CONTEXTUAL BACKGROUND

Hospitals are immovable structures whose design is set in stone, usually many years ago.

Their configuration often reflects the practice of health care and the patient populations of a bygone area. This has resulted in complex, confused institutions, in which much of the cost is spent on overhead activities. Their incompatibility with present needs ranges from major operational problems (e.g., process failure leading to lower performing institutions) to minor problems (such as unadjusted working space and process failures leading to medication errors). Yet hospitals are a very important element of the health care system (Levit et al., 2002; Strunk et al., 2001). Financially, in the US, they account for about one third of total health care expenditure (32,6%) (American Health Association, 2010). In Belgium similar results are reported (31%) (FOD Sociale Zekerheid, 2012). Organizationally, hospitals dominate the rest of the health care system (McKee and Healy, 2000). Internationally, hospital care is the largest category of health care spending (American Health Association, 2011), so cost control in hospitals remains a challenge, as facilities need to remain competitive by offering cutting-edge services and honoring physicians’ suggestions regarding their needs of specialty equipment. This limits their capability to cut spending on capital goods. Hospitals have a particular need to provide quality care while curbing costs by eliminating wasted materials, effort, and time. The cost-cutting that cannot be achieved by eliminating expenditure on capital goods and nonessential services may be gained by boosting efficiency through producing more output without increasing inputs. Organizations that are able to raise production without needing additional inputs (e.g., additional supporting personnel) are operating more efficiently (Cutler, 2010).

In summary, hospitals are critical but costly resources in health care; the challenge is therefore to design processes that on one hand are flexible, but on the other hand work to standards that create consistency (Walley, 2007). Faced with the prospect of rationed care and organizational shake-ups, managers may opt to anticipate an advanced balanced act in managing health care, combining improved quality of care and efficiency. A number of

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attempts of this nature have been made: not only have hospitals evolved from functional, bureaucratic organizations towards more process-orientated service-line organizations (Gemmel et al., 2008; Vos et al., 2011), additional management techniques originating from industrial practices have, at the same time, begun to diffuse through hospitals (Duclos et al., 1995; Kaluzny et al., 1992; Mazzocato et al., 2010).

The patient—that is, the customer—should be at the center of attention in health care.

Customers’ needs (i.e., what the customer wants, expects and values) have been the main focus for the business models in other sectors as well. Managing a successful business requires a thorough analysis of the customers’ needs. What customers think and feel about a company and its products constitutes a key aspect of business success. It is important to understand customers’ needs if goods or services that meet these needs well are to be developed. Additionally, customers have higher expectations and needs of health care, comparing health care organizations not to each other, but to organizations like Disney and Volkswagen (Autostadt) (Herzlinger, 1997). Moreover, one must take into account patient preferences. Of the 10 rules for the redesign of health care from the Institute of Medicine’s Crossing the Quality Chasm, four reflect the need to optimize medical decision making and involve patients, including customization based on patients’ needs, values and preferences (IOM, 2001). Several researchers have shown that treatment decisions change after populations of patients become well informed. For example, an international Cochrane Review, that included 11 trials involving major elective surgeries, showed that demand declined by 20 per cent after patients became better informed. This systematic review reported consistent evidence that as patients became better informed, they made different decisions and felt more confident (Stacey et al, 2011). The expectation that patients will become increasingly involved in making treatment decisions poses new challenges and must be acknowledged as a warranted form of variation in health care.

Fulfilling different needs requires different operating systems. Moreover, hospitals in particular need to change proactively. It seems impossible for individual hospitals to meet this variety of needs with only one design of the operating system (Christensen et al., 2009).

Hence, today’s health care is not optimized for the twenty-first century. As Christensen, Grossman and Hwang (2009) have stated in the Innovator’s Prescription, “the delivery of care has been frozen in two business models—the general hospital, and the physician’s practice—

both of which were designed a century ago, when almost all care was the realm of intuitive medicine” (Christensen et al., 2009, p. xviii) (Figure 1).

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A general hospital is what is known as a job shop (Christensen et al., 2009). This way of organizing is characterized by very low standardization, unstructured problems, and variation in care (Cook et al., 2014), and inextricably leads to lower quality and higher costs (Cook et al., 2014; Kumar et al., 2011). Statistics reveal that general hospitals do not achieve an occupancy rate of 80%, which implies a lack of full efficiency (Kumar et al., 2011).

Besides the general hospitals, as shown in figure 1, in some countries (mainly in the US), we can witness the rise of specialized clinics, with a focus on one specific care process or discipline (e.g., cardiac, orthopedic, and eye clinics).

Figure 1 The general hospital, as we know it today

To accommodate the changes and challenges in health care, while paying particular attention to the ever-increasing healthcare spending, we must adjust our current policy on hospitals.

The classic hospital that contains everything is obsolete (Bohmer, 2009; Christensen et al., 2009). Cook et al. (2014) recently investigated which problems or populations of patients are best addressed by job shop models and which by focused factory models (therefore claiming that there are two kind of processes in health care). They found that, in hospital surgical care, the universal application of the job shop model contributes to unwarranted variation in care, which leads to lower quality and higher costs. Creating a focused factory model within a job shop—and thus within the general hospital—was found to be very effective in both improving quality and reducing costs. Sixty-seven percent of adult patients could be described as receiving focused factory care (Cook et al., 2014). Porter et al. (2013) proposed a strategy that emphasizes the need to stratify a heterogeneous population into subgroups with different

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needs; this stratification can then serve as the foundation for differing work models and metrics in health care (Porter et al., 2013).

Health care institutions should focus more on some specific aspects of care and cure. This is also called the focused factory concept (Bredenhoff et al., 2010; Cook et al., 2014; Kumar et al., 2011). The idea is to segment patients into homogeneous groups, which leads to more predictable and manageable patterns, both inside and outside the hospital. The focus can be on many different aspects. In health care, this is complicated by the combination of treatments, patient-related characteristics, medical disciplines, and organizational aspects. An appropriate definition of the focused factory in healthcare is also missing (Bredenhoff et al., 2010).

The idea of ‘focused factory’ is compatible with the fundamental idea that the design of the care process should be in line with the nature of illness and care (Figure 2)—a view that is supported throughout the literature (Bohmer, 2009; Christensen et al., 2009; Cook et al., 2014; Lillrank and Liukko, 2004; Porter et al., 2013; van Merode et al., 2004). This also supports the view of operations management that each kind of service needs a different approach.