills to
undertake this role in an effective manner.
The predictable five stages of team development most commonly
described in the literature were developed by Tuckman (West and
Markiewicz 2004; see Figure 24.2). Tuckman describes the transition
through each stage as a continuum but there is some argument which
suggests that the process is not necessarily sequential and that a team can
move back and forth between the different stages as it responds to
Managing people 423

Figure 24.2 Tuckman’s stages of team development

Source: Adapted from West and Markiewicz (2004).

external and internal influences (Shaw and Barrett-Power 1998; Sheard

and Kakabadse 2002). These stages acknowledge that, like individuals,
teams need to mature and develop their collective and emotional com-
petency before they can perform effectively. The behaviour displayed by
teams during each phase will provide some insight into the appropriate
management support that should be made available to enable teams to
move towards performing well and this is described below.

Forming

This stage is characterised by team anxiety, with individual members

making initial judgements of each other based on background, skills and
personal qualities. They may be reluctant to give much away about them-
selves but spend time eliciting information about other team members at
both personal and professional levels. This is the time when the team
collects information on the external inputs available to them and in
particular the initial leadership role and management responsibilities
expected of them. It could be described as the ‘honeymoon period’ and
individuals are careful not to create conflict or challenge the status quo.

Specific management role

During this stage, the manager should create opportunities for team-
building activities that allow the team to get to know and understand one
another. There should be a clear management brief that clarifies the team
purpose and corporate objectives to be delivered. In supporting the
development of a business plan, the manager should indicate the
resources available and support the allocation of team roles and
responsibilities.

Storming

The honeymoon is over and the team begin to seek clarification of roles
and objectives. Conflict can arise as hidden tensions emerge and team
424 Healthcare management

members begin to feel comfortable enough to challenge individual

behaviours. The team may question some of the initial assumptions made
in the forming stage, particularly in relation to allocated roles and the
team purpose. Some ‘cliques’ may develop as team members seek out
those with similar views. This is not an unhealthy stage of development
and can help the team to build an environment of trust that allows honest
exchange but needs to be managed in a timely and sensitive manner in
order for the team to move onto the next stage.

Specific management role

This is a stage when a manager may need to employ specific conflict
resolution strategies (see Fritchie and Leary 1998). Support will be
required in gaining consensus about team direction, roles and ground
rules. The manager can facilitate meetings that allow honest discussions
and encourage equal participation of all members.

Norming

Having weathered the storm, the team behaviour displays an acceptance

of individual roles and responsibilities and cooperation with each other.
The levels of trust and commitment to the team increase and communi-
cation between members becomes more open. The team settles into an
accepted working pattern, positively contributing to a consensus on team
strategies and goals. Some conflict may still occur but the team manage it
more effectively with clarity in the decision-making process.

Specific management role

The manager needs to ensure that the team behaviour is congruent with
organisational objectives as it is possible for teams to establish a working
pattern that begins to neglect the corporate objectives. At this stage
the manager can agree and facilitate further devolution of management
responsibilities, facilitating the ability for the team to be self-managing.
The manager can also support and encourage innovation by allowing
managed risks to be taken within the team to support learning and
professional development.

Performing

The team demonstrates a strong cohesion and team identity. All roles are
being performed effectively to achieve organisational and team goals.
The team displays the characteristics of an effective team with team
members developing roles flexibly to support innovation and are com-
fortable with self-management. It values the contribution and inter-
dependence of each member and spends time planning and reviewing
 Managing people 425

team outcomes. The team will have also developed effective networks
and working relationships with other teams.

Specific management role

At this stage the manager should have very little active management
input, moving from a supervising to coaching role. The manager should
also be expecting regular feedback of performance and encouraging the
team to influence organisational strategies and policies.

Adjourning

This stage applies to teams whose purpose is time-limited such as project

teams and can be a result of the task being completed or having been
curtailed. Team members may feel a sense of loss or even ‘mourn’ the
ending of the team and can sometimes display behaviour typical of the
storming stage, particularly if the ending is not the result of a successful
conclusion.

Specific management role

The manager facilitates a formal closure allowing team members to cele-
brate success or manage feelings of disappointment or failure. The man-
ager should also support individuals in moving on if there is no further
role for them within the organisation.

Team models

Within an organisation, or across a healthcare economy, different team

models can be observed and should be designed with the team purpose
in mind. The basic and most common models in healthcare can be classi-
fied into three types: project teams, cross-functional teams and work
teams. However, the development and use of information technology
within healthcare is now seeing an increase in the number of virtual
teams, in both clinical and management settings, in a drive to reduce
unnecessary costs associated with face-to-face meetings.

Project teams

Project teams are established with the remit of working on one particular
problem or topic and as such they tend to be non-repetitive in nature and
focused. These teams generally include members from different organisa-
tional functions that take time away from their ‘day job’ to bring their
specific area of expertise to the team collective. As health systems develop
426 Healthcare management

to include more partner organisations the membership of these teams can

represent a variety of professional and organisational cultures that requires
sensitive and capable management to reduce the potential for conflict,
demotivation and inability to achieve the agreed objectives. A differen-
tiating factor between these and other teams is that they are time-limited
and therefore there is a management responsibility to ensure that the
team follows a clear brief and has a system of review in place that clearly
identifies when the job is done. If not, there is a danger that the team
drifts on without any formal closure. Typically, these teams move through
the development process more quickly than other teams in order to
achieve the team objective within a given timescale.

Work teams

These are perhaps the team model most people think about when refer-
ring to team working. They are typically comprised of individuals with a
strong team identity as they work together in that team for most of their
working time and do not have an identified end point. Good examples of
these in healthcare are clinical teams such as community nursing, therapy
or ward teams. These teams can have a varying degree of self-direction
and autonomy of decision making. If supported in their development,
they can collectively take on the management responsibilities of a trad-
itional line manager in determining allocation of roles and resources,
undertaking responsibility for team selection, individual appraisal and
regular monitoring and review of team performance.

Cross-functional teams

Cross-functional teams, as the name suggests, brings individuals together

from the various functions within an organisation to share ideas, informa-
tion and expertise. Typically, these teams are involved in strategic plan-
ning or overseeing organisational processes and can often represent one
or more organisations. This, as Robbins (1984) observes, can mean the
team takes longer to move through the forming and storming phase as
team members take time to feel comfortable with the different profes-
sional and cultural backgrounds. However, this diversity can often mean
these teams are highly influential in determining the corporate vision and
objectives. A challenge in the management of these teams is agreeing the
levels of authority that each team member has in contributing to team
decisions on behalf of their organisation or functional department. Also,
the success of the team can depend on the extent to which the individual
functional departments legitimise the work of the team and are willing to
share information and resources to help it achieve its objectives.
 Managing people 427

Virtual teams

The development of virtual teams in healthcare is on the increase and

poses a unique set of challenges for the manager. These teams are
described as ‘geographically dispersed’ but use information technology
to achieve a common purpose through interdependent tasks (Lipnack
and Stamps 1997). Commonly, they appear in health systems when
members from different organisations working at the clinical interface
using telemedicine or working on a project or task together find the
model of communicating and sharing ideas electronically more efficient
in time and other resources. A specific example is strategic planning
across a health and social care economy where regular face-to-face con-
tact is less crucial to team success than the sharing of expertise and
knowledge. However, it has been identified that these teams still require a
certain element of trust to perform effectively and therefore some face-
to-face contact is required to achieve this (Panteli and Duncan 2004). It
can be argued that because virtual teams are different in various ways, the
traditional management theories do not easily transfer and managers
need to find new methodologies for providing leadership and support
(DeRosa et al. 2004).
These last three teams that are sometimes well established and long
term in nature can often move back and forth between the stages of team
development due to team and organisational changes. They may need
external support to ensure that the development process does not
become stifled, paralysing the team in a particular stage. This is particu-
larly evident for a team stuck in the storming phase. Unable to manage
conflict effectively, team members change frequently due to high levels
of demotivation and job dissatisfaction and lead the team back to the
forming/storming phase in a repetitive cycle. It is at this point that the
team will need external management support to address the areas of
conflict and move on to norm and perform successfully. A more positive
characteristic of these teams is the opportunity they have over a longer
period of time to develop individual professional roles in a way that leads
to innovation and a high level of team competency.

Team roles

A managerial challenge when developing and recruiting teams is to

ensure that they have the necessary collective skills and competencies to
deliver not only the organisation’s business objectives but also to establish
effective teamwork. This is achieved by understanding and developing
the roles acted out within teams. One of the leading researchers and
writers on team roles is Belbin who suggests that each team member
fulfils four different roles:
1 Team role: the tendency to behave, contribute and interrelate with
other team members in a particular way.
428 Healthcare management

2 Functional role: the expected duties and role of a team member accord-
ing to their professional title, e.g. nurse, accountant, surgeon
3 Professional role: the professional qualifications and formal training that
members bring to the team
4 Work role: the tasks and responsibilities, typically management based,
that individuals or the team undertake.
Senior (1997) suggests that people’s functional roles, whilst necessary
for their expertise and knowledge, do not necessarily contribute to the
way in which the team operates, makes decisions and implements
them. This is related to their team role and the way in which they
approach a problem or task. Belbin’s research developed the theory
that there are a limited number of ways in which individuals can
contribute to team working in this way and produced a framework of
nine different team roles (see Table 24.1). Belbin states that ‘a well-
balanced team will encompass all the team roles required for an effect-
ive performance’ and that where team roles are absent the team will
have a lower success rate (Belbin 2000: 114). This has an implication
for the recruitment to teams and may not form part of a traditional
recruitment process.
A management role in enabling individual participation in the team is
ensuring that each member is clear about their role and the associated
responsibilities. A lack of clarity about all the four roles each team
member undertakes can lead to confusion, mistrust and conflict and
potentially impact on corporate and clinical governance.
Belbin’s research also identified that the positive characteristics for
each team role had an opposite ‘weakness’, but that this was no more than
‘the obverse side of the strength’ (Belbin 2003: 49). This is an important
observation for managers and other team members as what could be
perceived as being a negative or obstructive attitude may indeed be a
corresponding weakness that should be seen as a ‘trade-off’ for the
strength. However, Belbin also suggests that some associated weaknesses
can undermine the strength and contribute negatively to the effectiveness
of the team and need to be managed appropriately (see Table 24.1). The
management role is creating an opportunity for individuals to assess their
strengths and weaknesses in this context and discover how to play to their
strengths and develop strategies to manage their weaknesses.

Sustaining effective teams

No manager can make a team perform well but they can create a support-
ive environment and ensure the right conditions are in place to encour-
age the development of the characteristics of effective team working
outlined above. Alongside support in progressing through the team
development process, the manager can facilitate the team to reflect con-
tinually on their role as transformers – how well they are determining
 Managing people 429

Table 24.1 Belbin team roles

Team role Weaknesses

Allowable Not allowable

Plant Ignores details. Too Strong ‘ownership’ of idea

Creative, imaginative, unorthodox. preoccupied to when co-operation with
Solves difficult problems communicate effectively others would yield better
results
Resource investigator Over-optimistic. Loses Letting people down by not
Extrovert, enthusiastic, communicative. interest once initial following up arrangements
Explores opportunities. Develops enthusiasm has passed
contacts
Coordinator Can be seen as manipulative. Taking credit for the effort
Mature, confident, a good chairperson. Delegates personal work of the team
Clarifies goals, promotes decision
making, delegates well
Shaper Can provoke others. Hurts Inability to recover situation
Challenging, dynamic, thrives on people’s feelings with good humour or
pressure. Has the drive and courage to apology
overcome obstacles
Monitor evaluator Lacks drive and ability to Cynicism without logic
Sober, strategic and discerning. Sees all inspire others. Overly
options. Judges accurately critical
Teamworker Indecisive in crunch Avoiding situations that may
Co-operative, mild, perceptive and situations. can be easily entail pressure
diplomatic. Listens, builds, averts friction, influenced
calms the waters
Implementer Somewhat inflexible. Slow Obstructing change
Disciplined, reliable, conservative and to respond to new
efficient. Turns ideas into practical possibilities
actions
Completer Inclined to worry unduly. Obsessional behaviour
Painstaking, conscientious, anxious. Reluctant to delegate. Can
Searches out errors and omissions. be a nitpicker
Delivers on time
Specialist Contributes on only a Ignoring factors outside
Single minded, self-starting, dedicated. narrow front. Dwells on own area of competence
Provides knowledge and skills in rare technicalities. Overlooks the
supply ‘big picture’

Source: Belbin (2003).

their objectives, developing appropriate strategies and processes and

reviewing their outputs. West and Markiewicz (2004) suggest that pro-
moting a continual cycle of reflection, planning and action will stimulate
innovation and improve the performance of the team more effectively
430 Healthcare management

than one-off team building events. However, for clinical and manage-
ment teams with heavy workloads, creating the time and motivation for
reflection can be the biggest challenge. It seems obvious to suggest that a
team cannot develop the characteristics of effective teamworking with-
out regularly setting time aside as a whole team, and yet this is often a
neglected aspect of effective teamwork. Therefore, one of the conditions
to be cultivated is that of ‘organisational permission’ – the explicit devel-
opment of a culture where time out for team reflection, business plan-
ning and appraisal is valued as much as clinical practice and management
tasks.

Focusing on the real issues

It is tempting for teams to spend time and effort focusing on those areas
that are comfortable, avoid conflict and are working well, as opposed to
the aspects of team performance that are the causes of ineffectiveness.
Lencioni (2005) suggests that for teams to be sustainable and perform
well on an ongoing basis, five common dysfunctions need to be
overcome:
• absence of trust
• fear of conflict
• lack of commitment
• avoidance of accountability
• inattention to results.
In order for a team to understand which issues are relevant to them and
causing dysfunction as an effective team, they need to have some method
for analysing critically the way they function and behave. Team perform-
ance reviews enable teams to have constructive feedback and a recognised
tool for assessing team performance is an audit questionnaire that can be
repeated at regular intervals as a benchmark for improvement. A number
of examples are available for use (see Kinlaw 1991; Wheelan 2005; West
and Markiewicz 2004) and follow a similar format of Likert scales to
assess individual member’s agreement or disagreement with statements
that reflect optimum team and organisation practices. The outcome of
these questionnaires can then be used as a basis for a team action plan and
can sometimes highlight tensions in the team that have not surfaced as
illustrated in the case study (Box 24.3).
The outcome of the performance review can then inform a team
development plan that is agreed by all team members and ensures the
team are expending their effort and energies in the areas that will bring
about most change and improve performance. The important role for the
manager is to ensure that the team has the necessary resources to imple-
ment the plan and provide the leadership and support to prevent it
becoming a one-off event that is never repeated.
 Managing people 431

Box 24.3 Implementing audit questionnaires: case study

The author worked with an established team of podiatrists to facilitate effective

teamworking. The audit questionnaire (Team Climate Inventory, West and
Markiewicz 2004) revealed a marked difference of opinion in how effectively
different aspects of team working were performed. In particular, this related to:
contribution to decision making; support for new ideas; and transfer of
information. Initial thoughts were that this was a difference between grades
within the team with senior members not communicating effectively with more
junior members, but analysis demonstrated a difference in feelings between full-
time and part-time staff. When this issue was worked through as part of a team
development plan it transpired that most of the team meetings were held at
times when part-time staff were unavailable and no one in the team had
addressed this. More significantly, resentment in the part-time staff, previously
unexpressed, was able to be managed constructively and a repeat exercise six
months later identified a consensus of high performance.

Conclusion

The Summary Box draws together the key themes from this chapter.
What cannot be overemphasised, however, is the significant role a man-
ager plays in the development of competent individuals and teams. The
‘human factor’ within management is critical to success and yet too often
the appropriate training and development for managers to equip them
with the necessary skills to manage people effectively is neglected in
favour of ‘harder’ management skills. Each manager should critically
assess their own knowledge, skills and ability to facilitate effective team-
work and address any gaps through a personal development plan. Equally
important is for a manager to recognise the importance of investing time
in a team, to actively encourage teams to take time away from the work-
place in order to reflect and grow. Valuing this component of teamwork
contributes perhaps more than anything else to positive transformation
within complex organisations.
432 Healthcare management

Summary box

• The workforce is a significant organisational asset that needs to managed

effectively if the organisation is to be successful.
• Team-based working in organisations is considered an effective and efficient
model for managing the complexity of healthcare services.
• Teams are distinct from groups by their shared accountability for team
performance and the interdependence of each member in achieving objectives.
• Each team member has four distinct roles that form their individual
contribution to the team.
• The team development process and the associated management role are key
factors in developing effective teams.
• Sustaining effective teams is dependent on the organisation investing in time
out for the team to regularly reflect on performance and review their business
plans and team working processes.

Self-test exercises

1 Does your organisation support team working? Are the right

conditions in place to ensure those teams are effective?
2 To which teams do you belong or have responsibility as a line
manager? Are the roles and responsibilities within these teams clearly
defined?
3 Within the teams can you observe the roles described by Belbin? Are
the strengths or weaknesses predominant? What impact does this have
on team performance?
4 Do you feel you have the necessary skills and knowledge to support
team-based working? In what ways can you develop these skills?

References and further reading

Adair, J. (1986) Effective Teambuilding. Aldershot: Gower.

Allen, N. and Hecht, T. (2004) The ‘romance’ of teams: Toward an understanding
of its psychological underpinnings and implications. Journal of Occupational and
Organizational Psychology, 77: 439–61.
Barber, F. and Strack, R. (2005) The surprising economics of a ‘people business’.
Harvard Business Review, 83(6): 80–90.
Belbin, M. (2000) Beyond the Team. Oxford: Butterworth-Heinemann.
Belbin, M. (2003) Team Roles at Work. Oxford: Butterworth-Heinemann.
Belbin, R. (2004) Management Teams: Why They Succeed or Fail, 2nd edn. London:
Elsevier.
Borill, C., West, M., Rees, A., Dawson, J., Shapiro, D., Richards, A., Carletta, J.
and Garrard, S. (2001) The Effectiveness of Health Care Teams in the National
Health Service: Final Report for the Department of Health. London: Department of
Health.
Managing people 433

Clegg, S., Kornberger, M. and Pitsis, T. (2005) Managing and Organisations. An

Introduction to Theory and Practice. London: Sage.
Corby, S. (1996) The National Health Service. In D. Farnham and S. Horton
Managing People in the Public Services. London: Macmillan.
Department of Health (DH, 2000) The NHS Plan – A Modern and Dependable
NHS. London: Department of Health.
DeRosa, D., Hantula, D., Kock, N. and D’Arcy, J. (2004) Trust and leadership
in virtual teamwork: A media naturalness perspective. Human Resource
Management, 43: 219–32.
Farnham, D. and Horton, S. (1996) Managing People in the Public Services. London:
Macmillan.
Fritchie, R. and Leary, M. (1998) Resolving Conflicts in Organisations. London:
Lemos and Crane.
Hackman, J.R. (ed.) (1990) Groups that Work (and those that don’t): Creating
Conditions for Effective Teamwork. San Francisco: Jossey-Bass.
Handy, C. (1999) Understanding Organisations, 4th edn. Harmondsworth:
Penguin.
Hatch, M. (1997) Organization Theory: Modern Symbolic and Postmodern
Perspectives. Oxford: Oxford University Press.
Higgs, M. (1999) Teams and Team Working: What Do We Know? Henley Manage-
ment College Report HWP 9911. Henley: Henley Management College.
Ingram, H. and Desombre, T. (1999) Teamwork in healthcare: Lessons from the
literature and good practice around the world. Journal of Management in Medi-
cine, 13: 15.
Kinlaw, D. (1991) Developing Superior Work Teams: Building Quality and the
Competitive Edge. Lexington, MA: Lexington Books.
Kotter, J. (1990) A Force for Change: How Leadership Differs From Management.
London: Free Press.
Lencioni, P. (2005) Overcoming the Five Dysfunctions of a Team. San Francisco:
Jossey-Bass.
Lipnack, J. and Stamps, J. (1997) Virtual Teams: Reaching Across Space, Time and
Organisations with Technology. New York. Wiley.
Martinez, J. and Martineau, T. (1998) Rethinking human resources: An agenda
for the millennium. Health Policy and Planning, 13: 345–58.
Mickan, S. (2005) Evaluating the effectiveness of health care teams. Australian
Health Review, 29(2): 211–18.
Mohrman, S.A., Cohen, S.G. and Mohrman, A.M. (1995) Designing Team-Based
Organisations. San Francisco: Jossey-Bass.
Panteli, N. and Duncan, E. (2004) Trust and temporary virtual teams: Alternative
explanations and dramaturgical relationships. Information Technology and People,
17(4): 423–40.
Parker, S. and Williams, H. (2001) Effective Teamworking: Reducing the Psychosocial
Risks. Norwich: The Stationery Office.
Robbins, P.R (1984) Essentials of Organisational Behaviour. Harlow: Prentice Hall.
Senior, B. (1997) Team roles and team performance: Is there ‘really’ a link?
Journal of Occupational and Organizational Psychology, 70(3): 241.
Sheard, A.G. and Kakabadse, A.P. (2002) From loose groups to effective teams:
The nine key factors of the team landscape. Journal of Management Development,
21(2): 133–51.
Shaw, K. and Barratt-Power, E. (1998) The effects of diversity on small groups
and performance. Human Relations, 51(10): 1307–25.
Wade, J. and Kleiner, B.H. (1998) Practices of excellent companies in the
434 Healthcare management

managed health care industry. International Journal of Health Care Quality

Assurance, 11(1): 31–5.
West, M. (2003) Effective Teamwork: Practical Lessons from Organisational Research.
Oxford: Blackwell.
West, M. and Markievicz, L. (2004) Building Team-based Working – A Practical
Guide to Organizational Transformation. Oxford: Blackwell.
Wheelan, S.A. (2005) Creating Effective Teams: A Guide for Members and Leaders,
2nd edn. London: Sage.

Websites and resources

Belbin. Home to the team building work of Meredith Belbin and includes
resources and access to online team role inventories: www.belbin.com
Businessballs. Free management and training templates, resources and tools:
www.businessballs.com
EffectiveMeetings. An online resource centre with tools and techniques
for effective meetings and also team development resources:
www.effectivemeetings.com
Leadership through effective HR management. Good people management
in healthcare is everybody’s business – chief executives, board members and
non-executives, HR professionals and staff, general managers, doctors, nurses,
allied health professionals, line managers and frontline staff: www.hrmdev.com
Management Standards Centre. British government recognised standard-
setting body for the management and leadership areas that has online
resources outlining a range of management and leadership functions:
www.management-standards.org.uk
 25 User perspectives and user
involvement
Shirley McIver

Introduction

The relationship between those who provide health services and the
people who use them is a changing one. Most writers link this to other
economic and social changes, such as a rise in consumerism associated
with the growth of market-based societies which produces rising expect-
ations in the context of scarce resources (Abercrombie 1994; Mechanic
1998; Mays 2000). Falling levels of public trust due to increased media
coverage of healthcare scandals, such as the lack of appropriate screening
of blood products in France in the 1980s or the Bristol cardiac surgeons
in the UK, and greater explicitness about the way care is resourced or
rationed have also been cited (Davies 1999). Within this context, many
governments have introduced health policy that increases the importance
of user perspectives and involving users in decisions. The form this health
policy takes varies between countries but there are some common elem-
ents. For example, many European countries have developed policies for
protecting patients’ rights (e.g. Finland) although in some countries these
rights are not enforced by legislation (e.g. the UK Patient’s Charter).
Other countries have carried out national consultation about health pri-
orities (e.g. New Zealand, UK) or have citizen involvement on local
health organisations (e.g. Israel, New Zealand, UK) and in most countries
there have been surveys to find out users’ views (Calnan 1995, 1998).
Few countries make involvement in health decision making a legal
requirement apart from the UK (Health and Social Care Act 2001).
The issue of user involvement is complex but in this chapter it will be
broken down into four main areas. The first section examines evidence
about whether user perspectives are different from those of the health
professionals and managers and what is known about influences on these
perspectives. It also considers the different aims and objectives of user
involvement and the advantages in taking a strategic overview to ensure
that involvement is integrated into the organisation. The second section
looks at the involvement of users in choices about treatment and care,
identifying the reasons why this is considered important and ways of
436 Healthcare management

helping users to make these decisions such as better information,

decision aids and education programmes. The third section examines the
involvement of users in service improvement, looking specifically at the
involvement of users in clinical research, service planning and evaluation.
The importance of the wider context of quality management is
emphasised to overcome a common tendency to collect users’ views
without working out the implications for practice so that changes to
services can be produced as a result. The fourth section concentrates on
the involvement of the public or local communities and identifies a
number of different approaches whilst arguing for the value of com-
munity involvement because it has a clearer conceptual foundation than
other approaches and is supported by the World Health Organisation.

