Fluent Essays

FOLLOW INSTRUCTIONS EXACTLY AS IT STATES. AND USE THE FIRMAT BELOW AS SHOWN IN THE INSTRUCTIONS. AND ALWAYS WORK ACCORDING TO THE GRADING RUBRIC. NO PLAGIARISM. READ THE SCENARIO You are a healthcare consultant with a background in organizational development and change management. You have been hired by a healthcare organization, to help them develop a strategy to address a current crisis or challenge that is negatively impacting standards of care, outcomes, and the patient experience. After doing your research, you will write a short, memo style  report, to be presented to the Board of Directors at their upcoming meeting. Topic You may pick your own topic for this assignment, but it must fit within this overall definition: a crisis or challenge that is negatively impacting standards of care, outcomes, and the patient experience in a healthcare workplace. There are two ways that you may identify your topic: • If applicable, you may pick a crisis or challenge within your own current or past healthcare workplace. O Sample crises and challenges: COVID-19, weather emergency, staffing shortage, layoffs, financial crisis, merger, or acquisition, etc. • If you do not have a healthcare workplace example, search for an article about a relevant crisis or challenge. Be sure to include a link to the article in your references. O Suggested sources: The Wall Street Journal, Forbes, Business Week, The Economist, Modern Healthcare, The Journal of the American Medical Association, and any other professional journal or publication. O You may also find useful material on the following websites: American Hospital Association (www.aha.org), American College of Healthcare Executives  (www.ache.org), and The  American Public Health Association (www.apha.org). Your Assignment: Based on your chosen topic, write a concise, memo-style report to the Board of 2 to 3 pages. Your report must include the following four sections:  O Executive Summary · Briefly describe the healthcare organization concerned, including its location, size, major products or services, the community it serves, etc. · Provide a clear and concise description of the crisis or challenge faced by the organization. II. Assessment of the Issue Indicate current and expected future effects of the crisis or challenge on these areas: · Standards of care and outcomes · The patient experience · Facility staff (to include medical staff) · Other internal and external stakeholders · Financial health of the organization Note: In preparing for this section, you may wish to conduct a SWOT analysis III. Recommendation Describe an actionable strategy to address the crisis or challenge, including: · Major actionable steps of the strategy · Timeline to implement these steps · Resources, including staff time, materials, facilities, financial considerations, etc. IV. Outcomes and Measures Describe the expected results and outcomes of the strategy, and indicate how success will be measured. This section should answer these questions: · How will your recommended actions impact the patient experience? · What data will be needed to measure these results and impacts? · What is the next step if the plan does not achieve its desired effect? Formatting Your assignment must follow these formatting requirements: • Typed, double-spaced, using Times New Roman or Ariel font (size 11 or 12), with one-inch margins  on all sides. • The body of your report must not exceed 3 pages in length. • In place of a Cover page, provide the following Headings on Page 1 of your report: · TO: Insert Professor’s Name · FROM: Insert Your Name · DATE: Insert Assignment’s Due Date · RE: Report to the Board Citations and references must follow the formatting instructions found in the JWMI Writing Standards Guide. Check with your professor for any additional instructions. Note: The Headings and References pages are not included in the required assignment page length. Assignment 3: Report to the Board Scenario You are a healthcare consultant with a background in organizational development and change management. You have been hired by a healthcare organization, to help them develop a strategy to address a current crisis or challenge that is negatively impacting standards of care, outcomes, and the patient experience. After doing your research, you will write a short, memo style report, to be presented to the Board of Directors at their upcoming meeting. Topic You may pick your own topic for this assignment, but it must fit within this overall definition: a crisis or challenge that is negatively impacting standards of care, outcomes, and the patient experience in a healthcare workplace. There are two ways that you may identify your topic: • If applicable, you may pick a crisis or challenge within your own current or past healthcare workplace. · Sample crises and challenges: COVID-19, weather emergency, staffing shortage, layoffs, financial crisis, merger, or acquisition, etc. • If you do not have a healthcare workplace example, search for an article about a relevant crisis or challenge. Be sure to include a link to the article in your references. · Suggested sources: The Wall Street Journal, Forbes, Business Week, The Economist, Modern Healthcare, The Journal of the American Medical Association, and any other professional journal or publication. · You may also find useful material on the following websites: American Hospital Association (www.aha.org), American College