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Week 2 Overview

In the case study you read last week, there was a problem that needed a solution. Decision-making was driven by the urgency to improve the performance of the emergency department of the hospital. Quite a different type of decision is one related to starting a new business.

Week 2 case study also illustrates two important parts of evidence-based decision-making-research and quantitative analysis.

· Demonstrate understanding of health care services delivery in the United States.

· Demonstrate ability to properly utilize the concepts of health care finance, economics, information systems management and risk management in administrative decision making.

Take the Plunge?

Exurbia Health is a health system in the outer suburbs of a large metropolitan area. Jim Lifton, the CEO of Exurbia, was considering starting a new program in bariatric surgery. A prominent surgeon on the staff of Exurbia spoke to Lifton about bariatric surgery as a new procedure to treat obesity. Lifton wanted a background briefing and recommendations regarding the issue. He specifically wanted answers to the following questions:

1. What is the current status of obesity in America?

2. What are the best programs doing to treat obesity? Where are they?

3. What is the status of bariatric surgery in terms of efficacy, safety, success, cost, and reimbursement issues?

4. What kind of physicians do this surgery? What kind of training must they have?

5. Who should be involved in evaluating this program?

6. Are there other hospital services that will be impacted and in what way?

7. Are there services or businesses not part of the hospital that need to be taken into account or made a part of the program?

8. Are there downsides to discussing this openly? Might someone take offense and who is most likely to do so?

9. Who might be expected to be very supportive?

10. What should Exurbia do?

11. What plan should management present to the board of trustees?

12. If it looks like Exurbia should go forward with a detailed analysis and business plan, who should participate in developing it and why?

Identifying the Problem

The first step listed in the decision-making model is identifying the problem. That must also include identifying the outcome, which is desired. The two questions must be married to fully achieve an understanding of the problem.

What is the problem in this case study? Here are some questions:

· What are the core issues facing Mr. Lifton?

· What is the desired outcome, what are the minimal outcomes which are acceptable?

· How should he rank them in importance and urgency?

· Which problems or issues can be deferred and which cannot?

Exurbia does not have an apparent problem in the usual sense of the term. That is, there is no event or situation with negative effects that needs to be remedied. The decision to be made relates to whether or not to introduce a new program in bariatric surgery. The problem lies in the risks implicit in the decision. The risk here is more defined by the desired outcome than is defined by how to start a Bariatric Center.

Possible outcomes may include service expansion, service to the community, feeding other departments in the hospital or purely profit. However not understand and drive to the requisite outcome will doom the project.

Starting a new line of business is one of the riskiest things an organization can do. According to the Small Business Administration, about 50 percent of all new businesses end up failing. The reasons for failure are numerous but most often entail one or more of the following:

· Undercapitalization

· Failure to create a proper business plan

· Underestimating the power of competitors

· Not accurately identifying the market the market

Established businesses, when they start a new venture, run the risk of diverting their attention and energy away from their core competency. This can lead to loss of primary business. New endeavors absorb greater amounts of organizational energy, attention, and resources during the development stage. Resources are often diverted at the expense of established programs.

Entering into a new medical business is even more risky. Introduction of a new treatment carries not only the usual business risk but also the added risk of adverse clinical outcomes. For health care providers, a new business line may place them in competition with their allies such as physicians or employers in the community. Physicians may believe the hospital is competing with them and decide to take their patients to a competitor. A major employer may steer employees away from the hospital.

Identifying Solutions

As you look for solutions you must employ a road map of types which presents you with primary and alternative routes. It is a common mistake to assume and then seek a single solution for any problem which needs resolution. To that end be willing to seek multiple solutions while at the same time rating those solutions as to their practicality, expense, effort to be put in place and time frame for which the solution will be able to function. There are those times which are emergent and may only be solved with a stop gap type solutions.

This may be a mechanism to essentially deal immediately with the problem while affording more time for you and your team to develop a more complete and practical solution set. Here the real goal is to take measures to insure that the true problem, the root of the problem, is being addressed with the solution. And if that cannot be accomplished initially to understand that additional resources, money and energy may well be required.