Identifying users and objectives

The first question important to address is ‘why involve users?’ This ques-
tion can be answered in a number of ways. One argument is that health
professionals and service users have different interests. Rudolf Klein, for
example, argues that where there are scarce resources then different
groups will come into conflict about how the resources should be shared
out. Some healthcare systems institutionalise the power of the profes-
sional expert and so this voice is dominant and other voices become
repressed, which results in the interests of users being overlooked (Klein
1984).
There is evidence that health professionals and service users have dif-
ferent views on what are the most important indicators of good quality
care. For example, research by Wensing and colleagues (1996) with
chronically ill patients and general practitioners, utilising panels, focus
group discussions and a written consensus procedure, showed such differ-
ences. These included the finding that general practitioners stressed the
importance of answering patients’ needs, whereas patients wanted to be
listened to and taken seriously. Patients valued involvement in decisions,
whereas general practitioners thought that patients’ capacities should not
be overestimated. The findings led the researchers to comment about
indicators that are relevant for patients but not for general practitioners:
To use such indicators as part of quality improvement initiatives
might therefore cause resistance among general practitioners and
reduce the likelihood of achieving improvement. On the other
hand, as many indicators as possible that patients consider relevant
should be included to get a full picture of patients’ views. Clearly a
balance has to be found. (Wensing et al. 1996: 80)
Another argument is that healthcare decisions cannot be based on
technical information alone but will also include values and beliefs. This
means that those involved will weigh options differently. This can result
in two doctors disagreeing about which treatment is best for a patient.
 User perspectives and user involvement 437

Rakow (2001) found that doctors treating children with congenital heart
disease varied in their preferred management for the same patient, lead-
ing the researcher to comment: ‘Ultimately, it is the outcome and time
preferences of patients (or arguably, of parents when they act as proxy
decision makers) that should determine choice’ (p. 149).
A third argument is that patient involvement in decisions about treat-
ment and care produces better health outcomes. Studies have shown that
patients who are informed are more likely to comply with treatment and
to have improved outcomes (Kaplan et al. 1989), although, as Angela
Coulter (1997) noted, much of this evidence comes from North America
and may not apply to publicly funded healthcare systems.
These arguments have a number of consequences. The first is that
different interests and values can be found amongst different types of
users, as well as between users and health professionals (and also amongst
different types of health professionals). This suggests that there is value in
distinguishing between regular and occasional users, current and poten-
tial users, user advocates and representatives, and carers. It also raises the
importance of differential access to ‘voice’. Disempowered and vulner-
able people are less likely to be able to get their views across.
Another consequence is consideration of the degree of influence that
users should have over decisions. This raises questions about the mechan-
isms and methods for listening to users and involving them in decisions.
Clearly the implications will be different if the decision takes places at the
micro level of an individual, the meso level of a health organisation, or the
macro level of a health system. This presents a complicated set of issues to
consider and so it is useful to summarise them into a framework. Various
analytical frameworks are available (e.g. Charles and DeMaio 1993; Salt-
man 1994) but most make distinctions between the individual patient,
service users in general and the local community, and between the differ-
ent types or focus of involvement. There may also be a connection
between the focus and the method. Table 25.1 provides a summary show-
ing the connections between these different elements.
It is important that managers involved in health and social care organ-
isations are clear about the three different strands of patient, user and
community involvement, understand the arguments for and against
involvement and are aware of some of the difficulties that can occur and
how they might be overcome. These issues will be covered in more depth
in the following three sections. It is also important that a manager new to
the area of user involvement knows where to start. If an organisation does
not have a user involvement strategy, it can be useful to develop one. (The
self-test exercise on pp. 451–2 present some key stages to work through.)

Involving users in choices about treatment and care

There are two main arguments for the importance of involving users in
treatment choices. The first relates to the ethical principle of autonomy
438 Healthcare management

Table 25.1 Framework for examining public and patient involvement

Level Focus Methods

Micro Patient information Different media, link workers

Patient education Patient self-management programmes, self
help groups
Patient choice of provider League tables and performance data,
Facilitators
Patient involvement in treatment and care Patient consultation aids
decisions Decision aids
Voice (complaints) and redress Complaints system
Patient’s advocates
Patient’s rights
Meso Evaluation of local services Patient surveys and other methods
Inspection and scrutiny of services
Planning changes to local services Membership of decision making groups and
Allocating resources locally organisations
Local accountability Role of voluntary and community sector
organisations
Press
Macro Influencing national health policy and National voluntary sector organisations and
government agenda patient committees and groups
Input into clinical research agenda Members of Parliament
Lobbying, protest and direct action

which states that individuals have a right to exercise control over

decisions which affect their lives. In many countries this had led to legis-
lation to support the clinical duty to obtain informed consent for treat-
ment and participation in research. This means that if users believe that
health professionals have abused their right to make informed choices
about their care they can seek redress in court. However, legal standards
and procedures differ between countries. In the UK users can pursue a
case for battery if they feel they have been touched without consent, or
for negligence if they consider that they have received insufficient infor-
mation. The standards are changing in the UK but they are relatively
weak compared to some other countries and the professional view of
what counts as reasonable information usually has precedence (Doyal
2001).
The second argument is that better information and greater involve-
ment in decisions produces improved health outcomes. Most of the
evidence for this has come from the USA and there have not been a
large number of studies. The most well known research is that carried
out by Kaplan and colleagues who ran a series of studies in which
patients with chronic conditions were either given education about
treatment options and helped to ask questions in the consultation, or
were given only basic information. The patients who had received
coaching and support were more involved in the consultation and had
User perspectives and user involvement 439

significantly better health outcomes using measures such as blood sugar

or blood pressure levels, activities of daily living or subjective percep-
tions (Kaplan et al. 1989).
There is strong evidence that users value information. Lack of infor-
mation and poor communication are a frequent source of patient dissatis-
faction (McIver 1993). This means that the argument for improving
information for patients is more straightforward than the argument for
greater participation in treatment decisions. A number of authors have
pointed out that the extent to which users desire involvement will vary
depending on factors such as whether or not it is an emergency situation,
or whether they have a chronic condition and have built up knowledge
about it. Research has also shown that younger and more highly educated
people express a greater desire to be involved in treatment decisions than
older people (Coulter 1997; Charles et al. 1997).
The main arguments against providing patients with better informa-
tion and giving them more opportunity to get involved in treatment and
care decisions are the difficulties and the resource implications. As Angela
Coulter points out:
It is certainly asking a great deal of doctors to expect them to
provide full information about the risks and benefits of all treatment
options, given the short consultation times experienced in most
busy general practice and outpatient clinics and the fact that they
may not have all the facts at their fingertips anyway. (Coulter 1997:
116)
Difficulties lie not just in conveying complex information about the risks
and benefits of one course of action over another, but also in establishing
what is actually happening in a consultation and then changing patterns
of established behaviour. For example, research carried out by Fiona
Stevenson and colleagues (2000) showed that although the majority of
patients in the study believed that talking to their doctors about the
medicines they were taking was useful and that they were encouraged to
do so, observations of the consultations showed that in reality this did not
happen. Even when information was shared, patients’ beliefs were not
generally taken seriously. Solutions to these problems lie in creating
standard treatment information packages that can be adapted for indi-
vidual use, usually know as ‘decision aids’ and providing alternative
methods of informing, educating and supporting users.
There has been an increase in the number of decision aids being con-
structed and tested. A systematic review identified 17 that had been
subject to randomised controlled trials to assess the impact on health
outcomes (O’Connor et al. 1999). A decision aid has the following
features that distinguish it from more general patient information:
• information tailored to patients’ health status
• values classification
• examples of other patients
• guidance or coaching in shared decision making
440 Healthcare management

• different modes of delivery

• not educational materials that inform about health issues in general
way
• not passive informed consent materials
• not designed to promote compliance with recommended option.
Although decision aids may not be useful in all situations, they are valu-
able when the options have major differences in outcomes or complica-
tions, decisions require trade-offs between short-term and long-term
outcomes, one choice can result in a small chance of a grave outcome or
there are marginal differences in outcomes between options. The system-
atic review found that trials were consistent in showing that decision aids
do a better job than usual care in improving patients’ knowledge about
options, reducing their decision conflict, and stimulating patients to take
a more active role in decision making without increasing their anxiety.
The researchers concluded that ‘the largest and most consistent benefit
of decision aids over usual care is better knowledge of options and
outcomes. . . . Decision aids increased active participation in decision
making’ (O’Connor et al. 1999: 733).
There have also been developments in providing alternative ways of
educating and supporting patients. One of these is the chronic disease
self-management programme developed by Professor Kate Lorig and
colleagues at the University of Stanford in the USA. This is a
community-based patient self-management education course that uses
trained people who have a chronic condition to deliver the programme.
It covers topics such as exercise and nutrition, use of cognitive symptom
management techniques, fatigue and sleep management, dealing with
emotions of anger, fear and depression, communication and problem
solving and decision making. A randomised controlled trial showed that
treatment subjects, when compared with controls, demonstrated
improvements at six months in weekly minutes of exercise, frequency of
cognitive symptom management, communications with physicians, self-
reported health, health distress, fatigue, disability and social/role activities
limitations. Also they had fewer hospitalisations and days in hospital, but
no differences were found in physical/pain discomfort or psychological
well-being (Lorig et al. 1999). One of the main ways in which managers
can help in the development of greater user involvement in treatment
and care decisions is to make sure that the organisation is helping clini-
cians to provide good quality information (see self-test exercises p. 451).
The linked task of making sure informed consent procedures are clear
and monitoring the implementation of these procedures is also vital.
Other important steps are providing advocates and interpreters to help
vulnerable people and those who have difficulty communicating, facili-
tating access to self-help and support groups and providing resources to
enable local access to chronic disease self-management programmes.
 User perspectives and user involvement 441

Involving users in service improvement

The literature on quality management emphasises the importance of

focusing on the customer to achieve services that meet their needs. The
health sector has adopted many of the approaches used in manufacturing
and other sectors to manage and improve service quality, including carry-
ing out market research to find out users’ views. The most important
point to be made about involving users in quality improvement initiatives
such as service planning and evaluation is that this involvement must not
be carried out as a separate activity. The quality management context,
including the systems for assuring and accounting for quality in an organ-
isation should be linked together. This principle has been promoted in
many countries (for example, the system of clinical governance in the
UK) and internationally by the World Health Organisation (WHO).
An example of this is the International Alliance for Patient Safety
which has been established by the WHO. There is also evidence that the
importance of the user’s perspective on what comprises good quality care
has gained widespread acceptance. A seminar entitled ‘Through the
Patient’s Eyes’, which was attended by 64 individuals from 29 countries
in Salzburg in 1998, adopted the guiding principle of ‘nothing about me
without me’ and created the country of PeoplePower. This set out a
vision for the future that included the principles of production, govern-
ance and accountability created by patients and health professionals
working closely together (Delbanco et al. 2001).
There are a number of stages in health and social care service devel-
opment when users can be involved, but three are particularly important
and have received most attention:
1 During research to find out which treatments and services are most
effective.
2 During the planning, development and redesign of services.
3 During the evaluation of services.
This section will briefly examine each of these areas in turn before con-
sidering some of the particular difficulties encountered in this sector.
The value of consumer involvement in health research is a relatively
recent activity but one that has been acknowledged internationally
through organisations such as the Cochrane Collaboration, the Con-
sumers Health Forum of Australia and the UK Health Technology
Assessment Programme (Telford et al. 2004). This stretches beyond issues
around the involvement of users as research subjects into their involve-
ment at all stages in the design, conduct and dissemination of clinical and
health services research.
As Charlotte Williamson has pointed out, consumer groups have for
some time lobbied governments and professional bodies over their con-
cerns about the lack of investigation of certain topics, of poorly designed
and unsafe research and a disregard of research evidence from other coun-
tries, and this had some impact. Members of consumer groups have
442 Healthcare management

pressed research organisations to include consumers on their research

committees, or they have initiated research themselves and invited clini-
cians and researchers to join them (Williamson 2001). Most countries
have identified a need for the training of users if they are to be able to
take part in research a meaningful way. A US course called LEAD (Lead-
ership, Education and Advocacy Development) is now seen as a pre-
requisite for women participating in breast cancer research activities
funded by the US Department of Defense and the National Cancer
Institute, and this is being attended by consumers from other countries
such as Australia (Goodare and Lockwood 1999). In the UK, the
Department of Health has set up an organisation called Involve to sup-
port and promote public and user involvement in health and social care
research and this funds research and produces a newsletter. In 2004 a
project to assess training provision and participants’ experiences was car-
ried out and this confirmed the value of training, leading the researchers
to comment: ‘We recommend that training should be an integral, vital
part of any research activity if service user involvement is to be effective
and meaningful’ (Lockey et al. 2004).
User involvement in the planning and development of health services
is also a relatively recent activity. A systematic review of the literature on
this subject identified reports going back to the 1980s (Crawford et al.
2002). Very few of these assessed the subsequent impact on quality of care
although the researchers were careful to point out that the absence of
evidence should not be mistaken for the absence of effect and they were
able to identify a number of improvements to services that resulted from
user involvement (see Box 25.1).
Users can be involved either indirectly or directly in planning and
development. They can be involved indirectly by providing their views
through a market research technique such as focus group discussions,
interviews or a questionnaire survey, which are then taken into consider-
ation along with other information by health professionals making the
planning decisions. Alternatively they can be directly involved on com-
mittees or in workshops where decisions are made. Little research has
been carried out on which methods are the most effectives for involving
users. One useful piece of research was carried out in the UK by the
North of England evidence-based guideline development programme
(van Wersch and Eccles 2001). Four different approaches were tried out:
• including individual patients in guideline development groups
• a ‘one-off’ meeting with patients
• a series of workshops with patients
• including a patient advocate in guideline development groups.
The researchers found that when individual patients were included in
guideline development groups they contributed infrequently and had
problems with the use of technical language. In the ‘one-off’ meeting the
users again had problems with the medical terminology but the group
were interested in the sections on patient education and self-
management. The workshops enabled the patients to have explanations
User perspectives and user involvement 443

Box 25.1 Summary of findings of systematic review on user

involvement in planning and development of health services

• There was evidence of an impact upon the patients involved. Several papers
commented that patients who participated in initiatives welcomed the
opportunity to be involved and that their self-esteem improved as a result of
their contributions, although there were also studies in which patients
described dissatisfaction with the process.
• Among the most frequently reported effects of involving patients was the
production of new or improved sources of information for patients.
• Other changes included making services more accessible, such as extending
opening times, improving transport to treatment units, and improving access
for people with disabilities.
• Several reports described new services being commissioned as a result of the
requests of patients, including advocacy, initiatives aimed at improving
opportunities for employment, complementary medicine, crisis services, and
fertility treatments. Two reports describe how involving patients led to
proposals to close hospitals being modified or abandoned.
• Eight reports stated that initiatives had a more general effect on organisational
attitudes to involving patients, including comments that staff attitudes to
involving patients became more favourable and that the culture of
organisations changed in a way that made them more open to involving
patients.
• Some projects resulted in further initiatives aimed at strengthening the
involvement of patients.
• Concerns were also expressed by researchers who found evidence that
involving patients was used to legitimise decisions that would have been made
whether or not patients supported them.
• Attempts to gauge the overall impact of involving patients had been made by
conducting surveys of participants and retrospectively examining records of
meetings. A survey of the leaders of public involvement initiatives of Health
Systems Agencies in the United States in 1980 asked respondents to judge the
effects of involving patients and 75% of those who replied said that involving
patients had improved the quality of health services and 46% (71) that it had
led to improvements in people’s health.
• Facilitated meetings between workers in primary care and patients with
diabetes in 17 primary care centres in Stockholm in the mid–1980s generated
196 plans for improving patient care. Eighteen months later the extent to
which plans had been implemented was evaluated and 70% (137) of plans had
been implemented.

Source: Crawford et al (2002)

about the technical elements of the guideline development so patients

could then make relevant suggestions but this was relatively resource
intensive. The patient advocate within the guideline development group
was familiar with the terminology, had the confidence to speak and was
able to contribute.
444 Healthcare management

The findings suggest that when users are involved directly on working
groups or committees this should be someone who has either been
trained to speak on behalf of patients or is experienced in doing so. It also
reinforces the message delivered earlier about the importance of investing
in training for users involved in health service activities. The findings
about the effectiveness of patient advocates and representatives is interest-
ing because there is a view amongst health professionals that such people
lose their amateur status and so become unrepresentative of the majority
of users. However, this is only a problem if the role of the user on the
committee or group is unclear. Is the person speaking on behalf of a
particular group of users (for example, they may have been elected by a
voluntary sector organisation to represent the interests of that group), or
are they bringing information summarised from research into users’
views, or are they speaking from their own experience of using services?
There is evidence that patients like patient advocates to speak on their
behalf. A questionnaire survey of patients carried out in Scotland by
Entwistle and colleagues (2003) asked which of three methods –
patient’s representatives, telephone comments line or a feedback website
– they preferred. Although many indicated they would be reluctant to
approach their healthcare providers about perceived shortfalls in care
because they lacked confidence that they would get any response, more
supported the patient representative method than the other methods.
Of the three main stages of health and social care service development,
the one with the longest history is that of user evaluation of services.
Patient and user ‘satisfaction’ surveys have been carried out in many
countries since the 1970s. Despite this, ‘satisfaction’ is a complex and
little understood concept in the health sector. As Williams (1994) writes:
‘We do not currently know how patients evaluate and, because of this,
inferences made from many satisfaction surveys may not accurately
embody the true beliefs of service users.’
Some of this complexity is due to the different types of information
that can be collected from users. Wensing and Elwyn (2002) summarise
this along two dimensions: whether users are evaluating their own health
outcome or whether they are evaluating the service provided, and
whether they are reporting their experiences or rating them in some way.
There has been progress in recent years, however. A systematic review of
the literature on the measurement of satisfaction with healthcare and the
implications for practice was carried out by Crow et al. (2002) This
provides a good summary of the key issues and makes a number of
methodological recommendations. There is also a survey advice centre
for the UK NHS patient survey programme run by Picker Institute
Europe, an organisation that produces a newsletter dedicated to sharing
good practice on improving the patient’s experience.
One of the most important difficulties experienced in the health and
social care sector is that of involving groups of people who are vulnerable
or who have communication problems, such as those with learning
disabilities, autism or dementia, but examples can be found:
 User perspectives and user involvement 445

• Researchers at the Norah Fry Research Centre at the University of

Bristol, UK involved service users with learning difficulties in a project
on gender issues in service provision that used a questionnaire survey
approach (Towsley 2000).
• The Alzheimer’s Society won an award in 2001 for its involvement of
users in all aspects of its research programme using a Consumer
Network approach.
• Potter and Whittaker (2001) explored the way in which children with
a diagnosis of autism communicated and how the environment could
enable them.
Tailoring approaches to capture the views of these groups of people is still
a methodologically underdeveloped area but the research so far suggests
that indirect approaches to questions using stimuli such as singing, pic-
tures, reminiscence and questions during everyday activities work best,
although advocates, interpreters and people with special skills may be
needed (McIver 2005). A key task for managers lies in making sure that
patient surveys and similar activities designed to get users’ views about
services are linked to other mechanisms to assure and improve the quality
of services. A common failing of patient surveys has been an inability to
use the findings to improve services (see self-test exercises p. 452).

Involving potential users and communities

This final section examines the involvement of ‘the public’ or local

communities in health and social care decisions. This can encompass a
range of different activities at both the national and local level such as: lay
representation on professional bodies or national inspectorates; national
consultation exercises; lay representation on the governing boards of local
organisations; and consultation with local communities. Three main
types of approaches can be identified: public representation on commit-
tees and governing boards; market research and opinion polls; and com-
munity involvement. These approaches have different aims and serve
different purposes although there is a general lack of clarity around the
role and function of involving the public in these different ways. The
most developed approach is that of community involvement and several
arguments can be put forward for why it is important.
First, it can be seen as a basic right for citizens. Many countries have
signed up to the World Health Organisation Alma-Ata Declaration 1978
that stated: ‘the people have the right and duty to participate individually
and collectively in the planning and implementation of their health care’.
A second reason linked to this is that it gives people an enhanced sense
of self-esteem and capacity to control their own lives and reaffirms the
role of people in managing their own health (Annett and Nickson 1991).
More typically, health services providers have seen community consult-
ation as a way of finding out local needs and priorities for resource
446 Healthcare management

allocation. Associated with this is the fact that involvement can enhance
accountability to local communities through more open decision making
and participative democracy. Community involvement is a rather broad
and general concept that can include a wide range of activities. A useful
definition is provided by Zakus and Lysack (1998: 2):
Community or public participation in health, sometimes called
citizen or consumer involvement, may be defined as the process by
which members of the community, either individually or collect-
ively and with varying levels of commitment:
(a) develop the capability to assume greater responsibility for assess-
ing their health needs and problems
(b) plan and then act to implement their solutions
(c) create and maintain organisations in support of these efforts
(d) evaluate the effects and bring about necessary adjustments in
goals and programmes on an ongoing basis
Community participation is therefore a strategy that provides
people with the sense that they can solve their problems through
careful reflection and collective action.
This is a helpful definition because it makes very clear the different stages
involved. That is, it emphasises the fact that local communities are not
necessarily aware of their own health needs and so health planners cannot
expect to find out needs by just asking people. Public health doctors and
others will have information that they can share with local communities
to help inform their discussions. It also identifies the importance of estab-
lishing and resourcing community organisations that can support com-
munities during the process of assessing, identifying and implementing
solutions. Finally, it highlights the need for regular evaluation to assess the
impact of activities and measure progress towards objectives.
One of the advantages of taking a community development approach
is that it provides a framework that can encompass a range of methods for
listening to the views of local people and can coordinate this information
collection. A systematic literature review to establish evidence for what is
successful in community involvement identified the following key
elements (Home Office 2004):
1 Understand the geography and socio-demographic features of the
local community, identify local circumstances that may present
barriers (e.g. transport) and act to overcome these.
2 Engage the community in project management.
3 Develop targeted and universal strategies to reach all members of the
local community.
4 Engage in training and capacity building.
5 Provide information and publicity.
6 Evaluate progress and identify barriers.
7 Work in partnership with local voluntary sector and other agencies.
The involvement of the public in priority setting and rationing in health-
care has become of particular interest in many countries in recent years.
User perspectives and user involvement 447

A range of different methods has been used including surveys, meetings,

focus groups and panels and rapid appraisal, as well as various techniques
to elicit values or rank and rate different options (Mullen and Spurgeon
2000). A number of deliberative methods have also been piloted. The
most well known is the citizens’ jury or planning cell, an approach used
in the USA, UK and Europe to involve citizens in planning decisions
(Stewart et al. 1994). The key features of deliberative methods are: the
provision of information to participants in a way that does not rely on a
high literacy level (e.g. through presentations or role play); the opportun-
ity for participants to ask questions to get the information they need; time
for discussion and debate between participants to enable them to work
through the implications of the information. The assumption is that this
approach will enable participants to develop a more informed view and
that this will be more stable than that produced in response to questions
in a survey (Dolan et al. 1999). Box 25.2 summarises the findings of an
evaluation of citizens’ juries in the UK.
An important task for managers is to make sure that community
involvement takes places within a framework that improves networking
and coordination between different agencies in order to minimise the
duplication of information collection and maximise the effective use of
resources. A difficult but necessary aspect of this is to assess the impact

Box 25.2 Findings from an evaluation of citizens’ juries in healthcare

in the UK

The citizens’ juries enabled local people to contribute to debates about funding
priorities within service areas for five reasons:
1 Clarity and focus: The method requires a specific question. This ensures that
there is a focus to the issue which enhances a person’s ability to get to grips with
it. Also jurors were given a definite task to perform so expectations were clear.
2 Information provision: Witness presentations enable jurors of all literacy levels
to hear about the issues in an interesting and accessible way. Questioning of
witnesses allows people to get information relevant to their needs.
3 Discussion and deliberation: Time allowed for discussion in small and large
groups enabled people to exchange views, share ideas and work together as a
team. This enhanced their understanding of issues, broadened their
perspective and maintained their commitment to working hard on the task.
4 Recommendations: The process enabled local people to formulate a number of
practical recommendations about what action the organisation should take to
address the issue. This was useful for the organisation because the implications
were clear and it facilitated project planning.
5 Accountability: The citizens’ jury process made clear what was expected of the
organisation. The recommendations went to a public board meeting and this
made sure they got onto the organisation’s agenda. Local publicity and
observers ensured that the organisation had to respond.
Source: McIver (1998).
448 Healthcare management

of community involvement activities to measure progress against goals

and account for the use of resources (see self-test exercises p. 452 on
measuring the impact of community involvement).

Conclusion

Managers can have an important role to play in facilitating the develop-

ment of user involvement through making sure that a strategic approach
is adopted that covers different aspects of involvement, including patient
involvement in choice of treatment, user involvement in service
improvement and community involvement in tackling local health prob-
lems. They can help to create an organisation that values the user’s voice
as an integral part of its activities and one which learns from its experi-
ences and develops the skills of its staff by evaluating user involvement
initiatives and mechanisms.

