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The purpose of this book is to help the reader make career choices based on the best available evidence. We want to share with you the knowledge and informa- tion required to either enter the field of healthcare management or, for those already working in healthcare, move into increasingly responsible and complex roles. Additionally, we wish to give the reader a sense of the breadth and depth of career opportunities available in the field of healthcare management. Because of the inherent limitations of this book, we will not be able to provide the reader with specific, personal advice and guidance. For that, we recommend that per- sons needing this information contact the program director of their local cer- tified undergraduate or accredited graduate program. Before diving into the specifics of the education and process for finding a job in healthcare, we should take a few minutes to define what we mean when we say healthcare manage- ment, and share some perspectives about the breadth and depth of opportunities in the field.

As of the writing of the second edition of 101 Careers in Healthcare Management, healthcare remains the largest segment of the economy of the United States. According to the Center for Medicare & Medicaid Services (CMS), $3.2 trillion was spent on health services in 2015 (CMS, n.d.). This figure represents just under 17.8% of the total gross domestic product (GDP) or $9,990 per capita. Our level of spending on health services is the highest of any nation. Where does this money go? Again, according to CMS, in 2015 we spent $1.02 trillion on hos- pital services; $640 billion on physician and other clinical services; $96 billion on other professional services including physical therapy, optometry, chiropractic and other similar services; $128 billion on dental services; $320 billion on prescription drugs; $64 billion on durable medical equipment; $157 billion on long-term care; $89 billion on home health services; $163 billion for other health, residential, and personal care services; and $59 billion for other nondurable medical products. The remainder includes expense categories such as governmental administration for programs like Medicare and Medicaid, net cost of commercial health insurance, public health activities, and investment in research (CMS, n.d.).

Three trillion two hundred billion dollars is an enormous sum and it begs the question—who gets all this money? Most of the money spent on health services funnels into various types of organizations—all of which require professionally trained and experienced managers and administrators. While there are a number of physicians and other clinical practitioners who remain in solo or small group practices (and this number continues to shrink annually), the vast majority of health services and supporting structures are housed in small, medium, and large

C H A P T E R 1 INTRODUCTION TO HEALTHCARE MANAGEMENT

C o p y r i g h t 2 0 1 8 . S p r i n g e r P u b l i s h i n g C o m p a n y .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

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organizations. Table 1.1 gives the reader a sense of the number of different health service organizations in operation in 2015.

These numbers do not account for all the federal, state, and local governmen- tal health service organizations, associations, retail pharmacies, and individuals working as independent contractors. Taken in the aggregate, healthcare is a very big business with multiple lines of service and support. As a result of all these dif- ferent parts to the healthcare industry, the reader will frequently hear the term “health sector” used, which is just another way of expressing the sum total of the various firms and organizations that either directly or indirectly touch on the delivery of health services to the individual patient.

WHAT IS HEALTHCARE MANAGEMENT? So, what exactly is healthcare management, and what is it that healthcare manag- ers do? For the purposes of this book, let us stipulate that healthcare management is the practice and application of business management principles within the con- text of health sector organizations. Note that here, healthcare management does not propose to manage the health of individuals or communities. We are not refer- ring to clinicians who treat and manage illness and disease. Rather, our focus is on the management of the various forms of organizations that are part of the health system. It is important to note that the practice of healthcare management will differ depending on which part of the health sector we happen to be examining. While the core principles of management are the same, there are critical differ- ences in the way in which management is practiced depending on the mission, design, and operation of the organization.

By way of illustration, let us compare and contrast the essential management challenges faced by a not-for-profit hospital and a small, mid-size commercial health insurance company. We will assume that the two organizations generate the same amount of revenue each year—the hospital through the provision of patient services, and the insurance company through the sales of insurance to individu- als and employer groups. Both of these organizations face similar challenges in

