Changing economic environment of hospitals: management challenges of the 1990s

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The modern hospital is an organization which is influenced by the external environment in which it functions. A major relevant area is the economic environment. In recent years the western world has been facing the challenge of rising costs of health care and an increase in their proportion to the gross national product of most countries. Consequently, hospitals as major providers of health care are under pressure from governments and health insurance companies to cut costs and to "produce" more efficiently. Since hospitals worldwide are finding it hard and painful to function in the new environment in which attitudes to hospitals are changing, a potential managerial-economic crisis may be the next phase. How can the hospital adapt to these changes? First, by adopting managerial attitudes and the tools of the business sector. These include: the strategic planning process, hospital operative autonomy, creating medical-economic responsibility centers as departments, cost-accounting for medical procedures, and case-mix budgeting. Management information systems are necessary during the transition. The hospital information system should include functions at the operative level, such as outpatient visits, and admissions and discharges of patients; and also clinical, diagnostic and laboratory procedures related to the patient case-mix. The second level is a management information system which includes salaries of personnel, case-mix budgeting with variance analysis, prices of procedures and epidemiological data. The authors believe that only the managerial approach combining medical and economic disciplines can meet the challenges of the changing modern economic environment.

Original languageEnglish
Pages (from-to)458-461
Number of pages4
Issue number12
StatePublished - 16 Dec 1990
Externally publishedYes


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