Self-test exercises

Stages in developing a user involvement strategy

1 Has there been any mapping of current user involvement activities?

What kind of information is being produced for users? Is it co-
ordinated? Is there user involvement in service improvement? Are
there mechanisms to ensure users’ views are heard at all levels in the
organisation? How diverse is the range of views heard? Are some
groups of users overlooked, such as the vulnerable, children or people
with communication difficulties? What relationships exist with local
communities? Are there networks linking different organisations
representing users and community interests?
2 How would you analyse the internal environment? Who would you
involve? What are the strengths and weaknesses of the current mechan-
isms to involve users?
3 How would you analyse the external environment? What are the
pressures supporting user involvement or creating barriers to it?
4 What other information would be useful? Policy documents
and/or evidence of what works? What are other similar organisations
doing?
5 How would you identify priorities from the list of possible activities?
6 How would you develop a consensus amongst stakeholders on what
are the priorities for action?
7 How would you identify the resources to address the priorities?
8 Who will lead on developing and overseeing the implementation of an
action plan?
 User perspectives and user involvement 449

Summary box

• Different interests and values can be found amongst different types of users, as
well as between users and health professionals so it is important to distinguish
between groups of users to make sure that they are involved.
• Disempowered and vulnerable people are less likely to be able to get their
views across.
• It is important that managers involved in health and social care organisations
are clear about the three different strands of patient, user and community
involvement, understand the arguments for and against involvement and are
aware of some of the difficulties that can occur and how they might be
overcome.
• There is strong evidence that users want better health information because
lack of information and poor communication are a frequent source of patient
dissatisfaction. This means that the argument for improving information for
patients is clearer than the argument for greater participation in treatment
decisions and is a good place to begin to develop patient choice.
• Decision aids and self-management programmes are ways of helping users to
become more informed and better able to take part in decisions about choice
of treatment.
• There are many examples of ways in which users have been involved in clinical
research, service planning and evaluation, but it is important that this
involvement is set within the wider context of quality management so that
improvements in services can be produced as a result
• The public have been involved as members of committees and groups at both
national and local level through market research techniques and opinion polls
and through deliberative methods which are thought to facilitate the
development of a more informed view.
• Many writers argue that a community involvement approach should be
adopted because this is supported by the World Health Organisation and
concentrates on the benefits brought by enabling people to solve their own
problems through collective action.

9 Is there a way of reporting on the progress of the action plan to the

governing board of the organisation?
10 When will progress against achievements be assessed?

Checklist for developing good quality information

1 Identify sources of up-to-date evidence that can be used in the

information.
2 Find out from users what they want to know and when they need to
know it.
3 Review what information is already available and look for sources that
might be adapted or used.
4 Work with clinicians and users to develop draft information and test it
450 Healthcare management

out on users, improving the clarity of the language and presentation as

required.
5 Think about using a variety of different media to make it accessible to
different types of users at different times.
6 Make sure that all professionals involved are referring to the same
information and are consistent in what they say to users.
7 Consider whether the information could be taken further to educate
patients to better manage their condition and if so look for or set up a
self-management programme.
8 Consider whether users might benefit from information about sources
of support.
9 Evaluate the effectiveness of the information in fulfilling the aims.

Using the findings of patient surveys to improve services

Your organisation wants to listen to the views of its service users in

order to improve services and it recently carried out a self-completion
questionnaire survey of patients about their satisfaction with services.
Unfortunately the response rate was only 10% and the questionnaires
have not been analysed as the project manager is on extended sick
leave. You have been given the job of working out what to do next.
1 What might be reasons why the response rate was so low?
2 Would it be worth analysing the findings?
3 What could you do to increase the response rate in future surveys?
4 What other methods could you adopt to get users’ views?
5 What other sources of information could you use together with the
findings to help you identify areas that might be causing problems for
users?
6 What would you do when you had identified a problem area? What
method could you adopt to investigate the root cause of the problem?
7 How would you develop ideas for overcoming the problem? Who
would you involve?
8 How would you report back to users about what had been the findings
and impact of the survey?

Measuring the impact of community involvement activities

1 How would you measure the impact on services (e.g. changes in

uptake, new services being offered, changes in location of services)?
2 How would you measure the impact on service users (e.g. greater or
more appropriate use of services, more diverse range of users, greater
willingness to get involved or provide their views)?
3 How would you measure the impact on staff (e.g. greater staff satisfac-
tion, less sickness leave)?
4 How would you measure the effect on other agencies (e.g. better
 User perspectives and user involvement 451

networking, more appropriate referrals from and to other agencies,

greater level of activities)?
5 How would you measure the impact on community health (e.g.
greater uptake in screening programmes and other services; greater
uptake of sport, leisure and recreation facilities; improvements to the
local environment, decline in crime rates)?

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Calnan, M. (1998) The patient’s perspective. International Journal of Technology
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Charles, C. and DeMaio, S. (1993) Lay participation in health care decision
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 26 Quality improvement in
healthcare
Ruth Boaden

Introduction

‘Quality’ is a term widely used not only within healthcare but throughout
society, with numerous references to the quality of care, commissioning,
the use of the primary care ‘Quality and Outcomes Framework’, the
regulation of quality of care and the impact of IT on quality and service
user expectations of quality in this book alone. However, the study and
development of quality is often hampered by lack of clarity of definition.
Diverse meanings of the term make it both a ‘seductive and slippery
philosophy of management’ (Wilkinson and Willmott 1995).
Within the healthcare field, the dominance of the medical profession
with its own perspective on quality means that ‘quality has become
a battleground on which professions compete for ownership and
definition of quality’ (Øvretveit 1997). The medical profession has trad-
itionally ‘owned’ quality and utilised its own professional approaches to
assuring and regulating it. The rise of quality improvement as something
that involves more than the clinical professions has therefore led to ‘the
quality movement being equated with a change in power or a bid for
power by managers within European health care systems’ (Øvretveit
1997).
One early pioneer of healthcare quality was Donabedian (1966) whose
research and writings were important foundation for other develop-
ments, although some would argue that healthcare quality has been an
issue since Florence Nightingale’s time (Stiles and Mick 1994). Def-
initions of quality in healthcare abound (Reeves and Bednar 1994), and as
the concept has been formalised within the healthcare field, a suite of
healthcare-related definitions and ‘dimensions of quality’ have developed
(see Table 26.1).
Quality can be viewed from various perspectives, and whilst patients
may not feel qualified to judge the technical quality of healthcare ‘they
assess their healthcare by other dimensions which reflect what they per-
sonally value’ (Kenagy et al. 1999). The concept of ‘quality’ outside
healthcare was pioneered by Shewhart and his work on statistical process
 Quality improvement in healthcare 455

Table 26.1 Definitions of healthcare quality

Donabedian (1987) Maxwell (1984) Langley et al. (1996) Institute of Medicine and
Committee on Quality
Health Care in America
(2001)

• Manner in which • Access to services • Performance • Safety

practitioner manages • Relevance to need • Features • Effectiveness
the personal • Effectiveness • Time • Patient-centredness
interaction with the • Equity • Reliability • Timeliness
patient • Social acceptability • Durability • Efficiency
• Patient’s own • Efficiency and • Uniformity • Equity
contribution to care economy. • Consistency
• Amenities of the • Serviceability;
settings where care is • Aesthetics
provided • Personal interaction
• Facility in access to • Flexibility
care • Harmlessness
• Social distribution of • Perceived quality
access • Usability
• Social distribution of
health improvements
attributable to care

control (SPC) in the 1930s (Shewhart 1931). However, many academic

fields of study have contributed to the study of quality, including services
marketing, organisation studies, human resource management and organ-
isational behaviour. Recent developments into patient safety as one
aspect of quality are also multidisciplinary in approach (Walshe and
Boaden 2006).
There is no doubt that there is an increased focus on quality in all
sectors, and particularly in healthcare. However, there is a wide variety of
approaches that may be used to improve quality. While these may not be
mutually exclusive, there is little guidance on which approaches may be
appropriate in differing circumstances. It has been suggested that a num-
ber of approaches may be needed: ‘give attention to many different fac-
tors and use multiple strategies’ (Grol et al. 2004), and these are developed
from very differing perspectives on organisational and individual
behaviour (summarised by Grol et al. 2004). (See Table 26.2.)

The development of quality improvement

This section describes the development of the quality improvement

‘movement’ in general, with reference throughout to where the
approaches have been applied to healthcare. These improvement
approaches have been targeted at improving organisations and inter-
actions within them.
456 Healthcare management

Table 26.2 Approaches to quality improvement

Approaches to quality improvement may have a focus on changing:
• organisations
• professionals
• interactions between participants in the system
Quality may be controlled and improved by:
• self-regulation amongst professionals (see Chapter 19)
• external control, regulation and incentives (see Chapter 19)
• patient power, which may be exercised through market forces (see Chapter 25)
• reducing variation and waste in organisational processes
Quality may be improved from:
• the top down
• the bottom up
• the outside in (see Chapter 19)

The gurus

There are a number of key figures who contributed to the development

of quality improvement in the west, often referred to as quality ‘gurus’
(Dale 2003).
• W. E. Deming was an American who first went to Japan in 1947 and
developed a 14-point approach (Deming 1986) for his management
philosophy for improving quality and changing organisational culture.
He was also responsible for developing the concept of the Plan–Do–
Check–Action (PDCA) cycle. It is argued that his ideas influenced the
development of the field of strategic management both directly and
indirectly (Vinzant and Vinzant 1999).
• Joseph Juran focused on the managerial aspects of implementing quality
(Juran 1951). His approach can be summarised as: ‘Quality, through a
reduction in statistical variation, improves productivity and competi-
tive position.’ He promoted a trilogy of quality planning, quality con-
trol and quality improvement, and maintained that providing customer
satisfaction must be the chief operating goal (Nielsen et al. 2004).
• Philip Crosby was a American management consultant whose phil-
osophy is summarised as ‘higher quality reduces costs and raises profit’,
and who defined quality as ‘conformance to requirements’. He too
had 14 steps to quality and his ideas were very appealing to both
manufacturing and service organisations. He is best known for the
concepts of ‘do it right first time’ and ‘zero defects’ and believed that
management had to set the tone for quality within an organisation.
• Armand Feigenbaum defined quality as a way of managing (rather than a
series of technical projects) and the responsibility of everyone. His
major contribution was the categorisation of quality costs into three:
appraisal, prevention and failure, and his insistence that management
and leadership are essential for quality improvement. His work has
been described as relevant to healthcare (Berwick 1989).
Quality improvement in healthcare 457

There are both similarities and differences between these approaches and
there is no clear overarching philosophy of quality improvement,
although the key points are as follows (Bendell et al. 1995):
1 Management commitment and employee awareness are essential
(Deming).
2 Actions need to be planned and prioritised (Juran).
3 Teamwork plays a vital part (Ishikawa who pioneered the quality circle
concept).
4 Tools and techniques are needed (e.g. seven quality control tools
promoted by Ishikawa).
5 Management tools/approaches will also be needed (Feigenbaum).
6 Customer focus is needed (Deming).
Nielsen et al. (2004) asked the question ‘Can the gurus’ concepts cure
healthcare?’ Although their focus was on the overall philosophy rather
than the use of individual tools, they concluded:
• Crosby would emphasise the role of leadership in pursuing zero
defects.
• Deming would emphasise transformation (as he did in the fourteenth
of his 14 points (1986) whilst being disappointed at the reactive
behaviour of healthcare organisations and individuals with ‘far too
little pursuit of constant improvement’ (Nielsen et al. 2004).
• Feigenbaum would focus on clearer identification of the customer and
the application of evidence-based medicine.
• Juran’s emphasis would be on building quality into processes from the
start (what he termed ‘quality planning’).

Total quality management

The most popular term for an overall organisational approach to quality

improvement is ‘total quality management’ (TQM), whose common
themes may be summarised; (Berwick et al. 1992, Hackman and Wage-
man 1995) as follows:
• Organisational success depends on meeting customer needs, including
internal customers.
• Quality is an effect caused by the processes within the organisation
which are complex but understandable.
• Most human beings engaged in work are intrinsically motivated to try
hard and do well.
• Simple statistical methods linked with careful data collection can yield
powerful insights into the causes of problems within processes.
Just as the term ‘quality’ has a variety of meanings, there is a confusion
of terminology in this area, with not only TQM used but also ‘con-
tinuous quality improvement’ (CQI; McLaughlin and Simpson 1999)
and ‘total quality improvement’ (TQI); Iles and Sutherland 2001),
458 Healthcare management

Table 26.3 Principles of quality management

1 Productive work is accomplished through processes.
2 Sound customer–supplier relationships are absolutely necessary for sound quality management.
3 The main source of quality defects is problems in the process.
4 Poor quality is costly.
5 Understanding the variability of processes is a key to improving quality.
6 Quality control should focus on the most vital processes.
7 The modern approach to quality is thoroughly grounded in scientific and statistical thinking.
8 Total employee involvement is crucial.
9 New organisational structures can help achieve quality improvement.
10 Quality management employs three basic, closely interrelated activities: quality planning, quality
control and quality improvement.

although such terms appear to be interchangeable in practice. Another

view with a specific healthcare focus is found in (Berwick et al. 1990/
2002) who describe the principles of ‘quality management’ (see Table
26.3).
These principles of quality management have been applied in the US
healthcare system (see Box 26.1 and Table 26.4).

Box 26.1 Influences on quality in healthcare: Institute for Health

Improvement (IHI)

Established in 1991 as ‘a not-for-profit organization driving the improvement of

health by advancing the quality and value of health care . . . a reliable source of
energy, knowledge, and support for a never-ending campaign to improve health
care worldwide. The Institute helps accelerate change in health care by cultivating
promising concepts for improving patient care and turning those ideas into
action’, IHI has had influence not only in the USA but also in the UK. Its work has
developed since its establishment to educate, encourage healthcare staff to work
together in collaboratives, to redesign processes and now to promote a quality
improvement ‘movement’. The president of IHI, Don Berwick, has authored a
number of books and articles on quality improvement, including Curing Health
Care (Berwick et al. 1990) which was reissued in 2002 with a Preface reflecting on
‘ten things we know now that we wish we had known then’. These provide an
interesting summary of the progress of thinking about quality improvement in
healthcare over this period.

Widening the scope of quality improvement

Until the 1980s most of the emphasis on quality improvement was within
manufacturing industry, but then the field of ‘service quality’ developed
(Groonroos 1984; Berry et al. 1985), with the widespread use of
the SERVQUAL questionnaire (Parasuraman et al. 1988), as well as
 Quality improvement in healthcare 459

Table 26.4 If only we had known then what we know now

Ten key lessons for quality What we know now (Berwick et al. 1990/2002)
improvement (Berwick et al.
1990/2002)

Quality improvement tools can • Spending too much time analysing processes can slow the pace
work in healthcare of change.
• Teams can enter the PDSA cycle in several places.
• Tools are important in their place, but not a very good entry
point for improvement: ‘Teams can unconsciously use the tools
as a way to delay or avoid the discomfort of taking action.’
Cross-functional teams are • Getting action is more important than getting buy-in.
valuable in improving healthcare • The process owner concept from industry is helpful here.
processes
Improvement is a matter of • The shift of blame from individuals to processes is not 100%.
changing the process, not • There are limits to a blame-free culture, but perhaps not to a
blaming the people process-minded culture.
Data useful for quality • Measurement is very difficult for healthcare, and healthcare is far
improvement abound in behind.
healthcare • Balanced scorecards are helpful.
• SPC has enormous potential with ‘hundreds of as-yet-untapped
applications’.
• Medical records need modernising to enable better public health
data.
• IT is key.
Quality improvement methods • There need to be consequences for not being involved in
are fun to use improvement (not improving should not be an option).
Costs of poor quality are high • Waste is pervasive in healthcare; improvement is the best way to
and savings are within reach save money.
Involving doctors is difficult • Balance is important.
• Doctors are not well prepared to lead people.
• Doctors can (and are) learning new skills to supplement their
medical training, not to replace it.
Training needs arise early • Healthcare lacks a training infrastructure.
• The argument here refers to professional boundaries.
Non-clinical processes draw early • Clinical outcomes are critical.
attention • This is the ‘core business’ of healthcare and focus on them
achieves buy-in from all health professionals.
Healthcare organisations may • Definitions of quality in healthcare must include the whole
need a broader definition of patient experience – not just clinical outcomes and costs.
quality • The Institute of Medicine’s six aims for improvement are cited
here (2001).
In healthcare, as in industry, the • The executive leader doesn’t always have to be the driver of
fate of quality improvement is change.
first of all in the hands of leaders • This is especially true at the start of improvement, but achieving
system-level improvement does require senior commitment.
460 Healthcare management

promotion of the concept of the ‘moment of truth’ and an emphasis on

service recovery. Many of these concepts are applicable to the provision
of healthcare as a service, although they have not been extensively used.
However, a tension between ‘hard’ (systems) approaches and ‘soft’
(people/culture) issues (Wilkinson 1992) also developed at this time,
partly in response to the apparent ‘failure’ of quality improvement
(whichever term was used) to achieve sustained improvements in organ-
isational performance. Criticism of the quality improvement literature
came from those who described it as ‘an evangelical line that excludes
traditions and empirical data that fail to confirm its faith’ (Kerfoot and
Knights 1995); a view that could be justified because of much of the
prescriptive research labelled as ‘quality’ (Wilkinson and Willmott 1995).
However, this led to research from the 1990s that offers additional per-
spectives on quality (Hackman and Wageman 1995; Webb 1995) whose
findings are perhaps more applicable to the complex world of healthcare
and in particular focus on individuals, their motivation, behaviour and
interaction and the way in which this affects quality.
Achievements in the area of quality improvement were increasingly
the subject of national ‘awards’. The Deming Application Prize (Japan)
led to the development of the Malcolm Baldrige National Quality Award
(USA) and the European Foundation for Quality Management (EFQM)
Award/Excellence Model (Europe), with its associated national and
sector-specific derivatives. Quality was increasingly assessed by organisa-
tions themselves (self-assessment) as a means of improvement, and these
models attempted to integrate the ‘hard’ and ‘soft’ factors, with the term
‘quality’ being replaced by ‘excellence’. There is specific guidance for US
organisations in healthcare wishing to apply for the Baldrige Award
(Baldrige National Quality Program 2005) and the European Excellence
award has a ‘public sector’ category.

Quality improvement techniques

This section describes the most commonly used quality improvement

techniques and their application in healthcare. Although there is con-
siderable debate about whether techniques are any use on their own
(‘teaching tools very rarely results in a change to the system’, Seddon
2005), the empirical evidence is that much quality improvement in
healthcare has been carried out using these techniques.

Plan–Do–Study–Act model

The Plan–Do–Study–Act (PDSA) model was first formally proposed in

healthcare by (Langley et al. 1996) as part of the ‘Model for Improve-
ment’ (see Figure 26.1) to improve processes and therefore outcomes
(Deming 1986). This links the PDSA cycle with three key questions and
Quality improvement in healthcare 461

is often referred to as rapid-cycle improvement (Horton 2004), where a

number of small PDSA cycles take place one after the other, similar to a
learning approach (e.g. Kolb 1984; Schon 1988). The model for
improvement can be regarded as a philosophy rather than an individual
technique and one which can be used as an overarching framework
within which other improvement techniques can be utilised. It is, how-
ever, a continuous (incremental) improvement approach, rather than a
breakthrough (transformational) approach, and this may be in conflict
with current management styles or past experience of improvement
(Walley and Gowland 2004).
The PDSA cycle is a key part of the collaborative approach which was
one of the first large-scale applications of PDSA in healthcare, initiated by
IHI and then developed in the NHS. The approach involves a number of
teams with a common interest (e.g. improving cancer services) working
together in a structured way with a group of national experts for a period
of around 12 to 18 months to plan, implement and monitor improve-
ments in care. Use of the PDSA model with NHS collaboratives has been
reported (Kerr et al. 2002) to facilitate the use of teamwork to make
improvements, as well as provide a framework for the application of
effective measurement and use of improvement tools. However, there is
to date insufficient evidence to determine whether collaboratives are
more or less cost effective in making and spreading improvements than
other approaches (Øvretveit et al. 2002), or to assess spread and sustain-
ability. The PDSA cycle is an adaptation of the Plan–Do–Check–Act
(PDCA) cycle developed by Deming (Deming 1986) and termed by him
the Shewhart cycle (Dale 2003).

Statistical process control

The roots of statistical process control (SPC) can be traced to work in the
1920s in Bell Laboratories (Shewhart 1931), where Shewhart sought to
identify the difference between ‘natural’ variation in processes – termed
‘common cause’ – and that which could be controlled – ‘special’ or
‘assignable’ cause variation. Processes that exhibited only common cause
variation were said to be in statistical control. One of the many significant
features of this work, which is still used in basically the same form today,
is that ‘the management of quality acquired a scientific and statistical
foundation’ and in healthcare it is often regarded as a tool for measure-
ment (Plsek 1999).
The statistical approach has been applied in a variety of healthcare
areas (Benneyan et al. 2003), (Marshall et al. 2004a), although it is not
promoted centrally within the NHS. The use of control charts (the way
in which SPC data is displayed) is viewed as helping to decide how to
improve – whether to search for special causes (if the process is out of
control) or work on more fundamental process redesign (if the process is
in control). Charts can also be used to monitor improvements over time
(Benneyan et al. 2003). A study of the effect of presenting data as league
462 Healthcare management

tables or control charts for the purposes of decision making (Marshall et

al. 2004b) concluded that fewer outliers for further investigation are
identified when data is presented in control charts.
There is evidence that discussions about the applications of SPC in
healthcare started in the early 1990s (Berwick 1991) and it is certain that
there have been a number of applications in US healthcare for some
while (Mohammed et al. 2001), as well as some debate (Benneyan and
Kaminsky 1995). Mohammed (2004) reports the results of his search on
Medline for ‘statistical process control’ to demonstrate the rapid growth
in publications about SPC in healthcare. He was also involved in the
widely publicised application of SPC to data about mortality in the light
of the Shipman case (Mohammed et al. 2001, 2004), and this raised the
profile of SPC amongst doctors. However, the fact that SPC was first used
in manufacturing makes translation difficult: ‘there is a reluctance, despite
evidence to the contrary, to accept that an approach for improving
the quality of “widgets” can be legitimately applied to healthcare’
(Mohammed 2004).

Six sigma

Six sigma is an improvement approach which was initially established by

Motorola in 1987. It represents the amount of variation in a process. The
term ‘six sigma’ refers to a process that has at least six standard deviations
(6σ) between the process mean and the nearest specification limit. Six
sigma as an approach has a number of fundamental themes:
1 A genuine focus on the customer: six sigma measures start with cus-
tomer satisfaction, and there is an emphasis on understanding customer
expectations and requirements.
2 Data and fact-driven management: decisions based on fact, with the
development of an understanding of internal processes.
3 Process focus, management and improvement: understanding the
process is the key and controlling the inputs will improve the
outputs.
4 Proactive management: developing an understanding of six sigma
principles, defining the root causes of problems, challenging ‘why’
things are done this way.
5 ‘Boundaryless’ collaboration: the approach is teamwork focused.
6 Drive for perfection, tolerance for failure: it is okay to fail during
improvement, but the key is to understand why failure occurred and
improve it next time.
There are a number of core six sigma methods/tools (many of which are
also used in other improvement approaches), but the two key ones are
generally agreed to be Define–Measure–Analyse–Improve–Control
(DMAIC) and Define–Measure–Analyse–Design–Verify (DMADV;
Brassard et al. 2002). DMAIC is the most commonly used methodology
and claimed to be very robust and able to provide a framework and
Quality improvement in healthcare 463

common language, enabling organisations and individuals to ‘improve

the way they improve’ (Brassard et al. 2002).
The academic and theoretical underpinning of six sigma lags rather
behind its practical application (Antony 2004). There is a ‘paucity of
studies that fundamentally critique the phenomena of six sigma in organ-
isations from both people and process perspectives’ (Erwin and Douglas
2000). An overview of healthcare applications can be found in Chassin
(1998) and Sehwail and DeYong (2003), but it should be noted that ‘six
sigma has not been widely applied to patient care’ (Revere et al. 2004).

Lean

The term ‘lean’ has been developed in the context of manufacturing

from work carried out at Toyota, and like many other ‘approaches’ it
consists of a number of tools, some of which are also used elsewhere: just-
in-time (JIT), the kanban method of pull production and mistake proof-
ing (Hines et al. 2004), with an overall focus on the elimination of waste.
Over the early 1990s these principles were gradually extended so that
system design was described as based on ‘lean principles’ (Womack and
Jones 1996):
• identification of customer value
• management of the value stream
• developing the capability to flow production
• use of ‘pull’ mechanisms to support material flow
• pursuit of perfection through reducing all forms of waste in the
system.
The lean approach is gradually being promoted both in the USA and UK
with the implementation of the Toyota production system in a US health
centre (Kaplan and Rona 2004) and lean in healthcare (Hill 2001; Bushell
and Shelest 2002; Greenwood et al. 2002). There are no reports of out-
comes apart from case studies and most of these are in conference papers
rather than refereed journal articles.