TABLE 1.1 NUMBER OF HEALTH SECTOR ORGANIZATIONS IN 2015

Type of Organization Number

Community hospitals 5,627

Physician practices/clinics 730,366 physicians in group practices

Long-term care 45,600 nursing homes and assisted living

Health insurance companies 857

Pharmaceutical manufacturers 263

Healthcare consulting firms Thousands of large and small firms

Healthcare-related associations Thousands of associations of all sizes

Medical equipment manufacturers 735

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making enough money to cover all short- and long-term expenses; attracting and retaining high-quality employees; competing with similar organizations in their market; assuring that technology is up to date; and staying current with federal, state, and local governmental regulations. While similar in many respects, there are a number of critical differences that make managing hospitals and health insurance companies particularly complex. The hospital operates as a not-for- profit firm (the most common structure among hospitals in the United States), and while they are exempt from paying most taxes, they must provide a level of com- munity benefit equal to the amount of money not paid in taxes. The hospital gets reimbursed for services by multiple payers, who typically pay a different rate for the same service. In many cases, the primary knowledge workers in hospitals (phy- sicians) are not employed by the hospital and are, therefore, not under the direct control of the hospital management. Finally, for hospitals that operate emergency departments (EDs), federal legislation requires that the hospital evaluate and sta- bilize every patient who enters the ED regardless of their ability to pay. The health insurance company most likely operates as a for-profit firm that pays all applicable taxes. All of the key knowledge workers (sales staff, underwriters, claims, customer service representatives, et al.) are directly employed by the organization. If some- one wants health insurance, they must pay the monthly premium and if not, the insurance is canceled. The point to this single example is to illustrate that while hospitals and health insurance firms both occupy important parts of the health sector, the administrative and managerial demands on both of these organizations have important differences.

WHAT IS THE ROLE OF THE HEALTHCARE MANAGER? Healthcare managers are responsible for carrying out the administrative and managerial functions of their respective organizations. On a macro level, we can think of managers occupying entry level, middle, and senior/executive manage- ment positions. There is an immense amount of literature on what managers do, but for the purposes of this book, we turn to the work of Dr. Henry Mintzberg for a brief examination of managerial roles. This is not the only structural analysis available, but in our assessment, this set of role definitions works well for health sector organizations. According to Mintzberg, all managers fulfill three main roles with multiple subroles under each one (Mintzberg, 1989). These roles and subroles are as follows:

Interpersonal Roles Informational Roles Decisional Roles

Figurehead Leader Liaison

Monitor Disseminator Spokesperson

Entrepreneur Disturbance handler Resource allocator Negotiator

Each of the roles involve the following activities (Mind Tools, 2017).

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Interpersonal The managerial roles in this category involve providing information and ideas.

Figurehead Leader Liaison

Informational The managerial roles in this category involve processing information.

Monitor Disseminator Spokesperson

Decisional The managerial roles in this category involve using information.

Entrepreneur Disturbance handler Resource allocator Negotiator

In the final analysis, managing is about getting the work of the organization done through the efforts of other people. Highly effective health sector managers understand that in order to do their job properly, two conditions must be met. The first is a thorough knowledge and understanding of the industry and the work involved. For example, a person charged with managing the implementation of a health information technology (IT) system must be well versed both in the technical aspects of IT and the nuances of healthcare. The second condition (and perhaps the most important) is the ability to activate each of the roles indicated by Mintzberg with all of the stakeholders in the organization in order to achieve the desired results—in this case, a successful IT implementation that satisfies the needs of the end users. Stated another way, successful healthcare managers understand and embrace the principle that when distilled to its essence, health- care is inherently a people business. The only way that entry-level, middle-, or executive-level managers accomplish their work is through outstanding relation- ships with persons throughout their organizations and others including patients, family members, payers, suppliers, regulators, governmental officials, the media, and uncounted others.

There is a large and growing demand for health sector managers and admin- istrators. The Bureau of Labor Statistics stated that there were 333,000 persons employed in the field as medical and health service managers in 2014, and that the job outlook for the period 2014 to 2024 was faster than average (U.S. Department of Labor, 2015). The median annual pay for medical and health service managers in 2016 was $96,540. Taken in the aggregate, there is a high level of demand for skilled and dedicated persons who wish to make a tangible difference in making high-quality healthcare accessible to persons across the country.

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Given the results of the presidential election in November 2016, there is a great deal of uncertainty regarding the viability of the Patient Protection and Affordable Care Act (ACA) and what this will mean to health sector organiza- tions. While many questions remain at this time, there is no doubt that people will continue to seek out health services, and it is up to healthcare managers to operate their organizations in a manner that provides safe and effective care.

The upcoming chapters focus on a brief history of healthcare management, the education required for a career in healthcare management, how to find the right job in the field, and the critical competencies in preparation and profession- alism. We conclude this book with some thoughts about the competencies that healthcare leaders will need for an uncertain future. We invite you to join us on this exciting journey of discovery.

REFERENCES Bureau of Labor Statistics, U.S. Department of Labor. (2015). Medical and Health Services

Managers. In Occupational Outlook Handbook, 2016–17 Edition. Retrieved from https://www.bls.gov/ooh/management/medical-and-health-services-managers.htm

Center for Medicare & Medicaid Services. (n.d.). Historical. Retrieved from https:// www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ NationalHealthExpendData/NationalHealthAccountsHistorical.html

Mind Tools. (2017). Mintzberg’s management roles. Retrieved from https://www.mindtools .com/pages/article/management-roles.htm

Mintzberg, H. (1989). Mintzberg on management. New York, NY: The Free Press.

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