Leadership and Management in Health Care

Leadership & Management, Health Care

Leadership & Management in Health Care

President Clinton's Secretary of Health and Human Services, Donna Shalala, used to tell a story about her mother, who was 86 at the time but still a full-time attorney representing several clients who lived in nursing homes. She would tell Shalala, "Donna, I don't care whether they are good nursing homes or bad nursing homes, you have to watch them like a hawk" (Cited in White House, 1998, quoted by Hovey 2000, 43). Clinton's presidency was very aware of health care issues, even if it was unable to solve them. Shalala's remarks were delivered at a press conference regarding nursing home regulation; arguably, under the current administration, issues of health care for the aged have gotten more problematical rather than less.

Background

Despite relatively little action regarding health care for the aged by the federal government, there is little doubt that the news media has crated heightened awareness of the "graying" of American, and "has focused attention on the distinctive needs of individuals who are disabled, chronically ill, or functionally impaired. By no means are all of these people elderly" (Kahl & Clark 1986, 17+). Kahl and Clark noted that the aging of the population was expected to put pressure on the demands for hospital care, and that hospital use was significantly greater for the aged than for those under age 65 and that, in fact, the aged are hospitalized more often and stay in the hospital longer than those who are under 65. Indeed, the rapidly growing population that was age 85 and above used twice as many hospital days as those between 65 and 74. (Kahl & Clark 1986, 17+).

Kahl and Clark wrote almost two decades ago. Their predictions, which were made for only the ten years after their research, have held true even into this millennium. Without serious restructuring, legislators worry, the U.S. health care system -- particularly the need for long-term care, will "bust the bank." In 2000, it was noted that 35% of Medicaid's $160 billion budget went to long-term care. "That percentage is almost certain to increase as the roughly 77 million baby boomers age and medical science keeps people with chronic diseases and disabilities alive longer" (Fox-Grage & Shaw 2000, 30). Worse yet, predict Fox-Grage and Shaw, more than fifty percent of the U.S. population will need some sort of long-term care; that care costs about $51,000 a year in 2000 terms (2000, 30). Adding to the future woes caused by the aging baby boom, even current residents of long-term care facilities cannot be expected to vacate and save some funding for the future:

Just under half of the 13.5 million Americans who need long-term care are under the age of 65 and are expected to live longer than their counterparts did a generation ago. People 85 and older -- half of whom need help with basic daily living tasks like dressing and bathing -- now number about 4 million and represent the fastest growing segment of the population. By 2050, their numbers are expected to swell to perhaps 27 million. (Fox-Grage & Shaw 2000, 30).

It is possible that the number of those who need help with care is higher than Fox-Grage and Shaw note; in 1986, Kahl and Clark gave as 4.1 million the number of those who would need nursing home care by 1996. (1986, 17+)

Nor is aging the end of the problem. There is also the problem of multiple health problems in the very aged, along with the technological advances that make performing multiple and complicated surgeries on the aged less risky; however, that may also lead to need for long-term care. This trend, according to Kahl and Clark, was likely to wipe out any gains that were realized as hospital stays decreased in average length (1986, 17+).

In 1986, health sector output had outstripped economic growth in general, contributing a 5.6% annual gain in real output, compared to a 3.3% increase in real GNP (now called GDP) between 1960 and 1984 (Kahl & Clark 1986, 17+). Apparently, however, the growth in the aged population, along with the trend toward performing more procedures noted above, means that as of 2000, the cost of health care for the aged posed a larger dilemma than Social Security and Medicare. (Fox-Grage & Shaw 2000, 30)

Any discussion of health care for the aged means one sort of long-term care or the other. Here are the facts contributing to the need for leadership in that sector:

Nearly 13.5 million people needed long-term care in 1996. That number is expected to rise dramatically by 2020.

The Census Bureau estimates that the elderly population will more than double by 2050 to 80 million as the baby boomer generation grows older. But not just the elderly need long-term care services; roughly 6 million or 44% of people needing long-term care are under the age of 65.

Medicaid spends roughly $60 billion on long-term care, and the Congressional Budget Office expects it to rise to more than $75 billion by 2020.

Private long-term care insurance expenditures are expected to rise to little more than half of Medicaid expenditures -- $36.2 billion.

National spending for long-term care in 1997 was $115 billion; nursing home care accounted for 72% of the bill.

About 35% of total Medicaid spending paid for long-term care services.

Institutional care-nursing homes and intermediate care facilities for the mentally retarded -- accounted for 75% of total Medicaid long-term care spending.

Sources: The Census Bureau, the Congressional Budget Office, the Medstat Group, Health Care Financing Administration) (Fox-Grage & Shaw 2000 April 30

It is easy to see why Froeschle & Donahue concluded in 1998 that "Health care today is between paradigm. The stated of fluctuation places extraordinary challenges on leaders of...health care facilities. New leadership skills are needed to overcome this dilemma (1998, 60)

Study question

In light of these pressures on health care for the aged, it is reasonable to ask what skills a manager in the health care industry, particularly the sector serving the aged, needs to display.

What is the environment, and what is its effect on management?

Before determining what skills a manager in health care will need for the near-term and until 2020, it will help to have a snapshot of the evolving health care delivery setting.

In 1986, health care was still primarily delivered in doctor's office, hospitals and nursing homes, although even then, the structure of the industry was changing to include health maintenance organizations (HMOs), in addition to the burgeoning urgent care centers (the fabled "doc in a box"), birthing centers and hospices (Kahl & Clark 1986, 17+).

