BOOKS OF RtfiDIfGS - PAHO/WHO

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the health care industí , While much
of the discussion is focused on the
nonprofit, nongovernment hospital industry,
many of the process-. -nd
issues are relevant to other health care
provider groups. Because the topic area
of PBCP subsumes other 0reas of financial
mana¿ement, and because it overlaps
with many other areas of management
activities not typically associated
with financial management, discussion
here must be narrowly focused. The
paper presents a normative model of
the three processes (i.e., PBCP) and
discusses several issues related to the
gap between the state of the art and the
state of practice. To accomplish this,
the paper is divided into tibe¿ parts.
The first section provides a orief his
torical perspective to PBCP and sur.
marizes several important external
pressures currently imposed on the
health care industry. The second section
presents a generic model of each of
the three processes (PBCP). The elements
of the models and the relationships
between their elements are highlighted.
The final section discusses
several issues associated with orientation,
design and implementation of
PBCP currently practiced in the hospital
field.
Background-Legacy and
Inertia
As the hospital industry developed
from a cottage industry to being the
nucleus of a technologically sophisticated
health care system in the early
1970s, it did so with few constraints.
Each institution had cash-flow concerns
like any other economic entity;
however, major programming decisions
were made largely independent of any
external planning or regulatory bodies.
By 1970, the hospital industry was
undergoing rapid growth in the hope of
fulfilling the promise that "high quality
Health Services Research
health care was d -:;ht." The inertia
generated by this period is still influencing
managerial decisions and has
left the industry with a legacy of high
and rapidly increasing costs. Enthoven
[4, p. 12291 summarizes the management
philosophies that have resulted:
In the system of fee-for-service,
cost reimbursement and third.
party intermediaries that dominate
health care fiaancini today, the
question of efficient use of resources
does not even arise. The
problem of how best to spend a
given amount of money for the
health care of c pupulation is not
posed. Providers are not required
to set priorities, look at alternatives
and make hard choices. From the
point of view of the provider, there
is an apparently unlinrited amount
of money. The system rewards
cost-increasing behavior with more
revenue; it punishes cost-reducing
behavior with less revenue. Such a
system must produce inflation in
prices and waste in the use of
resources.
To better understand the elements of
this philosophy as they relate to PBCP,
four general areas of planning concern
are discussed: service mix, production
efficiency, production effectiveness,
and capacity.
Service Mix. The miy of services
available in a given hospital was influenced
by the rapid technological
change in the medical field [5], the high
degree of medical specialization [61,
and the ability of hospitals to rapidly
adopt new technologies. The rapid
technological change was stimulated
by research funded through the federal
government, as well as universities,
foundations, and industry. The resultant
new clinical technology required
expensive and highly specialized hospital
facilities.. The clinical efficacy of
these technologies were often not ques-