of Healthcare Executives (www.ache.org), and The American Public Health Association (www.apha.org). Please contact your instructor if you need help to select a topic. Your Assignment: Based on your chosen topic, write a concise, memo-style report to the Board of 2 to 3 pages. Your report must include the following four sections: · Executive Summary · Briefly describe the healthcare organization concerned, including its location, size, major products or services, the community it serves, etc. · Provide a clear and concise description of the crisis or challenge faced by the organization. · II. Assessment of the Issue Indicate current and expected future effects of the crisis or challenge on these areas: · Standards of care and outcomes · The patient experience · Facility staff (to include medical staff) · Other internal and external stakeholders · Financial health of the organization Note: In preparing for this section, you may wish to conduct a SWOT analysis · III. Recommendation Describe an actionable strategy to address the crisis or challenge, including: · Major actionable steps of the strategy · Timeline to implement these steps · Resources, including staff time, materials, facilities, financial considerations, etc. · IV. Outcomes and Measures Describe the expected results and outcomes of the strategy, and indicate how success will be measured. This section should answer these questions: · How will your recommended actions impact the patient experience? · What data will be needed to measure these results and impacts? · What is the next step if the plan does not achieve its desired effect? Formatting Your assignment must follow these formatting requirements: • Typed, double-spaced, using Times New Roman or Ariel font (size 11 or 12), with one-inch margins on all sides. • The body of your report must not exceed 3 pages in length. • In place of a Cover page, provide the following Headings on Page 1 of your report: · TO: Insert Professor’s Name · FROM: Insert Your Name · DATE: Insert Assignment’s Due Date · RE: Report to the Board Citations and references must follow the formatting instructions found in the JWMI Writing Standards Guide. Check with your professor for any additional instructions. Note: The Headings and References pages are not included in the required assignment page length. RUBRIC - Assignment 3: Report to the Board Criteria Unsatisfactory Low Pass Pass High Pass Honors 1. Provide a clear and concise description of the organization and the crisis or challenge that it faces. Weight: 20\% Does not provide or inadequately provides a description of the organization and the crisis or challenge. Not at all clear or concise. Provides a partial description of the organization and the crisis or challenge. Not fully clear and concise. Provides a satisfactory description of the organization and the crisis or challenge. Clear and concise. Provides a very good description of the organization and the crisis or challenge. Very clear and concise. Provides an exemplary description of the organization and the crisis or challenge. Excellent level of clarity and conciseness. 2. Write an impact assessment that includes current and expected future effects on standards of care, the patient experience, facility staff, other stakeholders, and financial health of the organization. Weight: 20\% Does not assess the current or expected future effects on standards of care and outcomes, the patient experience, facility staff, other stakeholders, and financial health of the organization. Partially assesses the current and/or expected future effects on standards of care and outcomes, the patient experience, facility staff, other stakeholders, and financial health of the organization. Satisfactorily assesses the current and expected future effects on standards of care and outcomes, the patient experience, facility staff, other stakeholders, and financial health of the organization. Writes a very good assessment of the current and expected future effects on standards of care and outcomes, the patient experience, facility staff, other stakeholders, and financial health of the organization Writes an exemplary assessment of the current and expected future effects on standards of care and outcomes, the patient experience, facility staff, other stakeholders, and financial health of the organization. 3. Describe a recommended, actionable strategy to address the crisis or challenge, including details about major steps, timeline, and resources needed. Weight: 20\% Does not describe or inadequately provides an actionable strategy to address the crisis or challenge with minimal detail about major steps, timeline, and resources needed. Describes a partial, but incomplete, actionable strategy to address the crisis or challenge, with limited details about major steps, timeline, and resources needed. Satisfactorily describes an actionable strategy to address the crisis or challenge, with adequate details about major steps, timeline, and resources needed. Describes a very good, actionable strategy to address the crisis or challenge with clear details about major steps, timeline, and resources needed. Describes an exemplary and actionable strategy to address the crisis or challenge, with excellent details about major steps, timeline, and resources needed. 