In addition, home health care was gaining in popularity by the end of the 1990s, if a simple visual survey of caregiver cars on the road and ads in the Yellow Pages was any indication.

Paying for those services was also undergoing changes. In the mid-1960s, the health care consumer paid for about half of all health care spending, with the other half paid for about equally by insurance and public programs. By 1984, the consumer paid only about 28%, with 40% of the tab picked up by government programs, and 31% by insurance. (It should be noted that insurance is not divorced from consumer spending; it is the result of consumer spending, either directly or via that portion of an employer's budget that pays for it as part of an employee's 'benefits,' that is, as part of his or her wages, although those 'wages' are never directly seen by the employee and are tax-deductible to the employer; this means it costs the employer a great deal less to cover the employee with health insurance than to give that money directly to the employee.)

All this has had an effect on health care delivery that becomes part of the consideration of a manger's role and responsibilities. The transfer of responsibility from the consumer to "third parties" such as insurance carriers is considered to have made patients and providers insensitive to the cost of treatment and care. (Kahl & Clark 1986, 17+). Although the relative amounts are probably different by now -- with greater percentages spent on nursing home care, as of 1986, health insurance and public programs paid 90% of hospital expenditures, 72% of physician services, and 50% of nursing home care (Kahl & Clark 1986, 17+). Arguably, as the percentages paid by third parties rose above the 1986 levels, even greater insensitivity to costs was evident on the part of consumers. In addition, "New programs, new technologies, and new types of personnel have been added because of perceived clinical benefits, with little concern for the cost implications" (Kahl & Clark 1986, 17+).

There is widespread confusion about who pays for all this care for the aged. Medicare covers acute care, such as physician and hospital services. However, private long-term insurance must cover logn0-term care; if an individual lacks this coverage, then Medicaid pays for nursing home placement. States, however, control Medicaid payments, not the federal government alone. Thus, several states have begun implementing alternative services such as home-health care, to contain Medicaid costs. This has given birth in those states especially to an expanded sector of health care services that are professional without being housed within a monolithic facility such as a nursing home. In such cases, for example, benefits may be "individually tailored to each qualified person using state and federal long-term care funds. For instance, an elderly woman living alone in her own home may require minor nursing care and help with household tasks at a cost of roughly $900 a month" (Fox-Grage & Shaw 2000, 30), which is significantly better for the stakeholders than $51,000 a year, and open up new roles and responsibilities for health care managers as well.

There is also a government impact on the environment for health care for the aged. IN the summer of 1998, a General Accounting Office report exposed gaps in nursing home regulation enforcement. The President (Clinton) promised to crack down, Congress expressed outrage, and state agencies vowed to get tough. Some of this was related to the pressure to do more with less; it is difficult, however, to improve quality of care without increased operating costs as quality is often related to staffing with more and better qualified (that is, more expensive) staff (Hovey 2000, 43).

However, federal nursing home regulation has little effect on whether a nursing home can open for business or remain in business; its major effect is on participation in Medicaid and Medicare (Hovey 2000, 43).

However, this leaves open a double bind for managers, with the need for income provided by Medicaid and Medicare, and the need to provide the beds required by the community.

Federal requirements under the Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) required nursing homes to adhere to new standards for quality of care, facility practices, resident rights, resident assessment, and quality of life, as well as improving standards for nursing assistants and conducting outcome-oriented surveys. Also instituted were intermediate sanctions for noncompliance. (Hovey 2000, 43)

Who are the stakeholders?

The idea of 'stakeholders,' or everyone who has an interest in a particular company's product or service, has been gaining ground since the 1980s. A study by Kumar & Subramanian (1998) tried to throw some "empirical light" on stakeholder management through a survey asking hospital executives to rank the importance they attached to a variety of goals relating to stakeholders. (Kumar & Subramanian 1998, 31+)

The stakeholders in the case of health care for the aged are the aged themselves, and their families, but also their doctors and the health care facility itself. The federal government and state governments, as well as insurance companies, can also be considered stakeholders. Problematical in this regard is that only 10 to 20% of older Americans can afford premiums on long-term care insurance, which range fro $900 to $2,400 a year, according to a study by the U.S. General Accounting Office (Fox-Grage & Shaw 2000, 30). Because of this, the federal and state governments become, by default, the biggest stakeholders, and therefore of primary concern to health care managers. Moreover, they have to power to impose demands that the relatively powerless consumer of this form of care cannot impose or effectively demand. This adds to the roles and responsibilities of the manager. In addition, "Each of these stakeholder groups has its own expectations, and if the hospital executives are to gain their acceptance, they must set their performance goals to address the specific concerns of each group" (Kumar & Subramanian 1998, 31+).

It is also wise (if not always accurate) to consider that the government may represent the interests of the consumer stakeholder vis-a-vis care for the aged:

Government regulators of nursing home care face an even more difficult than usual task in balancing cost and quality concerns, because unlike most areas of health care in the United States, government payers (primarily Medicaid) fund nearly three-fourths of all nursing home care in the U.S. (Hovey 2000, 43)

Noting the huge numbers of people who will require long-term care, and the relative beginnings of alternatives to facility-based care, there is likely to be a cost-quality tradeoff mandated at least in the short and medium terms (Hovey 2000, 43).