Ludwig Kuntz

Process-based organization design and hospital efficiency.

BACKGROUND The central idea of process-based organization design is that organizing a firm around core business processes leads to cost reductions and quality improvements. PURPOSES We investigated theoretically and empirically whether the implementation of a process-based organization design is advisable in hospitals. METHODOLOGY The data came from a database compiled by the Statistical Office of the German federal state of Rheinland-Pfalz and from a written questionnaire, which was sent to the chief executive officers (CEOs) of all 92 hospitals in this federal state. We used data envelopment analysis (DEA) to measure hospital efficiency, and factor analysis and regression analysis to test our hypothesis. FINDINGS Our principal finding is that a high degree of process-based organization has a moderate but significant positive effect on the efficiency of hospitals. PRACTICE IMPLICATIONS The main implication is that hospitals should implement a process-based organization to improve their efficiency. However, to actually achieve positive effects on efficiency, it is of paramount importance to observe some implementation rules, in particular to mobilize physician participation and to create an adequate organizational culture.

Stress on the Ward: Evidence of Safety Tipping Points in Hospitals

Do hospitals experience safety tipping points as utilization increases, and if so, what are the implications for hospital operations management? We argue that safety tipping points occur when managerial escalation policies are exhausted and workload variability buffers are depleted. Front-line clinical staff is forced to ration resources and, at the same time, becomes more error prone as a result of elevated stress hormone levels. We confirm the existence of safety tipping points for in-hospital mortality using the discharge records of 82,280 patients across six high-mortality-risk conditions from 256 clinical departments of 83 German hospitals. Focusing on survival during the first seven days following admission, we estimate a mortality tipping point at an occupancy level of 92.5%. Among the 17% of patients in our sample who experienced occupancy above the tipping point during the first seven days of their hospital stay, high occupancy accounted for one in seven deaths. The existence of a safety tipping point has important implications for hospital management. First, flexible capacity expansion is more cost-effective for safety improvement than rigid capacity, because it will only be used when occupancy reaches the tipping point. In the context of our sample, flexible staffing saves more than 40% of the cost of a fully staffed capacity expansion, while achieving the same reduction in mortality. Second, reducing the variability of demand by pooling capacity in hospital clusters can greatly increase safety in a hospital system, because it reduces the likelihood that a patient will experience occupancy levels beyond the tipping point. Pooling the capacity of nearby hospitals in our sample reduces the number of deaths due to high occupancy by 34%. This paper was accepted by Serguei Netessine, operations management.

Incorporating efficiency in hospital-capacity planning in Germany

Hospital occupancy is a key metric in hospital-capacity planning in Germany, even though this metric neglects important drivers of economic efficiency, for example treatment costs and case mix. We suggest an alternative metric, which incorporates economic efficiency explicitly, and illustrate how this metric can be used in the hospital-capacity planning cycle. The practical setting of this study is the hospital capacity planning process in the German federal state of Rheinland-Pfalz. The planning process involves all 92 acute-care hospitals of this federal state. The study is based on standard hospital data, including annual costs, number of cases—disaggregated by medical departments and ICD codes, respectively—length-of-stay, certified beds, and occupancy rates. Using the developed metric, we identified 18 of the 92 hospitals as inefficient and targets for over-proportional capacity cuts. On the upside, we identified 15 efficient hospitals. The developed model and analysis has affected the federal state’s most recent medium term planning cycle.