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Making Decisions

How will Lifton identify and evaluate solutions? Here are some questions to guide the analysis.

What are the implications of each of the treatments for obesity?

What impact may the solutions have on others who serve the obese community?

What are the criteria for ranking options?

What is the relative importance of quality, profitability, physician acceptance, competition, and risk?

Whenever one considers entering into a new business one should develop a comprehensive business plan, beginning with a comprehensive study of the business. The decision must rest on reliable information. You can define the information you need through a set of questions that must be answered. The following questions are just a few examples. You can think of more.

What is bariatric surgery and how does it work? Is the surgery safe? What are the risks? Does it work? How does it compare with other obesity treatments? What do medical and regulatory authorities say about all this?

What is the market for this surgery? How many people suffer from obesity? How many of them need bariatric surgery? What is the demographic profile of potential candidates for this surgery?

What is the cost of the surgery? How many people who need the surgery can afford to pay for it? Do third-party payers cover this procedure? Which ones cover it and do they operate in the relevant area?

What is the competition? Do any other organizations in the area offer bariatric surgery? What is their capacity relative to the estimated size of the market? In other words, is there room for one more bariatric surgery program?

What investment is necessary to start the new program? What is the estimated utilization? How soon can the program start showing profits?

Before you read further, try to find some of this information, or just identify the sources of information. Among the readings this week, there are some sources of information and you will find some on your own.

As you conduct research, the information suggests solutions. Keep these aside and continue your research. Be wary of being convinced by just one piece of information leading to just one solution. Make sure you read more and explore other solutions.

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Quantitative Analysis

A great deal of the information that you will use in decision-making will be numerical. You will need an understanding of elementary statistics to analyze such quantitative information. Let us see this with a simple statistic, the extent of obesity and overweight in America. You will find varying estimates of the number of overweight and obese people in the population statistics in the Health, US, 2004, by the National Center for Health Statistics (NCHS) show the following percentage of overweight and obese adults.

The incidence of overweight and obesity show a sudden increase after 1976-80. The increase is even greater in states like Maryland and Mississippi. The moment you see this graph, you should ask why there was this sudden change. Did dietary habits change during the period 1980-88? Did physical exercise decrease during this period? One of the first things you should check is the definition of overweight and obesity. If the definition changed, the same people might be classified differently.

If the statistics are based on a sample survey, you will need to evaluate the sample. Is the sample large enough? Is it representative? Does it have characteristics similar to the population group of interest to you? For example, suppose your hospital is in an area with a specific dietary tradition, say, a higher proportion of fruits and vegetables in typical meals. Are the results of a national sample survey applicable? Would you adjust the numbers in the survey? How will you estimate the variance?

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The New Program

After almost a year of critical analysis, the committee unveiled a comprehensive program for weight management.

The weight management program includes:

· Community education programs.

· Weight screenings including blood pressure, diabetes testing, and body mass indexing.

· A continuum of programs from weight counseling, nutrition advice, cooking classes, fitness programs (yoga to weight training to running), to psychiatric and psychological counseling and group therapy.

Bariatric surgery is a part of this program.

· Clients for whom all other measures fail are given the option of being screened for bariatric surgery.

· All receive a psychiatric evaluation to determine their probability of making the necessary lifestyle alterations required by the surgery.

· All receive extensive physical examinations including cardiac evaluation, anesthesia consult, and sleep apnea testing.

· All surgical patients are briefed extensively about the postoperative course and the dramatic lifestyle changes required. They observe videos of the procedure and taped remarks of previous patients. They are encouraged to talk with former patients who serve as volunteer counselors.

· Surgical candidates are given a list of qualified surgeons to choose from.

The economics of the program are as follows:

· The charges include fees for implantables.

· Those candidates who are not covered by a third-party payer are offered special rates comparable to third-party reimbursement as well as financing options.

Quality control is always important, and more so for a procedure that has some opponents.

Administrative and managerial issues are also addressed.

· The program is managed and owned by Exurbia.

· Exurbia markets the program under its brand.

Week 2 Summary

This week's case study illustrates two important parts of decision- making—research and quantitative analysis.

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