4. Describe the expected results of the strategy, indicate how success will be measured, and describe the next step if the plan does not achieve the desired effect. Weight: 20\% Does not describe or inadequately describes the expected results of the strategy, and/or does not indicate how success will be measured, and/or fails to describe the next step if the plan does not achieve the desired effect. Partially describes the expected results of the strategy and/or partially indicates how success will be measured, and/or partially describes the next step if the plan does not achieve the desired effect. Satisfactorily describes the expected results of the strategy, indicates how success will be measured, and describes an adequate next step if the plan does not achieve the desired effect. Provides a very good description of the expected results of the strategy, indicates clearly how success will be measured, and describes a good next step if the plan does not achieve the desired effect. Provides an exemplary description of the expected results of the strategy, indicates very well how success will be measured, and describes an excellent next step if the plan does not achieve the desired effect. 5. Clarity, Logic, Writing Mechanics, Grammar, and Formatting. Weight: 20\% Multiple mechanical errors: much of the report is difficult to understand or the text does not flow; student fails to follow the formatting instructions. Mechanical errors make the report difficult for the reader to understand; text does not flow; includes unsupported conclusions and assertions. Some mechanical errors: text flow is satisfactory; report is mostly clear; assertions and conclusions are generally justified and explained. Few mechanical errors; text flows well; report clearly expresses the student’s ideas in a manner that logically develops the topics. Minimal minor mechanical errors; text flows very well; report clearly expresses the student’s ideas in an exemplary manner that logically develops the topics. THIRD EDITION Health Care Operations Managemen t A SYSTEMS PERSPECTIVE James R. Langabeer II, PhD, MBA, FACHE Professor of Healthcare Management and Informatics, University of Texas Health Science Center Jeffrey Helton, PhD, CMA, CFE, FHFMA Associate Professor of Healthcare Management, Metropolitan State University of Denver JONES & BARTLETT LEARNING World Headquarters Jones & Bartlett Learning 5 Wall Street Burlington, MA 01803 978-443-5000 [email protected] www.jblearning.com Jones & Bartlett Learning books and products are available through most bookstores and online booksellers. To contact Jones & Bartlett Learning directly, call 800-832-0034, fax 978-443-8000, or visit our website, www.jblearning.com. Substantial discounts on bulk quantities of Jones & Bartlett Learning publications are available to corporations, professional associations, and other qualified organizations. 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Parker Media Development Editor: Troy Liston Rights & Media Specialist: Maria Leon Maimone Cover Image (Title Page, Part Opener, Chapter Opener): © maxkabakov/Getty Images; © amgun/Getty Images; © monsitj/Getty Images Printing and Binding: McNaughton & Gunn Library of Congress Cataloging-in- Publication Data Names: Langabeer, James R., II, 1969- author. | Helton, Jeffrey, 1961-author. Title: Health care operations management: a systems perspective / James Langabeer II, Jeffrey Helton. Description: Third edition. | Burlington, MA : Jones & Bartlett Learning, [2021] | Includes bibliographical references  and index. | Summary: “This book provides a well-rounded, comprehensive treaty on all aspects of operations  management specific to the healthcare industry. It covers everything from hospital finances to project management,  patient flows, performance management, process improvement, and supply chain management”— Provided by publisher. Identifiers: LCCN 2019039957 (print) | LCCN 2019039958 (ebook) | ISBN 9781284194142 (paperback) | ISBN 9781284194173 (ebook) Subjects: MESH: Hospital Administration— methods | Efficiency, Organizational Classification: LCC RA971 (print) | LCC RA971 (ebook) | NLM WX 157.1 | DDC 362.11068—dc23 LC record available at https://lccn.loc.gov/2019039957 LC ebook record available at https://lccn.loc.gov/2019039958 6048 Printed in the United States of America 24 23 22 21 20 10 9 8 7 6 5 4 3 2 1 https://lccn.loc.gov/2019039957 https://lccn.loc.gov/2019039958 Design Credits: © maxkabakov/Getty Images; © amgun/Getty Images; © monsitj/Getty Images. Contents Preface About the Authors New to the Third Edition PART I: An Overview to Healthcare Operations Chapter 1 Operations Management and Decision-Making A Systems Approach The Healthcare Industry Defining Operations Management Key Functions of Healthcare Operations Management The Need for Operations Management Goals of the Operations Manager Competitive Advantage of Operations Factors Driving Increased Healthcare Costs Learning from Other Industries Principles of Management The Scientific and Mathematical Schools of Management Management Decision-Making Power and Decision-Making in Health Care The Role of Technology and Systems Trends in Operations Management Best Practices for Successful Operations Managers Tips for Success Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 2 Hospitals and the Healthcare Industry Hospitals Are Big Business What Is a Hospital? Teaching Hospitals Hospital Business Operations Hospital Policies and Regulations Chapter Summary Key Terms Discussion Questions References Chapter 3 Operational Finance How Hospitals Are Paid