Theory of constraints

The basic concepts of the theory of constraints (TOC) are:

• Every system has at least one constraint – anything that limits the
system from achieving higher performance.
• The existence of constraints represents opportunities for improvement.
Constraints are not viewed as negative, as traditional thinking might
do, but as opportunities to improve.
It was developed by Elihu Goldratt who believed that theory of
constraints (TOC) represented ‘an overall theory for running an organ-
isation’ (Goldratt 1988). Although it had evolved from factory-floor
464 Healthcare management

concepts, it was applicable to the whole organisation; constraints might

be managerial policy related rather than related to physical things. It
claims to be designed for ‘achieving breakthroughs in performance in
large complex environments dominated by high uncertainty’ (Goldratt
Consulting Group 2005), which would seem to make it ideal for health-
care. One of its prerequisites is to establish the goal of the organisation,
which is often contestable in the complex professionalised environment
of healthcare. Its Five Focusing Steps describe how to reduce the impact
of the constraint on the system.
A recent review of TOC across all sectors (Mabin and Balderstone
2003) states that over 400 articles and 45 books have been published on
the subject since 1993, but without much systematic assessment of its
impact. Where research results have been reported, the research is ‘anec-
dotal and fragmented’ (Lubitsh 2004) and mainly from the US. There is
some work on the application of TOC in healthcare in the UK (Goldratt
Consulting Group 2005), but the results are only reported by those who
supported the work.

Other techniques

The term ‘redesign’ covers more than a single technique, although it can
be described as ‘thinking through from scratch the best process to achieve
speedy and effective care from a patient perspective’ (Locock 2003) –
something which may involve many of the improvement techniques
already described in this chapter. The basic principles of process redesign
have been ‘packaged’ into an approach usually termed ‘business process
re-engineering’, first coined by Hammer and Champy (1993), arguably as
a response to the failure of the incremental improvement approach pro-
posed by TQM. Its most publicised and studied application in healthcare
was probably that at Leicester (McNulty and Ferlie 2002), although
redesigning of healthcare at a whole system as well as at individual organ-
isation level is an ‘international preoccupation’ (Locock 2003) and one
which has led to increased discussion between IHI and the NHS (e.g.
Locock 2003). Redesign was the driver for the initial establishment of a
national body to promote quality improvement in England (see Box 26.2).
There are many other techniques claimed to be useful for quality
improvement: a summary and basic description is shown in Table 26.5
(developed from Dale 2003).

Clinical approaches to improvement

There are some approaches to quality improvement which have been

developed specifically within the clinical field. These include clinical
governance, clinical guidelines and pathways and a number of approaches
to reducing adverse events and focusing on patient safety, although these
are not always exclusively clinical (Walshe and Boaden 2006).
Quality improvement in healthcare 465

Box 26.2 Promoting quality improvement in England: NHS

Modernisation Agency (MA)

The NHS Modernisation Agency (MA) was established in 1991 ‘to support the
NHS and its partner organisations in the task of modernising services and
improving experiences and outcomes for patients’ (2005) and has recently been
superseded (in 2005) by the NHS Institute for Innovation and Improvement.
Many of the key staff in the NHS MA were drawn from the team involved with
a large re-engineering project at a hospital in Leicester in the mid-1990s (Bowns
and McNulty 1999) and were influenced by this experience. The original ambition
of this project for rapid organisational transformation altered to one of
continuous incremental change, resulting in a shift of timescales within which
such change could be achieved from two years to five to ten years. This shift in
philosophy was seen as accounting for the fact that the resulting changes in
performance fell short of those aimed for, although they were generally
sustainable. The learning from this project itself had influence:
• Some re-engineering techniques (particularly ‘process thinking’) were used
successfully to improve patient care. This has been the basis of much of the
subsequent work of the MA.
• External management consultants were shown to need a deep understanding
of the NHS environment to support change effectively. Much process/quality
improvement since this time within the NHS has been supported internally by
trained staff, rather than by external organisations.
• Change was shown to be highly context specific and continuity of support
by senior management ‘necessary, though not sufficient’ to re-engineer in an
NHS setting; effective redesign needs sustained leadership and support of
change by a critical mass of clinicians. The issue of clinical support for, and
involvement in, improvement has not however always been at the forefront
of improvement efforts (Degeling et al. 2003).

Clinical governance can be defined as the ‘action, the system or the

manner of governing clinical affairs’ (Lugon and Secker-Walker 1999)
and is a specified statutory duty of all NHS organisations. It was
developed as an overall approach as part of policy on quality in the NHS
(DH 1998) and it has led to the establishment of formal audit pro-
grammes, increased focus on clinical effectiveness and the formal man-
agement of risk, amongst other things. It can be viewed as an overall
quality improvement process, but one which focuses specifically on clin-
ical issues whilst still highlighting the importance of organisational cul-
ture, individual behaviour and interaction and may itself use a range of
techniques for improvement.
Clinical guidelines/pathways are structured, multidisciplinary plans of
care designed to support the implementation of clinical guidelines and
protocols, providing guidance about each stage of the management of a
patient with a particular condition, including details of both process and
outcome. They aim to improve continuity and coordination of care and
466 Healthcare management

Table 26.5 Quality improvement tools

Tool Description Source (where one identifiable)

Benchmarking Learning from the experience of Developed from the work at Rank
others by comparing products or Xerox in the 1980s, documented by
processes – can be internal (within a (Camp 1989).
company), competitive (with
competitors), functional/generic
(comparing processes with ‘best in
class’)
Brainstorming Used with a variety of tools to generate Term now often replaced by ‘thought
ideas in groups. showering’ which is felt to be more
politically correct, with some
considering the original term to be
offensive for those who have epilepsy.
Checklists Lists of key features of a process, Commonly used in a variety of
equipment, etc. to be checked. situations.
Departmental Tool used to facilitate internal Originated at IBM in 1984.
purpose analysis customer relationships.
Design of A series of techniques which identify Dates back to agricultural research by
experiments and control parameters which have a Sir R. A. Fisher in the 1920s, later
(DOE) potential impact on performance, developed by Taguchi (1986) and
aiming to make the performance of the adopted in both Japan and the west.
system immune to variation.
Failure mode and A planning tool used to ‘build quality Developed in 1962 in the aerospace
effects analysis in’ to a product or service, for either and defence industry as a means of
(FMEA) design or process. It looks at the ways reliability analysis, risk analysis and
in which the product or service might management.
fail, and then modifies the design or Termed ‘Failure Mode Effect and
process to avoid these or minimise Criticality Analysis’ (FMECA) by Joint
them. Commission on Accreditation of
Healthcare Organisations (2005)
Flowcharts A basis for the application of many Developed from industrial engineering
other tools. A diagrammatic methods but no one identifiable
representation of the steps in a process, source.
often using standard symbols. Many Widely used in systems analysis and
variations available. business process re-engineering.
Housekeeping Essentially about cleanliness, etc. in the Based on what the Japanese refer to as
production environment. the five 5s:
• seiri – organisation
• seiton – neatness
• seiso – cleaning
• seiketsu – standardisation
• shitsuke – discipline
Mistake-proofing Technique used to prevent errors Developed by Shingo (1986)
turning into defects in the final
product – based on the assumption that
mistakes will occur, however ‘careful’
individuals are, unless preventative
 Quality improvement in healthcare 467

Table 26.5 continued

Tool Description Source (where one identifiable)

measures are put in place. Statistical

methods accept defects as inevitable,
but the source of the mistake should be
identified and prevented.
Policy The western tradition of hoshin kanri – Developed in Japan in early 1960s,
deployment Japanese ‘strategic planning and concept conceived by Bridgestone
management process involving setting Tire Company, and adopted in the US
direction and deploying the means of from the early 1980s, with great
achieving that direction’ (Dale 2003). popularity in large multinationals with
Used to communicate policy, goals and Japanese subsidiaries.
objectives through the hierarchy of the
organisation, focusing on the key
activities for success.
Quality costing Tools used to identify the costs of PAF developed by Feigenbaum (1961).
quality, often using the prevention– Cost of (non)conformance developed
appraisal–failure (PAF) categorisation by Crosby (1979).
Quality function Tool to incorporate knowledge about Developed in Japan at Kobe shipyard.
deployment needs of customers into all stages of
design and manufacture/delivery
process. Initially translates customer
needs into design requirements, based
on the concept of the voice of the
customer. Closely related to FMEA
and DOE.
Total productive Can be considered as a method of Developed by the Japanese from the
maintenance management, combining principles of planned approach to PM.
productive maintenance (PM) with
TQM.
Seven quality
control tools
1 Cause-and-effect Diagram used to determine and break Ishikawa (1979).
diagram down the main causes of a given
problem – sometimes called ‘fishbone’
diagrams. Used where there is one
problem and the causes may be
hierarchical in nature. Can be used by
teams or individuals.
2 Checksheet Sheet or form used to collect data. Can be similar to a checklist.
3 Control chart The way in which SPC data is Control charts were used as the basis
displayed, viewed as helping to decide for SPC development but it is not clear
how to improve – whether to search exactly when they were first used.
for special causes (if the process is out
of control) or work on more
fundamental process redesign (if the
process is in control). Charts can also
be use to monitor improvements over
time (Benneyan et al. 2003a).
468 Healthcare management

Table 26.5 continued

Tool Description Source (where one identifiable)

4 Graphs Any form of pictorial representation of Basic mathematical technique.

data.
5 Histogram Developed from tally charts, basic Basic mathematical technique.
statistical tool to describe the
distribution of a series of data points.
6 Pareto diagram Technique for prioritising issues – a Named after nineteenth-century
form of bar chart with a cumulative Italian economist who observed that a
percentage curve overlaid on it. large proportion of a country’s wealth
Sometimes referred to as the 80/20 is held by a small proportion of the
rule. population.
7 Scatter diagram Used to examine the possible Basic mathematical technique.
relationship between two variables.
Seven Generally used in design or sales/ Developed by the Japanese to collect
management marketing areas, where quantitative and analyse qualitative and verbal data.
tools (M7) data is less easy to obtain. Many have already been used in other
TQM applications.
1 Affinity diagrams Used to categorise verbal data/
language about previously unexplored
vague issues.
2 Arrow diagrams Applies systematic thinking to the Used in project management as part of
planning and execution of a set of critical path analysis (CPA) and
complex tasks. programme evaluation and review
technique (PERT).
3 Decision Used to select the best process to Similar to decision tree for unsafe acts
programme chart obtain the desired outcome by listing culpability, based on decision trees
all possible events, contingencies and presented in (Reason 1997).
outcomes.
4 Matrix data Multivariate mathematical methods
analysis process used to analyse the data from a matrix
diagram.
5 Matrix diagrams Used to clarify the relationship
between results and causes or
objectives and methods, using codes to
illustrate the direction and relative
importance of the influence.
6 Relations diagrams Used to identify complex cause-and-
effect relationships, where the causes
are non-hierarchical and the ‘effect’ is
complex.
7 Systematic Sometimes called a ‘tree’ diagram –
diagrams used to examine the most effective
means of planning to accomplish a task
or solve a problem.
 Quality improvement in healthcare 469

enable more effective resource planning, as well as providing comparative

data on many aspects of quality of care, and are increasingly being used in
the UK as patient choice is introduced. They are claimed to reduce
variation and improve outcomes (Middleton et al. 2001).
Patient safety is a vast area of study that has developed at least in part
from quality improvement (Walshe and Boaden 2006) and cannot be
covered in detail here.

Overview

Changing organisations and systems: the process view

Many of the quality improvement techniques described in this chapter

are focused on organisational change and all are based on the process
view of organisations (Slack et al. 2004). Process management is defined
as entailing three practices: mapping processes, improving processes and
adhering to systems of improved processes (Benner and Tushman 2003).
It is argued that taking a process view is one of the key characteristics of
organisations that are successful in improvement, along with adopting
evidence-based practice, learning collaboratively and being ready and
able to change (Plsek 1999).
The process view has also been the basis for the development of
systems thinking, which developed into hard systems and soft systems
(Checkland 1981), and has been more recently linked with organisational
learning (Senge et al. 1994). It can be described as exploration of ‘the
properties which exist once the parts [of the system] have been combined
into a whole’ (Iles and Sutherland 2001) and is in some ways simply a
combination of processes. Systems thinking has also been proposed as a
means of understanding medical systems (Nolan 1998), based on the
following principles:
• A system needs a purpose to aid people in managing inter-
dependencies.
• The structure of a system significantly determines the performance of
the system.
• Changes in the structure of a system have the potential for generating
unintended consequences.
• The structure of a system dictates the benefits that accrue to various
people working in the system.
• The size and scope of a system influence the potential for
improvement.
• The need for cooperation is a logical extension of interdependencies
within systems.
• Systems must be managed.
• Improvements in systems must be led.
This process view is therefore not only about changing organisations but
470 Healthcare management

also examining and improving the interaction between elements of the

organisation, including the individuals who work within them. It can also
be seen in the clinical emphasis on pathways and the use of clinical
guidelines.
Taking a process view of organisations leads to consideration of other
factors, which are reflected in varying degrees in the various quality
improvement approaches available:
1 Variation within a process is inherent and it is argued that understand-
ing and analysing the variation are keys to success in improvement
(Snee 1990). This is especially true in healthcare (Haraden and Resar
2004) and is seen to be the result of clinical (patient) flow and profes-
sional variability (Institute for Healthcare Improvement 2003). Patient
variability is ‘random’ and cannot be eliminated or reduced but must
be managed, whereas non-random variability should be eliminated.
It is argued (Institute for Healthcare Improvement 2003) that ‘it is
variation . . . that causes most of the flow problems in our hospital
systems’.
2 Managing the flow of patients through a process is also important and
can to some extent draw on approaches widely used in manufacturing
(Brideau 2004). Understanding and evaluating flow requires more
detailed understanding of demand and capacity than has often been
the case in healthcare organisations (Horton 2004). Zimmerman
(2004) proposes that studying and improving flow leads to a need to
consider alignment within the whole healthcare system and within
pre-hospital care of goals within the system, especially between health-
care organisations and clinicians. This will inevitably lead to whole
systems approaches to improvement.
3 All approaches to quality improvement involved the identification of
the customer, which may be internal or external to the organisation,
and subsequently their needs. The purpose of the process has to be
clear before improvement can take place. It is in this area that the issue
of professionalism and the increasing role of the patient have an impact.
Whilst much rhetoric about healthcare systems states that they are
patient driven, this does not appear to be the case in practice. Whether
the ‘customer’ can be defined as the patient is open to question but it is
clear (Walley and Gowland 2004) that to date patient involvement in
quality improvement has been limited, with lack of attention to the
presence of the patient in processes (Shortell et al. 1995) and lack of
consumer power also being cited as important (Zbabada et al. 1998). It
is also argued that the market structure of healthcare in the UK does
not enable ‘consumers’ to alter the behaviour of healthcare providers
as there is no effective choice (Zbabada et al. 1998).
The application of many of these concepts is embodied in the ten ‘high
impact changes’ (NHS Modernisation Agency 2005a) in the NHS (see
Table 26.6), which now form a key part of the programme for public
sector efficiency improvement (Gershon 2004).
 Quality improvement in healthcare 471

Table 26.6 The ten high impact changes

Change No. 1 Treat day surgery as the norm for elective surgery.
Change No. 2 Improve access to key diagnostic tests.
Change No. 3 Manage variation in patient discharge.
Change No. 4 Manage variation in patient admission.
Change No. 5 Avoid unnecessary follow-ups.
Change No. 6 Increase the reliability of performing therapeutic interventions through a care bundle
approach.
Change No. 7 Apply a systematic approach to care for people with long-term conditions.
Change No. 8 Improve patient access by reducing the number of queues.
Change No. 9 Optimise patient flow using process templates.
Change No. 10 Redesign and extend roles.

Source: NHS Modernisation Agency (2005)

The things that are different about healthcare

Much experience and evidence of organisational quality improvement

has been in the private sector. Compared to the private sector, healthcare
can be characterised (Pollitt 1993) by the following:
• the range and diversity of stakeholders
• its complex ownership and resourcing arrangements
• the professional autonomy of many of its staff.
Healthcare practitioners believe that healthcare systems are ‘uniquely
complex’ (Benneyan and Kaminsky 1995), although many would argue
that this should not mean that quality improvement approaches are not
useful (Walley 2003). The extent to which knowledge, theories and
models from the private sector can be transferred to healthcare/public
sector organisations is described in the meta-analyses reported by Golem-
biewski et al. (1982) and Robertson and Seneviratne (1995) who show
that public and private sector interventions had similar patterns of results.

Conclusions

Many believe that ‘in matters of quality improvement, healthcare can

indeed learn from industry – and perhaps, equally important, industry
can also learn from healthcare. The fundamental principles of quality
improvement apply to both’ (Berwick et al. 1990/2002). However, given
the variety of perspectives on quality improvement, especially those from
an organisation/process perspective and those developed by professionals,
there are challenges for all:
• Quality improvement needs to be demystified: ‘much of it is common
sense, accessible to all and not the preserve of a few. The tendency for
472 Healthcare management

each new quality improvement theory to generate its own jargon and
esoteric knowledge must be resisted’ (Locock 2003).
• Healthcare professionals need to recognise their role and responsibility
to the wider system: ‘the need to balance clinical autonomy with
transparent accountability, to support the systematization of clinical
work’ (Degeling et al. 2003).
• Managers need to recognise the limits of their authority in improve-
ment: ‘there was no evidence that managers alone could produce . . .
clinical buy-in’ (Dopson and Fitzgerald 2005).
In the continually changing world of healthcare, quality is always going to
be important and the differing perspectives and multidisciplinary
approaches taken into account.

Summary box

• Quality is a widely used term with a variety of meanings attributed to it.

• Approaches to quality improvement may have a focus on changing
organisations, professionals and interactions between participants in the
system. Quality may be controlled and improvement by a variety of means,
including reducing variation and waste in organisational processes.
• Quality improvement developed from the ideas of a series of gurus in
manufacturing, with these concepts later translating to service organisations
and to a more ‘total’ (i.e. organisationwide) approach to improvement.
• There is a wide variety of techniques and approaches available for quality
improvement from other sectors, including the plan–do–study–act model,
statistical process control, six sigma, lean, theory of constraints and process
redesign.
• Clinically developed approaches to improvement include clinical governance,
clinical pathways and some approaches to patient safety.
• Viewing organisations as processes is the basis of many improvement
approaches and this links to wide whole system concepts.
• Improvement in processes can result from consideration of variation, flow and
clarification of the goal of the system, taking into account what the
customer(s) want.
• Healthcare is different from other sectors in terms of quality improvement
primarily because of the professional autonomy of many of its staff, but
improvement is a challenge for all parties who need to simplify concepts,
recognise their responsibilities and the limits of their authority.

Self-test exercises

1 What were the influences on the development of the quality move-

ment from its origins in both manufacturing and professional practice?
2 There are many quality improvement techniques available but which
ones do you think would be most useful in improving quality:
 Quality improvement in healthcare 473

• in a hospital emergency department?

• in a large organisation where multiple performance measures are
used?
• in a pathology laboratory?
• in a primary care centre where there are often queues of patients
waiting to see health professionals?
3 What are the challenges of getting clinicians to accept methods of
improvement other than those developed as ‘clinical governance’?
4 What needs to be in place if quality improvement in healthcare is to
continue to develop?

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Websites and resources

Agency for Healthcare Research and Quality. http://www.ahrq.gov/

Canadian Council on Healthcare Accreditation. http://www.cchsa.ca
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478 Healthcare management

NHS Institute/Modernisation Agency. http://www.institute.nhs.uk/ http://

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ance/HumanResourcesAndTraining/ProductiveTime/fs/en
 27 Research, evaluation and
evidence-based management
Kieran Walshe

Introduction

This chapter is about how healthcare managers and policymakers use

evidence when they make decisions, and it argues that by making more
effective use of evidence from research and evaluation, managers and
policymakers could make better decisions. It is not difficult to find
examples of bad decisions – which not only look like mistakes in retro-
spect, but which flew in the face of evidence available at the time. For
example, mergers between healthcare organisations have often been jus-
tified on the grounds that the new, larger organisation would be more
efficient, with lower administrative costs and savings from the rationalisa-
tion of clinical services, buildings and facilities. In the UK the late 1990s
saw an epidemic of acute hospital mergers and reconfiguration based on
little or no real evidence (Edwards and Harrison 1999), and more
recently the Department of Health has mandated mergers among pri-
mary care organisations across England (DH 2005). In fact, the research
evidence suggests that such mergers rarely achieve their explicit object-
ives, that there are often as many diseconomies as economies of scale and
that after merger it takes years for the new organisation to become prop-
erly integrated and begin to realise any of the potential advantages of its
scale (Fulop et al. 2002). There are even a number of well-documented
examples of frankly disastrous mergers that have come close to destroying
the unfortunate organisations which have been pressed into merging
(Kitchener 2002). So why, faced with all this evidence, do managers and
policymakers continue to have such faith that organisational mergers
‘work’? The unpalatable truth may be that managers do not know about
the evidence; do not understand, trust or believe it if they do know it
exists; and allow other factors such as ideology, fashion and political
convenience to predominate in the decision-making processes in their
organisations (Abrahamson 1996; Marmor 2001; Smith et al. 2001).
This chapter first explores the growth of the evidence-based health-
care movement in the 1990s and the increasing role played by research
evidence in clinical decision making. It then argues that while managerial
480 Healthcare management

and clinical decision making are very different processes, decision making
by managers and policymakers can and should be more directly informed
by research evidence. Next, the chapter explores how evidence is created
in research, and then examines how healthcare managers and policymak-
ers can find, appraise and apply relevant evidence. It concludes by suggest-
ing that the technical challenges of providing the right evidence, at the
right time, in the right format for managers to use are not negligible but
are also not insuperable. However, making better use of evidence requires
a real cultural shift among managers – towards a more scientifically
informed, intellectually rigorous way of thinking and behaving.

The rise of evidence-based healthcare

In the 1990s, there was a widespread international change in the way that
healthcare professionals, researchers, and health systems thought about
and used research evidence about research in clinical decision making,
which has been labelled as the rise of the ‘evidence-based healthcare
movement’ (Davidoff et al. 1995; Sackett and Rosenberg 1995). It was
driven in part by a growing realisation of what is sometimes termed the
‘research–practice gap’ – that healthcare interventions which we knew
to be effective took a long time to enter common clinical practice, while
other interventions which we knew did not work also took a long time
to be discarded by clinicians (Antman et al. 1992). The Institute of
Medicine (1999) described these as problems of underuse, overuse and
misuse, and there was no shortage of practical and high-profile examples.
Thrombolytic therapy for myocardial infarction – a drug treatment for
people with heart attacks which, if given promptly reduces the likeli-
hood of the person having another heart attack in the future and signifi-
cantly reduces mortality – became the ‘poster child’ for the EBM
movement because there was good evidence that it had taken a decade
or more for physicians to adopt it after the research evidence for its
effectiveness was incontrovertible (Birkhead 1999). But just as high-
profile examples of overuse, underuse and misuse can be identified in the
clinical domain, we can also find cases in the managerial arena as Table
27.1 shows.
In retrospect, we saw a real shift in the 1990s in the paradigm that
dominated our thinking about how health services research was con-
ducted; how research findings were disseminated or communicated to
healthcare professionals and organisations; and how those findings were
implemented and used to change clinical practice (Lemieux-Charles and
Champagne 2004). This shift is mapped out in Table 27.2 and can be
summarised as a move away from seeing all these matters as issues primar-
ily for individuals – researchers and practitioners – to seeing them as
issues which organisations and healthcare systems needed to grapple
with; and a shift from allowing these issues to be treated passively and
reactively, leaving them almost wholly unmanaged and uncontrolled, to
 Research, evaluation and evidence-based management 481

Table 27.1 The research–practice gap

Clinical domain Management and policy domain

Overuse • Prophylactic extractions of asymptomatic • Organisational mergers as a response to

impacted third molars (wisdom teeth) problems of service quality, capacity or
• The widespread/general use of screening financial viability in healthcare
for prostate cancer organisations
Underuse • Smoking cessation through nicotine • The replacement of physicians with other
replacement therapy health professionals in providing many
• Compression therapy for venous leg ulcers routine health services especially in
settings like primary care and accident
and emergency departments
Misuse • Pressure-relieving equipment in the • The adoption and implementation of
prevention of pressure sores total quality management or continuous
• Selection of hip prostheses in hip quality improvement initiatives
replacement surgery

Source: Adapted from Walshe and Rundall (2001).

being much more proactive and strategic in setting direction, managing

implementation and monitoring progress.
The idea that evidence should play a bigger part in decision making
has an intuitive appeal and it quickly began to appear in a much wider
literature, in public policy fields such as housing, social care, criminal
justice and education (Davies et al. 2000) and in other areas of manage-
ment (Tranfield et al. 2003). After the UK General election in 1997, the
New Labour government announced that ‘what matters is what works’,
signalling a move away from ideologically driven policymaking to a more
pragmatic and technocratic approach in which evidence of effect and
impact would play a much later part (Cabinet Office 1999). The realities
of this ambitious announcement have been more complex and contin-
gent, but the Cabinet Office and National Audit Office have both pro-
duced reports and materials on using evidence in policymaking, and the
Economic and Social Research Council (ESRC) has supported the
creation of a Centre for Evidence Based Policy and Practice (see website
resources section at end of chapter).
Health policy and management have been on the front line of this
developing movement. Clinicians challenged to justify the adoption of a
new surgical technique or new pharmaceutical have often responded by
arguing that the same evidentiary standard should be applied to manage-
ment decisions – like proposals to change or reconfigure services, to
introduce new organisational structures, or to change payment or incen-
tive systems (Hewison 1997; Kovner et al. 2000). It is a difficult argument
to resist. While some commentators have asserted that policy and man-
agement decisions are different in some important and fundamental ways
which mean they are not simply amenable to technocratic, rationalist
analysis (Klein 2000), and while others have cautioned about the
unthinking transfer of methods and techniques for research synthesis and
482 Healthcare management

Table 27.2 The paradigm shift of evidence-based healthcare

From To

Research strategy No national leadership of healthcare Growing strategic lead at a national

research, funding fragmented across level, coordination of research activity
many research funders with poor and funders leading to a more coherent
communication and coordination overall research agenda
Research direction Researcher led, tied to academic Needs led, tied to health service
agendas, little coordination priorities, focused on major service
areas/needs, well coordinated
Research quality Much ad hoc, piecemeal, small-scale, Coherent research programmes made
poor quality research, sometimes up of well-planned, larger research
repetitive, not well managed or projects of high quality.
reviewed
Research methods Inflexibility about methods, with More appropriate use of research
frequent mismatches between research methods, from experimental methods
questions and methods used to qualitative approaches, depending on
the research questions
Research outputs Publications in peer-reviewed academic Changes in clinical practice seen as
journals seen as researchers’ primary primary aim of research, with
goal publication as one step towards that goal
Dissemination of Journals, textbooks, expert opinions, Online databases, summaries of
research findings and narrative reviews evidence, clinical guidelines, secondary
journals, systematic reviews
Mode of access to ‘Pull’ access, reliant on clinicians ‘Push’ access, with relevant research
research findings seeking information by accessing findings delivered to clinicians
libraries, journals, databases, etc. proactively, as close to the relevant point
of care as possible
Practitioner Focused on reports of individual Focused on meta-analyses and
understanding of research studies systematic reviews of relevant, appraised
research findings research
Practitioner attitudes Uninformed, suspicious of methods and Informed, accustomed to using and
to research motives, lacking skills in research participating in research, skilled in
appraisal and interpretation appraising and applying research to own
clinical practice
Major influences on Personal clinical experience, precedent, Clinical epidemiology, empirical
clinical practice tradition, expert opinion. evidence, research
Responsibility for Left to individual clinical professionals Seen as a key organisational function,
implementing and clinical teams, with little corporate supported by investments in
research findings interest or involvement in decision information resources, etc., with
making corporate involvement and oversight
alongside clinical team in decision
making

Source: Adapted from Walshe and Rundall (2001).