Reduction of anesthesia process times after the introduction of an internal transfer pricing system for anesthesia services

To improve operating room workflow, an internal transfer pricing system (ITPS) for anesthesia services was introduced in our hospital in 2001. The basic principle of the ITPS is that the department of anesthesia receives reimbursement only for the surgically controlled time, not for anesthesia-controlled time (ACT). A reduction in anesthesia process times is therefore beneficial for the anesthesia department. In this study, we analyzed the ACT (with its parts: preparation before induction, induction, extubation, and recovery room transfer) for 3 yr before and 3 yr after the introduction of the ITPS in 55,776 cases. Furthermore, the anesthesia cases were subsegmented into 10 different anesthesia techniques, and the process times were studied. The average total ACT was reduced from 40.4 ± 23.5 min in 1998 to 34.3 ± 21.7 min in 2003. The main effect came from reductions in anesthesia preparation time and recovery room transfer time, whereas induction and extubation time changed little. A significant reduction in average ACT was seen in 7 of 10 analyzed anesthesia techniques, ranging from 4 to 18 min. We conclude that transfer pricing of anesthesia services based on the surgically controlled time can be a successful approach to reduce anesthesia process times.

Transfer Pricing in Hospitals and Efficiency of Physicians: The Case of Anesthesia Services

Abstract: The objective is to investigate theoretically and empirically how the efficiency of the physicians involved in anesthesia and surgery can be optimized by the introduction of transfer pricing for anesthesia services. The anesthesiology data of approximately 57,000 operations carried out at the University Hospital Hamburg-Eppendorf (UKE) in Germany in the period from 2000 to 2002 are analyzed using parametric and non-parametric methods. The principal finding of the empirical analysis is that the efficiency of the physicians involved in anesthesia and surgery at the UKE improved after the introduction of transfer pricing.

Constraint qualifications in quasidifferentiable optimization

The classical linearization procedure for differentiable nonlinear programming problems can be naturally generalized to the quasidifferentiable case. As in the classical case one has to impose so-called constraint qualifications on the constraint functions in order to ensure that optimality of a feasible point implies optimality of the nullvector for the corresponding “quasilinearized” problem. We present various constraint qualifications in a unified setting, propose a new one, and investigate the relations between these conditions.

Modelling start-up costs of multiple technologies in electricity markets

This paper deals with the dispatch problem in providing electric power with minimal costs using different technologies. Initially, we describe this problem in terms of a linear program. This enables us to take generally neglected start-up costs into account. The main result is the explicit solution of a simplified linear program which provides us with a better understanding of the ‘start-up cost’ effects. Furthermore, we show that dominated technologies should be used in the case of limited availability of efficient technologies.

Modular organization and hospital performance

The concept of modularization represents a modern form of organization, which contains the vertical disaggregation of the firm and the use of market mechanisms within hierarchies. The objective of this paper is to examine whether the use of modular structures has a positive effect on hospital performance. The empirical section makes use of multiple regression analyses and leads to the main result that modularization does not have a positive effect on hospital performance. However, the analysis also finds out positive efficiency effects of two central ideas of modularization, namely process orientation and internal market mechanisms.

A nonsmooth variant of the Mangasarian-Fromovitz constraint qualification

A unified view on constraint qualifications for nonsmooth equality and inequality constrained programs is presented. A fairly general constraint qualification for programs involving B-differential functions is given. Further specification to piecewise differentiable equality constraints and locally Lipschitz continuous inequality constraints yields a nonsmooth version of the Mangasarian-Fromovitz constraint qualification.

Stress on the Ward - An Empirical Study of the Nonlinear Relationship between Organizational Workload and Service Quality

We discuss the impact of organizational workload on professional service outcomes, such as survival rates in hospitals. The prevailing view in the literature is that service quality deteriorates when organizational workload increases. In contrast, we argue that the relationship between workload and service outcomes is nonlinear and that there is a quality-optimal workload level. Whilst outcomes deteriorate with increasing workload when workload levels are already high, they will improve if workload increases from a low level. We reach this hypothesis by combining three perspectives: (i) the queuing theory perspective, with its focus on congestion, (ii) a discretionary choice perspective, with a focus on decisions made by professionals in response to changes in workload, and (iii) an endocrinological perspective, with a focus on the subconscious eff ects of workload on worker performance through the cognitive impact of stress hormones. Using a patient census of 1.4 million patients in 624 departments across 101 hospitals, we provide empirical support for the nonlinearity hypothesis in the context of hospital survival rates. We further discuss the implications for hospital capacity planning and the wider implications for service operations management.