From Retrospective to Prospective Profit Margins Income Statements Income Statement Ratio Analysis Balance Sheet Working Capital Other Financial Ratios Cash Flow Statement Audited Financial Statements Debt in Health Care Implications for Operations and Logistics Management Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 4 Health Plan Operations What Are Health Plans? The Basics of Health Insurance Key Operational Functions in Health Insurance Plans Sales, Enrollment, and Member Services Network Management and Provider Services Medical Management Claims Processing Operational Impacts of Health Insurance Payment Methods Chapter Summary Key Terms Discussion Questions Exercise Problems References PART II: Methods for Improving Operations Chapter 5 Operational Planning and Analysis Why Plan? The Planning Process Analyze Operations and Environment Generate Strategic Alternatives Breakeven Analysis Implement, Measure, and Revise Return on Investment Capital Investment Models in Health Care The Politics of Capital Investment Recommendations Validating ROI at Multiple Stages Calculating Return on Investment Time Value of Money Calculating Multiple Cash Flows Other ROI Techniques Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 6 Quality and Process Management Quality Choices for Operations Management Tools and Techniques Process Process Maps Process Improvement Methodology Improving Service Quality Key Questions to Promote Dramatic Changes Chapter Summary Key Terms Discussion Questions References Chapter 7 Six Sigma and Lean Management Six Sigma Modeling Six Sigma Processes DMAIC Data Types Lean Management Data Comparing Six Sigma to Lean Common Principles of Both Lean and Six Sigma Chapter Summary Key Terms Discussion Questions References Chapter 8 Forecasting and Decision Tools Data-Driven Decisions Quantitative Tools De-Bottlenecking Forecasting Patient Demand and Volumes Forecasting Using Product Life Cycles Product Usage Patterns Basic Principles of Forecasting Capacity Analysis Capacity Planning: Aligning Capacity with Demand Minimizing Wait Times Time and Motion Studies Improving Flows with Tracking Systems Bar Codes Radio Frequency Identification Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 9 Productivity and Performance Management The Quest for Productivity Measurement Issues Single Versus Multiple Factors Common Hospital-Wide Productivity Metrics Improving Productivity Principles of Productivity Management Substituting Capital for Labor Staffing and Labor Scheduling Models Basics of Labor Hour Management Productivity and Performance Scorecard Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 10 Project Management Defining Projects Power, Influence, and Project Management Project Success Key Phases of Project Management Change Management Rapid Prototyping Risks Involved in Project Management Departments of Performance Improvement Chapter Summary Key Terms Discussion Questions Exercise Problems References PART III: Analytical Tools and Technology Chapter 11 Operational Metrics in Healthcare Organizations Input Measures for Operating Metrics Sources of Data for Operational Metrics Output Measures Common Operating Metrics Other Operational Metrics Using Operational Metrics Chapter Summary Key Terms Discussion Questions Reference Chapter 12 Statistical Applications in Operations Management Using Data for Operations Analysis Review of Basic Statistical Concepts Calculating Descriptive Statistics Using Microsoft Excel Linear Regression Analysis Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 13 Using Information Technology in Operations Management Background of Health IT in Health Care Applying Data Analysis to an Operations Management Question Example of Using Microsoft Excel to Link Data for Calculations Impact of IT on Operational Performance Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 14 Operations Analysis and Benchmarking Operations Analysis Benchmarking An Introduction to Benchmarking Chapter Summary Key Terms Discussion Questions References PART IV: Healthcare Supply Chain Chapter 15 Supply Chain Management Defining Supply Chains Process Flows in Supply Chain Supply Chain Components Business Processes in the Supply Chain Supply Chain Strategy for Hospitals and Health Care Patient (Customer) Demand Drives Supply Chains Principles of SCM Strategy and Logistics Capabilities Efficient Versus Responsive SCM Strategy Reverse Logistics Supply Chain Information Systems Supply Chain Collaboration Sales and Operations Planning Collaborative Planning, Forecasting, and Replenishment Chapter Summary Key Terms Discussion Questions References Chapter 16 Purchasing and Materials Management Purchasing Items and Attributes Data Hierarchies United Nations Standards Products and Services Code Internal Controls Spend or Value Analysis Group Purchasing Organizations Trends in Hospital Purchasing Customer Service Materials Management Revenue Generation The Costs of Supplies and Inventory Differences Between Supply Expense and Inventory Optimizing Facility Layout and Design Cost Minimization Models Laundry and Linen Chapter Summary Key Terms Discussion Questions References Chapter 17 Financial Management of Inventory Inventory and Its Role in Health Care The Costs of Supplies and Inventory Differences Between Supply Expense and Inventory Impact of Timing on Expenses Important Facts About Inventory Criteria for Inventory Valuation Methods Lower of Cost or