 Research, evaluation and evidence-based management 483

application from the biomedical to the managerial arena, few would

argue that there is not scope to improve the quality of managerial
decisions and policy choices by bringing robust evidence to bear (Lomas
2005).

Evidence-based management and policymaking

Table 27.3 summarises and compares the clinical and managerial domains
in terms of their approaches to producing and using evidence in decision
making. In broad terms, they have very different cultures and the clinical
culture places much greater value on empiricism and science, while the
managerial culture gives priority to personal experience and experiential
learning. They draw on quite different literatures. The clinical literature is
better organised and structured, easier to search and more positivist and
oriented toward generalising research findings, while the management
literature is less coherently defined and organised, less amenable to
searching and synthesis and makes fewer claims to generalisability. The
decision-making process is different too. Clinicians make many homo-
geneous decisions to which it is sensible and simple to apply algorithmic
approaches (guidelines, protocols and procedures) to define and standard-
ise the process and to embed the use of evidence. In contrast, managers’
decision are more heterogeneous and less clearly bounded and are often
made in combination with others (Walshe and Rundall 2001).
In short, while the principles of evidence-based decision making
should clearly apply in the managerial and policymaking arenas, their
practical application is likely to be rather different. The challenges are less
concerned with the technical and logistic problems of delivering the
right evidence in the right place at the right time to support the
decision-making process, and more about changing attitudes and beliefs
among both researchers and managers, promoting linkage and exchange
between the two communities and creating a culture in which the value
of good evidence is recognised and a capacity to make use of it in
decision making (Lomas 2000).
The Canadian Health Services Research Foundation (CHSRF), cre-
ated in 1997 with funding from a government endowment of CD$126
million, has pioneered work in this area and unusually for a research
institute defines its purpose as to ‘support the evidence-based decision
making in the organisation, management and delivery of health services
through funding research, building capacity and transferring knowledge’
and aims to ‘establish and foster linkages between decision makers (man-
agers and policymakers) and researchers’ (CHSRF 2004). CHSRF has
tackled this ambitious mission on several fronts. They fund programmes
of research which have to have co-funding from healthcare organisations,
a requirement which is designed to ensure that researchers have manager-
ial commitment and support for their work and have to engage with the
practice community. They also support training for managers in research
484 Healthcare management

Table 27.3 The clinical and managerial domains compared

Clinical practice Health care management

Culture • Highly professionalised, with a strong • Much less professionalised, with much
formal body of knowledge and control less formal body of knowledge, no
of entry to the profession resulting in control of entry, and great diversity
coherence of knowledge, attitudes and among practitioners
beliefs • Personal experience and self-generated
• High value placed on scientific knowledge highly valued, intensely
knowledge and research, with many pragmatic
researchers who are also practitioners • Less understanding of research, some
(and vice versa) suspicion of value, and of motives of
researchers
• Divide between researchers and
practitioners, with little interchange
between the two worlds
Research and • Strong biomedical, empirical paradigm, • Weak social sciences paradigm, with
evidence with focus on experimental methods more use of qualitative methods and less
and quantitative data empiricism
• Belief in generalisability and objectivity • Tendency to see research findings as
of research findings more subjective, contingent, and less
• Well organised and indexed literature, generalisable
concentrated in certain journals with • Poorly organised and indexed research
clear boundaries, amenable to literature, spread across journals and
systematic review and synthesis other literature sources (including grey
literature), with unclear boundaries,
heterogeneous and not easy to review
systematically or synthesise
Decision making • Many clinical decisions taken every day, • Fewer, larger decisions taken, usually by
mostly by individual clinicians with few or in groups, with many organisational
constraints on their decisions constraints, often requiring negotiation
• Decisions often homogeneous, or compromise
involving the application of general • Decisions heterogeneous, and less based
body of knowledge to specific on applying a general body of
circumstances knowledge to specific circumstances
• Long tradition of using decision support • No tradition of using any form of
systems (handbooks, guidelines, etc) decision support
• Results of decision often relatively clear, • Results of decision and causal
and some immediate feedback relationship between decision and
subsequent events often very hard to
determine

Source: Adapted from Walshe and Rundall (2001).

appraisal and research application and training for researchers aimed at

developing research capacity and researcher skills in in knowledge transla-
tion and utilisation. They invest directly in the process of linkage and
exchange through events, workshops and forums in which researchers,
policymakers and practitioners are brought together to discuss issues of
common concern, and through publications like their evidence briefings
Research, evaluation and evidence-based management 485

and ‘mythbuster’ series, designed to provide clear, credible and com-

prehensible summaries of the evidence on a topic for a practitioner
audience (Box 27.1).
The work of CHSRF provides an eloquent proof of principle, show-
ing that it is possible to bring evidence to bear on the worlds of managers
and policymakers, and that research can make a real and important con-
tribution to decision making. More importantly, its experience supports
the contention that action at a health system level is needed to promote
linkage and exchange between the research and practice communities, to
change cultures and attitudes, and to build capacity on both sides in
knowledge translation and utilisation. For other countries, the work of
CHSRF has been held up as a model to follow or learn from (NAO
2003). In the UK, the NHS service delivery and organisation (SDO)
research programme, established in 2000 by the Department of Health,
has adopted some of the principles and ideas of CHSRF in setting its
research agenda and communicating research funding to managers and
others in the NHS.

Box 27.1 About the Canadian Health Services Research Foundation

• The Canadian Health Services Research Foundation (a) funds management

and policy research in health services and nursing; (b) supports the synthesis
and dissemination of research results; (c) supports the use of research results
by managers and policymakers in the health system.
• It provides research funding opportunities for both researchers and decision
makers to investigate specific health-system questions (including investigator-
initiated and commissioned research, as well as policy syntheses).
• It provides training opportunities for senior decision makers in nursing,
medicine, and health administration to learn to find and apply research in their
daily work and to facilitate evidence-based decision making.
• It supports training and personnel development for new researchers as well as
for established researchers in our own field and those in other fields who
would like to apply skills from other domains to health-system challenges.
• It provides user-friendly research results and descriptions of ongoing projects.
• It offers services and resources to both decision makers and researchers, to
support communication and networking, and disseminating and using research.
• It holds and co-sponsors skill-building events and activities where researchers
and decision makers work together to find better ways to enhance research
results and put them to work.
• It recognises excellence and achievement in doing, supporting, communicating
and using research results, through its Health Services Research Advancement
Award.
486 Healthcare management

Creating evidence: the role of research

The traditional complaint of clinicians and managers alike is that they

cannot pursue evidence-based practice because the right evidence to
support their decision making is not available. While in some cases this
may be an excuse for inaction, it is certainly true that the conventional
processes of research outlined in Table 28.2 often delivered research
which was interesting to researchers rather than research useful to
practitioners, health organisations or health systems.
Now, research funders make increasing use of research ‘horizon scan-
ning’ or ‘listening’ processes designed to help them identify or predict the
issues on which research is needed, and then to set their priorities accord-
ingly (Lomas et al. 2003). For example, the NHS SDO programme has
conducted and subsequently updated a broad consultation which identi-
fied its main research themes through, among other things, a large-scale
email survey of key stakeholders asking them to respond to five key
questions (NCCSDO 2000, 2002):
1 What is the single most important change to the organisation of the
NHS services that you would like to see?
2 What do you think will be the major issues facing the NHS in five
years time?
3 Would you like to see any further R&D work on the current themes,
over and above the work outlined below?
4 What new themes should the NHS SDO R&D Programme be
addressing now to inform the next five years?
5 Have you used any research evidence on service delivery and organisa-
tion in healthcare to effect change in services? If yes, what were the key
elements that encourages you to act on its finding?
The results of this exercise in horizon scanning are summarised in Box
27.2, which sets out the research themes which resulted.
Of course, this is just the start of the process. Research funders have to
convert these broad themes into researchable, focused questions and
decide on what methodologies or approaches are best suited to tackling
them. Some questions may need new primary research, involving empir-
ical fieldwork that gathers data to try to answer the questions, but others
may be better answered by seeking and summarising the findings from
existing research through a process of synthesis (Pawson 2002; Lavis et al.
2005). Research funders also have to think pragmatically about the time-
scale for the research, and the point at which it will deliver meaningful
research findings to decision makers. Commissioning and undertaking
research can be a laborious and time-consuming process, taking any-
thing from six months to three years before the products are available. If
policymakers and practitioners need the evidence more quickly than
researchers can deliver it, some compromise needs to be made in research
design and process to try to match timescales while maintaining the
rigour and validity of the research.
Research, evaluation and evidence-based management 487

Box 27.2 NHS service delivery and organisation research

programme themes

Organising the NHS around Access, adapting to local needs, self-management,

the needs of the patient choice, empowerment and consumerism, role of
carers
User involvement Formal mechanisms, empowerment and
evaluation
Continuity of care Organisational boundaries, partnership working,
professional boundaries
Co-ordination/integration Structural and financial issues, financial changes,
across organisations shifting the balance of power, integrated care
organisations
Workforce issues and Interprofessional working, changing roles,
interprofessional working recruitment and retention, staff morale,
education and training
Resources Effects of increased investment, financial systems,
evaluation of benefits of investment
Implications of the Development of electronic records, the need for
communications revolution patient held records, and the development of
improved information systems
Relationship between Development of organisational roles and
organisational form, function boundaries, and tensions between central and
and outcomes local control
Evaluation of major policy Developing new models of service delivery,
initiatives development of nationally comparable service
models
Management of change The changing role of the patient, scale and pace
of change, management styles in change
management, benefits of change

Finding the evidence: what do we know?

Most policymakers and managers are not in a position to commission

research when they face a decision – and do not have the time to wait for
research findings anyway. Therefore, what matters most is their ability
to access, appraise and apply the findings from existing research to the
situations or decisions they face. The first step is finding that research.
Unfortunately, while a huge investment has been made in organising
the clinical evidence base, particularly through the worldwide Cochrane
Collaboration and its associated library of systematic reviews, randomised
controlled trials and other evidence, the literature on management and
policy issues remains fragmented, heterogeneous, distributed and difficult
to access. There is no single portal or gateway to use and so it is very
488 Healthcare management

important to work out a clear search strategy. Ideally, that search strategy
would achieve three things: it would be sensitive (which means it finds all
the relevant research and does not miss anything out); specific (which
means it does not find any irrelevant or unrelated research); and realistic
(which means it can be done in the time and with the resources available).
In reality, there is an inevitable tradeoff to be made between sensitivity,
specificity and realism, depending in part on the circumstances and con-
text for the decision. If resources and time are short, then ‘quick and
dirty’ searching is needed, while if there is more space for reflection and
analysis, a more sophisticated and comprehensive search can be under-
taken. Obviously, the more important and significant the decision, the
more should be invested in the search for evidence.
Table 27.4 sets out four main sources of evidence to which managers
might turn, broadly in the order in which they could or should be
searched: evidence databases; bibliographic databases; key research
agencies; key journals.
The place to start is the evidence databases, though as has already been
observed, no one has yet tackled the immense task of providing a proper
portal to the evidence on healthcare management and policymaking.
Table 27.4 suggests three sources. First, the Cochrane Library, although
mainly focused on clinical interventions, contains some reviews and
other data relevant to organisational issues (Lavis et al. 2006). For
example, it holds evidence on the impact of stroke units on the manage-
ment of stroke, and reviews of interventions to change professional prac-
tice like the use of financial incentives and educational programmes.
Second, the NHS National Electronic Library for Health (NeLH) pro-
vides a superb and searchable portal to a wide range of resources from
NHS organisations and research programmes, including clinical guide-

Table 27.4 Research findings: some key sources

Evidence databases Cochrane Library
NHS National Electronic Library for Health
NHS Centre for Reviews and Dissemination
WHO Health Evidence Network
Bibliographic databases Medline
ABI-INFORM/Proquest
Health Management Information Consortium (HMIC)
Key research agencies Canadian Health Services Research Foundation
NHS service delivery and organisation (SDO) research programme
US Agency for Healthcare Research and Quality
UK Department of Health Policy Research Programme
Key journals Health Affairs
Health Services Research
Health Services Management Research
Journal of Health Services Research and Policy
Milbank Quarterly
Frontiers of Health Services Management
Research, evaluation and evidence-based management 489

lines, official reports, research reports and other materials. Third, and with
a more international orientation, the World Health Organisation’s
Health Evidence Network provides an integrated, searchable interface to
the evidence and information from a wide range of agencies in many
countries, as well as undertaking its own syntheses on questions raised by
members of the network.
The next step – and one that many practitioners will find more dif-
ficult – is to access the relevant bibliographic databases which index the
contents of academic and practitioner journals, and also provide some
coverage of books, official reports and other materials. Here, recom-
mendations are much more difficult to make as there are dozens of such
databases with overlapping and complementary coverage, but three par-
ticular examples are cited. The first port of call for many people will be
Medline – the database of medical and health-related literature created
and maintained by the US National Library of Medicine. While it is
somewhat Americocentric, it has by far the best overall international
coverage both of clinical and policy/management materials in the health
sector and it is freely available through the NLM’s PubMed service.
However, much of the relevant literature on management issues is not
health-sector specific and will have been published in more generic
business and management journals. To access the literature on issues like
leadership, organisational design and development, quality improvement
and many other topics it is very important not to confine the search to
the health-related literature covered by Medline. The most useful data-
base in this area is ABI Inform (also known as Proquest) which gives
comprehensive coverage of the business and management literature.
However, neither ABI Inform nor Medline cover what some people
call the ‘grey literature’ – publications from healthcare organisations,
health ministries and agencies, think tanks, government departments, and
others. In this area, for the UK, the Health Management Information
Consortium database (HMIC) provides by far the best coverage. It com-
bines the catalogues of collection at the UK Department of Health’s
library services and the King’s Fund and is particularly useful because it
indexes and abstracts UK practitioner journals like the Health Service
Journal and official reports and publications, though its coverage is very
UK focused.
For most purposes, the search strategy is likely to stop after accessing
evidence and bibliographic databases, but some may find it useful to
search the information resources provided by key research agencies like
CHSRF, the NHS SDO research programme, the US Agency for
Healthcare Research and Quality, and so on. Searching these sites for
research on a specific issue is likely to be a frustrating and unproductive
experience, but browsing them to get a better sense of the research
resources, themes and issues they have covered is certainly worthwhile.
Similarly, few managers will have the time to undertake hand searches of
key journals like those listed in Table 27.4, but it can be very useful to
scan the contents pages of past issues to understand their coverage, or to
subscribe to the contents page services most journals now offer, so that
490 Healthcare management

summary details of each new journal issue are received by email as it is

published.
Searching some or all of these sources is made much easier with some
informed and trained support from a knowledge officer, information
scientist or librarian who understands the search structures and termin-
ology used. It is common for untrained searchers either to cast their
search too broadly – using terms which return hundreds or even thou-
sands of ‘hits’ – or too narrowly, so that they get little or nothing and miss
relevant materials. But finding the evidence is only one step in the pro-
cess – the next challenge is knowing whether to trust it and what it
means.

Appraising the evidence: what does it mean?

Just because research is published in a prestigious journal or produced by

a government agency does not mean it should be taken on trust. Many
agencies have a political or organisational agenda, covert or overt, and the
authors of the research may have been influenced by their own beliefs
and values. However stringent the quality control and peer review pro-
cess, badly designed, poorly conducted research studies still get published
even in the best journals. Moreover, the findings from research are not
always clear and unambiguous – they can be open to interpretation or
difficult to understand. Even if the findings are clear, it is important to
consider how generalisable or transferable they are – in other words, to
what extent they can be applied to a particular organisation or context,
and whether there are important differences between the setting for the
research and the setting in which it is to be applied. The ability to
appraise research evidence critically and carefully is essential (Cooma-
rasamy and Khan 2004). There are three key questions to be asked in
appraisal:
1 Can I trust this research? Has it been conducted properly, using the
right research methods, to tackle a meaningful set of research
questions?
2 What does this research mean? What are the findings, and how much
confidence can I place in them?
3 How can this research be applied to our local situation? Is it appropri-
ate to generalise or transfer from the setting in which the research was
conducted, and what implications are there from any differences in
setting?
Of course, the way these questions might be asked would be different for
different sorts of research. Appraising a qualitative study involving inter-
views with health professionals may require different criteria from those
used to appraise a quantitative experimental study such as a randomised
controlled trial. But the three issues remain the same – trust, meaning and
application. Table 27.5 sets out a critical appraisal framework which
 Research, evaluation and evidence-based management 491

Table 27.5 Appraising research evidence: key questions to ask

Randomised controlled trial Qualitative study

Can you trust Did the trial address a clearly focused Was there a clear statement of the aims of
this research? issue? (Are the population, intervention the research? (what were they trying to
and outcome studied clear?) find out, and was it relevant and
important)
Was the assignment of patients to Is a qualitative methodology appropriate?
treatments randomised? (Does research seek to understand/
illuminate experiences or views?)
Were all patients entered into the trial Was the sampling strategy appropriate to
properly accounted for at its conclusion? address the aims of the research? (Consider
(Look at completion of follow-up and where sample selected from, who and why,
whether groups analysed by intention to how and why, sample size, non
treat). participation.)
Were patients, health workers and study Was the data collection appropriate to
staff blind to the treatment? address the aims of the research? (Consider
where and how collected, how recorded,
whether methods modified during study.)
Were the groups similar at the start of the Was the data analysis appropriate to address
trial? the aims of the research? (Consider
whether method is clearly explained, how
it was done, how categories/themes were
derived from data, if credibility of findings
tested, whether all data taken into
account.)
Aside from the experimental How well were research partnership
intervention, were the groups treated relations handled? (Did researchers
equally? critically examine their own role, bias and
influence? how was research explained to
participants? how and where was data
collected?)
What does it How large was the treatment effect? How Is there a clear statement of the findings?
mean? precise was the estimate of the treatment (Are they explicit and easy to understand?)
effect?
Were all the important outcomes of the Is there justification for data
intervention considered? interpretation? (sufficient data to support
the findings, selection of data for paper
explained).
How can it be Can the results of this study be applied to How transferable are the findings to a
applied locally? your local population? (Consider what wider population? (Consider context of
differences might exist and how study, sufficient details to compare to
significant they might be.) other settings, whether all relevant
outcomes considered.)
Are the benefits of this intervention How relevant and useful is the research?
worth the costs and/or harms, for your (Address the research aim, add new
local population? understanding, suggest further research,
relevance to your setting.)

Source: Adapted from the CASP, JAMA and EBM tools, all available from the SCHaRR Netting the Evidence
Website (see web resources)
492 Healthcare management

could be used to analyse a randomised controlled trial (RCT) or a qualita-

tive study. Similar sets of questions can be produced to appraise other
kinds of study – case study designs or economic evaluations, for example
– and to appraise secondary research such as systematic reviews.

Applying the evidence: informed decision making?

The final step – and perhaps the most difficult one – is to use the evi-
dence in a local context as part of the decision-making process (Lavis et
al. 2005). Experience and research both suggest that it is unrealistic to
expect this to be a simple or linear process in which the evidence –
packaged or presented as a product by researchers – directly shapes an
individual decision. It is more likely that evidence plays a more indirect
and longer term part, shaping the context in which decisions are made
and contributing to an iterative local debate in which evidence, values,
politics, resources and other priorities all play a part. It is unlikely that for
most health management or policy issues the research evidence will offer
unambiguous or universal prescriptions for action. Rather, it is more
probable that any recommendations will be contingent and will offer a
range of possible courses of action with different potential benefits and
costs.
Researchers may find their engagement in the decision-making pro-
cess exciting and rewarding, as they see their endeavours having a real-
world impact on health services and organisations. However, they may
equally find the process alien and uncomfortable, and be disappointed by
the way their carefully created and presented research findings are dealt
with rather sceptically or abruptly, and other considerations accorded
greater value. Researchers also need to consider how they are viewed by
other stakeholders in the decision-making process – as honest brokers,
offering information as a currency in the debate to all parties, or as yet
another vested interest, allied to one side or another and using evidence as
ammunition. The challenge for researchers is to engage closely with
policymakers and practitioners while at the same time maintaining some
distance. The researcher should not lose the disinterested and objective
perspective on issues which they bring to the debate and for which they
will be valued.

Conclusion

The quality of management and leadership in healthcare organisations is

a fundamental determinant of the quality of service they provide to
patients. Well-managed and effectively led organisations provide an
environment in which high quality clinical care is both clearly valued and
more capable of being delivered consistently. The decisions made by
managers in organisations and, at a health system level, by policymakers
inevitably influence organisational capacity, capability and behaviour.
 Research, evaluation and evidence-based management 493

There is no doubt that the more effective use of research evidence in

the decision-making process could make for better decisions, less prone
to fashion, ideology or personal conviction and more likely to be con-
sidered, rational and, in the longer term, more beneficial. But we are a
long way from that position now. We have at the moment separate and
divided research and practice communities, with different and conflicting
notions of what constitutes evidence, and how to use it in decision
making. Managers and researchers need to learn to speak each other’s
languages, to understand and respect each other’s expertise, and to trust
and value the contribution each can make to improving healthcare
organisations and health systems.

Summary box

• By making more effective use of evidence from research in decision making,

managers and policymakers in healthcare organisations and health systems
could improve the quality of decision making which would have direct benefits
for the quality of health services.
• The rise of the evidence-based healthcare movement has led to a shift in the
paradigm for knowledge creation, translation and utilisation in many sectors,
to place greater emphasis on the use of evidence in decision making.
• There are important differences between the clinical and managerial or
policymaking domains which mean that the way evidence is collated and used
may be very different. There is a real need to change attitudes and beliefs
among researchers and managers, and to promote linkage and exchange
between the two communities.
• Some research funders, such as the Canadian Health Services Research
Foundation and the NHS service delivery and organisation research
programme are showing that research can make a more significant
contribution to health management and policy development.
• Managers can make some immediate progress in their own organisations by
searching for, appraising and applying evidence in their own decision making.
There are a growing number of sources of evidence available intended to
support a more evidence-informed approach to management.
• Managers and researchers need to learn to speak each other’s languages, to
understand and respect each other’s expertise, and to trust and value the
contribution each can make to improving healthcare organisations and health
systems.

