Hospital Restructuring: Can the Administrator to Provider Ratio Be Reduced?
Brian V. Nahed, MD
Alan Scarrow, MD
According to a 2017 report from Athenahealth, hospital administrator positions increased by 3200% between 1975 to 2010 while the number of physicians increased by 150% and the U.S. population increased by 133%.1 It’s a shocking statistic. One that reveals five decades of health care transformation from a small association of clinicians and hospitals to a large, complex, highly specialized, and regulated industry dominated by regional and national systems that consume $3.5 trillion annually and account for nearly 17% of the U.S. gross domestic product. Given the amount of money at stake and the fact that 330 million Americans rely on our health care system, it’s not surprising that health care has become a business led by non-clinical administrators.
The Business of Health Care
Health care is unlike any other business. Nonetheless, a health care system must execute the same fundamentals that all businesses do if they wish to survive. It must turn its operations into cash to pay employees, invest in infrastructure, repay debt, and return profit. To that end, health care administrators are divided into two groups: those dedicated to top line growth (e.g., sales and operations) and those dedicated to bottom line growth (e.g. personnel and resource management). Over the past ten years, top line has been steady with revenue for physician and hospital services increasing annually at 3.6% and 5.1% respectively.2 Historical increases in revenue relied on added patient volume, often driven by the reputation of the caregivers and hospitals. However, the growing popularity of narrow insurance networks, which limit patients’ choice of facility or provider, has forced many hospitals to hire marketing, advertising, network development, and contracting professionals to drive patient volume. While understandable, those additional hires have also added to health care administrative burden and related costs.
Bottom line growth through savings and efficiency has been more elusive in health care. It takes just as long to listen to a patient’s history, dispense medicine, or comfort a grieving family today as it did fifty years ago. Similarly, electronic health care records (EHRs) may have improved the coordination of care, but they haven’t made patient care faster. As the cost of providing care has risen, health systems have hired more managers and administrators to find ways to cut costs wherever possible.
Outside of health care, successful businesses have a clear mission to deliver a product or service at a price and quality point that makes the business competitive in their market. The process of creating and selling that product or service is continuously measured and analyzed. Hospitals differ in that they have multiple, concurrent missions of patient care, research, teaching, and charity. Those concurrent, often conflicting missions, obscure true measures of price and quality. As a way around that obscurity, to slow rising costs, and define optimal care, government officials and insurers created numerous publicly reported metrics starting in the 1990s to measure and pay for physician and hospital performance. Unfortunately, most metrics have been too generic (e.g., readmission within 30 days) or fail to isolate an aspect of care related to actual outcomes, making them void of clinical meaning. Further, lagging indicator metrics such as length of stay or net profit have supported siloed, short-term goals that often ignore the long-term needs of health systems and the communities they serve. Despite these defects, the collection and analysis of metrics has grown in number and scope, robbing caregivers of their time, adding to the administrative burden, and drawing attention away from clinical care.
Profit and Metrics
Henry Ford once said, “a business that makes nothing but money is a poor business.” Businesses get into trouble when their mission prioritizes profit over adding distinctive value to their customers. While the last fifty years have proven that health care can be a profitable business, the shift in focus has displaced the patient as the first priority. Health care’s ongoing struggle to deliver the best care in the most cost-effective manner, has created a long, bloated list of both metrics and administrators.
What is the Solution?
Simplifying the Organizational Structure
Health system administrators have responded to the growing complexity of health care by creating even more complex oganizational structures.3 The small hospital leadership team of fifty years ago has given way to large executive teams covering marketing, operations, compliance, finance, human resources, quality, safety, logistics, supply chain, information management, and patient relations to name just a few. This complexity has added administrative burden without a proportional improvement in patient outcomes.
The key to managing complexity is a combination of autonomy and cooperation. Front-line workers with the autonomy to make decisions are capable of implementing more effective solutions. But they also carry the responsibility to coordinate and cooperate with others in the hospital who may have a different focus but seek the same goal. A surgeon, for example, may know what resources are needed for an operation, but also has a responsibility to consider the cost of those resources and balance those needs with the demands of the entire health system. Combining autonomy and cooperation can lead to greater efficiency and reduce the need for managers and administrators.
Reign in Metrics and Regulations
Each year the government generates 3,500 to 4,800 new regulations with a cost estimated at $1.88 trillion.4 Many health care regulations have added administrative burden as hospitals must hire teams of attorneys and compliance professionals to adhere to those regulations. Regulations beget additional metrics necessary to assess compliance. The generation and analysis of those metrics is performed by administrators that divert resources away from frontline workers and patient care. The number and scope of regulations and their associated metrics must be curtailed. As an example, the Health Insurance Portability and Accountability Act (HIPAA) created a set of well-intended regulations designed to protect patients’ private medical information. Yet in restricting caregivers from sharing patient information it has resulted in fragmented, siloed care filled with repeated tests, metrics to monitor HIPAA compliance, and teams created to resolve potential breaches. Reducing regulations that obstruct care delivery and the associated metrics would free individual providers and health care systems to focus on appropriate and innovative patient care with less administrative burden.
While health care delivery continues to increase in complexity, the growth of administrative complexity has resulted in higher costs, less autonomy, and a growing list of ineffective metrics. Streamlining the administrative complexity created over the past fifty years is a task unlikely to be taken up by health care administrators. As Upton Sinclair once wrote, “it is difficult to get a man to understand something when his salary depends on him not understanding it.” In this moment, for this generation, the challenge falls to providers to lead the effort and join with our administrative colleagues to deliver the best care in the most efficient manner possible.
- Cantlupe, Joe. “Expert Forum: The rise (and rise) of the healthcare administrator.” https://www.athenahealth.com/knowledge-hub/practice-management/expert-forum-rise-and-rise-healthcare-administrator. Accessed 11.2.20
- American Medical Association. “Trends in Healthcare Spending.” https://www.ama-assn.org/about/research/trends-health-care-spending, https://www.ama-assn.org/about/research/trends-health-care-spending. Accessed 11.2.20
- Morieux, Yves, and Peter Tollman. Six Simple Rules: How to Manage Complexity without Getting Complicated. Harvard Business Review, 2014.
- Tanner, Michael. The Inclusive Economy: How to Bring Wealth to America's Poor. Washington, DC: Cato Institute, 2018.