Market Periodic Versus Perpetual Systems Accounting Entries for Supply and Inventory Inventory Errors Inventory Ratios Other Inventory Calculations Limitations of Inventory Ratios Inventory Policies and Procedures Inventory Planning Inventory Audit Inventory Management Expectations Chapter Summary Key Terms Discussion Questions Exercise Problems References Chapter 18 Operations Management in the Pharmacy The Modern Pharmacy The Pharmaceutical Supply Chain Managing Items Using the National Drug Code Process Workflow and Automation in the Pharmacy Key Operations Management Trends for Pharmacies Effect on Pharmacy Performance Chapter Summary Key Terms Discussion Questions Reference Appendix: Answers to Selected Chapter Exercise Problems Glossary of Terms Index M Design Credits: © maxkabakov/Getty Images; © amgun/Getty Images; © monsitj/Getty Images. Preface y interest in health care began when I was a child and found myself in and out of hospital emergency departments for a variety of mostly sports-related injuries. I was fascinated knowing that the hospital was always open and staffed with really smart people trying to solve people’s problems. I started my career in healthcare management as an administrative fellow at a large academic medical center, shadowing executives and learning from rotations through all departments. My career has been diverse: I’ve been a hospital administrator, served as the chief executive officer for a health information exchange, led a successful boutique consulting and software company, and am now a professor involved in research and education. It is this diversity of experience that makes me fully appreciate all of the interworkings of a complex healthcare organization. My approach is systems-oriented and highly collaborative, both of which I feel are necessary to effect large-scale change. I hope this text will help students and healthcare administrators address important operational and day-to-day issues in this rapidly evolving industry. We would like to thank Jones and Bartlett Learning for their leadership in publishing this third edition. We would also like to thank the thousands of readers and dozens of professors who read the prior editions and offered their opinions and insights for revisions. Finally, I dedicate this text to my loving wife, Dr. Tiffany Champagne-Langabeer, for her constant love and support. —Jim Langabeer The business of health care has been my passion since meeting a hospital administrator (now CEO of a major healthcare corporation) while a teenager in the 1970s. Even then, there was some recognition of the business element of our industry and the need for efficient operations in delivering patient care. As our industry has evolved through implementation of PPS, risk contracting, VBP, and so many other initiatives aimed at promoting efficiency and cost containment, we have adapted so that we could preserve operating margins—not always with better operational performance. The incentives created by those industry changes still leave us as managers asking “how can we be more efficient?” That became the centerpiece of my work during more than 27 years as a hospital, health plan, and health system chief financial officer—improving operational performance to improve financial results. The lessons learned from those years of experience—and now years of research in health operations with an amazing colleague and mentor, Jim Langabeer—now come to you in the third edition of this work aimed at helping you successfully pursue that objective of operational excellence in your organization. —Jeff Helton Design Credits: © maxkabakov/Getty Images; © amgun/Getty Images; © monsitj/Getty Images. About the Authors James R Langabeer II, PhD, MBA, FACHE Courtesy of James R Langabeer II, PhD, MBA Dr. James Langabeer is a Professor of Healthcare Management, Policy, and Biomedical Informatics at the University of Texas Health Science Center at Houston. He has spent most of his career focused on improving quality and efficiency of health care, and has been involved in hospital executive leadership, information technology startups, management consulting, and healthcare research and teaching. Dr. Langabeer was the founding Chief Executive Officer of a regional health information exchange, where he led the organization from concept to one of the largest in the country. As Assistant Controller at M.D. Anderson Cancer Center, he oversaw the supply chain, strategic projects, and financial management of one of the largest hospitals in the country. James also served as the Executive Vice President of a premier mid-sized technology and consulting firm based in Cambridge, Massachusetts. He has lived and/or worked extensively in Boston, London, Paris, Rotterdam, Tel Aviv, and Houston. He has served on the faculty of the University of Texas System, Boston University, and Baylor College of Medicine. Dr. Langabeer has served as principal investigator on many national research projects. He has been funded by the American Heart Association, the U.S. Centers for Disease Control, Health and Human Services, and many other agencies and foundations. He has nearly 100 publications in some of the highest rated management and clinical journals such as the Health Care Management Review, Pediatrics, and Health Care Management Science. Dr. Langabeer earned his PhD from the University of Lancaster in England in Management Science with an emphasis on decision making, and