Self-test exercises

1 Undertake an audit of the evidence resources available in your organ-

isation to support managers. Visit your postgraduate centre, library,
information services department and other potential resources.
Explore what training is available in searching, critical appraisal and
494 Healthcare management

other areas. Find out whether information scientists/librarians are

available to support you in accessing evidence. Consider whether there
are important gaps in provision and, if appropriate, draw up a short
report to discuss with colleagues.
2 Choose an issue or topic of current relevance to your organisation –
something on which important decisions are being made in the near
future. Search some of the sources of evidence described in the chapter
and listed in the website and resources section. Appraise the evidence
you find using the framework set out in Table 27.5. Consider how the
information from this process could be used by decision makers in
your organisation.

References and further reading

Abrahamson, E. (1996) Management fashion. Academy of Management Review,

21(1): 254–85.
Antman, E., Lau, J., Kupelnick, B., Mosteller, F. and Chalmers, I. (1992) A com-
parison of the result of meta-analysis of randomised controlled trials and
recommendations of clinical experts. Journal of the American Medical Association,
268: 240–8.
Birkhead, J.S. (1999). Trends in the provision of thrombolytic treatment 1993–
1997. Heart, 82: 438–42.
Cabinet Office (1999) Modernising Government. London: The Stationery Office.
Canadian Health Services Research Foundation (CHSRF, 2004). Annual Report.
Ottowa: CHSRF.
Coomarasamy, A. and Khan, K.S. (2004) What is the evidence that postgraduate
teaching in evidence based medicine changes anything? A systematic review.
British Medical Journal, 329: 1017–22.
Davidoff, F., Haynes, B., Sackett, D. and Smith, R. (1995) Evidence-based
medicine. British Medical Journal 310(6987): 1085–6.
Davies, H. T. O., Nutley, S. M. and Smith, P. C. (eds) (2000) What Works?
Evidence-based Policy and Practice in Public Services. Bristol: The Policy Press.
Department of Health (DH, 2005) Commissioning a Patient Led NHS. London:
DH.
Edwards, N. and Harrison, A. (1999) The hospital of the future: Planning hos-
pitals with limited evidence: A research and policy problem. British Medical
Journal, 319: 1361–3.
Fulop, N., Protopsaltis, G., Hutchings, A., King, A., Allen, P., Normand, C. and
Walters, R. (2002) Process and impact of mergers of NHS trusts:
Multicentre case study and management cost analysis. British Medical Journal,
325: 246–52.
Hewison, A. (1997) Evidence-based medicine: What about evidence-based
management? Journal of Nursing Management, 5: 195–8.
Institute of Medicine (1999) The National Round-Table on Health Care Quality:
Measuring the Quality of Care. Washington, DC: Institute of Medicine.
Kitchener, M. (2002) Mobilizing the logic of managerialism in professional
fields: The case of academic health center mergers. Organization Studies, 23(3):
391–420.
Klein, R. (2000) From evidence-based medicine to evidence-based policy?
Journal of Health Services Research and Policy, 5(2): 65–6.
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Kovner, A.R., Elton, J.J. and Billings, J. (2000) Evidence-based management.

Frontiers of Health Services Management, 16(4): 3–46.
Lavis, J., Davies, H.T.O., Oxman, A., Denis, J.L., Golden-Biddle, K. and Ferlie, F.
(2005) Towards systematic reviews that inform health care management and
policy-making. Journal of Health Services Research and Policy, 10(3): S35–48.
Lavis, J., Gruen, R., Davies, H. and Walshe, K. (2006) Working within and
beyond the Cochrane Collaboration to make systematic reviews more useful
to healthcare managers and policymakers. Healthcare Policy, 1(2): 21–33.
Lemieux-Charles, L. and Champagne, F. (2004) Using knowledge and evidence
in healthcare: Multidisciplinary perspectives. Toronto: University of Toronto
Press.
Lomas, J. (2000) Using linkage and exchange to move research into policy at a
Canadian foundation. Health Affairs, 19(3): 236–40.
Lomas, J., Fulop, N., Gagnon, D. and Allen, P. (2003) On being a good listener:
Setting priorities for applied health services research. Milbank Quarterly, 81(3):
363–88.
Lomas, J., Culyer, T., McCutcheon, C. et al. (2005) Conceptualising and combin-
ing evidence for health system guidance. Ottowa: CHSRF.
Marmor, T. (2001) Fads in medical care policy and politics: The rhetoric and
reality of managerialism. London: Nuffield Trust.
National Audit Office (NAO, 2003) Getting the Evidence: Using Research in Policy
Making. London: NAO.
NCCSDO (2000) National Listening Exercise: Report of the Findings. London:
NCCSDO.
NCCSDO (2002) Refreshing the National Listening Exercise: Report of the Findings.
London: NCCSDO.
Pawson, R. (2002). Evidence based policy: The promise of realist synthesis.
Evaluation, 8(3): 340–58.
Sackett, D.L. and Rosenberg, W.M. (1995) The need for evidence-based
medicine. Journal of the Royal Society of Medicine, 88(11): 620–4.
Smith, J., Walshe, K. and Hunter, D.J. (2001) The redisorganisation of the NHS.
British Medical Journal, 323: 1262–3.
Tranfield, D., Denyer, D. and Smart, P. (2003) Towards a methodology for devel-
oping evidence informed management knowledge by means of systematic
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Walshe, K. and Rundall, T. (2001) Evidence based management: From theory to
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Websites and resources

Cabinet Office. Policy hub website providing resources on evidence-based

policymaking: http://www.policyhub.gov.uk/
Canadian Health Services Research Foundation. http://www.chsrf.ca/
Critical Appraisal Skills Programme. http://www.phru.nhs.uk/casp/casp.htm
ESRC Centre for Evidence-Based Policy and Practice. http://
www.evidencenetwork.org/
National Electronic Library for Health. Pages on evidence-based decision
making: http://www.nelh.nhs.uk/ebdm/
NHS Centre for Reviews and Dissemination. http://www.york.ac.uk/inst/
crd/
496 Healthcare management

SCHaRR Netting the Evidence. http://www.shef.ac.uk/scharr/ir/netting/

US Agency for Healthcare Research and Quality. http://www.ahrq.gov/
World Health Organization’s Health Evidence Network. http://
www.euro.who.int/HEN
 28 Conclusions: complexity, change
and creativity in healthcare
management
Judith Smith and Kieran Walshe

Introduction

This book has demonstrated in a most vivid manner the complexity of

the task facing healthcare managers in the twenty-first century, especially
in relation to the rapidly changing nature of the context in which health-
care is delivered and managed. Healthcare is, as Chapter 2 demonstrated,
an intrinsically political domain in which every citizen has some sort of
interest and where managers are just one group of stakeholders within a
complex web of actors who influence the development and implementa-
tion of health policy. The fundamental complexity of healthcare as a
sector is increasing on account of four main factors as set out at the start
of this book in Chapter 1:
• the demographic shift (ageing population accompanied by rising
incidence of chronic disease)
• the pace of technological innovation
• changing user and consumer expectations
• rising costs.
These factors are woven throughout the chapters of the book, emerging
at different points when authors assess the current state of play for their
particular area of healthcare management. In this final chapter, we exam-
ine the specific nature of the challenge facing healthcare managers as they
seek to deal with the inherent complexity and change within health
systems, and we describe the creativity that is thus called for in order for
healthcare management to be truly effective. As academics who both
started their professional life as healthcare managers and who spend a lot
of time involved in the development of the current and future generation
of managers, we felt we had to conclude the book by setting out what this
analysis of healthcare management actually means for the task of being a
healthcare manager today. Hence we make no apology for the conclu-
sions resting on a form of ‘job specification’ for a healthcare manager – a
manager who needs to be highly creative when managing change within
a highly complex environment.
498 Healthcare management

Managing in the face of complexity

The implications of this increasing complexity for the role and activities
of healthcare management are evident in the challenges associated with
making decisions about funding healthcare (see Chapter 3). These chal-
lenges operate at both a macro (national or system-wide) and local level,
with managers being at the forefront of developing proposals on resource
allocation and advising their political masters as to how funding should
be used and with what anticipated results. As such, managers are clearly
often in a difficult and unpopular place – at the heart of difficult decisions
about how a country, region, district, hospital or primary care service is
going to divide up and allocate resources when faced with many compet-
ing demands. The manager’s role as a potentially unpopular decision
maker is not confined to financial resources. As Chapter 4 illustrated,
managers face new challenges in relation to how the different sectors of
healthcare are configured – what might have been traditionally under-
stood as community- or hospital-based care is now contested as technol-
ogy increasingly enables the shift of care away from hospital settings.
Similarly, societal moves towards increased expectations of public services
mean that healthcare managers find themselves under constant pressure
to try and support the design of services that are much more clearly
patient focused and not so much influenced by the convenience and
priorities of professional staff (Chapter 4).
In making decisions about resource allocation and service configur-
ation, managers constantly face the challenge of how to respond to new
and emerging technological advances, about whose efficacy and effi-
ciency data may be initially in short supply. Chapter 5 set out the
intricacy of processes for assessing new technologies and setting funding
priorities, along with the rise of health economics as a discipline that can
assist managers in making investment (or disinvestment) decisions. These
processes, and an understanding of health economics and priority setting,
are areas where healthcare managers now need to have some understand-
ing and expertise in a way that would have been much less pressing even a
decade ago. Technological advances increasingly drive approaches to the
design and delivery of healthcare, and being able to identify and interpret
the implications of emerging technologies is now a vital skill for the
healthcare manager.
A further dimension to the complexity of the task facing healthcare
managers, and perhaps the most difficult one in relation to its enormity, is
that of the changing epidemiology of almost all countries’ health. As
pointed out in Chapter 6, the rising incidence of chronic disease
throughout developed countries of the world, and the increasing avail-
ability of treatments to treat such conditions, means that ‘people living
with long-term conditions’ now represent the greatest single public
health management challenge for countries in the OECD. For countries
in the developing world, the impact of diseases such as HIV/AIDS are the
foremost epidemiological challenge, posing challenges for health man-
 Conclusions 499

agers in relation to the design and delivery of services across the spectrum
from health promotion to palliative care.
If the rising incidence of chronic and infectious diseases is the greatest
public health challenge to healthcare managers, finding ways of tackling
deep-seated and often increasing inequalities in the health status of popu-
lations must be the next most knotty public health management chal-
lenge. As Chapters 5 and 16 explained, the only route to addressing the
causes of ill health and inequality lies in managers finding much more
effective ways of working in partnership with other agencies such as
housing, social care, education and regeneration. In order to do this,
managers will need to adopt a more holistic approach to their under-
standing of ‘health’ along with new strategies for addressing multi-
sectoral and highly complex social problems that in turn impact on
people’s (poor) health.
Given that the context of healthcare management in the twenty-first
century is characterised by a high level of complexity, the major
challenges facing healthcare managers when seeking to manage that
complexity can be summarised as shown in Box 28.1.

Box 28.1 Major challenges for healthcare managers

• Developing the political acumen and astuteness to understand, influence and

manage within the health policy process.
• Having robust and transparent approaches to making healthcare funding
decisions.
• Having sophisticated and sensitive approaches to making decisions about the
redesign of services across healthcare systems.
• Understanding and using new approaches to the assessment and prioritization
of new health technologies.
• Developing new approaches to the management of chronic disease and long-
term conditions.
• Having coherent and sophisticated plans for tackling infectious diseases.
• Being able to adopt a range of strategies that enable healthcare funders and
providers to work in close partnership with other agencies whose activities
impact on health status.

Managing in the face of change

If the context of healthcare management is defined by its complexity, the

nature of the healthcare management task would seem to be character-
ised by the need to deal with and accommodate change. In the chapters
that focus on specific sectors of healthcare management (Chapters 7, 8
and 9), it was made clear that primary care is becoming more ‘managed’
and organised as its importance to overall health gain is realised, acute
care is being redefined by technological and staff training advances
500 Healthcare management

together with a stronger focus on clinical governance and patient safety,

and mental health services are being constantly challenged in relation to
having a stronger user focus and less of a medical or institutional bias. It is
striking that in each of these sectors the most evident management chal-
lenge is in relation to trying to change the centre of gravity of the
particular service, bringing about a reorientation towards a stronger client
or patient focus (mental health and acute services) and in primary care
towards a broader public health and less medical model of provision.
There are a number of areas of healthcare management that tend to
receive relatively little policy and management development attention,
often remaining ‘in the wings’ whilst other functions that are more
closely related to the direct delivery of patient care take centre-stage.
These neglected and perhaps for some people, less exciting, areas of man-
agement include: service and capital development (Chapter 10); health
planning and strategy (Chapter 11); healthcare commissioning and con-
tracting (Chapter 12); and healthcare information technology and sys-
tems (Chapter 13). However, it is clear from a careful reading of these
chapters that these management functions are at the epicentre of much of
the current change within healthcare systems, change which is in itself a
reflection of the complexity of the wider context of healthcare. As the
nature and focus of health services change, so the requirement for build-
ings and equipment evolves, and increasingly globalised economies mean
that capital and service planning can rarely be contained at a national
level in the twenty-first century (Chapter 10). Complexity calls for
sophisticated strategy and planning within healthcare organisations and
for wider populations, and the intricacies of political and policy influ-
ences set out in Chapter 2 make the process of strategy development ever
more challenging (Chapter 11). The complexity of decision making
about resource allocation and service design that is explored earlier in the
book (Chapters 3 and 4) becomes a very real and pressing management
activity in the chapter on healthcare commissioning and contracting
(Chapter 12).
Healthcare commissioning and contracting are probably only partially
understood by a majority of people working with health systems. Yet
Chapter 12 makes it clear that the responsibilities facing commissioners
are crucial to determining the nature, level and quality of health services
people receive, and the environment within which health professionals
can practise. Once again, this area of management is defined by change –
for health systems look to their funders or commissioners to develop the
levers and incentives to bring about desired changes to patterns of service
delivery and hence commissioning is where new forms of primary, acute
and mental healthcare will ultimately be enabled and incentivised.
Healthcare information technology (IT) and systems are the area of
management where complexity and change perhaps converge in the
most dramatic manner (Chapter 13). Technological change is for most
people particularly evident in the IT sector (and indeed in all our daily
working lives) and its increasingly complex nature has far-reaching
implications for how health services are organised and delivered and for
Conclusions 501

the management of many of the most basic (and yet crucial) systems
within healthcare organisations; for example, medical records, transmis-
sion of test results, prescribing of drugs and communication between
departments and organisations. For managers, changes and developments
in IT pose a range of challenges, not least in relation to how such devel-
opments will impact on how healthcare staff work, services will be
delivered and patients will access the health system. As with most man-
agement activity, the people element of this challenge is likely to be the
most exacting for managers – how to maximise the benefits of new
information technology and systems. This leads us to consider the other
main area of change that challenges healthcare managers – how to change
the ways in which people work at an individual, group and organisational
level.
The challenge of healthcare management in the face of changes to
the ways in which people are organised and developed was explored in
Chapters 14, 15, 16 and 17. The overall scale of the healthcare work-
force was examined along with an exploration of how human resource
management can be used as a way of bringing about new ways of
working – new ways that are needed in response to the changing and
complex context within which healthcare is delivered (Chapter 14).
Specific areas in which healthcare managers have to use their skills in
bringing about change were also examined, including the ways in which
managers and clinicians work together (Chapter 15) and governance
arrangements are established and managed for healthcare organisations
(Chapter 16). In these two latter cases, it was made clear that managers
will need to be able to persuade and influence colleagues whilst setting
overall parameters and standards of conduct for teams and organisations
– more directive approaches being unlikely to work in such complex
and political settings. Similarly, when seeking to develop and manage
the relationship between healthcare organisations and partner agencies
(an activity that we have already noted is vital to health improvement
and public health work), the healthcare manager will need sophisticated
interpersonal skills that enable the building of trust alongside robust
processes of accountability for delivering on agreed objectives across
organisations.
In a climate of continuous change, there is a clear need to measure
organisational performance and put in place ‘dials’ from which man-
agers, staff, users and others can read the important indicators of the
organisation’s activity. There has been a proliferation of approaches to
performance measurement in healthcare in recent years, but Chapter 18
organised these into an analytical framework that offers managers a way
of ordering their approach to performance measurement and thus bring-
ing some way of taking stock amidst rapid change within complex
services. When managing in the face of change, healthcare managers face
the challenges shown in Box 28.2.
502 Healthcare management

Box 28.2 Managing in the face of change

• Having the necessary skills to be able to bring about changes in the overall
model and orientation of care towards one that is more person focused.
• Being able to develop robust plans for capital and service development in an
increasingly globalised world.
• Finding new ways of developing strategy within a political context that
continues to become more complex.
• Developing appropriate levers and incentives to use within funding and
commissioning, and thus bring about desired changes to healthcare provision.
• Creating the wider culture and environment where IT developments can be
maximised.
• Enabling human resource management that is focused on developing the new
ways of working that are needed in a changing world.
• Having the necessary powers of influence and persuasion to work with
clinicians and board members in an effective manner.
• Using these skills of influence and persuasion to develop strong partnership
working with other agencies in a manner that also assures the delivery of joint
objectives.
• Developing a clear set of measures by which stakeholders can assess the
performance of healthcare organisations and thus look for further
improvements.

Managing with creativity in order to improve care

In a context of heightened complexity and constant change – a context

that seems set to define healthcare management for the foreseeable future
– healthcare managers need to be highly skilled and have well-developed
emotional intelligence if they are to bring about the improvements in
health and care that represent the ultimate aim of their profession. In
concluding her book on NHS leaders in 1989, Rosemary Stewart, prob-
ably the foremost UK researcher of healthcare management in the 1970s
and 1980s, exhorted healthcare managers as follows:
The NHS needs leaders who can enthuse others with high goals for
what they can achieve. Do not have too grand an idea of leadership.
You do not have to be charismatic but you must care – and care
deeply – about what you want to achieve. You must show that you
care in what you do because you are a model for other people’s
actions. . . . Above all, you must inspire trust: that is a key aspect of
successful leadership in the NHS because there are so many
individuals and groups who may be suspicious of you and your
intentions. (Stewart 1989: 185)
This relationship between having an advanced set of skills and yet a
commitment to the ultimate aim of improving health and care seems to
Conclusions 503

us to continue to be an apt summary of the task facing modern healthcare

managers. Stewart, however, rightly points to the fact that healthcare
management is a profession that tends to attract mistrust, criticism and
even derision – in comparison with jobs such as medicine and the law
which typically command a much greater degree of public respect and
even deference. The healthcare manager is never going to become a
popular figure within communities and society, for he or she is, as we
have seen in this book, charged with making some of the most difficult
and sometimes unpalatable decisions about health funding and provision.
However, what the healthcare manager must be is someone who, as in
Stewart’s words, inspires trust and credibility.
The final nine chapters of the book set out the ‘toolkit’ for managers
to use in developing this trust and credibility – credibility that is con-
cerned not only with acquiring practical skills such as managing projects,
process improvement and resources, but also with the personal integrity
that comes from having a well-developed sense of personal awareness and
effectiveness, and a commitment to respecting the integrity of colleagues
in teams and organisations. In acquiring an appropriate combination of
skills and personal qualities to enable effective practice, healthcare man-
agers need, above all else, the ability to be creative in their approach to
how they foster personal, team and organisational development. Rose-
mary Stewart asserted that ‘A good leader should also be an effective
manager. You will not be effective unless you are able to understand and
manage yourself and your job’ (Stewart 1989: 185). This message under-
pins Chapter 21 with its many pointers about how to understand and
manage one’s own practice as a manager.
The importance of developing emotional intelligence and understand-
ing one’s own and other people’s leadership styles and behaviour was
made clear in Chapter 19. The challenge for the healthcare manager in
relation to matching behaviour and management style to specific situ-
ations and needs underlined the importance of managers being about to
be creative and adaptive in their practice. Chapter 20 took this analysis of
individual style and behaviour further and explored the implications for
organisational design and development, again underlining the need for
managers to be able to interpret and make sense of organisations for those
with whom they work, acting as an interpreter and ‘sensemaker’ of
organisational pressures and life. Perhaps one of the most immediately
practical and challenging chapters of the whole book is the one that
focuses on personal effectiveness and development (Chapter 21), asking
managers to examine their style of working and to find ways of develop-
ing the creativity and reflective practice that is crucial for effective
leadership and development as set out in Chapters 19 and 20.
For managers currently working within health services, Chapters 22 to
26 set out a wealth of evidence-based practical guidance for how actually
to do the business of management in a complex and rapidly changing
context. Whether seeking advice on how to manage projects, develop a
business plan, or improve team working, it is clear that managers need to
have the skills to set up robust processes which are at once transparent and
504 Healthcare management

accountable in an increasingly contested environment, but also flexible

and dynamic and able to respond to change in a creative manner. Simi-
larly, when challenged to improve the involvement of service users with
the management of services (Chapter 25) or to find new ways of improv-
ing the quality and processes of care (Chapter 26), this combination of
stronger and yet adaptable processes again emerges as a key message for
healthcare managers.
Developing management practice that is properly evidence based and
open to learning from research is something that all too often remains as
aspiration rather than reality (Chapter 27). This book is itself intended as
a contribution to the ongoing international effort to develop evidence-
based management in healthcare, bringing together as it does the prac-
tical challenge of managing health and health services with the wealth of
research evidence about what is needed to manage effectively in this
complex and changing world. In order to manage in a creative manner
that in turn enables care to be improved, managers need to develop a
number of ways of practising (Box 28.3).

Box 28.3 Managing in a creative manner

• Inspire credibility and trust.

• Develop emotional intelligence and use this to understand others’ style and
behaviour.
• Interpret and make sense of organisations for those with whom they work.
• Develop as reflective and self-aware practitioners.
• Develop and keep updated fundamental management skills such as project and
resource management.
• Be able to design and implement robust yet flexible processes for improving
services and assuring proper user involvement.
• Focus their organisation on issues of diversity and inclusiveness.
• Practise in an evidence-based manner that remains open to change and
challenge.

Overall conclusions

Concluding this book appeared at first to be a daunting task, with 26

substantive chapters covering so many aspects of healthcare management.
Yet as it turns out, the task has not been as difficult as we imagined, for a
reading of the totality of the book’s contents has revealed a strong and
consistent message in relation to the complexity of the context, the chan-
ging nature of the task, and the degree to which creative and thoughtful
responses are required, rooted in a commitment continually acquire to
and update practical management skills. We have devoted our careers to
first of all managing and then latterly researching and seeking to develop
the management of healthcare, and we have a strong belief in the need for
 Conclusions 505

ever more effective and skilled management of health services. The chal-
lenge set by Rosemary Stewart in 1989 remains pertinent today, and all
good leaders of healthcare need to be first and foremost good managers.
This book seeks to add in some small way to the process of developing
healthcare management as an international community of professionals
dedicated to improving the health and care of people who are often
vulnerable and unable to act for themselves within the wider health
system and society. If the book helps you to understand better and hence
practise the craft of healthcare management in a creative way that
ultimately improves care, we will have achieved what we intended.

Reference

Stewart, R. (1989) Leading in the NHS: A Practical Guide. Basingstoke: Macmillan.

