BOOKS OF RtfiDIfGS - PAHO/WHO

Budgeting Attitudes
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The planning attitudes extend to the
budgeting process; in particular, there
is no indication that hospitals are motivated
to develop technically efficient
budgets. Many believe this results from
the fee-for-service, cost-based reimbursement
system which fails to provide
real inceitives for efficiency.
Under this system, there is little incentive
to move away from peak-load
staffing and to contend with the problems
of part-time and temporary staff;
there is little incentive to search for
better modes of operation which might
lower costs; and there is little incentive
to say "no" to requests for additional
staff which are intended to increase the
quality of care without regrad to effectiveness.
The negative effects of hospitals'
ability to attract patients are
greatly reduced by the widespread absence
of these incentives and the general
lack of competitive pressures in {ieindustry.
The net result has been a
widespread increase in costs, quantity
and perhaps quality without any type
of competitive or effective regulatory
mechanisms for forcing the system toward
an equilibrium' position.
There appears to be concensus that
this system will change through either
more restrictive means of calculating
reimbursement rates, or a restructuring
of financial incentives. While this future
scenario has not altered current
budgeting decisions, it has increased
hospital managers' desire for improved
budgeting capabilities. In some cases,
hospitals are preparing for this future
environment by increasing their expense
base with the hope that future
restrictions will be less painful.
In addition, many financial managers
have sought to develop formulistic approaches
to budgeting, e.g., developing
departmental cost functions, and/or
rigid productivity indexes. While these
Health Services Research
are important elements in the models
described above, there is a danger that
mathematical models will be used to
develop the budget without department
head input, review or understanding.
Such a unilateral preparation process
will reduce the effectiveness of the
entire management control process and
not be in the long-run interests of the
hospital.
Attitudes Toward Control
The power structure in hospitals is
such that management often finds its
hands tied. Many decisions geared toward
improving efficiency or insuring
compliance with the budget often involve
a perceived sacrifice by physicians
and other professionals. Confrontations
between administrators and the
medical staff are often one-sided in that
administrators are easier to replace
than medical staffs. Since efficient behavior
is not rewarded financially, nor
does the system as yet demand efficient
management, the route of choice is
often the route of minimum resistance.
Without clear directives and support by
hospital boards, this cannot and will
not change.
Information Systems
Accurate, valid, and timely data are
essential for the management decisions
described in PBCP. In an abstract sense,
there are four key relationships which
should be geherated from the information
systems: costs per responsibility
center, costs per inputs, inputs per
.output, and cost per output. The information
system must provide this data
for the hospital's own operations and
should include comparable data from
other institutions. Drebin [75, p. 881
criticizes the capabilities of many (not
all) hospital information systems.
(The hospital industry] is unable to
define its product or quantify the
value of its product, cannot specify