an MBA from Baylor University. He is a Fellow of the American College of Healthcare Executives (FACHE). Jeffrey Helton, PhD, CMA, CFE, FHFMA Courtesy of Jeffrey Helton Dr. Jeffrey Helton is an Associate Professor of Health Care Management at Metropolitan State University of Denver. He also holds adjunct faculty appointments in healthcare management at George Washington University, Texas Tech, and at the University of Colorado at Denver School of Business. The majority of his career has been spent as Chief Financial Officer for several healthcare systems across the United States, where he led several turnarounds of organizations previously in bankruptcy or receivership. During his career as a financial executive, he identified a number of operational challenges in hospitals and health plans that required development of staffing standards, labor management processes, and internal financial controls to restore financial stability to organizations. He has since supported other healthcare organization turnarounds as a consultant, assisting in the analysis of labor costs and development of labor control programs. As a part of his consulting work, Dr. Helton has also served as Chief Financial Officer of the Disaster Housing Assistance Program on behalf of families displaced from homes as a result of Hurricanes Katrina and Ike. As custodian for more than a quarter billion dollars in federal funds, he became a Certified Fraud Examiner and provided fraud prevention assistance to agencies assisting victims of these natural disasters. He has also used that background in fraud detection to assist several healthcare organizations develop fraud prevention and detection programs and has provided material support to multiple healthcare fraud prosecutions, resulting in millions of dollars in recovered fraud losses. Dr. Helton is a Fellow of the Healthcare Financial Management Association, where he serves on its Board of Examiners. He also volunteers his financial management expertise to the Association of University Programs in Healthcare Administration where he serves on its Board of Directors. He is a Certified Fraud Examiner and is also a member of the Board of Advisors for the Association of Certified Fraud Examiners. Dr. Helton is also a Certified Management Accountant and a Fellow of the Healthcare Financial Management Association. Dr. Helton earned his PhD in Public Health Management from the University of Texas School of Public Health, a Master of Science in Hospital and Health Administration from the University of Alabama at Birmingham, and a Bachelor of Business Administration from Eastern Kentucky University. He is a journal article reviewer for Healthcare Financial Management, Journal of Healthcare Management, Social Science and Medicine, and Journal of Public Health Management and Practice. Design Credits: © maxkabakov/Getty Images; © amgun/Getty Images; © monsitj/Getty Images. New to the Third Edition Health care in the United States is continuously struggling to innovate, reduce costs, and improve quality. This balance has not been achieved, partly because of health policy that has not stimulated substantive change to the industry’s structural dynamics, but also because of gaps in the management of healthcare organizations. Improving the operations (production and delivery of health services) can make hospitals, clinics, and other organizations more efficient and competitive and, most importantly, higher quality. Improving quality relative to costs through process transformation is the focus of this text. That’s why in this third edition, we focus on providing more content on new areas, as well as other improvements suggested by readers and reviewers. We hope to provide you with a better understanding of the industry and outline methods and tools for analyzing finances, streamlining clinical and administrative processes, and optimizing available resources—all of which are critical to organizations that are struggling to compete and survive in an era of constrained reimbursements. In this edition, we specifically provide expanded coverage in these areas: New chapter on managed care, health plans, and value-based payments and their impact on operations New chapter on Lean and Six Sigma quality improvement techniques New chapter on information technology in operations New chapter on the use of statistical analyses in operations management Completely revised chapters on supply chain management Significant expansion and updated focus on healthcare finance and financial analysis Extensive reorganization, updated references, and even more extensive glossary of key terms We have also addressed some errors and omissions in the first two editions. In all, we have 18 chapters divided into 4 parts, which will allow the academic reader to complete about one chapter per week during the semester. In the first two editions, this text has served as a reference guide for thousands of practitioners and students alike who seek to learn about healthcare operations and how to improve organizational competitiveness and performance. We’d like to thank our faithful readers who have adopted this text for their classrooms and provided us with insight for this third edition. PART I An Overview to Healthcare Operations CHAPTER 1   Operations Management and Decision-Making CHAPTER 2   Hospitals and the Healthcare Industry CHAPTER 3   Operational Finance CHAPTER 4   Health Plan Operations Design Credits: © maxkabakov/Getty Images; © amgun/Getty Images; © monsitj/Getty Images. CHAPTER 1 Operations Management and Decision-Making   H GOALS OF THIS CHAPTER 1. Describe a systems approach to management. 