Index

ABI Inform (Proquest) 488, 489 HR management 241

Accelerated Development Programmes research evidence 490–2
245 appreciative inquiry cycle 388, 392, 393
acceptant consulting style 278–80 arrow diagrams 468
accountability 247 Ashton, T. 215
accreditation 306, 309–10 assimilation 261
Ackerman, L. 386–7 Association of Public Health
action learning 374–5 Observatories (APHO) 113
Action Learning, Action Research and Attwood, M. 192
Process Management Association audit 275
(ALARPM) 380 Audit Commission
activity-based budgeting 407–8, 408 diabetes care 58, 59, 60
activity-based funding 46, 48, 137 implementing NICE guidance 80, 81
activity and interventions, describing 209 barriers to implementation 79–80
acute care 134–50, 170–1, 499–500 partnership working 288
Czech Republic 146 audit questionnaires 430, 431
traditional approach and alternative Auseinet 164
models 134–8 Australia 40, 44
UK 142–6 HealthConnect 226
US 138–42 Pharmaceutical Benefits Scheme 84
see also secondary care pharmaceutical industry and HTA 77
addiction 104 autism 445
adjourning phase 423, 425 autonomy, principle of 437–8
Advanced Life Support Programme availability of data 312
Leadership Module 333–4 Avon Mexico 392, 393
advice services, telephone/internet based
125 bacteria, and viruses 91
affinity diagrams 468 Baggott, R. 45
ageing population 3, 47–8 Bakker, M.J. 107
Alder Hey Hospital 271 balanced scorecard, public sector 403–4
Alimo-Metcalfe, B. 325 BAMM 268
Allen, R.C. 389 bank financing 179, 180
Allitt, B. 271 basic assumptions 354–5
Alma Ata Declaration (1978) 117–18, Bass, B. 324
445 bed numbers 138, 140
Alzheimer’s Society 445 mental health 154
Anell, A. 25 behavioural change 389
anxiety 369 Belasen, A.T. 261, 264–5
application of research 490–2 Belbin, R.M. 420, 427–8, 429
appraisal benchmarking 466
health technology 74, 75–6 ‘benefit’ principle of taxation 41
508 Index

benefits competitive analysis 167–8

criteria 172, 413 costing options 170
identification and realisation of 412–13 engaging stakeholders 169
measuring 173 evaluation criteria 169–70
benefits realisation plan 413 service design options 168–9
Bennis, W.G. 189 environmental analysis 405–6
Berg, M. 84 framework 401, 402
Berwick, D. 458, 459 public sector scorecard 403–4
best fit HR management 239, 242, 248 resource planning 406
best practice HR management 239, 240, SMART objectives 404–5
241, 244 stakeholder involvement 401–4
Better Commissioning Learning and business process re-engineering 225, 242,
Improvement Network 222 344, 464
Bevan, R.G. 22 business units 255
bibliographic databases 488, 489 Businessballs 340, 380, 434
Black, A. 136, 143 butterfly effect 352
Black, J. 195
Black Report 101 Cabinet Office 481
Blaxter, M. 91 Cabinet Office Leadership Programme
block contracts 46, 208 340
Boaden, R. 6 Cadbury Report 270
board tasks model 274–5 Canada 82
boards see health boards Canadian Coordinating Office for Health
Boland, T. 303–4 Technology Assessment
Bolden, R. 158 (CCOHTA) 88
Bolman, L.G. 388–9 Canadian Health Services Research
booking services 232–3 Foundation (CHSRF) 483–5,
Boyd, A. 196 488
brain metaphor 349 Canadian Mental Health Association 164
brainstorming 466 cancer drugs, new 82, 83
breadth of partnership 292 cancer networks 144
Bristol Royal Infirmary 26, 271, 344–5 cancer services centre 57–8
British Medical Association 45, 143 capital development 166–82, 500
British Medical Journal 268 business case for capital investment
Brown, N. 99, 101 171–5
budget management 399, 407–9 developing a business plan 167–70
budget monitoring 409 full business case 171, 175
budget setting process 407 LIFT 178
capital and revenue 408 from option appraisal to
types of budget 407–8 commissioning 176–9
budget variances 409 options for financing 179–80
bureaucracies 263, 265 PFI 167, 175, 176–80
machine bureaucracy 343–7 capital expenditure 408
professional bureaucracy 238 Capital Prioritisation Advisory Group
business case 411–14 (CPAG) 177
for capital investment 171–5 cardiovascular disease 98, 100–1
full business case 171, 175 statins and prevention of 75–6
outline business case 170, 171–5 care managers, individual 122–3
framework for 411–13 care packages 137
identification and realisation of care pathways 60–1
benefits 412–13 Care Services Improvement Partnership
option appraisal 412 164, 222
scoping the need 411–12 Care Trusts 290
risk assessment 414 career development 241
business failures 269, 328 CARMEN 299
business planning 399, 400–6, 503–4 catalytic consulting style 279–80
developing a business plan 167–70 cause-and-effect diagrams 467
assessing demand 167 centralisation 301–2
Index 509

Centre for the Advancement of Coaching Network 380

Interprofessional Education Cochrane Collaboration 441, 487
(CAIPE) 299 Cochrane Library 488
Centre for Evidence Based Policy and Cockman, P. 278–9
Practice 481 Code of Conduct 270–1
Centre for Reviews and Dissemination coercive power 261–2
488 collaborative approach to quality
Chambers, N. 279, 280 improvement 461
change 381–98, 497, 503–4 collective payment for healthcare 16–17
case studies in change management Collins, J. 324
391–4 commercial, for-profit organisations 62,
choosing change methods 388–90 63, 66–7
context driving change 382–4 Commission for Health Improvement
limits of structural change 295 (CHI) 160, 302, 307
manager as change agent 390 Commission for Healthcare Audit and
managing in the face of 499–502 Inspection (CHAI) 154, 307
reasons for the occurrence of 14–15 Commission for Social Care Inspection
theories of 291–2, 384–5 154
typologies of 385–8 commissioning 20, 23, 201–23, 500
Change Agent Team 299 commissioning cycle 205, 206
change agents 390 commissioning organisation 212–14
change journeys 389 definitions 203–4
Changing Workforce Programme (CWP) for efficiency 214–15
245–7 for health improvement 216
economic and technical factors 246 impact of 214–17
social and political factors 246–7 and mental health 155
chaos theory 352–4 policy context 201–3
charges for healthcare 18, 44–6 primary care led 119–20, 126–7, 129,
charismatic leadership 328 212–13
Chartered Institute of Personnel and for quality 216–17
Development (CIPD) 380 for responsiveness 215–16
Checkland, P. 385 service specification 208–10
checklists 466 in theory and practice 204–12
checksheets 467 committees 442–4
chief executives 257 Commonwealth Fund 222
Children’s Trusts 290 communicable diseases 94, 96, 97, 498–9
choice 23, 188, 302 communication 241, 372–3
‘choose and book’ policies 232–3 people with communication problems
chronic disease 3, 99–101, 498–9 444–5
chronic disease management 147 community
chronic disease self-management healthcare system and 2
programme 440 involvement 445–7
church-affiliated hospitals 64 community care reforms 289–90
citizens’ juries 447 community enterprises 125
clause 4 of Labour Party constitution 23 community health centres 125
clinical decision making 84, 483, 484 community health partnerships 187
clinical directorates 57, 58, 255 community health services 120, 121–2,
clinical directors 255, 257–8 123–4
clinical governance 464, 465 community mental health teams
Clinical Governance Support Team 278 (CMHTs) 155
clinical guidelines/pathways 464, 465–9 competing logics 246
Clinical Pathology Accreditation (CPA) competition 188, 301
306 aggressive 193
clinical practice regulation and information technology
compared with healthcare management 232–3
483, 484 see also market reforms
see also doctors competitive advantage 191
coaching 375–6 competitive analysis 167–8, 191–2, 385
510 Index

complaints 373 cost and volume contracts 208

complementary private insurance 44 costs 409–11
completer (team role) 429 business plan and costing options 170
complex adaptive systems 352–4 calculation in outline business case
complexity 471, 497 173–4
managing in the face of 498–9 classification 410–11
Complexity and Management Centre 362 containment 16–17
compliance-based regulation 305 pressures on 47–8
comprehensive care 118, 120, 121–2 rising 4, 497
confidence 369 Coulter, A. 76, 439
conformance 274–6 Council for Excellence in Management
confounding 313 and Leadership 340
confrontational consulting style 279–80 Covey, S. 370–1
constraints, theory of 463–4 Craig, N. 102–5, 110
consultants 257–8 cream skimming 67
consulting styles 278–80 Creating Capable Teams Toolkit 156
consumer expectations 4, 497 creativity 497
consumerism 48, 137, 188 managing with 502–4
Consumers Health Forum (Australia) credibility 502–3
441 critical appraisal framework for research
consumption 107 490–2
contact, first 118, 120, 121 critical variable, culture as 354
contingency HR management 239, 242, Crosby, P. 456–7
248 Crosland, A. 157–8
contingency theory of leadership 327 cross-functional teams 426
continuous care 118, 120, 121 cultural artefacts 354–5
continuous learning 387–8 cultural theory 230–1, 302–3
contracting 23, 201–23, 500 modes of governance 301
definitions 203–4 cultural web 260
policy context 201–3 culture
relational contracting 211–12 clinical compared with management
in theory and practice 204–12 483, 484
contracts 124, 205–8 doctor-manager relationship 259–62
making contracts effective 210 organisational design and development
service specification 208–10 354–5
types of 208 organisational metaphor 349
contrived randomness 301 and performance 274, 354
control 276–7 Cunningham, G. 334
ownership and control of healthcare current scientific paradigm 381, 382
organisations 62–8 Czech Republic 146
see also governance
control charts 461–2, 467 data
control locations and resultant action availability and reliability 312
matrix 303–5, 310 validity and confounding 313
Cooper, S. 332, 333 databases
cooperation, between management and bibliographic 488, 489
workers 346–7 evidence 488–9
Co-ordinated Care Trials 287 Davidson, N. 101
coordination of care 118, 120, 122 Davies, C. 270
coordination problem 232–3 Davies, W. 183
coordinator (team role) 429 Dawson, J. 156
co-payments 18, 44–6 Dawson Report 135
core competencies 240 daycases 137, 138
Cornforth, C. 278 de Sa, J.M. 215
corporate scandals/failures 269, 328 Deal, T.E. 388–9
corporate strategy 183 death rates 94–101, 239
cost-benefit analysis 173–5 decentralisation 185–7, 192, 301–2
cost per case contracts 208 decision aids 439–40
Index 511

decision making direct taxation 39

clinical 84 directed creativity 362
compared with management decision disease see illness
making 483, 484 distributed leadership 332
informed by evidence 492 district general hospitals (DGHs) 57, 58,
decision-making power 262 135–6, 143
decision programme chart 468 diversification 194
Define-Measure-Analyse-Design-Verify diversity
(DMADV) 462 respecting 159
Define-Measure-Analyse-Improve- valuing gender diversity 393
Control (DMAIC) 462–3 Dixon, A. 35, 42
Degeling, P. 259 Dixon, J. 141, 196, 213
deliberative methods 447 doctor-manager relationship 253–68,
demand, assessing 167 501
Deming, W.E. 456–7 changing nature of 254–6
Deming Application Prize 460 culture 259–62
demographic change 3, 47–8, 84–5, 497 doctors in management and leadership
Denmark 41 roles 256–9
Department of Health 27, 64, 222 organisational structures 263–5
Capital Investment Manual 171, 175 doctors 230–1
Commissioning a Patient-Led NHS 157 clinical practice compared with
Creating a Patient-led NHS 303 healthcare management 483,
Delivering the NHS Plan 307 484
A Health Service of all the Talents 244–5 disagreement about treatment 436–7
HR in the NHS Plan 243–4 GPs see general practitioners/practice
Keeping the NHS Local 143–4 power of medical profession 26
National Programme for IT 227 Dolan, P. 82
The New NHS, Modern, Dependable dominant model of organisations 343–7
211 Donabedian, A. 454, 455
Partnership in Action 288 Drucker, P. 7
Policy Research Programme 488 drugs 76, 77–8
Reforming NHS Financial Flows 46 managing entry of new drugs 80
Standards for Better Health 271 prioritising new cancer drugs 82, 83
departmental purpose analysis 466 Dubos, R. 90
depression 152 Duran, A. 206–7
depth of partnership 292 Durie, M. 92, 101, 101–2, 108
design of experiments (DOE) 466
determinants of health 101–2, 103–5, early life 103
383 earned autonomy 330
deterrence-based regulation 305 economic factors 242, 246
Devadasan, N. 108–9 Economic and Social Research Council
developing countries 94–101, 498–9 (ESRC) 481
developmental change 386–7, 391–2 Edmonstone, J. 334–5
devolution Edwards, N. 253
of financial management to service EffectiveMeetings 380, 434
areas 391 efficiency 35
health reforms and 17 commissioning for 214–15
political power 19, 63, 185–7 egalitarianism 230–1
diabetes 98 elective care services 147
service provision 58–60 separation from emergency care
diagnostic services 141–2, 144–6 services 137, 138–41, 142–3
diet 105 Elkind, A. 350
different ways of working 237, 242–3 electronic health records 226–7, 228,
CWP 245–7 229–30
links with HR approach 247–8 emergency admissions 142
UK policy context 244–5 emergency care services, separation from
diffusion of IT 228–31 elective care services 137, 138–41,
direct costs 410 142–3
512 Index

emergent change 386–7 external sources of power 262

emerging paradigm 381, 382 Exworthy, M. 56
and change 387–8
emotional intelligence 327, 330, 331, facilitator modes 278–80
368–9 failure mode and effects analysis (FMEA)
Emotional Intelligence Consortium 380 466
employee involvement 241 fatalism 230–1
employee security 241 Fayol, H. 344
endocrine disorders 98, 101 Feachem, R.G.A. 141
enforcement of contracts 210 Feigenbaum, A. 456–7
Engels, F. 101 Ferlie, E. 7, 257, 260
England 21, 290 financial management, devolving to
acute care 142–4 service areas 391
health boards 272–3 financial modelling 174
healthcare providers 47, 64–6 financing healthcare 32–52, 498
healthcare system 63, 64–6 analytical framework 33
National Programme for IT 227 functional components 33–5
NICE see National Institute of Clinical healthcare expenditure in OECD
Excellence (NICE) countries 36–8
structural reforms 19–20, 23–4, 25, 187 insurance 34–5, 42–4
entrepreneurial governance thesis 301 options available for capital
environmental analysis 405–6 development 179–80
equity 35 out-of-pocket payments and charges
equity financing 180 35, 44–6
Ervik, R. 38–9 pressures on healthcare costs/spending
espoused values 354–5 47–8
ethical practice 159 primary care compared with secondary
Europe care 129
addressing health inequalities 107 revenue generation 38–9
healthcare reforms across 15–18 taxation 34, 38–9, 39–41
European Foundation for Quality ways of distributing funding 46–7
Management (EFQM) 306, first contact, point of 118, 120, 121
309–10, 315 fishbone diagrams 467
Award/Excellence Model 460 fixed costs 410
European Investment Bank 179 flow, managing 470
European Public Health Alliance (EPHA) flowcharts 466
102, 113 flux and transformation metaphor 349
evaluation focus strategy 193
of options in business planning 169–70 folk beliefs 91
of services and user involvement 444 folk sector 91
Evans, R.G. 14, 15–16, 18 followership 330
Every Child Matters website 299 food 105
evidence-based healthcare 480–3 for-profit organisations 62, 63, 66–7
evidence-based management 483–93, 504 forming phase 423
appraising the evidence 490–2 Fotaki, M. 196
finding the evidence 487–90 foundation trusts 20, 23, 65–6, 178, 187,
informed decision making 492 272–3
role of research in creating evidence four Cs 118, 120–2
486–7 Fowler, A. 303–4
evidence databases 488–9 France 35, 42, 44
exceptionalism 4–5 health technology assessment 78
‘exit’ 215 freestanding imaging centres 142
expectations, user/consumer 4, 497 Frenk, J. 35
expert power 261–2 Frontiers of Health Service Management 488
exploratory OD activities 278, 279–80 Fuchs, V.R. 14–15
external control 303–4 full business case (FBC) 171, 175
external peer review 309–10 Fullan, M. 329
external regulation 196 functional role 428
Index 513

functionalised mental health teams 155–6 ‘growing our own’ future leaders
fund pooling 33–5 programme 336
Fundamental Interpersonal Relations guideline development groups 442–4
Orientation-Behaviour (Firo B) guidelines, service design and 169
368 ‘gurus’
change 384–5
Garratt, B. 274–5 quality 456–7
gatekeeping 55, 120, 121, 122
GDP, healthcare expenditure as proportion Ham, C. 76, 141, 193–4, 214
of 20, 36–7, 106 Harding, A. 62
Geller, J.L. 154 Hawthorne Studies 347
gender differences 94, 95 health 90–113, 498–9
gender diversity, valuing 393 addressing health inequalities 107
general acute hospital 57, 58 addressing health status of indigenous
general management 254–5 peoples 108–9
General Medical Council 22, 26, changing epidemiology 498–9
268 contribution of healthcare to health
general practitioners/practice 20, 22, 55, status 102–6
123 definitions of 90–4
commissioning 212 determinants of 101–2, 103–5, 383
fundholders 217 patterns of illness and 94–101
perspective compared with service role of healthcare managers 109
users’ 436 Health Act (1999) 290, 307
primary care service development health action zones 107
123–4 Health Affairs 488
see also primary care health boards 186, 187, 269–85
general taxation 39–40 developing effective boards 278–80
generative learning 387–8 forms of 271–4
generic OD capabilities 278, 279–80 framework for NHS board
Germany 42, 42–3 development 279–80
Gillies, A. 190 roles of 274–7
Ginsburg, P.B. 38 Health Concern 143
Glasby, J. 293 health development, primary care as an
Glennerster, H. 186 approach to 117–18
Goldratt, E. 463–4 Health Evidence Network 488, 489
Goleman, D. 368–9 health expenditure
Good Governance Standard 270, 271, 274, acute care 135, 146
282 and health status 102, 106
Gosden, T. 125 and levels of care 56
governance 65, 269–85, 501 mental health 152–3
developing effective boards 278–80 OECD countries 36–8
evolving trends 270–1 pressures on 47–8
forms of health boards 271–4 private expenditure 17, 38
modes of 301 public expenditure 16, 17, 20, 38, 203
roles of boards 274–7 WHO member states 106
government 15, 20, 185, 202 health improvement
government-controlled public sector commissioning for 216
providers 62, 64–5 managing primary care for 119–20,
grade dilution 243 120–3
graphs 468 health inequalities 94–101, 499
great man theories of leadership 326 addressing in Europe 107
grid, and group 230–1 determinants of health 101–2, 103
Griffin, S. 59 health maintenance organisations
Griffiths Report 5, 254 (HMOs) 141, 420
Grint, K. 328 Health Management Information
group, and grid 230–1 Consortium (HMIC) database
group family practice 57 488, 489
groups, teams and 419–20 Health Management Online 164
514 Index

health outcomes, user involvement and healthcare scandals 26, 271, 344–5, 435
437, 438–9 healthcare systems 53–72, 498
Health Policy Consensus Group 41 challenging social trends 3–4
health professionals 85 changes in models of care 84–5
doctors see doctor-manager relationship; importance of ownership and control
doctors 66–8
numbers in the NHS 238 mental health and embedding change in
nurses 231 the system 158–60
primary care 55 models of ownership and control
health records 226–7, 228, 229–30 62–6
health-related behaviour 107 patient journeys and 60–1
Health Services Management Centre political and social environment 2–4
(HSMC) 291 pressures facing 184–5
Health Services Management Research primary care based 119–20, 128–9
488 process view and quality improvement
Health Services Research 488 469–71
Health and Social Care Act (2001) 435 roles 201–2
Health and Social Care (Community typical healthcare organisations 56–60
Health and Standards) Act (2003) typology 53–6
308 UK healthcare system 20–2
health technology assessment (HTA) healthcare triangle 33
73–89, 498 healthcare workforce see workforce,
and appraisal 74, 75–6 healthcare; workforce management
barriers to implementation 79–80 HealthConnect 226
broadening out 85 Healthspace 231
challenges for the future 84–5 Hefford, M. 47, 121
demographic and system changes 84–5 Hellriegal, D. 262
and priority-setting processes 78–84 Helman, C. 91
processes and stakeholder interests hierarchical command and control 345–6
74–8 hierarchical structures 263
role for management 79–84 hierarchism 230–1
technical issues 84 Higgins, J. 196, 279, 280
theory and practice 78–9 Higgs, M. 390, 419
Health Technology Assessment Higgs Report 278
Programme 441 high impact changes 470–1
healthcare histograms 468
contribution to health status 102–6 historical institutionalism 15
evidence-based 480–3 Hodgkinson, G. 276
innovative practices 107 holistic model of health 90–1
uniquely complex characteristics Honey, P. 366
471 Hood, C. 230, 301
user involvement 437–40 Hope, R. 159
Healthcare Commission 64–5, 66, 154, horizon scanning 486, 487
196, 307, 319 horizontal integration 193
Healthcare Industries Task Force 413 Hospital Accreditation Programme
healthcare organisations (HAP) 306
examples of typical organisations 56–60 hospital trusts 272
and healthcare management 4–7 hospitals
importance of ownership and control acute care see acute care
66–8 district general hospitals 57, 58, 135–6,
models of ownership and control 62–6 143
social mission/purpose 7 strategic future 193–4
healthcare process 6–7 housekeeping 466
healthcare reforms 13–31, 184–8 Howell, B. 47
across Europe 15–18 Hrobon, P. 146
reasons for 14–15 Hudson, B. 294
strategic responses 188–9 Hughner, R.S. 91, 92, 93
UK NHS 19–27 human relations theory 388
Index 515

human resource (HR) management 237, policy responses 225–7

239–42, 418, 501 regulation 232–3
best practice 239, 240, 241, 244 informed consent 438
contingency 239, 242, 248 injuries 94, 96, 99
links to different ways of working inspection 301–3, 307, 309–10
247–8 Institute for Health Improvement (IHI)
resource-based 239, 240 363, 458
UK policy context 243–4 Institute for Innovation and Improvement
see also workforce management 245, 320, 341, 363
humanistic theories of leadership 327 Institute of Medicine and Committee on
Hunter, D.J. 194 Quality Health Care in America
Hyde, P. 241, 245–6 455
hypothecated taxation 40–1 institutional mix 14
instruments of domination metaphor 349
identification of needs and strengths 159 insurance contributions 34–5, 42–4
ideology 22–5 integrated care delivery systems 137, 141
illness Integrated Care Network 295, 299, 355
definitions of 90–4 integrated health and social care 186–7,
patterns of health and 94–101 290
imaging centres, freestanding 142 integrated regional vascular service
implementation plan 413 (IRVS) 145
implementer (team role) 429 integration
imprecision 312 commissioning and integration of care
Improvement Leaders 330 213
Improvement Leader’s Guides 164, 362 view of culture 354–5
Improving Working Lives 243, 244 inter-agency working see partnership
incentives 18 working
incremental budgeting 407, 408 internal control 303–4
incremental change 17 internal market see market reforms
independent public sector providers 62, internal regulation 196
65–6 internal service agreements 210
Independent Sector Treatment Centres International Alliance for Patient Safety
(ISTCs) 47, 302 441
India 108–9 International Coach Federation (ICF)
indigenous peoples 380
addressing the health status of 108–9 International Initiative for Mental Health
definitions of health 92 Leadership 164
health and illness patterns 97–101 International Journal of Integrated Care
indirect costs (overheads) 410 299
indirect taxation 39 International Network of Agencies for
individual care managers 122–3 Health Technology Assessment
individualism 230–1 (INAHTA) 74, 89
individuals, and partnership working 293 International Network for Integrated Care
inequality, challenging 159 (INIC) 299
see also health inequalities International Organisation for
infancy 103 Standardisation (ISO) 306, 320
infectious diseases 94, 96, 97, 498–9 ISO 9000 309–10, 315
informal resource allocation mechanisms internet-based advice services 125
80–2 interpersonal power 261–2
information asymmetry 5–6 Investors in People (IIP) 306, 320
information deficits 210 invitation to negotiate 177
information provision 439 Involve 442, 453
information technology (IT) 224–36,
500–1 job descriptions 255, 256
claims for 224–5 Johari window 365
current situation 227–31 Johns, C. 374
diffusion 228–31 Johnson, G. 260
evidence on use of 227–8 joint care planning teams 289
516 Index

Joint Commission on the Accreditation of Leading an Empowered Organisation

Healthcare Organisations (US) Programme 333
306, 320 lean approach 463
joint consultative committees 289 learning 159
joint finance programme 289 and change 387–8
Joint Future Unit 299 and learning styles 366–7
Journal of Health Services Research and Policy learning cycle 366–7
488 learning difficulties, people with 444–5
Journal of Integrated Care 299 legitimate power 261–2
journals, key 488, 489–90 Lencioni, P. 430
Judge, K. 291 length of stay 137, 138, 139
Juran, J. 456–7 levels of partnership working 293
just-in-time (JIT) 463 Lewin, K. 386
life course, concepts of health over 91–2
Kaiser Permanente 62, 64, 141 life expectancy 94, 95, 99, 101
kanban 463 Light, D.W. 211–12, 213, 215
Kaplan, S.H. 438–9 Lipson, D.J. 215
Keen, J. 228–9 local commissioning groups 187
Kennedy, I. 344–5 local health boards 186, 187
Kidderminster 143 Local Improvement Finance Trusts
King’s Fund 453 (LIFT) 178
Organisational Audit 306 local planning 189
Kinmonth, A.L. 59 local taxation 41
Kitson, A. 334 localism 192
Klein, R. 22, 436 long-term objectives 405
Kleine, S.S. 91, 92, 93 Lorig, K. 440
Kleinman, A. 91 Lupton, C. 215
Knowledge Exchange 380 Lysack, C.L. 446
knowledge power 262
Koeck, C. 345 M7 (seven management tools) 468
machine bureaucracy 343–7
labour market 107 machine metaphor 349, 350
Labour Party Mackenbach, J.P. 107
clause 4 of the Constitution 23 Mahoney, C. 154–5, 156
New Labour see New Labour making a difference 159
Langlands Review of governance for Malcolm Baldrige National Quality
public services 270, 271, 274, 282 Award 306, 460
Langley, G.J. 455 managed care 141, 212
lay knowledge 91 managed clinical networks 144, 145, 187
lay opinion and HTA 76–7 management
lay views of health 92, 93 functions of 344
Le Grand, J. 186, 215, 217 healthcare management compared with
LEAD course 442 clinical practice 483, 484
lead doctors 255 leadership and 324–5
leadership 321–41, 502–3 principles of 344
conceptual frameworks 329–31 management ‘franchising’ 326
doctors in leadership roles 256–9 Management Standards Centre 434
evidence of leadership development in manager-doctor relationship
healthcare 332–7 see doctor-manager relationship
evolution of leadership theory 325–9 managers
manager as change agent 390 as change agents 390
mental health services influence and healthcare reform 26
embedding change 158–60 role in health technology assessment
engaging senior stakeholders 157–8 79–84
model of leadership development role in health and well-being 109
331–2 role in team development 423–5
and strategic planning 189–90 marginalised groups 155
Leadership Trust 340 market organisational metaphor 350
Index 517

market reforms 25, 186, 202 Monitor 65–6, 272, 320

acute care 136–7 monitor evaluator 429
financing health services 46, 47, 166 monitoring 147
ideology 23–5 budget monitoring 409
primary care 124 contracts 206
regulation 196 monopolies 232, 233
market research 442, 445 moral hazard 44
market structure 38 Moran, M. 229
Markiewicz, L. 158–9 Morgan, C. 336, 337
Marmot, M. 101, 103–5 Morgan, G. 348–50
Martin, D. 82 mortality rates 94–101, 239
maternal conditions 97 Mossialis, E. 15, 33, 34, 42
matrix data analysis process 468 Moullin, M. 403–4
matrix diagrams 468 multidisciplinary primary care services
matrix structures 264 120, 121–2
Maxwell, R.J. 455 multiple aspects of the self 331
Maynard, A. 18 Mumford, A. 366
Mays, N. 213 Murray, J.L. 35
McDonald, R. 80 mutuality 301
McNulty, T. 7 Myers Briggs Type Indicator 327, 368
meaning, research and 490–2 myocardial infarction, thrombolytic
Means, R. 153 therapy for 480
media 3, 27
Medicaid 42, 44 N3 227
medical director 256–7 Nanus, B. 189
medical model of health 91 National Agency for Accreditation and
medical profession see doctor-manager Evaluation in Health (ANAES)
relationship; doctors 78
Medicare 42, 44 National Audit Office 178, 481
Medline 488, 489 National Coalition on Health Care 43
Meeting Wizard 380 National Committee for Quality
mental health 151–65, 500 Assurance (NCQA) 222–3
defining 151–2 National Electronic Library for Health
embedding change in the system (NeLH) 164, 223, 488–9
158–60 National Health Service (NHS) 63
engaging senior stakeholders 157–8 acute care 142–6
expenditure on 152–3 Appointments Commission 272, 276,
immediate management challenges 278
154–5 Care Records Service 227
managing new mental health teams Clinical Governance Support Team
155–6 278
policy context 153 comparison with Kaiser Permanente
prevalence of mental disorders 152 141
rhetoric/reality gap 154 deficits 153, 271
mentoring 376 doctor-manager relationship 254–6
mergers 194, 295, 479 features of 20–2
metaphorical analysis of organisations governance 270–1
348–50 groups in the workforce 238
Milbank Quarterly 488 Health Technology Assessment
Milne, R. 74 Programme 88
Mind Tools 380 healthcare expenditure on 37
Mintzberg, H. 1, 259 HR practices and NHS
mistake-proofing 463, 466–7 policies/initiatives 241
Modern Public Management (MPM) 302 Institute for Innovation and
modernisation 237, 239 Improvement 245, 320, 341, 363
Modernisation Agency 61, 244, 245, 465 Leadership Qualities Framework
high impact changes 470–1 329–30, 341
Molander, C.F. 389 Model Contract 207
518 Index

Modernisation Agency see New Public Management (NPM) 202–3,

Modernisation Agency 301–2
NeLH 164, 223, 488–9 New Ways of Working 244, 245
PAF 308 New Zealand
patient complaints 373 addressing health status of indigenous
PFI in 176–7 peoples 108
primary care led commissioning 126 health boards 273
Quality and Outcomes Framework 217 performance management 309
reform 19–27, 186–7 Primary Health Care Strategy 47, 121,
Service Delivery and Organisation 128–9
(SDO) research programme 363, Public Health and Disability Act (2000)
485, 486, 487, 488, 489 108
size of workforce 13, 237 NHS Confederation 26, 277
SWOT analysis 190 NHS Executive 177
National Institute of Clinical Excellence NHS foundation trusts 20, 23, 65–6, 178,
(NICE) 78, 88, 169, 302, 320 187, 272–3
appraisal of statins 74, 75–6 NHS Leaders team 341
Citizens Council 77 NHS Leadership Centre (NHSLC) 380
implementation of guidance 80, 81 NHS Networks 164, 380
barriers to implementation 79–80 NHS Plan, The 239, 243
National Institute of Mental Health (US) NHS Reform and Healthcare Professsions
165 Act (2002) 307
National Leadership and Innovation NHS Reorganisation Act (1973) 289
Agency for Healthcare in Wales NHS trusts 64–5
341 NHSnet 226
National Primary and Care Trust Nichols, L.M. 38
Development Programme 223 Nicholson, N. 258–9
National Programme for IT 227 Nielsen, D.M. 457
National Service Frameworks (NSFs) 169, NIMHE 156
189, 302, 309 Nolan Committee report 270
Mental Health 155 non-communicable diseases 94, 96, 98,
natural monopolies 232, 233 99–101
needs non-intentional injuries 99
assessment 206 non-linearity 352
identifying people’s needs and strengths norming phase 423, 424
159 North Bristol NHS Trust 271, 274
scoping 411–12 North Tyneside 157–8
negative action 303–4 Northern Ireland 21
neoplasms 98, 101 integrated health and social care 186–7,
net present value (NPV) 173 290
Netherlands 84 structural reforms 19–20, 186–7
Health Insurance Act (2006) 43 Northern and Yorkshire Board-level
health technology assessment 78–9 Development Programme
healthcare reforms (Dekker Plan) 335
24 not-for-profit organisations 62, 64, 67
national IT network 226 nurses 231
visitatie 307 nutritional deficiencies 97
network infrastructure 225–6
network map 372, 377, 378 objectives
network organisations 264–5 outline business case 172
networking 371–2 SMART 404–5, 412
networking power 262 O’Connor, A. 439–40
neuro-psychiatric disorders 98 O’Donnell, C. 413
New Labour 481 O’Dowd, A. 176
ideology 22–3 OECD 214, 223, 270
reform of NHS 19–20 OECD countries 498
regulation 302 healthcare expenditure 36–8
new mental health teams 155–6 trends in acute care 138, 139, 140
Index 519

Office for Information on Health Care ownership of healthcare organisations

Performance 307 62–8, 232
Oliver, A. 15, 79, 188 importance of 66–8
opinion polls 445 models of 62–6
opportunity costs 410–11
option appraisal 173, 412 Papworth, M.A. 157–8
option generation 173 parasitic diseases 97
organisation development (OD) Pareto diagrams 468
developing effective boards 278, Parker, M. 355
279–80 Partnership Assessment Tool 294
OD cycle 356–7 partnership boards for joint
organisational culture see culture commissioning 277
organisational development and design partnership readiness framework 295
342–63, 503 partnership working 159, 286–99, 499,
complex adaptive systems and chaos 501
theory 352–4 depth v. breadth of partnership 292
culture and 354–5 different levels of 293
dominant model of organisations factors that help and hinder 294–5
343–7 health of indigenous peoples 108–9
metaphorical analysis 348–50 limits of structural change 295
postmodernism 346, 347, 348, personal effectiveness 371–3
348–50 policy context 289–90
role of organisational development rationale for 287–9
356–7 service development and delivery
sensemaking 348, 351–2 170–1
social constructionism 346, 347–8, theories of change 291–2
351–2 Patching, K. 278
organisational performance path dependency 15, 22
culture and 274, 354 path-goal theory 327, 330
role of boards 274–6 patient advocates 442–4
workforce management and 239, patient choice 23, 188, 302
243 patient journeys through healthcare
organisational permission 430 system 54, 60–1
organisational structures 263–5 patient records 226–7, 228, 229–30
organisations patient safety 464, 469
partnership working 293 patients/service users see service users
process view 469–71 pay/salaries 37, 241, 247
team as an organisational asset 421–2 Payment by Results (PbR) 23, 46, 302
organism metaphor 349 Payne, M. 288
Orvain, J. 78 Peck, E. 1, 277, 292
out-of-hours care centres 125 Peckham, S. 56
out-of-pocket payments 35, 44–6 Performance Assessment Framework
outline business case (OBC) 170, 171–5 (PAF) 302, 308
calculating costs 173–4 performance indicators 311–14
developing and presenting 175 conceptual difficulties 311–12
generating options 173 perverse incentives 314
identifying the preferred option technical difficulties 312–14
174–5 unintended consequences 314
measuring benefits 173 Performance and Innovation Unit 342
objectives and benefits criteria 172 performance management 300–20, 501
sensitivity analysis 174 accreditation 306
outpatient consultations 147 business planning and 400–6
ovarian cancer 60–1 CHI 302, 307
overheads (indirect costs) 410 conceptual framework 303–5
oversight 301 external peer review 309–10
Overview and Scrutiny Committees NSFs 308–9
(OSCs) 309, 320 OSCs 309
Øvretveit, J. 204 PAF 308
520 Index

rise of regulatory and inspection influencing dynamics of reform in the

systems 301–3 UK 25–7
star ratings 308 reform in the NHS 19–20
using performance indicators 311–14 policy steering mechanisms 107
see also regulation political factors 242, 246–7
performance ratings 308 political skill 373
performing phase 423, 424–5 political system
perinatal conditions 97 organisational metaphor 349
personal development 159 UK 19–20
personal effectiveness 364–80, 502–3 political theory 388–9
reflective practitioner 373–6 politicians 2–3
self-awareness 365–9 Pollitt, C. 203, 275
self-management 369–71 Pollock, A. 176–7
working successfully with others popular sector 91
371–3 population ageing 3, 47–8
personal qualities, and leadership 326, 330 Porter, M. 167, 183, 191–2, 385
personal-situational theories of leadership positive action 303–4
326, 327–8 Positive Psychology Network 380
perverse incentives 45, 314 positive risk taking 159
PEST (political, economic, sociological, postmodernism 346, 347, 348, 348–50
technological) analysis 405–6 post-transformational leadership 328–9
Peters, B.G. 270 Power, M. 275
pharmaceutical industry 27 power 246, 325
and HTA 77–8 asymmetry 5–6
technical issues 84 doctor-manager relationship 260,
physical enactment, and repertoire 261–2
leadership 331 Poxton, R. 295
Picker Institute Europe 444 practice-based commissioning 129, 193,
Pierre, J. 270 212
Plan-Do-Study-Act (PDSA) model ‘practitioner’ genre (of change) 385
460–1 predictive modelling 210
planned change 386 preferred bidder letter 177–8
planning 206, 399–417 Preker, A.S. 62
budget management 399, 407–9 prescriptive consulting style 279–80
business planning 399, 400–6 prices 38
resource planning 406 price consciousness 44–5
of services and user involvement primary care 53–6, 117–33, 170, 499–500
442–4 Alma Ata Declaration 117–18
strategic see strategic planning care pathways 60–1
planning cells (citizens’ juries) 447 diabetes care 58–60
plant (team role) 429 managing for health improvement
Plsek, P. 353–4 119–20, 120–3
plurality of providers 47 managing for primary care service
Pointer, D. 271–2, 273 development 119–20, 123–5
policy 183 primary care organisations 57, 123,
evidence-based policymaking 483–93 124–5
policy context 2–4, 168, 184–8 primary care based health system 119–20,
commissioning and contracting 201–3 128–9
driving change 382–4 primary care centres 124
information technology 225–7 primary care led commissioning 119–20,
mental health 153 126–7, 129, 212–13
partnership working 289–90 primary care trusts 204, 272
strategic responses 188–9 principal funder 202
workforce management 243–5 priority-setting processes 78–84
policy deployment 467 prison health service 411
policy process 13–31 Private Finance Initiative (PFI) 167, 175,
dynamics of reform 14–18 176–80
ideology 22–5 funding methods 179–80
Index 521

guidance for PFI projects 177 quality control tools 467–8

LIFT 178 quality costing 467
principal benefits 179 quality function deployment 467
principal challenges or risks 179 quality gurus 456–7
procurement process 177–8 quality improvement 454–78, 504
progress to date 176–7 approaches to 455, 456
reasons to choose PFI 178–9 clinical approaches 464–9
private expenditure on health 17, 38 development of 455–60
Private Finance Unit 177, 178 process view 469–71
private insurance 35, 42–4 techniques 460–4, 466–8
private-public joint venture boards 277 TQM 305, 457–8, 459
probability of dying 94, 95 unique complexity of healthcare 471
process management 469 user involvement 441–5, 470
process mapping 156 widening the scope of 458–60
process redesign 464 Quality and Outcomes Framework 217
process view of organisations 469–71
procurement 204 randomised controlled trials (RCTs)
see also commissioning; contracting 490–2
professional bureaucracy 238 rational choice institutionalism 15
professional role 428 rational systems theory 388
professional sector 91 rationalism 343
professions 5 rationing, informal 82–3
influence on healthcare reforms 25–6 RCN Clinical Leadership Development
Program of All-Inclusive Care for the Programme 334
Elderly (PACE) 286 records, health 226–7, 228, 229–30
project blueprint 175 recovery, promoting 159
project teams 425–6 recruitment 241
Proquest (ABI Inform) 488, 489 redesign 464
provider capture 211–12 Redmond, B. 374
provider dominance 209–10 referent power 261–2
psychic prisons 349 refinancing 179–80
psychometrics 367–8 reflection 278
public expenditure on health 16, 17, 20, reflective consulting style 279
38, 203 reflective practice 1, 373–6
public health 123 sustaining effective teams 429–30
public management approach 186 reforms see healthcare reforms
public participation 445–7 regional clinical networks 144, 145
public-private partnerships 167, 175, regional strategic planning 189
176–80 registration of patients 120, 121
public representation 445 regulation 300–20
public sector 203 accreditation 306, 309–10
public sector organisations 66–7 CHI 160, 302, 307
government controlled 62, 64–5 external peer review 309–10
independent of government 62, 65–6 and information technology 232–3
public sector scorecard 403–4 performance management 308–9
public service agreements (PSAs) 308 rise of regulatory systems 301–3
public views, and HTA 76–7 and strategic planning 194–6
Puffit, R. 400 regulators 27
punctuated equilibrium 14 regulatory capture 78
purchaser-provider split 212, 214–15 rehabilitation 147
purchasing 33–5, 119–20, 126–7, 203, 204 Reinertson, J.R. 157
see also commissioning; contracting Reinhardt, U.E. 33
relational contracting 211–12
qualitative studies 490–2 relations diagrams 468
quality Relenza 77
commissioning for 216–17 reliability 312
definitions of quality in healthcare religion organisational metaphor 350
454–5 remuneration/pay 37, 241, 247
522 Index

repertoire model of leadership ‘satisfaction’ surveys 444

development 331 Savage, E. 44
research 479–96, 504 Savas, S. 208
appraising 490–2 scatter diagrams 468
informed decision making 492 Schein, E. 354
paradigm shift of evidence-based Schoen, C. 45
healthcare 480–1, 482 Scholes, J. 385
role in creating evidence 486–7 Scholes, K. 260
search 487–90 Schut, F.T. 24
user involvement 441–2 scientific management 263, 343–4
research agencies, key 488, 489 Scotland 21, 273
research institutions 26–7 managed clinical networks 144
research-practice gap 480, 481 partnership working 290
resource-based HR management 239, 240 social care 290
resource investigator 429 structural reforms 19–20, 187
resource management 399–417, 503–4 search for evidence 487–90
budget management 407–9 secondary care 53–6, 135–6
business planning and performance acute care see acute care
management processes 400–6 care pathways 60–1
costs and cost behaviour 409–11 diabetes care 58–60
developing a business case 411–14 typical secondary care organisations 57,
resource planning 406 58
resources 183 Secretary of State for Health 64
power related to 262 selection 241
service design 169 self-awareness 365–9
respiratory illness 98, 100–1 self-inflicted injuries 99
respiratory infections 97 self-management
responsiveness, commissioning for 215–16 chronic disease self-management
Revans, R. 374 programme 440
revenue collection 33–5, 38–46 personal effectiveness 369–71
revenue expenditure 408 self-organisation 352–3
revolving door 78 semi-variable costs 410
reward power 261–2 Senate-type boards 272–3
rewards 241 sense organ disease 98
Richardson, J. 44 sensemaking
Ring, I. 99, 101 leadership as 329
risk, and capital schemes 179 organisational design and development
risk adjustment models 313 348, 351–2
risk assessment 169, 414 sensitivity analysis 174
risk management 210 sensitivity of indicators 313–14
risk taking, positive 159 servant leadership 328–9
road traffic accidents 99 service delivery and organisation (SDO)
Robertson, I. 44 research programme 363, 485,
Robinson, R. 22 486, 487, 488, 489
robustness of indicators 313–14 service development 166–82, 500
role redesign 242–3, 245–6 business case for capital investment
Role Redesign Workshop 245 171–5
roles, boundaries of 371 capital schemes 176–9
routine investigations 147 developing a business plan 167–70
Rovereto Project 287 financing options 179–80
Royal Colleges 22, 26, 143 full business case 171, 175
Rundall, T. 481, 482, 483, 484 partnering 170–1
Rutten, F. 79 primary care service development
119–20, 123–5
safety, promoting 159 service design options 168–9
Sainsbury Centre for Mental Health user involvement 442–4
(SCMH) 156, 165 service provision and delivery 53–72,
salaries/pay 37, 241, 247 201–2, 498
Index 523

defining at a macro level 208–9 social factors 242, 246–7

healthcare organisations 56–60 social health maintenance organisations
ownership and control of healthcare 286
organisations 62–8 social insurance contributions 34–5, 42
patient journeys 60–1 social mission/purpose 7
plurality of providers 47 social perspective on health 90–1
provider dominance 209–10 social support 104
typology of healthcare systems 53–6 societal values 85
service quality 458–60 sociological institutionalism 15
service specification 208–10 soft systems methodology 385
service user centred care 159 Spain 187
service users 435–53, 504 Sparrow, P. 276
access to records 231 specialist (team role) 429
empowerment 154 specialist cancer services centre 57–8
framework for examining user specialist services 136
involvement 437, 438 specific OD activities 278, 279–80
identifying users and objectives 436–7 specificity of indicators 313–14
involvement in treatment and care stakeholders
437–40 business plan and 169
involving potential users and engagement in mental health
communities 445–7 management 157–8
power asymmetry between healthcare and health technology assessment 74–8
provider and 5–6 healthcare workforce management
and service improvement 441–5, 470 246–7
views and HTA 76–7 influencing dynamics of reform 25–7
vulnerability 6 involvement in business planning
seven management tools (M7) 468 401–4
shadow boards 277 star rating system 308
shaper 429 Starfield, B. 118, 120, 122
shared electronic health records 226–7, state, role of 15, 20, 185, 202
228, 229–30 statins 75–6
Shi, L. 120 statistical process control (SPC) 461–2
Shipman, H. 26, 271 STEP analysis 405–6
short-term objectives 405 stepped costs 410
Shortell, S.M. 257, 260, 264 Stevens, A. 74
SIPA project 287 Stevenson, F. 439
situational leadership 326, 331 Stewart, R. 502–3
situational sources of power 262 Storey, J. 323, 324
six sigma 462–3 storming phase 423–4, 427
skill shortages 137–8 strategic competence 276
smart followership 330 strategic planning 183–200, 500
SMART (specific, measurable, achievable, healthcare context 184–8
realistic, time-related) objectives and strategic responses 188–9
404–5, 412 outline business case 171–2
Smith, J. 126, 127 pitfalls of 194, 195
social care 289 regulation and 194–6
integrated health and social care 186–7, undertaking 189–94
290 strategic synergy 264–5
partnership working 286–99 stress 103
poor resources and mental health structural balance 14
154–5 structural change, limits of 295
Social Care Institute for Excellence structural level of partnership working
(SCIE) 299 293
social constructionism 346, 347–8, 351–2 structural reforms see healthcare reforms
social determinants of health 102, 103–5 substitutive private insurance 42–3
social enterprises 125 supplementary private insurance 43–4
social environment 2–4, 168 Surgicentres 138–41
social exclusion 103 Swayne, L.E. 193
524 Index

Sweden 24–5 theory of constraints (TOC) 463–4

health technology assessment 78 third party payer 33, 201–2
Sweeney, K. 357 ‘third way’ 22–3
SWOT (strengths, weaknesses, 358-degree review 365–6
opportunities, threats) analysis thrombolytic therapy for myocardial
190, 405 infarction 480
symbolic theory 389 Tichy, N.M. 385, 389
systematic diagrams 468 time management 369–71
systems approaches 469 time management matrix 370–1
strategic planning 192–4 Timmins, N. 47
total productive maintenance 467
tactics 183 total quality management (TQM) 305,
Tarimo, E. 117, 118, 123, 129 457–8, 459
task-based participation 241 Townsend, P. 101
taxation 34, 38–9, 39–41 trade unions 25–6
Taylor, B. 275 training 241
Taylor, F.W. 343 of users for user involvement 442,
team development plan 430 443–4
team development process 422–5 trait theories of leadership 326
adjourning 423, 425 transactional leadership 324–5
forming 423 transformational change 383–4, 386–7
norming 423, 424 transformational leadership 324–5, 328–9,
performing 423, 424–5 330
storming 423–4, 427 Transformational Leadership
team performance reviews 430–1 Questionnaire 329
team roles 427–8, 339 transformational OD activities 278,
team working 264, 418–34, 503–4 279–80
characteristics of an effective team transitional change 386–7
420–1 transitions, work role 257, 258–9
definition of a team 419–20 transport 105
focusing on the real issues 430–1 treatment, user involvement in 437–40
mental health teams 155–6 Treatment Centres 47, 142–3, 146
sustaining effective teams 428–30 ‘tree’ diagrams 468
team development process 422–5 Trent Leadership Development
team models 425–7 Programme 334–5
team as an organisational asset 421–2 trust 211, 502–3
teamworker (team role) 429 in research 490–2
technical factors 242, 246 Tuckman, B. 422–5
technology 168 Tuohy, C. 14, 15
HTA see health technology assessment Turnbull Report 271
(HTA)
new technology and pressures on unemployment 104
healthcare costs 47, 48 unintended consequences 314
rapid pace of change 3–4, 209, 497 unitary boards 272
telemedicine 144 United Kingdom (UK) 202
telephone based advice services 125 acute care 142–6
Ten Essential Shared Capabilities for healthcare financing 39, 40
Mental Health Practice 159 healthcare organisations 63, 64–5
Ten Have, H. 74 ideology and reform 22–5
ten high impact changes 470–1 influencing dynamics of reform
tender proposal request 177 25–7
Tenet Healthcare Corporation 62 NHS see National Health Service
territorial approaches 107 (NHS)
tertiary care 53–6, 136 political system 19–20
care pathways 60–1 see also under individual countries
diabetes care 58–60 United States (USA) 36, 38
typical tertiary care organisations 57–8 accreditation 306
Thatcher, M. 23 acute care 138–42
Index 525

Agency for Healthcare Research and Webster, C. 186

Quality 488, 489 Weick, K. 348, 351–2
electronic health records 226–7 Weinstein, K. 374
expenditure on mental health 153 welfare state 289
health boards 273 Wensing, M. 436
healthcare organisations 62, 63, 64 West, M. 158–9, 278
LEAD course 442 Western, J. 334–5
National Institute of Mental Health whole systems approach to mental health
165 157–8
private insurance 42, 44 Wilkinson, R. 101, 103–5
purchasing 202 Williamson, C. 441–2
quality management 458, 459 Winterton, J. 389
vertical integration 194 Worcester Mental Health Partnership
urgency, meaning of 370–1 Trust 160
user expectations 4, 497 work 104
users of services see service users work-life balance 241
work role 428
validity 313 work role transitions 257, 258–9
Van de Ven, W.P.M.M. 24 work teams 426
variable costs 410 workforce, healthcare 2
variation, within a process 470 characteristics 238–9
vertical integration 194 workforce management 237–52, 418, 501
violence 99 different ways of working 237, 242–3,
virement 409 244–7
virtual organisations 264–5 HR management 237, 239–42, 243–4,
virtual teams 427 418, 501 links between HR
viruses, and bacteria 91 approach and different ways of
vision 189–90 working 247–8
visitatie 307, 309–10 team working see team working
‘voice’ 215 UK policy context 243–5
vulnerable groups 444–5 working conditions 107
working groups 442–4
Wagstaff, A. 43 workshops, user involvement 442–4
Waitangi, Treaty of 108 World Health Organisation (WHO) 55,
waiting times 46 119, 128, 223, 441
reducing 20, 21, 392 Alma Ata Declaration 117–18, 445
Wales 21, 290 definition of health 110
health boards 273 definition of mental health 151
primary care based health system 128–9 Health Evidence Network 488, 489
structural reforms 19–20, 186 Mental Health Declaration for Europe
walk-in assessment centres 125 152
Walsh, K. 211 millennium development goals 94, 100
Walshe, K. 6, 305–6, 481, 482, 483, 484 patterns of health and illness 94–101
Wanless, D. 383 Wright, D. 44
war 99 Wyatt, J. 228–9
Waters, H.R. 217
Watkins, P.J. 60 Zakus, J.D. 446
Weber, M. 343 zero based budgeting 407, 408