2. Define healthcare operations management. 3. Describe the roles and responsibilities of healthcare operation managers. 4. Examine the management decision- making process. 5. Understand the goals of operations management. 6. Describe the management discipline and where operations management fits. ealthcare operations management is a discipline that integrates scientific principles of management to determine the most efficient and optimal methods to support patient care delivery. Given the interrelatedness of processes across most organizations, a systems approach, which encourages optimizing the whole rather than simply parts, is essential. Most employment positions in healthcare organizations today are, in fact, roles that involve coordination and execution of day- to-day operations. This chapter provides the rationale for operations management and describes its evolving role in helping both hospitals and other clinical organizations become more competitive. ▶ A Systems Approach This text is fundamentally about providing practical information to guide management of operations in a healthcare organization. In order to do this, we have to start with a foundation to understand the industry, the organization, and then provide the necessary toolkit to guide improvements across organizations. Throughout this text we focus on understanding the organization as a system, improving processes and productivity, analyzing and measuring operational performance, using data and systems to guide improvements, and streamlining the healthcare supply chain. FIGURE 1-1 presents the common themes in this text. FIGURE 1-1 Operations Management in Health Care An organization is a group of people who work together, through interconnected processes and behaviors, to achieve a common purpose. Therefore, a healthcare organization is a specific type of organization engaged in either production or delivery of health goods and services. Types of healthcare organizations include primary care clinics, urgent care centers, hospitals, freestanding emergency departments, retail pharmacies, physician offices, device and equipment firms, and pharmaceutical manufacturers, to name a few. One of the key terms used in organization involves the interconnection or interrelationships between workflows and people. This is aligned with the systems perspective or systems thinking, which entails a focus on the whole, rather than just on the parts. Healthcare operations management is about planning and directing these interconnected processes or systems. When we use the term system, we refer to a set of connected parts that fit together to achieve a purpose. Healthcare operations and systems management is the set of diverse and interrelated activities that allow for diagnosis, treatment, payment, and administrative management in healthcare facilities. ▶ The Healthcare Industry Many healthcare organizations are nonprofit in nature, which influences management styles and thinking. For example, nearly 80\% of hospitals are considered not-for- profit and exist solely to serve the community in which they operate, although this has decreased in recent years. As nonprofits, these organizations are exempt from most federal and state taxation and are not expected to show continuous positive growth rates or large profit margins, as most publicly traded firms do. However, if a hospital or healthcare organization cannot show some return on the capital or dollars invested, there will be negative consequences. For example, failure to show reasonable margins will likely cause the public bond market (which finances most healthcare growth today) to assign subpar credit ratings; therefore, the bonds themselves will have poor yields, making hospitals less than stellar investments for bondholders. Most importantly, the term limited profit margins implies there will be fewer dollars to invest back in the business to ensure that buildings are updated, that equipment is replaced and technology is modern, and that clinical programs will continue to expand and be enhanced. Without these investments, hospitals will probably be unable to attract the most qualified physicians and administrators, which will continue the downward spiral. While some hospitals and healthcare systems wait for changes in the public health policy to save them, the more competitive and successful hospitals are acting now to protect their margins. In this era of continual pricing pressures affecting the top line of the income statement, and with a large majority of all hospitals reporting negative profit margins, it is essential that hospitals begin to look toward more sophisticated business strategies to succeed. Differentiated marketing programs and strategies, broader use of advertising, and more careful and precise long-term planning about service lines are all strategies that must be utilized (Rovin, 2001). There needs to be a broader adoption of operations management techniques into health organizations. Monitoring and maximizing labor productivity for all medical support and allied health professionals is critical to maintaining salary expenses. Incorporating queuing theory and scheduling optimization methods helps drive waste and cycle time out of facilities. …